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4 Financial Hacks You Need to Be Using NOW

4 Financial Hacks You Need to Be Using NOW

There are a lot of financial hacks out there that you probably don’t know.

No, I don’t mean robbing a bank, or stealing money. Although these are technically hacks, I don’t recommend committing crimes to make money. Unless…. no, totally kidding. It is never acceptable. (Please don’t do it.)

The sad thing is, it probably isn’t your fault that you don’t know them. School fails to teach us pretty much everything we SHOULD know about money.

But, that’s okay, because as your number one favorite personal finance writer (if I’m not, just lie to me, my ego really needs this) it is my job to teach you these things.

Check out these four financial hacks to save money that are SO important to know, implement and start getting a better handle on your financial future today.

1) Pay Off Your High-Interest Debt

One of the biggest mistakes you can make is letting yourself get overrun by high-interest debt. It can steal so much of your income that you might quickly find your budget is much tighter than you’re comfortable with.

It may very well be the case that you’re wondering how to stick to a solid budget (and built an intentional budget) in the first place when the math simply doesn’t work out!

Credit Card Debt

If you’re a chronic spender, I’m looking at you.

Sometimes high-interest debt (i.e. spending more than you earn and racking up credit card debt) can cost you so much, that you’re not able to even make payments on the things you NEED every month like water and electricity. I don’t know about you, but I definitely do not want to be in the position of deciding to keep the water on vs. keeping my credit accounts out of collections. Although, I’m choosing no water 9/10 times. Showering is overrated.

By eliminating your high-interest debt, you not only save money every month by getting rid of that interest sooner, but you are also freeing up cash that you can use on other things like investing.

You can begin investing or saving BEFORE you pay off your debt, but I highly recommend you get rid of high-interest debt first. You’ll be able to stretch the success of your savings or investments better, with more cash-in-hand to work with.

Auto Loans

These loans should be tackled after you get rid of your credit card debt.

Why? Tackling any high-interest debts that you owe should always be the first line of attack if you’re looking for cost-cutting hacks. Car loans tend to have much lower interest rates than credit cards (3-6% or so versus 20%+ for credit cards), which means that you’ll make a lot more headway by lowering the balances that accrue far more interest with each statement.

Once you’ve got those pesky credit card payments out of the way, if you’re smart, you’ll use those newfound money skills to put extra cash towards your auto loan each month. The money you’re no longer spending on credit card payoff is now money you can put towards getting out from under your car debt.

Student Loans & Mortgages

These kinds of debts may almost be considered “good debts” for two reasons:

1) They are expected to take 10-30 years to pay off, typically, so you’re not getting as much knock on your credit score if it takes you 8 years to pay off a 10-year student loan or 25 years to pay off a 30-year mortgage. Additionally, the age of the loan over time will definitely help boost your credit score.

2) They have lower interest rates than credit cards (if you chose good student loans, at least), so they won’t cost you as much money out of pocket, proportionately.

If it’s in the cards to get these types of debts knocked out quickly then, by all means, do so. Otherwise, don’t hesitate to work at these slowly, with minimum payments, and take advantage of the extra cash to boost your investments and savings before you shift focus to these.

2) Set Your Bills to Recurring

This is one of those money hacks that no one thinks much of, but it is still very useful to do.

Nowadays most companies allow you to set up recurring payments every month. By setting this up, you’re allowing yourself to make sure that you never miss a payment. No more worrying about late fees, missing payments or getting your account sent to collections. In doing this, you’ll have the comfort of knowing you’re good to go each month.

I also like to set up recurring payments because it helps you to be aware of when the money will come out and how much will come out at that time. I like to think of this as one of my secret frugal life hacks that helps me improve my personal finance results.

Most credit card companies that offer recurring payments only require you to pay the minimum. I highly suggest editing the settings to ensure that you’re paying as much as possible toward your highest interest rate every month (see money hack #1)!

Want to know why else this is smart? You won’t have to pay for stamps anymore. As of January 2019, a Forever stamp costs $0.55. First grade math says that if you’re still mailing out 8 bills per month, you’re spending over $4 more per month than you need to!

3) Begin Investing

woman-checking-stocks-on-her-iphone-before-adjusting-the-expense-ratio-of-stocks-min-min

It probably sounds a bit like common sense, and maybe even a little silly to say, but one of the biggest financial skills you should have is to know how to invest and begin investing. If you do not owe any high-interest debt and have some disposable income, then there’s no reason why you can’t start investing today.

You don’t need $1,000 or even $100,000 to start investing. You can begin investing with as little as five dollars with apps like Acorns. I started using Acorns when I first graduated high school and wanted to start investing, but had a small income.

If you have a little more income or want to get started making bigger moves, investing with just $20 will get you up and running!

The reason it’s so important to begin investing is so that you can benefit from things like compound interest and dividend payouts. Check out this compound interest calculator from the U.S. Securities and Exchange Commission, to see how you can make your money work to reach your own investment goals. This allows you to grow the money that you have and build a more stable and secure financial future.

4) Reap the Rewards

My personal favorite finance hack, and in my opinion one of the most underrated, is getting cash back or rewards.

Credit Card Rewards

If you are someone who is able to use credit cards responsibly, then there is no reason why you should not be earning money every month just by paying for the things you need to pay for. For example, I use my Discover card to rack up cash back on all my qualifying purchases throughout the month. Since I make a point to pay off the balance when the statement comes each month, I pay no interest.

Credit card companies will often offer “bonus” rewards, such as 5% cashback bonuses on gas and other items or 3% back on dining out. You’re buying food and gassing up your car anyway…so if they’re willing to pay you to do it, then definitely take advantage of it!

This is also one of my favorite money saving budget hacks – when they issue the cash back, I make sure to take that money and put it straight into my Acorns account every month. This is such a simple money hack that doesn’t seem like a big deal, but it has grown my investing account by almost $300 per year for the last three years. How’s that for a no-brainer financial skill?

As life changes — you get married, have a family, etc — this simple finance hack will become one of your favorite hacks. Your expenses will increase with more mouths to feed, your cash back increases accordingly, and you’ve got even more to put into your investment account. Turns out kids aren’t just money sinkholes! When you’re ready for retirement I guarantee that extra investment amount will not be something you regret having done.

Think about this: $300 a year for 30 years is almost $9,000. If you could increase that to $600 per year, or $1200 per year, well…think of the possibilities! With compound interest, the resulting amount can grow exponentially. Don’t underestimate the power of reaping your rewards and investing them.

Alternative Cash Back Methods

All that said, if you are someone who cannot use credit responsibly or does not trust yourself to have a credit card, there are definitely other, safer options out there for you.

For example, I have a cash back checking account with Discover that also allows me to earn cash back on all qualifying purchases every month. So don’t feel like it’s necessary to use credit for earning rewards like this! Some other options to consider are simply using cash back services for your everyday purchases, such as Ebates or Ibotta.

Bonus: Diversify Your Income

This is DEFINITELY not taught to us in school, ever.

Think about it – you go through grade school, get to high school and are told to start deciding what your career will be…then you’re shipped off to college to get the degree and encouraged to put ALL your focus into that ONE great job you’re trying to land once you graduate.

Simply put, having only one income is a recipe for disaster. Diversifying income (having more than one source of income), is absolutely one of the best financial life hacks you could ever implement.

The more sources of income you have, the better off your overall financial picture looks. If you could make even an extra $200 per month, outside of your regular full-time job, you could:

  • Pay down debts
  • Have extra cash for saving or investing
  • Save for a bigger future purchase or a vacation
  • Possibly meet ALL your financial obligations for the month, if your day-job income is less than your current expenses.

Just think — all you might need to do is figure out how to save $100 a month and you’ll be well on your way to changing your life with less debt, more investments, and who knows what else.

Final Thoughts on Financial Skills You NEED to Know

After reading through the finance hacks above, you’re probably thinking they’re fairly common sense.

Yet I’d bet that a lot of you reading this don’t even have those 4 hacks squared away yet, do you?

Take each finance hack that’s explained here and treat it as a to-do project of sorts — work on it, get it buttoned up and then add the next one into your finance game.

You’ll be sitting pretty and living your best life before you know it.

Which of these finance hacks are you going to get started with today?

9 Financial Milestones to Complete Before 30

9 Financial Milestones to Complete Before 30

We all reach a point in our lives were we say “what the heck have I been doing with my life?”

The truth is, everyone goes through these crisis. It’s in our nature to wonder, could I have handled some things better? Could I have achieved more of my financial goals? Or more of my personal goals?

These thoughts are why I have comprised this list of things you can accomplish, no matter what age you are. Milestone that when completed you can see immediate results from that will impact your life.

Whether they cut down on stress, make you more financially stable, or just give you a little peace of mind. Completing these things should be on every person’s goal list.

1) Start saving up an emergency fund

I cannot tell you enough how important it is to begin saving for an emergency fund. When I initially moved out at 18 I spent every dollar I earned on silly things. I figured, I will make more money someday, and THEN I’ll start saving.

This is the worst mindset to have. Because the truth of the matter is, if you overspend on a low income, you most likely will continue to overspend on a high income.

That is why it’s best to begin to reverse this mindset wherever you are in your life RIGHT NOW.

The best way to do this is to increase the amount you are saving. I like to use the popular phrase “pay yourself first.” This idea means that every time you receive a chunk of money, you first put a portion of the money away, to save, or invest.

This is a great way to jumpstart your savings. To accompany this method I also use my trusty Digit app.

I love the digit app because once you connect your bank account, the Digit app analyzes how you spend money and then automatically transfers money you don’t need to your savings. And the best part is you never even know it’s gone!

Digit is my personal favorite way of saving money, because it allows you to set specific goals, and timeframes you want to save for. It also has a guarantee that it WILL NEVER overdraft your account. The savings automatically pause when your balance becomes low, and you can change this minimum balance setting whenever you would like.

I have grown my savings by almost 200% just this year using Digit. They also offer a 1% cashback bonus every so often as well! You can’t beat that.

You can also receive a free $5 from Digit whenever you sign up by clicking here.

2) Establish your credit

It is so important if you’re young or still in college that you begin establishing your credit. This doesn’t mean go open 20 credit cards and max them out. I mean establish your credit the RIGHT way, and get an awesome credit score.

Good credit is something everyone wants, but not everyone thinks they can get. The truth is, that if you handle your credit the right way, you can easily obtain a 750+ credit score within a year or two!

And if you have ruined your credit, then getting your finances together, making sure you are paying your debts down, and saving money will ensure your credit improves over time.

You need to check your credit score and be sure that there aren’t any errors or major issues that need to be taken care of. There are many websites out there that allow you to do this for free without any effect on your credit like NerdWallet, Credit Sesame, and Credit Karma.

It is also important to monitor your credit score to make sure you don’t fall victim to identity theft or any unauthorized credit usage.

Knowing your credit score gives you a better idea on where you need to start when it comes to repairing your credit and how you can raise your score.

And if you haven’t started establishing your credit then you can check out my article on getting started today with no credit history or experience.

And if you Do have credit but it could use some tender love and care, check out Mike’s awesome credit repair guide over at Credit Takeoff.

3) Start investing

No matter how broke you think you are or how clueless you are as an investor. With today’s resources there is absolutely NO reason why you should not be investing.

You should first begin saving for retirement and attempting to max out your retirement accounts every year to maximize the amount of tax benefit you’re getting. My personal favorite app for retirement investing is M1 Finance.

M1 Finance offers retirement accounts, and normal taxable accounts that you can easily fund through your standard bank account. I have mine set so that I automatically transfer $100 bucks every Monday to my account. The user interface and investing options are excellent and they provide an awesome investing experience.

They’re also offering anyone who signs up by clicking here their first $10 invested free.

If you work at a place that offers 401k contributions then you should also be sure that you are taking advantage of all employer incentives offered to you. These incentives can help to add enormous amounts of value to your investment account, so be sure you aren’t missing out on free money.

Another way that you can start investing even with a low income, is my favorite investing app for beginners. Acorns.

Acorns is an excellent investment app to get you started and allows you to submerge yourself into the crazy world of investing with only a small amount of capital.

You can invest in a well-diversified actively managed portfolio for as little as $5 at a time. Acorns is also free for college students for four years after sign up date. And only one dollar a month after that.

Acorns allows you to easily maximize the amount you’re investing by offering their round up and found money features.

Round-ups —

By far my favorite Acorns Investing feature, once your credit or debit card is linked to Acorns, the app will pull your daily transactions and every time you make a transaction it will automatically round the transaction up to the nearest dollar and invest it into your account.

For example, if you were to spend $1.82 on coffee, your round ups would kick in and bring that up to $2.00 and invest that $0.18 into your account. Once the total of roundups reaches $5 it will be allocated according to your investment portfolio preferences.  You can also specify which transactions you would like Acorns to pull from and even apply a multiplier of 2,3, or 10x if you want to grow your account faster. I keep mine on 2x.

The best part is you never even notice the money coming out.

Found Money —

Another awesome feature that Acorns offers that allows you to grow your investment account. Found Money is a portal on Acorns Investing App that you can click on to do your shopping. They have partnered with over 200+ companies and include big names like Apple, Nike, and Hulu to offer your cash back whenever you shop with these brands.

Using these features with acorns you can effectively grow your investment account even with a low income. And you can even get your first $5 dollars for free if you sign up using my unique link.

Sign up for Acorns by clicking here and receive $5 dollars.

You can also check out my full Acorns review by clicking here if you wanna learn more. 

4) Stop getting in debt and start paying off debt.

If you are struggling to obtain your financial freedom then it may have to do with your spending habits.

If you are having trouble with spending money and getting deeper in debt then you may need to consider cutting yourself off from credit. This means locking your credit cards in a home safe until you become more responsible with them, or even shredding them so you can’t use them any longer.

Getting in debt can be addicting and if you are constantly in need of the newest things credit can buy, then you may need to reevaluate your spending habits and consider trying to fix this by practicing contentment for what you DO have.

Trust me, I know better than most how difficult this can be, I grew up extremely poor. So whenever I got credit for the first time I wanted to buy all the fancy things I never had as a kid.

This was all fine and dandy until I had over $10,000 dollars In debt on a $20,000 dollar income. My life was a nightmare of financial stress for the year I spent trying to pay this off.

If it wasn’t for my handy digit app I talked about earlier, I probably never would have paid it off in time. They even recently launched a new feature on the app that allows you to use the app to automatically put the extra money you save to your credit cards.

Yes! Digit will automatically save AND pay off your credit cards FOR YOU. If that’s not badass, I don’t know what is. I wish they would have had this feature when I used it to pay off my debt years ago.

The truth is, you will feel so free whenever you resist the urge to get into more debt and start paying off the debt you have. It is one of the best feelings I have ever experienced. Being debt free is a dream come true.

If you need help with your budget and paying off debt, check out this article where I help walk you through budgeting and saving money to pay off your debt.

5) Get your health in check and make sure you’re covered

If you have no medical insurance coverage and no life insurance then you are truly living life on the edge my friend. While I respect those that live life adventurously and wild.

I don’t believe in leaving your family financially responsible for you and your expenses if you were to tragically pass away or have a medical emergency.

I was one of those “I don’t need health insurance, I never get hurt, I never get sick” kind of people for the longest time. Until I got majorly sick and ended up in the hospital for an entire week two years ago.

This changed my perspective, and I ensured that I was covered by health insurance from then on. It may seem like something you don’t need but the truth is, you will wish you had it when you do need it.

Another thing to consider is getting life insurance, or accidental death coverage AT LEAST. There are so many options out there and you can find plans for as low as $20 dollars a month that will cover your funeral expenses in case of accidental death.

YOU DO NOT want to leave your family to handle these burdens if something were to happen to you, and you DO NOT want to have medical emergency that you cannot afford.

So get coverage, you will have so much more peace of mind knowing that you have it. Your family will too.

This also means that you are taking care of your mind and body as best as you possibly can. I began really caring about my health two years ago when I met my girlfriend. (dating a woman way out of your league can really do this to you).

I decided I was tired of being overweight and tired of being so unhealthy. Using HealthyWage I was able to lose 55+ lbs AND make over 1,800 dollars while doing it. I used this money to fund my upcoming vacation that I am so excited for.

HealthyWage is an app that allows you to make a wager for how much weight you can lose in a given amount of time. The app will calculate your weight loss amount and your monthly bet and come up with a final amount they are willing to bet you to lose the weight.

It’s extremely simple, you lose the weight, you win the money. You don’t, you lose your money. Just like any other bet you’d take. There is a risk, if you don’t commit and lose the weight, you won’t make any money.

But, in the case you do make the commitment, it can be extremely rewarding. I was able to make 1,800 dollars in just 6 months using HealthyWage. And the best part is that I was doing something  I already wanted to do! Get healthier.

I am still so glad I used HealthyWage and winning that money was exactly the motivation I needed to lose over 55 lbs.

If you are interested in seeing how much money you can make by losing weight click here.

6) (Optional) Create your own business

Nowadays creating your own business is easier than it has ever been before. There are thousands of people creating their own websites and own businesses today.

The best advice I can give is find what you’re good at, then find out how to make money doing that. Whether you make money by teaching it to others, or completing the service for others. There is always someone willing to pay for something someone else is better at then them. TRUST ME.

You can easily create and launch your own bog just like this one and start your own business within a month just like I did. You can write about any topic you enjoy that interests you, and there are tons of ways to make money as a blogger or with your own website.

You can sign up for Bluehost and start your own WordPress website with your own hosting, a domain name, and a free SSL certificate, (google wants your website to be secure with an SSL certificate), for as little as $3.95 using my link to sign up.

Starting my blog has been one of the best decisions I have ever made, and I love knowing I created something and it’s become a full-fledged business.

You can sign up for Bluehost by clicking here.

You can also learn more about starting your own blog from the same people I did, Alex and Lauren over at Create and Go. 

7) Make the most out of your money

No matter how rich you are, it always feels good to save a little extra money. (Well, Jeff Bezos might not care, but I know I sure do, and you probably do too.)

There are tons of ways to get the most out of your dollars, and it’s easier to do now than it has ever been. (That means not having to carry a huge binder full of coupons now).

The digital age has made it so much easier to make a little extra cash with no effort. My favorites are using my Discover it Card to get up to 5% cashback, and using Ebates to get extra cashback when I shop.

The best part of shopping with Ebates is shoppers without cashback credit cards have an opportunity to make cashback as well! And that cashback can add up to real extra cash. (I have made up to an extra 100 bucks just by using the app when I shop for things I was already gonna buy.)

Ebates is a great app that EVERYONE can use to make a little extra money back when shopping. If you aren’t using an app like this you are leaving money on the table. And like I always say, “No money left behind.”

If you wanna sign up for Ebates to start earning cash back today, you can use my link to sign up and receive a free $10 sign up bonus.

You can also use apps like Ibotta to save money on everyday purchases in store instead of just online like with Ebates. While ebates is an online shopping portal, Ibotta allows you to save on typical grocery store purchases like eggs, milk, bananas and etc.

8) Keep track of your finances.

Once you have your financial health back on the right track it is important you STAY THERE.

This means keeping track of your finances and watching your finances improve and grow. My favorite way of doing this is by using personal capital. This app allows you to get a full picture of how you are doing financially.

The app keeps track of all of your debts, assets, liablities, and calculates your net worth over time. And my personal favorite feature is that it tracks your investment performance over time vs. other investment index’s like the S&P 500.

By keeping track of your finances and watching your net worth grow over time it encourages you to keep up the good work and continue to grow financially.

I love using Personal Capital and love the peace of mind it gives me in helping me understand my full financial health and keep track of everything in one single place.

Final thoughts:

At the end of the day, it’s okay if you haven’t completed all the things on this list. And you don’t necessarily have to, to have a happy healthy life.

But completing these things can surely lead to more peace of mind and better financial comfort. I know that over time completing these steps has helped me to grow confident, and made my life feel more secure.

I genuinely hope that every single one of you reading this finds the path to financial comfort and knows the feeling of not having to stress day in and day out about money. My goal in creating this blog is to make even the smallest difference in the life of my readers and I hope whoever you are reading this, one of these steps have helped you to feel that comfort.

Oh, and I can’t believe I almost forgot,

9) Sign up for the Busy Living Better email list

At the bottom of every blog post, this one included, you can find an email opt in that allows you to subscribe to the busy living better newsletter.

I send out weekly emails that help you to find financial freedom, learn to save money, make extra money, improve your credit score, and invest in all types of markets.

If you want to make sure to never miss a post and learn more about Finance every week, then go ahead and sign up. I’d love for you to join and you can even email me back every week and send me messages to just chit chat.

Now, get your butt into gear and start living better.

Until the next one,

Noah Riggs

Acorns Investing App 2020 Review | Is it Worth Using?

Acorns Investing App 2020 Review | Is it Worth Using?

You’re thinking about investing and you’ve heard a thing or two about Acorns huh? Squirrels like em, and it’s pretty cool that they grow into some large, mighty trees. Ed, Edd n Eddy taught me that. (Shout out to the classic cartoon network that was ACTUALLY awesome.)

acorn hanging from tree to represent acorns investing app

Well, the Acorns Investing App is actually pretty similar to the idea of typical acorns, metaphorically at least. (Probably minus that squirrels thing though)

The idea is that the small little acorns (tiny monetary deposits) you invest now will grow to become mighty oak trees one day.

It actually serves as a neat reminder that the small things do add up and can become something great. Acorns is an investment application that capitalizes on this idea.

So, today I wanted to give you guys a little truth bomb on some things concerning Acorns Investing.

We’re going to cover these things in my comprehensive review.

  • How does Acorns work?
  • What ways can you grow your account with Acorns?
  • How does the app invest your money?
  • What services Acorns App offers?
  • How to get the most out of Acorns Investing services and how much does it cost?

So, without further ado, let’s jump right in.

My Experience With Acorns

I have personally used Acorns for about three years now. It will forever have a special place in my heart as the Acorns Investing app was the first place I was able to get my feet wet with investing.

So when people ask “is Acorns safe?” My answer is always a resounding YES.

Investing can be expensive for many reasons.

You could be paying account fees, trading fees, or paying for a financial advisor to ensure your money is being allocated properly.

With Acorns you can chalk all these typical costs up to a single dollar a month. Yeah, THAT’S IT. One single buckerooni.

This is why at 18 years old I was able to jump right in and give Acorns a go.

Why as a freshly minted broke college student was I able to invest? Because of Acorns round up system. Let’s jump into how it works.

How Does Acorns Work?

Acorns is a micro-investing application that is extremely popular for allowing you to have a well-diversified investment portfolio using your spare change to fund it.

Many brokerages no longer require you to have an account minimum to invest, but the big problem many people run into is the fact that not all brokerages allow you to buy fractional shares.

What I mean by this is if you are a broke college kid like I was that you most likely cannot afford to buy a full share of a stock or ETF. They are simply just TOO dang EXPENSIVE.

Acorns battles this by allocating your money into different ETF’s and purchasing fractional shares of that ETF.

So you may not be able to afford to own an entire share of VOO (it’s price is $257.64 at time of writing) but you can through Investing your money into portions of this ETF.

Every time you deposit more money into Acorns you will continue to grow the portion of the ETF’s you own.

How Do You Put Money Into Your Acorns Account So Your Investments Can Grow?

There are a couple of options and this is another convenience win for Acorns.

You have the option of –

  • Setting a daily, weekly, biweekly, or monthly recurring investment.

You can set a recurring investment to come out of your bank account at any specified time and this will help to grow your account much quicker than just using the round up option. This doesn’t have to be a lot per deposit, as little as $5 is allowed.

  • Using the round up feature to round each transaction to the nearest dollar and invest the change.

By far my favorite Acorns feature, once your credit or debit card is linked to Acorns the app will pull your daily transactions and every time you make a transaction it will automatically round the transaction up to the nearest dollar and invest it into your account.

For example, if you were to spend $1.82 on coffee, your round ups would kick in and bring that up to $2.00 and invest that $0.18 into your account. Once the total of roundups reaches $5 it will be allocated according to your investment portfolio preferences. 

You can also specify which transactions you would like Acorns to pull from and even apply a multiplier of 2,3, or 10x if you want to grow your account faster. I keep mine on 2x. The best part is you never even notice the money coming out.

  • Using Acorns “Found Money” option to get cashback while shopping and having the cashback automatically invested.
Acorns-Found-Money

Another awesome feature that Acorns offers that allows you to grow your investment account, “Found Money” is a portal on Acorns Investing App that you can click on to do your shopping.

They have partnered with over 200+ companies and include big names like Apple, Nike, and Hulu.

How Does Acorns Investment App Allocate Your Money?

So, you’re putting your hard earned pennies into this app, and you’re probably thinking, well where is my money going? Well, you’re asking all the right questions my friend.

(If you weren’t asking this, then you’re reckless, wild, unbelievable, and… wow, you really trust me, I love it. I vow to only use my power for good. mostly…)

Seriously though, Acorns will ask you a series of questions when you first sign up for the app, things like your net worth, your salary, and your reason and time span for investing.

The app will then take these questions, analyze your answers and then choose a portfolio that best suits your needs. You can choose to either stay with the option Acorns Investing App give you, or you can be all rebellious with your bad self and choose whichever portfolio you’d like.

(One thing to keep in mind though, overall, even Acorns most Aggressive portfolio is pretty darn safe as far as diversification and quality funds go. So you really can’t go wrong here with your choice.)

The Portfolio Options Are:

  • Conservative: 18% stocks, 80% bonds, 2% real estate
  • Moderately conservative: 36% stocks, 60% bonds, 4% real estate
  • Moderate: 54% stocks, 40% bonds, 6% real estate
  • Moderately aggressive: 72% stocks, 20% bonds, 8% real estate
  • Aggressive: 90% stocks, 0% bonds, 10% real estate

I personally use the Aggressive option in my Acorns Investing portfolio and I have seen some quality returns over the years.

The ETF’s Acorns Are:

  • Large Company Stocks: Vanguard S&P 500  (VOO)
  • Small Company Stocks: Vanguard Small-Cap (VB)
  • Developed Markets: Vanguard FTSE Developed Markets ETF (VEA)
  • Emerging Markets: Vanguard Emerging Markets Stock (VWO)
  • Real Estate: Vanguard REIT (VNQ)
  • Corporate Bonds: iShares iBoxx$ Investment Grade Corporate Bond (LQD)
  • Government Bonds: iShares 1-3 Year Treasury Bond (SHY)

These are all quality investment ETF’s and if you check their performance over the years you will find that Acorns Investment Team does a good job of diversifying, and growing the money of its investors.

What Services Does Acorns Offer Besides The Typical Taxable Investment Account?

Acorns also offers other services along with their basic investment account. They have added these over the years I have been using Acorns.

It is pleasing to me as a customer to see them continuing to add things to their platform that customers are requesting. They are constantly innovating and growing, which is always a plus with any company.

At this time Acorns offers three different accounts:

  • Acorns Core – This is the basic taxable investment account you are initially offered at sign up.
  • Acorns Later – This is their special IRA (individual retirement account) that you can use to take advantage of some tax savings.
  • Acorns Spend – This is a checking account you can use through Acorns that will be attached to your investment account that offers some benefits like earning more money, custom spending strategies, free banking features, and automatic retirement savings and real-time roundups.

Acorns has a lot to offer and it continues to grow with what it offers and all the way it allows you to save and invest for the future.

How To Get The Most Out Of Acorns Investing Services? How Much Does It Cost?

Knowing what the Acorns fees are in important to make sure this is the right investment method for you.

Acorns basic service “Acorns Core” costs a dollar a month.

For an additional dollar a month you can use “Acorns Later” as well as “Acorns Core” and begin saving for retirement as well as your other investment goals.

Lastly, if you pay three dollars a month you will be able to receive the “Acorns Spend” account along with their other investment account services.

This is one of the only cons to me when it comes to Acorns. Acorns dollar fee a month can be viewed as high when you first begin investing. If you only have $100 dollars invested then you are paying a 1% fee a month for your funds to be managed.

This is a HIGH management fee.

The flip side of this is that as your investment account grows this fee decreases and your gains will erase the dollar you pay monthly and lower the fee to a more reasonable percentage.

A dollar is a reasonable amount in the grand scheme of things, you probably spend at least a dollar a day on something unreasonable anyways, so a dollar a month for a fully managed, hands-off investment account isn’t too shabby.

Also, it’s important to mention, Acorns is free for college students with an email address ending in .edu for four years after their sign up date AND for people under the age of 24!

Sidenote: One of my favorite Acorns features is they frequently have challenges rewarding you for referring a couple of friends, sometimes as much as $1,000!!

Final Thoughts On The Acorns Investing App

Overall, I think Acorns is an excellent investment app to get you started and allows you to submerge yourself into the crazy world of investing with only a small amount of capital.

Acorns is definitely a no brainer for college students looking to begin investing and is still something graduates and full-time workers should think about utilizing.

I have used Acorns for several years, and I have enjoyed my time as an Acorns customer and I will continue to use my account throughout the years as long as Acorns does not increase their price.

Acorns offers an easy hands-on investing experience that allows you to focus on other parts of your portfolio like real estate, crypto, and individual stock investing.

At the end of the day, it’s all about being ready for retirement.

That means starting to save however and whenever you can. Acorns will definitely not be enough to fund your retirement, you need to be utilizing other saving and investment platforms as well, but it surely can’t hurt to start saving with them now.

If you’d like to sign up for Acorns and receive your first $5 free, you can click here.

Let me know what you think about Acorns and if you use the App. I’d love to hear about your experience.

Until the next one,

Noah Riggs

Everything You Need to Know to Get Started with Crowdfunded Real Estate

Everything You Need to Know to Get Started with Crowdfunded Real Estate

Are you an avid HGTV viewer? I definitely used to watch a lot of the renovation shows when there was nothing else on, if I’m being honest….and then maybe when there was other stuff on. I used to sit there and get super excited about owning a home one day and maybe renovating it. But then, guess what happened…

I remembered that I was in college and completely broke. And what about today? Well, I’m still in college, and I’m slightly less broke. BUT I am invested in real property and help fund different projects (some of which are renovations)!

“He must be a millionaire,” you’re probably thinking. But I’m not! Which totally sucks, but I still get to invest in some of the things that millionaires would invest in. How can I do this? With a little something called crowdfunded real estate.

How does crowdfunded real estate work?

If you’re familiar with regular crowdfunding, then this concept should be fairly self-explanatory. But in the case that you aren’t or that you just can’t be bothered to think about it because work left your brain about as functional as that Tupperware you definitely didn’t notice wasn’t microwave-safe, I’ll explain it anyway.

I’m sure many of you have done this before, but do you remember a time when you bought something with a friend? Like when you were kids working extra chores so you could get a new game or toy or whatever? You put your money together because to buy it alone would’ve taken waaaaaay too long. But this also came with some consequences.

If you both bought it, then who keeps it? Well, you use it today, and then I’ll use it tomorrow. Or maybe it’s a communal thing like a lot of the stuff that my roommate and I bought for our apartment where you just use it if you need it. The point is that you have to share it since you both essentially bought shares of it. This is basically how crowdfunded real estate works.

Lots (and I mean lots) of people chip in money to buy property together by investing in this “crowdfund.” Then the crowdfund (I’m not sure if this is the proper name but just roll with it) buys property or real estate debt (we’ll talk a bit more about this in the reviews section). Then they do something to make money like rent it out or renovate and sell it (or in the case of debt, they let the person pay them back), and they split the profits among the investors.

Don’t worry, they keep meticulous records of how they specifically use your money to make sure you don’t have a reason to yell at them about not giving you your fair share. Because there’s always that one friend.

Now that you understand what crowdfunded real estate is, you may be wondering how it’s different from a REIT. Well, stop being so impatient. I’m getting to that.

Crowdfunded real estate vs REITs

The difference here is relatively subtle. If you’re talking non-traded REITs. In other words, not on the stock market exchange (cough cough you’d know that if you’d read my article 5 Places to Set and Forget Your Money to Let It Grow cough cough). Basically, in a non-traded REIT, they use everyone’s money for everything, so everyone gets a share of every pie.

Yuuuuup, we’re back to pie again!

You’ll soon discover pie can be used in many financial metaphors.

Anyway like I mentioned before, with crowdfunded real estate, your money is specifically used for certain projects, and they keep track of it all. So if you have different performance goals, then they can take this into account.

Now the difference between a publicly-traded REIT and a crowdfunding group is not only different in these respects but also in terms of liquidity and expected returns.

REITs allow for high liquidity by allowing you to trade your shares on the exchange. Meaning you can get your money out as fast as you can find some Class A suckerooney to buy your shares.

With crowdfunding, on the other hand, it can take quite a while (days, weeks, maybe months) to get your money out. This is because they actually specifically have your money tied up in real estate and can’t just sell the property since other people own it too. They have to use someone else’s money in the fund to take your place. This may sound like a bad thing, but the higher liquidity of REITs doesn’t come free.

The cost of having greater liquidity (getting your money out faster) is slightly lower expected returns. I’ll talk more about this in my next article where I get into the nitty-gritty money stuff like the return statistics and paying your taxes (Ugggh paying taxes? Do I have to??). But I felt like it was an important difference, so it should be mentioned at least briefly.

So if you’re wanting the best long-term performance, make sure you take this into account.

If you’re like me, then your ears perk up and you wipe the drool away from your bored face once you hear things like higher expected returns. And you think, “Say no more fam. Where do I sign up?” Well, wonder no more.

What are some crowdfunded real estate apps or
sites that I can use?

Alright, I tried to find the highest-rated companies that had fairly low minimum investments, and I came out with two favorites. This was pretty tough because a few of these real estate crowdfunding platforms had buy-ins of like $25,000, and I felt like if you had that kind of money laying around then there was probably something that I needed to learn from you. Anyway…

Peerstreet

The first one I wanted to mention is Peerstreet which I kind of hesitate to put on my list since you aren’t actually buying property. But it has good reviews, and it’s open about how it conducts its business and the fees it charges. So I figured why the hell not?

How does Peerstreet work then, if you don’t buy into the property? Peerstreet is basically Lending Tree for real estate loans.

peerstreet diagram screenshot-min
This image from PeerStreet’s site gives a pretty good visual.

If you’re not familiar with Lending Tree, just imagine that instead of all of your friends chipping in for an actual house, they’re chipping in to let someone else buy/renovate a house. You’re like the bank when you take out a mortgage loan.

Why do I sound kind of disappointed by this model? Well, there’s nothing wrong with investing in loans. I just feel a bit robbed since I’m basically doing the same thing as buying a bond instead of buying into the actual property.

In addition to the loss of coolness from not investing in actual real estate, the returns are also….decent. It averages around 6-9% which is on par-ish with the stock market. Although I’d rather invest my money there personally.

The good thing is that they have an automated loan picking process if you don’t feel like picking out your own. Or if you think you can beat that 6-9%, you’re welcome to forgo the automated process and try for yourself.

Fundrise

I’ve spoken about Fundrise before in my article 5 Places to Set and Forget Your Money to Let It Grow, but I think it’s pretty neat. So bare with me as I do it again.

Fundrise is a crowdfunded real estate group that takes the money you invest and buys actual property with it. So you may get some apartment buildings that give good dividends from rent or even some renovation projects to be sold for profit.

Whatever the property is, you’re invested in it. You can even see some pictures of the property and their plans for it through your account on their website. (Not to get you too excited. There aren’t too many.)

And don’t be worried about shoddy buildings or ancient apartments, Fundrise does a good job of selecting quality projects to keep your portfolio from being too high-risk.

This is a picture of one of the apartment complexes in my Fundrise portfolio. (Yes you’re actually a part-owner of real property)

One of the reasons I recommend Fundrise (besides how neat it is investing in actual property) is that the minimum investment is incredibly low in comparison to similar groups. This makes them a great option for real estate crowdfunding for beginners.

Most crowdfunded real estate groups that invest in actual property have minimum investments from $10,000 to $25,000 or even $50,000, but Fundrise’s minimum investment is only $500. So for beginner investors without a lot of startup money, this is a great choice.

In fact, once you’ve invested $1000, you’re able to select a plan to better fit your goals as well as better properties. And it seems to be worth it. They boast average yearly returns of 9-12% which is better than most publicly traded REITs and certainly better than Peerstreet.

Unfortunately, as you might have guessed, this comes at the cost of lower liquidity. So if you get nervous or something unexpected happens and you want your money, that may not be easily done.

Fundrise is very upfront about this, so don’t say you weren’t warned. But don’t worry too much either. If you’re investing over the long term, chances are that you won’t want to take your money out.

However, I recommend checking out both Peerstreet and Fundrise despite what I’ve written and favored here today.

Until the Next One,

Noah

The Complete Guide to ETF’s That Every Investor Needs

The Complete Guide to ETF’s That Every Investor Needs

If you have started looking into investing or have been back and forth on the idea of actually putting your money into the stock market than you have probably heard someone say the acronym “ETF”. And if you haven’t heard it then you probably have read it somewhere and wondered… “WTF”… is that?

You may have asked someone you know and they tried to give you their best explanation of it.

But at this point, you’re realizing asking your good buddy Mike (or Mikayla for our lady readers out there, or whoever you asked) probably didn’t help much since they didn’t do a very good job of explaining it (nothing against my Mike’s and Mikayla’s out there, your name was randomly chosen).

So, you just nodded your head when they were telling you all about how they work and you just pretended you knew exactly what they were saying.

Now, you’re probably wondering why you ever ask them anything, because they just seem to mutter out incomprehensible nonsense and never want to help you actually understand things. They just want to sound smart. (huh, this is getting deeper than I thought, you should really evaluate your friendships…)

ANYWAYS… Let’s get this show on the road. I got things to do, cookies to eat, and videos to make. (That’s right guys! I’m working on the YouTube channel and looking forward to getting some video content up to help educate more and more people and make things a little more interesting for my visual learners out there! You can subscribe to the newsletter at the bottom of the post and I will keep you updated on that)

Well, the truth of it is, you’re at least on the right track because learning more Information about the stock market and investments in general, is so important. I think everyone should know about ETF’s and exactly how they work, so today. I’m going to make sure we clear it all up.

So let’s jump right into this thing.

What Is An ETF?

The term ETF stands for “Erecti… (whoa whoa. Sorry, that’s the wrong term, I was reading something on my desk here.) It actually stands for “Exchange Traded Fund”.

What this simply means is that the fund is traded on an exchange like the Nasdaq or New York Stock Exchange. (Hence the name)

Not so complicated huh?

Lucky for my people who already have experience trading individual stocks of some sort, you will find that buying and selling an ETF is extremely similar. They are traded on the exchange in the exact same manner.

Now, for the fund part. (HA. Couldn’t help myself on that one)

An ETF is a collection of many stocks or bonds (anywhere from 10-1,000+) that have been allocated into one purchasable “fund”. They track an index, or a group of assets like commodities, currencies, and real estate.

A great way of looking at this is imagining you have a basket (the fund).

basket of fresh produce

In that basket, you are putting individual stocks. Then, you allow people to buy shares of this entire basket. With every share a person buys of this basket of stocks, they are purchasing a portion of every individual stock put into it.

So why should you want to invest in an ETF instead of investing in other individual stocks and bonds?

The most important reason for investing in an ETF is that it is less risky than investing in individual stocks, yet you can expect similar or even better returns in the long term. The reason for this is “Diversification”.

Diversification allows poor performances of some investments to be, in lack of better words, “canceled out” by your investments that are performing well. To better understand this let us look at an example.

Say you purchase 40 shares of Apple at $125 (A total of $5,000). If technology were to take a huge hit or AAPL was to make a bad business decision and the share price dropped 20%, your invested value would also drop by 20% because all of your money is in Apple. (This would drop your investment value by $1,000)

On the other hand, if you take those same $5,000 dollars and invest it in an ETF (we will make up our own for this example and call it “PLZ MAKE MONEY”) that held 5 stocks with an equal holding of each stock (most ETF’s actually hold higher percentages of certain stocks and lower percentages of others to further balance the risk, but this is just for the sake of example). We will just say this fund holds Apple (AAPL), Pfizer (PFE), McDonald’s (MCD), Coca-Cola (KO), and Chevron (CVX).

So, buying $5,000 worth of the ETF “PLZ MAKE MONEY” (I’m laughing because I just know one of you readers are going to try and find this ETF on the exchange…) will ACTUALLY get you a total of –

$1,000 of AAPL

$1,000 of PFE

$1,000 of MCD

$1,000 of KO

$1,000 of CVX

This is still not great diversification, remember, Yoda once said “5 stocks a portfolio does not make…” or something like that. (Just for my die-hard Star Wars nerds out there, I know he didn’t say this, it’s just a joke.)

So, if in like the previous example, AAPL was to suffer that 20% loss while you were invested in that ETF, and the rest of your stocks performed well enough to not have any losses but also not any gains, your investment value would only go from $5,000 to $4,800.

Even more importantly, on the other hand, if the remaining stocks were to perform well enough to average a 26% gain combined then you would actually have a positive return for the year. Even with the 20% loss sustained with AAPL.

THIS IS WHY DIVERSIFICATION IS KEY.

By buying a broad ETF you are allowing yourself to not be affected so strongly by specific market sectors having a bad year. I talk a lot about this in the article How to divide up your investment portfolio to achieve killer returns. I talk about how many different sectors you should be invested in and the ideal way to split up your money.

So you get why you should buy an ETF and what they are… but now you’re wondering well how the heck does an ETF actually work. Things like… Where do they pick the stocks that go into it and why? So, let’s cover that next.

What is in an ETF and how to find out what you’re getting when you buy one?

There are ETF’s for almost everything you can think of investing in. For example, you can buy an ETF that just focuses on high dividend stocks like the Vanguard High Dividend Yield ETF (VYM) or the Schwab US Dividend Equity ETF (SCHD).

Or maybe you want to invest in some REIT’s but don’t know which one you should buy? Vanguard offers a REIT ETF that holds many properties (VNQ). Heck even if you want to invest in the cannabis industry but you feel it’s too risky to buy just one company, there is an ETF for that, the ETFMG Alternative Harvest (MJ).

Forbes actually put together a great list of the best ETF’s of 2018 and they update it according to the year, some of which you can check out below.

ETF’s are managed funds and sometimes the allocations or stocks held inside of the fund can be changed based off of the market. To find out what stocks are held inside an ETF you can usually just type the ticker symbol into google followed by the word “Holdings”. For example, typing in “VOO holdings” will tell you exactly what the ETF has in it.

Doing this will also help you to find out the percentage of each holding inside of the ETF as they all typically hold different amounts of each company within the ETF. I wouldn’t worry too much about this, as long as the ETF’s objective is to achieve what you are looking for. (such as income, clean energy investing, aggressive growth, etc. )

So, now we’re moving along nicely. You now understand what an ETF is, how to find out what’s in it. But there are some things you still don’t get. Like, How do ETF’s make money and what does it cost to invest in an ETF? So let’s knock that out next.

How much does it cost me to invest in an ETF?

Well as you know by now, everyone has to make their money. ETF managers are no different, they spend much of their time actively managing and analyzing the performance of an ETF to try and achieve the best results for the investors, and they do deserve to be paid for this. ETF’s have expense ratios just like most other managed funds and you can usually find these easily while researching a specific ETF.

Most ETF’s have minimal fees and they can actually help you to save thousands of dollars through the years versus many other investment options.

You have to be aware of high expense ratios with other investment vehicles and even with some ETFs. It is always a good idea to take a look at the expense ratio of an ETF before buying into it. 

Not only are the fees with ETF’S generally extremely low, but a lot of brokers that charge you for trades generally will wave commissions for investing in ETF’s that were created by the brokerage you are using. Which can save you thousands of dollars over time as well, just as we mentioned before in 5 concealed costs that destroy your investment returns.

You may never even notice these fees being taken out as they are handled by the ETF’s parent company. The value of the asset, (also called the Net Asset Value) (NAV) is adjusted on a daily basis to account for these small fees.

So simply put, the management fees for investing in an ETF are already reflected in the value by being adjusted downward to find the Net Asset Value and aren’t something you should ever expect to be taken out of your investment balance in a lump sum. In other words, If an ETF returned exactly 0% over the course of the year than you would slowly see your balance decrease over time. Not all at once.

Next, let’s address some minor differences you should understand when investing into an ETF. Like, dividend payouts.

How does an ETF payout its dividends?

A lot of times an ETF holds shares of stocks that pay out dividends. In this case, ETF’s still pay out the full dividend amount, but do so by holding all paid out dividends until each quarter. This allows them to accumulate for the duration of the quarter before paying them out to shareholders.

Most ETF’s dividend yield can be found while researching a fund and you can know what amount and when your dividends should be paid to you.

Final Thoughts on ETF’s

The effect that an ETF can have on your portfolio is one that should not be overlooked and should be researched as thoroughly as possible. ETF’s have become an increasingly popular way of investing in the last few years and they have been widely praised by many investment professionals like Warren Buffet.

Look, honestly, guys, don’t be dumb. Diversify. Or DIE. (well, I mean odds are you probably won’t die, but like, still it’s pretty serious) Diversification can make all the difference in the world when it comes to investing and can really help to stabilize your investment portfolio.

Whether you decide to choose an ETF or a mutual fund (which I will explain more about later) or just individual stocks, always be sure you are diversified. 

If you guys are looking for great resources for finding quality ETF’s, then investment brokerages are going to be some of your best bets. I personally think Vanguard and Charles Schwab offer some of the best ETF’s available and you should consider checking them out.

And in the meantime, I’d love if you could subscribe to the blog and stay updated on all the awesome things I am working on for you! Thanks for reading!

Until the next one,

Noah

5 Concealed Costs That Destroy Your Investment Returns

5 Concealed Costs That Destroy Your Investment Returns

Up to this point, I’ve basically been telling you all of the amazing ways that saving and investing your money can MAKE you money in the long run. Like in my articles How to Invest in Stocks with Only $20 for an Amazing Future and 5 Places to Set and Forget Your Money to Let It Grow.

Well, today I’m going to do just the opposite. I’m going to talk about all the ways that investing (carelessly, that is) can actually LOSE you money.

Before you freak out, I don’t mean put you in debt or anything. I just mean that if you’re not careful, losing a few dollars to these things today could mean losing the potential for thousands of dollars in the future.

Remember that old saying “a penny saved is a penny earned”? That’s basically what I mean here. Every dollar invested today is worth $2 in just a few years. Making sure that you understand these common fees and staying aware of them will make all the difference in the world.

Don’t get me wrong, you’ll still save up plenty of money if you just follow the guidance I’ve given you so far. But a recurring fee of just a couple dollars with each trade, over a lifetime could easily end up costing you $100,000 in potential growth lost. Are you convinced now?

Uhh yeah!!

Good!!

So what are these pitfalls and tripwires that I need to look out for??

Well, I’m glad you asked!!

Trading Fees

For you Robinhood users, this may seem like a foreign concept to you, but there are actually brokers out there that will charge you for each trade that you make.

Nowadays it’s typically a flat fee if you’re using an online discount brokerage, so no matter how many shares you’re buying, you’ll have to pay the exact same amount.

There are also “full-service” brokers who offer a HUGE variety of services like research, tax tips, retirement planning, and even just general investment advice. These brokers are pretty comforting for first-time investors who need a little hand-holding and can keep you from making some rookie mistakes. Unfortunately, they’re able to offer these services by charging much higher commissions than the discount brokerages that we tend to preach about in our articles.

Honestly, for those of you looking to see the most gains from your money in the long run, stay away from full-service brokers. Hopefully, between my articles and other research, you’ll learn everything you need to know to be confident in your investment strategies. That’s my goal after all. To help more people like you make the most out of their money!

So back to the topic at hand. Are these fees a bad thing? Weeeeeell it depends. Typically the more money the broker makes, the more services they can offer you. So it really depends on what’s important to your investing strategy.

Someone who is just investing in ETFs may not need the full research suite of TD Ameritrade and wouldn’t want to pay the $6.95 per trade. On the other hand, someone who invests in individual stocks might find the fee well worth their money.

I don’t want to seem like I’m trying to steer you away from more expensive brokers. They definitely have more to offer, and there can be advantages in some cases. But for the style of investing that I’m preaching and for those of you that aren’t looking to become day traders, fewer bells and whistles usually won’t hurt.

The main point here is just to be aware of how your broker is making money off of you. If they aren’t taking too much of your money or what they offer is worth your money, then you can stop worrying about trade fees.

Expense Ratio

I’ve talked a bit about this before in my article How to Divide Up Your Investment Portfolio, so if you’ve read that article already then this may sound familiar. If not, I suggest you check it out if you’d like to know more about how to divide up your portfolio over different asset classes and market sectors.

Anyway, the expense ratio of a fund is how much of the money they make is being used to actually run the fund. This includes everything from office space to paying the employees. And if you haven’t guessed already, the larger this number is, the smaller your dividend returns will be. This matters a lot in the long run of your investments since these dividends play a large part in the compounding effect of your investment growth. I will talk about this in more detail in later articles but just know for now that high dividends are never a bad thing.

So because these expenses can cut into your returns, you’ll want to invest in funds that have the lowest expense ratio possible. Some of you may be worried about the quality of the fund declining with lower expense ratios.

I mean, how can they pay for the best people if they don’t give them enough money?? Which makes me feel kinda like Mr. T because I PITY THE FOOL WHO INVESTS IN INDEX FUNDS WITH A HIGH EXPENSE RATIO!!!

But in all seriousness, this is a valid concern if you’re investing in a managed fund instead of an index fund. However, YOU SHOULD NOT BE DOING THIS! I’ll explain more about this in another article, but in short, it’s better to capture the total gain of the stock market than just portions of it 99% of the time.

This is so true that there’s even a book about this called The Little Book of Common Sense Investing where John Bogle talks almost exclusively about this fact. I’m actually reading this book now, and I definitely recommend it if you have the time.

Bottom line: invest in index funds (mutual funds or ETFs) with the lowest expense ratio possible.

Commission Fees

Now if you’ve been reading my other articles, then you’ve probably heard me talk a lot (maybe even too much for your taste) about ETFs. And as much as I love them, there are a few that try to “swindle” you out of your future returns so to speak. They’re really just trying to make more money, and they do this through commission fees.

So what are these mysterious commission fees?? Well, a commission fee on an ETF is a fee taken out of the money you invest in the fund. This is actually separate from the trading fees discussed earlier, so if you’re not careful, you’ll be paying two fees which can add up to THOUSANDS of lost dollars over the years.

This is one of the costs that can really sneak up on you since it isn’t as obvious as regular trading fees. Not to mention the fact that they are applied on buys as well as sells.

Luckily, there are many ETFs that are commission-free, and some brokers even allow commission-free trading of all ETFs (of the ones they offer anyway).

I recommend doing some research into your brokerage to figure out which commission-free ETFs are offered. If they are good options, then try to invest mainly in these to cut down on unnecessary costs.

Bid-Ask Spread

This one is a bit more technical, but have no fear! Captain Pretty-Good-Explainer is here!!

Anyway, the bid-ask spread of a stock or ETF is the difference between what people are wanting to buy it for and what people are wanting to sell it for. Pretty simple, right? So how can this cost you money?

Let’s imagine a stock whose bid price and ask price are spread further than a hookers legs on a working Friday night (okay maybe not that far). Now let’s imagine that you made the mistake of buying the stock at the full ask price (what people are trying to sell it for) because you just kneeeeew the stock was going to go up.

Assuming that you’re not a HORRIBLE trader (or that you got lucky) and the stock actually did go up, when you went to sell it, you’d likely have to sell it at a lower price than what you’d actually want to sell it at because of the large spread. And if you’re desperate enough for whatever reason, you may even sell it at the bid price (what people want to pay for it).

Despite how much the stock’s assessed value may have increased, you didn’t actually see this full growth because you bought for more money than you should’ve and sold for less money than you could’ve.

I think you can see why this would be a bad thing. The best way to avoid this predicament is to either avoid stocks and ETFs with large bid-ask spreads or to be aware of the large spread and keep it from getting the better of you (by not selling frequently).

It’s all in how much risk you can stomach, really. In the end, most of the good index funds that are out there should have negligible spreads, so if this is your strategy, then you won’t have to worry too much. Just keep it in mind.

Taxes

Now is the point in the article where it’d be very easy to insert Ben Franklin’s quote about death and taxes. But honestly, the quote itself is about as unavoidable as the two things it mentions, so I’d be surprised if you haven’t heard it enough already.

Sadly, investing is no exception. If you’re wondering what you have to pay taxes on, the answer is the same as it is for every other part of life: Everything. Seriously though, you pay taxes on dividends, interest, and the infamous capital gains (yes, unfortunately, that weird tax all those old people gripe about will now start to affect you too).

Damn those dastardly capital gains…

The percentage you have to pay varies based on several things including your tax bracket, how long you’ve held the stock, and whether the company pays the U.S. government taxes before paying out their dividends (Don’t worry. All American companies do this).

I know I’m kind of brushing over all of this, but there are quite a few specificities to all of these different taxes. So it’s going to be something I have to cover in another article down the road. But there is one more thing I’d like to mention about taxes.

If you sell for a loss, this essentially counteracts your capital gains. Meaning that if you sell a few shares of one company for a $2000 gain and sell a few more of another for a $2000 loss, then you won’t have to pay any taxes! Of course, this also means that you didn’t make any money, so maybe don’t do that.

But if you’re looking to get rid of your position in a company or fund anyway, you might as well take the loss because:

  1. It’s better to cut your losses early
  2. You can use that loss to offset your gains

And if you’re feeling particularly crafty, you can strategically sell for a loss to offset a large gain. Just make sure you don’t buy the stock back within 30 days or it’ll qualify as a wash sale, and you won’t actually get a tax break from it. But I’m not a fan of this personally. As you’ll come to see, I prefer to avoid the capital gains tax by holding for as long as possible and selling very rarely (if ever).

Look I know I kind of brushed over some of this stuff pretty quickly (especially the tax stuff), but try to keep yourself from panicking just yet. Like I mentioned before, there’s A LOT of twists and turns to these various aspects of investing, but I promise you I will help you navigate them!

I love learning more and more about these things, and I love to share it with all of you. So stay tuned for upcoming articles as I get into some more specifics of all of the things I mentioned here.

I hope I was able to give you a basic understanding of the things I talked about here today. If not, feel free to go to the Contact page, and send me a personalized message about how I totally suck.

Thanks for reading and stay busy Living Better!

Until the next one,

Noah