3 Ways You Can Start Investing Even When You Are In Debt

“Balancing your money is the key to having enough.” – Elizabeth Warren

 

Nowadays debt is no stranger. Student loans, mortgages, credit cards, many of us need to rely on credit or loans to get what we need. Yet, when you have loans to pay back, how can you start investing for the future? Especially if you want to pay down those loans at an increased speed? Many of us feel it’s almost impossible to starting investing for the future until we are debt free. For some who take this path, they won’t start investing until their mid 30’s to early 40’s; which won’t leave them much time to build a steady nest egg for their retirement. The million dollar question is how can you start investing when you are young, have debt, and just starting out in a career? Here are my three ways you can start to do all of the above today:

 

Pay Yourself First – Any Robert Kiyosaki fans in the house? If you haven’t read Rich Dad, Poor DadI would highly recommend it. In his financial thriller Kiyosaki introduces the concept of paying yourself first. What does this mean? It means setting up automatic deductions and contributing to your simple IRA or 401k through work. How does this help? The biggest reason this helps is many times employers offer a percentage match of your contributions which means you’re making more money on top of your contributions. There are also several tax advantages upon the withdrawl of your money depending on what type of retirement account you have.

 

The second reason is because your money is going to grow faster in an IRA or 401k than in your traditional bank savings account. Most simple IRA’s, Roth IRAs, and 401k retirement funds are invested in several long term growth mutual funds which offer a healthy asset allocation of both stocks and bonds, this offers a decent percentage of growth over time. Of course these funds vary but once again you’ll see a better return compared to the 1% return you might make in a traditional bank savings account. By giving as much money as you can to your retirement accounts through work, you’ll be able to stash away money and start investing while paying down any loans. If things are already tight financially look at ways you can cut back. For instance if you spend $100 a month eating out, you might be able to stay in and contribute that $100/mo to your retirement fund.

 

Save Your Pennies – In my opinion stashing money away in a savings account isn’t a bad thing, as long as you have intentions of investing it. As previously stated, the reason many financial advisors advise to not stash money away in your bank account to save for retirement is due to such low interest rates associated with savings and checking accounts. Yet, there are other financial vehicles you can use to grow your money. For me, that vehicle has primarily been real estate. I have been known to live extremely frugally, save up a bunch of money, and then drop it on an investment property which will make me money for years to come.

 

So what is the point of investing in real estate? The point is to not only create equity in your property but you can essentially live for free by house hacking. House hacking, a term coined by Biggerpockets, is when you buy a multifamily property, live in one of the units, and rent out the other units on the property. From my first house hack I lived for a little under $700/mo due to my tenants helping out with the mortgage, not bad for Northern New Jersey; now, with the entire house rented out I make about $700/mo in rental income after the monthly mortgage is paid. Once the mortgage on that house is paid off entirely in the next 20-30 years I’ll be making about 30k a year from that house alone. I’ll always be a big advocate for real estate as I feel it’s an amazing investment tool to build and accumulate wealth.

 

Now I know what you might be thinking A) I don’t have anything close to a down payment to put down on a house or B) isn’t a mortgage a massive amount of debt? Both thoughts are certainly valid. With my home, I used an FHA loan which allowed me to put down as little as 3.5% of the home’s sales price so I didn’t have to deplete my savings by purchasing a home. The only condition with an FHA loan is that you must live in the property for at least one year, as this is an owner occupant loan.

 

Additionally when it comes to debt I believe there is good debt and bad debt. I would classify bad debt as anything you specifically need to pay off: student loans, credit card debt, rent, and even a mortgage where you are the only resource paying it off. I would define good debt as a mortgage which is paid off by tenants or another resource such as Air BNB. This way it’s not really money out of your pocket AND with every mortgage payment from your tenants you create more equity in your property! Want to know more about real estate investing? Check out Biggerpockets and be sure to check out Scott Trench’s book – Set For Life, which covers how to house hack and building wealth through real estate investment.

 

Save Your Pennies Some More – A really good way to invest while having debt, which I feel is rarely covered, is to become a lender. How do you become a lender? Well you need to save, save, and save some more. When you save a generous amount of money, put yourself out there to people who might want to borrow your money and charge them interest on the borrowed money to make money on your money. Again this loan could be in the form of a down payment for a car, home, or even a small business that someone might need. There are now sites like Lending Club which offers peer to peer lending. You supply the money and then make interest (about 4-6%) on your money while the borrower pays you back. Not bad for just saving!

 

Conclusion – Having debt doesn’t limit you from saving. By being frugal and taking these steps you can be on your way to creating wealth while still paying back any loans or debt you may have. As all things, saving money and investing takes knowledge and discipline. It’s super important to read up and educate yourself before investing! For more information check out our Resourcespage which includes some good reads and blogs that cover different forms of investing. Have any questions, comments, or ideas about investing? Let us know in the comments below!

Three Reasons Why You Should Substitute Your Master’s Degree For A Real Estate License

“There is no more profitable investment than investing in yourself. It is the best investment you can make; you can never go wrong with it. It is the true way to improve yourself to be the best version of you and lets you be able to best serve those around you.”– Roy T. Bennett

 

Ah, Spring is here and as usual the creativity is running through The Thrive Vine. Today’s topic is near and dear to me; mostly because this is the approach I took with my educational journey. I racked my brain for years wondering if I should go for my Master’s Degree (who knows someday I still might) but in the short term I opted for the not so conventional substitute of getting my Real Estate License.

 

Overall, getting my license has paid off. In my best year so far I was able to make 32k in commissions while working part time as an agent (if anyone wants to know more about how I did this I can certainly write a blog on this). Being in real estate has been a really fun and exciting path, and I think both short term and long term it has been a better investment than going for my Masters would have been.

 

Usually when I talk about getting a real estate license most people out the gate protest “I don’t want to sell real estate” or “I’m not a good salesperson” well that’s perfect! Because in today’s blog I’m going to explain why getting your real estate license isn’t just for selling houses, it’s just down right a more practical decision than going for a Master’s Degree. Here are three reasons why you should substitute your Master’s Degree for a Real Estate License:

 

Practicality –  In the opening of this blog I mentioned that getting your Real Estate License is more practical than getting a Master’s Degree. Why do I feel this way? Because whether you are going to be a homeowner or renter I’m about 100% positive you’ll want to know what your contract/lease means. We have to look at buying a home as being one of the biggest financial decisions of our lives (aside from college) and just having the knowledge of different types of loans, the options you have, and how the process works is beyond beneficial. You’ll never have to worry if someone is looking out for your best interest; because you’ll have the tools necessary to do so.

 

Supplement Your B.A – When driving myself crazy about whether to go for my Master’s Degree or not I started to ask myself some introspective questions, such as: What will a Master’s Degree do for me? Is it worth going into more debt? (this was a big one for me) and possibly what is my goal in my career? The answers to these questions I still have with me today.

 

I believe for most, a Master’s Degree ultimately means a larger potential salary, faster career advancement, and makes you certainly more marketable to employers down the road. Yet when I thought about it; these same qualities are what a Bachelor’s Degree was supposed to accomplish 20 years ago. So 20 years after I receive my Master’s Degree, would it be obsolete? More importantly, would I be obsolete? Could I be dispensable by a younger generation coming out of school with PHds? All of these questions came in to play and aided my decision. Instead of spending the tens of thousands of dollars on a Master’s Degree I went towards my Real Estate License, which including books and a 2 week class, was a  total of a thousand dollars.

 

When thinking about pursuing a real estate license many people assume you need to sell real estate. Although that’s what it’s most commonly used for, you can also use the credential to supplement your Bachelor’s Degree. How you might ask? Well think about real estate development companies, commercial real estate investors, property management companies, real estate investment trusts, even healthcare such as senior living companies, etc… any company or non profit that wants to expand, has a targeted demographic, and wants the best success for their business will have a need for someone who knows real estate.

 

Personal ROI – I lastly wanted to talk a little bit about Personal ROI (return on investment) between a Masters Degree and a Real Estate License. Let’s look at some numbers: Say you spend 20k on a Master’s Degree and get a job for about 70k-80k, if you have industry experience, or possibly 50k-60k if you don’t have any industry experience and just your Master’s Degree. If you’re coming out of school with debt, you won’t see the full return on your investment until you pay off your debt completely. On the other hand, real estate offers different kinds of Personal ROI. Keep in mind your total investment of your license is about a thousand dollars; so even if you sell one home you’ve made your money back on your initial investment.

 

But say you don’t want to sell houses, or choose to not, use a real estate license to supplement your career. Then how does getting a real estate license make sense? The answer is investing. Simply put, if I didn’t have my real estate license I probably wouldn’t have gotten into real estate investing as fast as I did. It was because of my real estate license that I was able to see properties that hit the market first, meet mortgage lenders and get great rates on my personal mortgages, and additionally meet wonderful people and form relationships along the way. As I’m sure you can tell, I feel getting a real estate license has the potential to have tremendous Personal ROI.

 

Conclusion – This blog admittedly a tad biased in favor of substituting a Master’s Degree for a Real Estate License. My goal here is not to deter anyone from pursuing their Masters, but really bring awareness in making a conscious effort to explore what additional credentials will do for you, and most importantly is it worth the debt you’ll take on. Furthermore think about your personal ROI, and hopefully, the joy and personal fulfillment a Master’s Degree might bring to you.

 

I sincerely believe having a real estate license is such a useful tool, to not only build wealth; but make connections and form relationships as well. What do you think? What does a Master’s Degree mean to you? Would you ever consider getting a real estate license? Let us know in the comments below!

Three Ways You Can Leverage Your Debt To Build Wealth

“I learned that if you work hard and creatively, you can have just about anything you want, but not everything you want. Maturity is the ability to reject good alternatives in order to pursue even better ones.” – Ray Dalio

 

To most, debt is a serious type of animal, and for good reason. Likened to that of meeting a grizzly bear in the middle of the wilderness (#yikes) we’ve always been instructed that debt is bad and, like a grizzly bear in the wilderness, should be avoided at all costs. However what I’m currently learning in my own investment journey is how to leverage your debt to acquire assets that will further build you wealth. Here are my three ways you can leverage your debt to build wealth:

 

The HELOC – Are you a homeowner? Or even one day plan to inherit an estate? Well a HELOC  (home equity line of credit) might be just for you. With a HELOC the owner of a property is able to take out a line of credit on their primary residence based on the amount of equity they have in the property.

 

For example say your home is worth 100k and you owe 50k on it, you now have 50k in equity in your home! Now naturally, when applying for a HELOC most banks won’t lend up to 100% of the amount of equity you have in your home, however they will lend up to 80% to even 90% of the LTV (loan to value). Essentially if you have 50k equity in your home you can walk away with a 40k line of credit based on an 80% LTV. This alone isn’t too shabby, 40k can pay for home repairs, to pay down your mortgage, go towards student loans, or it can be a nice down payment on another asset such as an investment property. Yet, like all lines of credit keep in mind a HELOC still needs to be paid back. So what does an example of this look like:

 

Let’s use our previous example of before: Your home is worth 100k and you owe 50k on it. You know the bank will lend up to 80% LTV so you’ll walk away with your 40k line of credit. Instead of blowing your 40k at the casino, you decide to use your line of credit as a 20% downpayment on a 200k multifamily which is priced below market value.

 

After maxing out your line of credit you might use some money from savings to create a little equity in the home such as floors, paint, etc… After having the multifamily rented out you can then choose to refinance the mortgage (remember you already have 20% equity in the home from your downpayment, on top of buying the home below market value, and the forced appreciation of the new flooring, paint etc..)

 

After all that work say the home appraises for 260k and you owe 160k (200k, the price of the home – 40k your down payment). You now have 60k in equity in your brand new investment property! After doing a cash out refi of say 75% LTV you end up with 45k (60k x 75%) in cash! Enough to pay off your HELOC and have 5k left over. Not to mention a brand new cash flowing investment property.

 

The Auto Refi – Let’s get real here, cars are one of our top liabilities. Some of us pay absorbent amounts on loans, and leases for the vehicle to depreciate right off the lot. It’s tough to imagine this liability could ever fuel an asset. However, like a home, you can also refinance your car loan. Why would this make sense? Well say your car is worth more than what you owe on it? You could simply refinance your car, take cash out, and start with a new loan.

 

Now, if you take the proceeds from your cash out and put them towards an asset such as a home, vacation rental, etc… you can then not only create value for yourself but have someone else pay off your car loan (#tenants). For more information this article from lending tree was super helpful.

 

The Credit Card – Ummm… What’s in your wallet? For most of us, not a heck of alot. However with cash back rewards programs from credit card companies you can see a portion of your purchases back. What does this mean? Well if you have the intention to invest, it means you can see a portion of your hard earned money back via rewards programs. These cash back rewards can potentially be set aside for cash flowing investments, or another asset that will build you wealth. There are a tons of blogs written on this topic, including this one which I thought provided good insight.

Conclusion –  The key takeaway here is that intentionality is everything. It is very possible to take some of our most wealth depriving liabilities such as homes, cars, and credit cards and use them to create wealth and acquire assets. However, at the end of the day the intentionality and financial discipline needs to be up to the individual to take action. What do you think? How can you leverage up some of your liabilities to help you gain wealth?

Life Hacks Baby Edition: Part 2

“We must consult our means rather than our wishes.”   – George Washington

 

Hi Everyone, and welcome back to Life Hacks Baby Edition: Part 2. In case you missed Life Hacks Baby Edition: Part 1, we discussed some investment strategies on how to pay for the big ticket items in your child’s life such as college, their first car, etc… using investment methods such as index fund investing and real estate investing. Today in Part 2 we’re going to discuss how to save on some expenses during the day to day journey of raising a child. We’ll provide some helpful links and hopefully some out of the box ideas of how you can reuse some of your resources to see some steady savings while raising your little one:

 

The Cell Phone Baby Monitor –  Just doing a quick search on Amazon I found baby monitors ranging from $20.00 to over $300.00! Each monitor has different bells and whistles for your young padawan; but for something that will likely only be used for a few years, is $300.00 worth the expense? One creative idea I saw to alleviate the expense of a baby monitor (or security camera) is reusing old smartphones. Essentially through baby monitor apps, or video teleconferencing apps such as Skype, you can download, mount, and run real time footage of the area that you want to monitor. For more information or how to learn how to set up your own baby monitor using an old smartphone or tablet be sure to check out resources like this article or the video below!

 

 

 

What To Wear – When I was growing up, cheap clothes definitely meant hand-me-downs, the Goodwill Store, and Salvation Army; all of which are still viable options today for any family on a budget. Yet, one trend that is catching my eye is the ever growing rental business of clothing. I see it for adults all the time and now there are multiple businesses that offer affordable clothing for children. Here are the top three companies I’ve come across:

 

Kidbox – Kidbox offers clothing for the day to day. Whether its back to school shopping or even the essentials like undergarments and socks, this company seems to offer  wide range of styles and clothing for your children. What is really great about this company is that you only pay for what you keep; which is a huge bonus.

 

The Borrowed Boutique and Rainy’s Closet – What I liked about both of these companies is that they are perfect for those “special occasions”  such as baptisms or weddings. Both companies offer a simply business model and the clothing they offer seems very elegant and well made. For your children you simply pick out a nice outfit, got to the event, and then return the outfit. This can certainly be much more cost efficient than buying a dress or suit and only having your child wear it once or twice for a special occasion.

 

What To Eat – I think at one time or another every parent has probably wondered “will this kid stop eating already!?” Growing kids are hungry, and… well… food costs money (you can put two and two together) No, I’m not proposing to starve the little meatballs, but instead map out some healthy and affordable meal planning. I’ve personally found the best way to feed a group of people in general is to make one big dish during the week and have leftovers for lunch or dinner for the rest of the week. It saves not only the most money, but time as well. Here are some recipes and resources you might find helpful when it comes to preparing dinner or cooking a dish up for the week that everyone in the family can enjoy:

 

Kidspot Recipes – This link will bring you to 12 quick and easy recipes anyone can accomplish while on a budget or strapped for time.

 

98 Cheap and Easy Foods to Make – In this article you will find, well…. 98 cheap and easy foods to make.., above all in this article the author lays out alot of quick and healthy dishes to make while on a budget.

 

Adult Hack –  I found this article actually pretty interesting and wanted to include it in this blog. It’s actually for how adults can watch their calories by ordering from the kids menu at many chain restaurants. Some of the restaurants mentioned aren’t the healthiest choice; however if you’re on the go this is an option worth exploring to save a little bit of money.


Conclusion –
There are ways of saving money all around us, sometimes we just need to get a little creative. What I’ve found the most helpful during my time writing these blogs is doing honest research. There are so many businesses and services out there to take advantage of, that you would never even know existed if you haven’t looked for them! How do you save money on the day to day expenses for your kids? Do you have any good recipes or tips on how to save money? Let us know in the comments below!

Life Hacks: Baby Edition Part 1 (Saving for College)

 

“Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.” – Dave Ramsey

A few weeks ago, I was going through my facebook feed and I came to the realization that I never really realized how many of my friends have children, or are expecting to have children! Since The Thrive Vine is a family blog I wanted to address kind of a misunderstanding about kids and finances. I think many people, to some degree or another, believe that kids are expensive; and that if you’re going to have children, your run at financial independence is just about over.

 

Sure you have the big ticket items like college, vacations, maybe even future medical expenses such as little Timmy breaking his ankle jumping from a jungle gym in elementary school (#sorrymomanddad) But what we forget are that children are just mini adults (and some adults are big kids) so if you can fiscally take care of yourself there is no reason why a child should break the bank for you and your family. Today in Life Hacks: Baby Edition Part 1, we are going to be addressing the all elusive college fund and how you can starting investing (not saving) for your baby’s future:

 

College Fund –  I remember any Birthday, Christmas, or Graduation money I got as a kid went into one fund: the college fund. In today’s world  things aren’t much different. In fact, many millennial parents are still paying off their own student loans while saving for their children’s education. I think what many people fail to realize is that college is no longer something that can be saved for; but something that needs to be invested towards.

 

Here’s what I mean: I remember my father telling me when he went to college back in the 70’s his tuition was $700 a semester (I believe this was including books!) I know personally, when I was in college, I spent more than my father’s total semester tuition in books alone almost every semester.

 

What I’m getting at here is that $700 is a very feasible goal to save towards. However what if your child’s tuition is 10k-20k a semester!? There’s a very little likelihood that you are going to save enough money for one semester never mind an entire college education in 17-18 years. However there are two main options that I’d like to share with you for investing towards your child’s college fund:

 

The Real Estate Method –  As you know I’m a real estate investor, and believe that real estate is probably the fastest way to grow your wealth. However what if just one rental property could pay for half if not all of your child’s college education? Here’s a scenario:

 

Say you purchase a rental property on your baby’s first or second birthday for 100k, you put down 20k, which leaves you with an 80k mortgage. Over the next 17-18 years you rent out the house and your tenants pay down another 20k of your mortgage which leaves your mortgage at 60k. Keep in mind the beautiful thing about real estate is appreciation; you purchased a house almost 20 years ago and as the market appreciates in value, so does your home. Lets fast forward to 17-18 years later and your home is now worth 210k due to appreciation and of course any work you put into the house.

 

This means by owning just one rental home for almost 20 years and having your tenants pay down your mortgage you now have 150k in equity! (210k appraised value – 60k your mortgage). So you might be asking how is this going to help with my child’s college fund!?

 

Well you are going to tap into that equity to pay for your child’s college! There are many options for this scenario including Home Equity Loans and HELOC’s however for this scenario let’s use a cash out refinance. In this scenario using a cash out refi you can walk away with 97,500 by refinancing your house. Here’s how:

 

210k (Appraised Value of your home) x 75% LTV (loan to value typically what a bank will lend you) = 157,500k

 

157,500k – 60k (Mortgage) = $97,500.00

 

With any luck $97,500 will hopefully be more than enough to put a dent in any college debt your child might have. Additionally you still have a rental property where your tenant will continue to pay down your mortgage.

 

The Index Fund Method – Believe it or not the greatest asset a parent has when investing for their child’s future is time (if you start early) It just so happens that is what index fund investing is all about; accruing compound returns over a period of time. Here at The Thrive Vine we aren’t exactly financial advisors I can’t tell you which funds to invest in, however from my own experience and readings I can share with you some funds and resources worth exploring.

 

Being a real estate guy I truthfully didn’t know much about index fund investing until I read the Simple Path To Wealth by J.L Collins. In his book, Collins strongly suggests the fund VTSAX (Vanguard Total Stock Market Index) What index funds do is track the stock market. What does that mean? It means that while many investors will gamble on individual stocks to provide stellar performance, by investing in a U.S total stock market index you are betting on the United States Economy as a whole. VTSAX alone is made up of about 3,600 publicly traded companies including tech giants such as Apple, Microsoft, and Amazon.

 

One thing that I didn’t like about VTSAX is that Vanguard requires 10k to start investing, because of this I started investing in SWTSX (Schwab Total Stock Index). While the Schwab index is made up of fewer companies than Vanguard, it doesn’t require a minimum to start trading; additionally if you have a Schwab account you get free trades. Still like Vanguard? No Worries you can invest in VTSAX in EFT form using the ticker VTI.

 

So all of this information might be useful but how is this supposed to help you invest towards your child’s college fund? The great thing about index funds are that they grow! When the market increases your index fund goes up in value. If you continue to invest on a regular basis (whether the market is up or down) your earnings can grow quite a bit. In fact VTSAX has a average 5 year return of 12.83% which isn’t too shabby.

 

The scariest part about index fund investing is when the market goes down. Keep in mind all markets, whether real estate or the stock market go down. The whole mantra behind index fund investing is that you can’t time the market; and you’d be foolish to do so. By investing steadily in your fund and keeping to your game plan you will eventually see gains.

 

When investing for your child’s future the greatest asset you have is time. Although 17-18 years might not seem like alot of time to accumulate a massive amount of money for your child’s education; once your money starts compounding you will certainly be in good shape for your child’s educational future.

Conclusion – How do you plan to save for your child’s college fund? What tips or strategies are you using that you might be able to share? In Part Two we are going to dive a little more into life hacks on how newer parents can save money  (which in turn they can invest) and continue on their journey to financial independence while bringing their little one along for the ride!

How Debt Can Set You Up For Financial Success

 

 

 

“I like the night. Without the dark, we’d never see the stars.” – Stephenie Meyer

 

Usually the words debt and financial success are never used together, nevermind in the same blog title. Yet, I wanted to write a blog about what I learned from being in debt and the biggest lessons and habits that helped me. While being in debt is certainly something most financial professionals (and me) would never advise, there is always a light at the end of the tunnel; and there are some life changing lessons to be learned by being in debt and getting out of it. Without further adieu here is how debt can set you up for financial success:

 

The Background Story – Back in 2011 I was the ripe old age of 22 and fresh out of college. My total student loan debt was a mere 45k;  childsplay compared to what many college graduates face today. Yet, as they say, timing is everything and after graduating just 3 years post the Financial Meltdown, the unemployment rate was 9%; which really sucked. After getting off to a rough start in the job market I found myself with two bachelor degrees working for $12.00/hr; not exactly what I was envisioning. However, it didn’t really matter how much I was making, I had 45k to start paying off.

 

The Habits –  I’ve always been a pretty frugal person so having enough money to pay off the monthly statement on my student loans really wasn’t an issue. It wasn’t until I started understanding interest rates that I was able to step up my game and start aggressively paying down my debt. Soon every spare penny I had went towards those loans and I eventually paid off the 45k in about a year and a half, thanks to $12.00/hr and more overtime hours than anyone would need in a lifetime.

 

Although most would say paying down the loans was a great accomplishment; it wasn’t until the debt was satisfied that I realized the habits formed by repaying my debt were attributing to my financial journey and success. If you’ve made it this far, you might be asking “what the hell is this guy talking about!?” Stay with me..

 

You see, it hit me that when you are actively paying back debt you are always on a budget; afterall, you know that you have a loan payment coming up and will budget your finances appropriately to make that payment. However when you pay that loan or debt off, you still have the power to put away money as if you were still paying off your debt. For example, say after you pay off your debt you continue to allocate that loan payment in your savings account or a retirement account.

 

By formulating this habit, you learn the art of not only saving but paying yourself first. Paying yourself first is really one of the most important rules of personal finance. It’s important to not increase your expenses by spending your money on expensive lunches and nights out at the bar everyday; but take that extra money and invest in yourself and your future.

 

Credit – Another way that debt has the potential to increase your financial success is through your credit. I remember after paying back my student loans my credit score soared to over 800. What did this do for me? It was because of a good credit score that allowed me to lock in a stellar 3.3 percent interest rate on my first duplex; without question this wouldn’t have been possible if I wasn’t set up by the habits that were created by paying off my debt.

Conclusion – Not very often will you hear to appreciate debt. However, when the habits used to pay back debt are used towards savings and investing; financial success is almost inevitable. What do you think? Do you think the habits caused by debt can later help you on your financial journey? Let us know in the comments below!

What Is Your Plan For The Next Financial Meltdown?

“Only I have no luck any more. But who knows? Maybe today. Every day is a new day. It is better to be lucky. But I would rather be exact. Then when luck comes you are ready.” – Ernest Hemingway

 

Last week was a rough week for the stock market. After the Dow plunged over a thousand points during a trading day most investors, including myself, proverbially shit ourselves. However after the Dow had it’s meltdown and the market starts to rebound most will lose their focus; yet, what if I told you last week was just the tip of the iceberg? A storm is coming and you need to be prepared to weather that storm. In today’s blog I’m going to make some market predictions for the years to come and more importantly explain some practical investment options you have to not only save your wealth, but how you can create more:

 

Start Saving – The best way to prepare for a market downturn is to start saving your money, because those with it are going to score big. We know the best time to invest in housing, and stocks is when the market is collapsing. As people are feverishly taking their money out of the market trying to save their losses; that is when you are going to strike to pick up stocks and other investments at a discounted rate. It’s easy to forget that we have been in a bull market for the past 10 years. However, what goes up must come down. So if you’re thinking about making a big investment now; I would really consider to think about that investment. In a few years your money and liquid cash might be able to get you much further.

 

Welcome Back Interest Rates – Here’s what we know: interest rates are going to rise. The Fed has to raise them to fight inflation. Right now with rates sitting at just above 4% we still have it really good. However when those rates start to get to the 5-6% range we will see some changes in several markets. The housing market will probably take a generally big hit. Higher rates will more than most likely deter home buyers, and as a result will make the rental market considerably strong around the country. So what does that mean? It means if you were thinking about selling your investment property, you might want to hold on to it for a few more years as rents will increase. On the flip side if you were thinking of buying a home, now might be a good time to do so to avoid higher rents, and capitalize while interest rates are still moderately low.

 

We will also see student loan interest rates go up as well. This is going to result in a sticky situation because there are many who already have issues paying back student loans. Higher interest rates may make the probability of default more likely; which is never a good sign.

 

Yet, rising interest rates aren’t always a bad thing. With increased interest rates we will see the return of investment vehicles such as bonds and CD’s (welcome back!). For the past 10 years the best investment vehicles to rely on has been real estate due to low interest rates, and the stock market due to consumer confidence. Bonds and CD’s are a wonderful way to tie up money and watch it grow over 5-10 years. Those with liquid money can really cash in with this investment vehicle by making interest rates work for them!

 

Patience – The next financial collapse that we see will involve a much larger portion of the millennial generation. During the financial crisis of 2008 many of us were still attending high school or college and certainly didn’t have money to play with in terms of investments. For the instant gratification generation, it will be extremely easy to see how our patience plays out when timing the market. My prediction is that in the next 3 years we start to see more market declines. Not to be a real buzz kill, but the next financial crisis will be worse than the financial crisis of 2008. Why you might ask? Well I have a strange feeling that student debt is going to play a big role in how the economy responds.

 

Whenever I see “loan forgiveness” or lengthy deferment programs; I cringe. The reason I view loan forgiveness as signs of a weakening economy is because the financial institutions aren’t getting paid. I get it “banks have enough money, why do they need yours?” Well just like the 2008 financial crisis was brought on by careless lending in the housing market, the next financial crisis could very well be brought on by careless lending for student loans. If loans aren’t being paid back due to increased interest rates, lack of jobs, or a decrease in wages; the economy will certainly feel that.

 

Conclusion – Financial meltdowns are inevitable. However individually and as a society we need to roll with the punches that the market might have in store for us. The best we can do is always be preparing and protecting our assets and hard earned money. Always assessing our risk and evaluating the market conditions is a great start. We know the financial dip of the stock market last week was just a taste of what’s to come. By taking the above steps you can start to plan and hopefully get a sense where the market might be headed in the upcoming years. Where do you think the market is going? How do you plan to prepare for a market decline? Share your thoughts and comments below! We’d love to hear them!

The Three Biggest College Expenses (Aside From Tuition) And How To Eliminate Them

“The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth in what seems to be an instant.”– Robert T. Kiyosaki

 

Nowadays, when college comes to mind the first thing our focus is drawn to is the tuition. Without a doubt this is for good reason. College tuition has skyrocketed in recent years causing a massive bubble, and not to mention incredible turmoil in America’s future economy. Due to students who are riddled in debt; the future economy will see (and to some point has already seen) delays in home ownership, and the decision to start families. Although it may seem virtually impossible to save on college costs, I’m here to tell you there is! In today’s blog I’m going to discuss college costs that we can control specifically textbooks, commuter costs, and housing. Stay tuned, to find out the Three Biggest College Expenses and how you can save and prepare for them:

 

Text Books – Textbooks are probably the biggest college expense next to Tuition. If you take enough classes you can easily rack up a 1k bill in text books in a semester. However I have a few ways you can take on this expense so that it is virtually no cost to you.

 

The first rule is to never buy your books from the University bookstore. Many times bookstore prices are crazy inflated, and for a book you will need for 15 weeks it’s usually not worth it. Instead your first stop should be your town library or university library. Essentially if the library has the book, you can keep renewing the book for 15 weeks; this results in you never having to spend a dime on your text book. Now it’s possible, the library won’t have your textbook, or worse, the right edition required for your class. No worries at all! Still steering clear of your University Bookstore, the next stop is to try Google Books!

 

Many times Professors will only require you to read a few chapters from an entire book. Luckily Google Books has previews of many chapters of educational texts. I would use google books to see if you can locate those chapters, or the book in it’s entirety, as you might not need to spend any money at all on a textbook.

 

Another idea should be a site like Amazon or my go-to, Ebay. Both Amazon and Ebay allow you to purchase books from outside vendors which allow for the pricing to be competitive; and for you to get a better deal.

Lastly, many times you can also find students who have previously taken your class who are selling their books; many universities have Facebook Pages dedicated to educational items for sale by students which again can lead to a great deal. The bottom line is that tuition is expensive enough; you should be spending anything on educational textbooks in 2018!

 

Commuter Costs – Ah the days of being a commuter. Going to a mostly commuter school I realized and started to appreciate the art of creating an accommodating schedule for myself. The last thing you want to do is have to constantly leave campus to go to work or because you have massive downtime. To respect your time, energy, and gas money; you want to focus on optimizing your schedule. What that means is scheduling your classes on 2-3 days out of the week. So say instead of taking a class a day, pack your schedule full of classes so you are only on campus just a few days a week; this will respect your time and the amount of gas you spend getting to campus. To take things a step further apply for an on campus job. What this does is it really maximizes your time and availability on the days you are on campus. If you do have any downtime in between classes you can put in a few hours at work! By just taking this approach you’ll save thousands of dollars in gas money and wear and tear on your car over the course of your college career.

 

Off-Campus Housing Costs – Housing is one of the biggest expenses a person can endure, whether in college or not. Yet in college how can you beat or drastically reduce this expense? Assuming you do not have the option to stay at home close to rent free (that’s a no brainer!) there are some ways to make a smart financial decision all the while achieving your autonomy. The first step should be getting roommates to split the cost of rent. This makes it really easy for everyone to save some money while having a roof over their head.

 

I know what you might be thinking; in my area rents are so high I’d need like 8 roommates to afford rent! Being from New Jersey, and a Landlord, I get it! Here is a little insider information that might help. Landlords love people who will watch after their property. To get a reduced rent ask the landlord two things: Can I help be your property manager; I’ll make sure the property is in good condition, field tenant phone calls, remind people to pay on time; do this in exchange for cheaper rent.

 

The next question you might want to ask is if you can sublet the space. So say you pay 1k/mo for a 2 bedroom unit; what would happen if you started to AirBNB out the second room? This way you could potentially make your rent back and live for free. Of course you want to run all of these ideas by your landlord first as there might be certain stipulations in your lease and location.

 

Bonus – Just for getting through this longer than usual blog I have a little bonus on how you can allocate money for Textbooks, commuter costs, and housing costs all before stepping foot in college. The answer lies within investing. As some of you might have guessed by now, I love my low cost ETF’s and index funds. The reason I love these types of funds is because they can see a growth rate of 5-10% if not more! But they take time to grow. So let’s talk hypothetical here: say in high school you worked really hard part time and were able to make 1-2k. Now by investing that 1-2k in a mutual fund (529 college savings plan) or index fund, your money can continue to grow exponentially. Which means that your money continues to replenish itself. Without a doubt, that money which will continue to grow can help with textbooks, housing, and commuter costs. Additionally the money that you save from the aforementioned costs is really just money back in your pocket that you can save, spend, or invest.

 

Conclusion – When attending any higher education institution tuition is, and should be, your main financial focus. However other expenses that we might not realize creep in. These other expenses with some planning and creative thinking can all but be drastically reduced or completely eliminated. What are your thoughts? What are some strategies that you think students can use to reduce their college expenses? Let us know in the comments below!

How You Can Save On Your Three Biggest Expenses

“The obstacle in the path becomes the path. Never forget, within every obstacle is an opportunity to improve our condition.”– Ryan Holiday

 

For some of us, it’s really hard to financially get to the next phase in our lives. We might have aspirations of one day starting a family, buying a house in a great community, and not to mention being extremely successful in our careers. Although some of these things might seem like a dream now, they can and will one day become reality. In today’s blog I’m going to address three things that people spend the most money on, and how you can save on these expenses. My hope is that by analyzing your financial situation you will realize all of your dreams are more than possible, you just need to go down the right path. Without further adieu let’s analyze your three biggest expenses:

Housing – Housing is probably the biggest expense Americans endure. Rents specifically have skyrocketed and have created a bit of a vicious cycle within the millennial generation. For this reason many millennials are staying with their parents for longer periods of time; they simply cannot afford to move out. Luckily I’m a landlord, and will share a bit of insider information. What we find as landlords is that there are plenty of people who make good salaries, but might have less than stellar credit usually due to outstanding loans. So the question is what can you do about high rents in your area? And how can you save money? I have a few answers for these questions.

1)The most obvious answer is to get a roommate to absorb some of the rent costs. This allows everyone to save a little more money and can really cut down on your living expenses.

2)My next suggestion, which might seem unconventional, is to get pre-approved for a mortgage and try to buy a house (wait a second hear me out). There is little dispute that in parts of the U.S (specifically New Jersey) rents are comparable to what you can buy a house for, so why not go for it? My best suggestion would be to purchase a small multifamily home and live in one unit while renting out the other; this alone can dramatically diminish if not completely wipe out your housing expense.

3)But wait a minute; say you don’t want to be a landlord or manage tenants, then what? Another way that you can come close to eliminating your housing expenses is to actually buy a 3-4 bed single family home; and then get roommates or Airbnb the spare rooms. This again will allow you to dramatically decrease you living expenses, give you the potential to live for free, and you won’t need to manage tenants as you just need to find roommates.

Health Insurance – For the past few years health insurance has been a bit of a topic of discussion. If you are paying out of pocket for Health Insurance, it is probably one of your biggest expenses. Luckily again, I have some experience in the health insurance industry and can certainly shine some light on how you might be able to save on your monthly premium.

First, I should disclose that like all insurance Health Insurance is a game of risk. No one plans on getting sick or injured. The plan you choose is based on calculated risk. With that said when choosing a health insurance plan, be extremely conscience and honest with yourself about your medical history. If you do have a medical history a plan with a high premium and low deductible might actually be worth it to you. Why? Because typically plans with higher premiums and lower deductibles offer better coverage. If you are in the Dr’s office or hospital frequently your insurance would absorb the cost you would have to pay out of pocket if you didn’t have that plan.

Now on the other hand say you’re generally healthy, then you might be able to go for a plan with a higher deductible and lower monthly premium. The logic behind this choice that if you go to the gym, and eat healthy the likelihood of you dropping dead from cardiac arrest shouldn’t be all that high. Taking a plan with a higher deductible and lower premium would allow you to really just have basic coverage and allow you to save on your monthly health insurance premium. Again it’s all based on risk and how you feel about the condition of your health.

*One last item to mention with health insurance plans are in and out of network plans. It’s important to realize not all procedures and Dr’s will be in your medical plans network. So before you do go in for a surgery or any type of procedure make sure the Dr. (specifically any anesthesiologists) are in your network. If not, you could be balanced billed for the cost of the procedure which could be tens or hundreds of thousands of dollars based on the procedure. Make sure to really do your homework when dealing with doctors and insurance plans, as it could take a huge toll on your financial health if something is overlooked.

 

Loans/Debt – The last biggest expense that most people have are loans and debt. Whether these are student loans, car loans, or credit card debt. The really great things about loans and debt is that they are extremely controllable and manageable. If you are in massive credit card debt; hide the credit card and continue to pay off your balance with you credit card company. The same goes for loans. If you are facing student loans continue to work on them and pay them down as long as the payment is manageable. Now, in the event you are having trouble making payments on either loans or credit card debt, these items are negotiable with your lender. Here is my story of how I negotiated the terms on my credit card, along with another blog on how you can consolidate and save on your student loans. By both negotiating and consolidating loans your monthly debt can drastically decrease and making for a much healthier financial future.

 

Conclusion – Housing, Healthcare, and Debt can be a brutal vicious cycle with no end in sight. These three expenses are what prohibit many people from moving on to the next stages of their lives, but if approached with a different mindset can really have a massive effect on your financial well being. Let us know what you think in the comments below! Are these your three biggest expenses? What are some other expenses you could do without?

The Top Three Ways To Start Saving For Your Child’s Education

“It is not necessary to do extraordinary things to get extraordinary results.” – Warren Buffett

 

Here’s a true statement: Kids are expensive. One day they are going off to preschool and then before ya know it the little meatballs are on their way to college. My questions is, what is your savings plan for your child’s higher education? Is the responsibility on them to pay? Are you planning on helping them out with some of their college expenses? Or is it a hope scholarships will pay for their schooling? No matter what route you take you need to have a plan. That’s where I come in. In today’s blog I’m going to discuss some ways you can start saving for your child’s college education today:

 

529 Plan – The 529 College savings plan is a plan that allows you to automatically make contributions into an account specifically for your child’s education. Think of it like an IRA or retirement account, but for your child’s education. There are several tax advantages to 529 Plans such as being able to deduct contributions off your state income taxes as well. You can also choose various stock and bond options as a way to help your contributions grow; which in twenty or so years could add up by the time your child is ready for college, or another venture. So how do you get involved with signing up for a 529 Plan? Several brokerages offer them, my best advice would be to Google 529 College Savings Plan in your state and start doing a little research on the best ones. Keep in mind college savings plan vary state to state, as the tax rules are different; a great way to get educated quickly on a 529 College Saving plan is to talk to your CPA or Tax official!

 

Utilize The Gig Economy – Growing up I was fortunate enough for my mother to be a stay at home mom throughout most of my childhood. However for most parents today that isn’t exactly an option. In many areas the cost of living requires a two income figure to meet expenses. Yet I feel there is a way around this, by utilizing the gig economy. My parents introduced me to this concept back in the 90’s where my father would work a full time job, and even though my mom was a stay at home mom, she would baby sit and do other odd jobs on the side. It was those odd jobs that helped pay for my college education. Today’s gig economy makes it so easy to be able to make income through offering services; from tutoring apps to selling arts and crafts online, and many other ventures. What is wonderful about these options is that it allows you to carve out your day and accommodate your children yet stash away money from those side gigs into a college fund. Need a list of possible gig economy options? Check out our blog on the Gig Economy where we provide links to several sites you might find helpful!

 

Low Cost Exchange Traded Funds – For those of you who don’t know, my investment of choice (aside from Real Estate) are low Exchange Traded Funds (ETFs). So what are ETF’s? ETF’s are a collection of stocks and bonds (kind of like a mutual fund). What is cool about ETF’s is that you can invest in higher end companies without paying a huge price for their stock. For instance Amazon is currently trading at $1,305.20. However I just bought an ETF for $70.00 which has 20% allocation in Amazon. See what I’m getting at? ETF’s also allow you to invest in specific industries. So say down the line you have a really good hunch that the Robotics industry is going to take off; you can invest in an ETF that specifically allocates stocks from Robotic’s companies. So how does this relate back to saving for your child’s college education? Well ETF’s are built for growth. Of course the growth percentage depends on the fund; but there are quite a bit of ETF’s that yield amazing dividends and growth in the long term, something that is needed when saving for your child’s college. To learn more about ETF’s do a little research on Google, other investment sites and blogs (check out our resources page), or ask us!

 

Conclusion – Saving for your child’s education is no easy task. However hopefully with some of the resources provided you can start today to stash a little money away for them before they they start the next phase of their life. Do you have any questions, thoughts, or comments on anything shared in today’s blog? Have you found a better or easier way to save for your child’s education? Let us know in the comments below, as always we love to hear from you!