How To Avoid Being House Poor

How Much Home Can I AffordEarlier this year, I published the post Is Being House Poor Limiting You? While no one ever thinks they will fall into being house poor, it does happen to some. Due to this, when asking yourself the question “how much home can I afford,” it’s best to think about ALL of the expenses that go into homeownership.

There are many “hidden” costs that go into homeownership that many do not think about when buying a home. While some homes may seem affordable, there are many factors and expenses to think about.

According to recent data from Zillow:

  • U.S. homeowners on average spend more than $9,000 per year in hidden homeownership costs and maintenance expenses
  • U.S. homeowners pay an average of $6,042 per year in unavoidable hidden costs: homeowners insurance, property taxes and utilities
  • U.S. homeowners pay an average of $3,435 per year in annual optional costs including house cleaning, yard care, gutter cleaning, carpet cleaning, and pressure washing.

That’s a lot of extra money each year that many homeowners do not realize that they may need to pay for.

By not knowing about these costs, a person may become stressed due to the amount of debt they may rack up from being house poor. It may also delay retirement, lead to a house being empty (there might be no money left to decorate), and more.

There are things you can do though so that you can make sure you don’t fall into a house poor situation, though. When pondering the question “How much home can I afford,” think about the many tips below.

 

Add up all of the costs.

Buying a home can easily lead to being house poor if you don’t do enough research. This can limit you because you may be even more house poor than you originally thought.

When some families buy a home, they don’t think about the total cost of homeownership. While you may be able to afford the monthly mortgage payment, you may not be able to afford everything else if you don’t do your research.

Before you say “yes” to a home, I recommend you add up all of the extra costs that you may have to pay for if you decide to buy a specific home.

Other homeownership costs include:

  • Gas. Many homes run on gas in order to have hot water, to use the stove, and so on.
  • Electricity. Generally, the bigger your home then the higher your electricity bill will be.
  • Sewer.  This isn’t super expensive, but it is generally around $30 a month from what I’ve seen.
  • Trash.  This isn’t super expensive either but it does cost money.
  • Water (and possibly irrigation).  Water bills can vary widely. I know many who live in areas where the average water bill is a few hundred each month.
  • Property taxes. Property taxes can vary widely from town to town. You may find yourself looking at two similar houses with similar price tags, but the property taxes may vary by thousands of dollars annually. That is a LOT of money. While it may seem small when compared to the actual home purchase price, remember that you have to pay property taxes annually and a difference of just $3,600 a year is $300 a month for life.
  • Home insurance. Home insurance can be cheap in some areas but crazy expensive in others. Don’t forget to look into the cost of earthquake, flood, and hurricane insurance as well as that can add up quickly depending on where you live.
  • Maintenance and repairs. Even if your home is brand new, you may have to pay for repairs, which is something that many don’t realize. No matter how old your home is, repair and maintenance costs will eventually come into play.
  • Homeowners association fees. This can also vary widely. You should always see if the house you are interested in is in an HOA because the fees can be high and there may be rules you don’t like as well.
  • Home furnishings. Furnishing your home can be done cheaply, but I know some who buy huge homes but can’t afford to put anything in them, such as a table, a bed, and so on. Why own a $500,000 house if you don’t have any furniture?

Related: Home Buying Tips You Need To Know Before You Buy

 

Buy for less than what you are approved for.

Many potential homeowners are approved for home loans that are somewhere around 30% to 35% of their salary before taxes.

That’s a lot of money. This amount is before taxes as well, which means that your actual monthly home payment would be a significant portion of your take-home income each month. Many who buy at the full approval amount cannot afford their homes due to the fact that it is such a significant percentage of what they earn.

If you don’t want to be house poor, then you should make sure to buy a home that is less than what you are approved for. You should also add up all of the costs of owning a home and make sure it is an amount that you are comfortable with.

Related posts:

  • Renting Out A Room In Your Home For Extra Money
  • How To Live On One Income
  • Ways To Make An Extra $1,000 A Month

 

Have an emergency fund.

An emergency fund isn’t just to protect you from your job. They also exist to help you in case something goes wrong with your home.

Your roof could spring a leak, a tree may fall on your home, a pipe may burst, there may be an electrical problem and more. Homes have many things that go into them and you never know if something may need to be fixed.

By having an emergency fund, you will have a fund that will help you if something were to go wrong. It will be you be more prepared so that you don’t have to take on any debt in order to help pay for an expense.

What would you say to someone who asks “How much home can I afford?” Do you know anyone who is house poor?

 

The post How To Avoid Being House Poor appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

Business Owner or JOB Owner?

 

Hey everybody, excited to have Steve Richards on the show today! Today, we are going to talk about something that we are both very passionate about and that is how to run and own a business, not a JOB. Some of the real estate investors end up in that J-O-B and they get stuck there and it’s not a good place to be.

Resources and Links from this show:

  • Investor Fuel Real Estate Mastermind
  • FlipNerd Professional Real Estate Investor Network: Join for Free!
  • The CEO Nation
  • Steve Richards on Facebook
  • Investor Machine Real Estate Lead Generation

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

[00:00:00] Mike: [00:00:00] Professional real estate investors are different.

We’re not afraid to go all in and take educated risks to build stronger businesses and help our families live better lives. This is the FlipNerd professional real estate investor show. And I’m your host Mike Hambright each week. I host a new episode live and bring you America’s top real estate investors as guests.

Let’s start today’s show. Everybody excited to be here with you today. Uh, today I am talking to Steve Richards and we’re talking about something that we’re both very passionate about, which is how to run and own a business, not a job. So many real estate investors end up in that job and they get stuck there.

And it’s not a good place to be. That’s what we’re going to talk about today. Steve, welcome to

Steve: [00:00:43] the show. Thanks, man. Thanks for having me. Yeah. Happy to see it. It’s

Mike: [00:00:47] funny. We were talking a head of time here. In fact, we, we can talk about like a half hour, so that’s honestly, I do all these podcasts. We’ve done over 1500 podcasts over this last, like almost seven years coming up on seven years.

For me, it’s just, it’s the ability to [00:01:00] just kind of hang out with you and network. And, you

Steve: [00:01:02] know, we usually talk for a

Mike: [00:01:03] half hour ahead of time. We’re talking afterwards and all this stuff. So it’s, it’s always fun, but you said some things and I even told you. What you just said could have just as easily come out of my mouth.

Right. Which is we, you know, we, we, we think the same in regards to actually running a business. And it took a long time for me to get there because I was just in the weeds so far and making more money than ever. So it was kind of like, well, I’m working harder than I want to, but I’m making a lot of money.

And then at some point you’re just like,

Steve: [00:01:29] ah, I just

Mike: [00:01:30] like, I don’t want to make less money, but I’m okay. I gotta get out of my own way. So I know you’ve felt the same way, right?

Steve: [00:01:36] Yeah, absolutely. It’s a trap. It’s like the curse of successful businesses. Now you’re now you find out that it actually does suck.

Mike: [00:01:46] Yeah. And the truth is isn’t, it, it hasn’t happened to me. I’m a knock on some wood here, but it happens to a lot of people when something bad happens. Right. They get sick. Family member gets sick, something happens

Steve: [00:01:58] where their

Mike: [00:01:59] time [00:02:00] has to go somewhere else. It has to is not an option. And then the business suffers and then they’re like, This, isn’t a business.

This is a job right now. So, uh, so I think what we want to talk about today is to tell folks

Steve: [00:02:12] that

Mike: [00:02:13] let’s be proactive about it. Let’s let’s get to that point. So before it becomes an issue for you and we all, nobody got in this business of real estate investing, you work 80 hours a week

Steve: [00:02:26] and be

Mike: [00:02:26] trapped where they are.

Right. So, uh, they did it to own a job to not to own a job, to own a business, but. That’s not how it usually works out. So, Hey, before we kinda jump into this, tell us your background. You’ve got a, a lot of great success, a lot of war wounds. I can see some scars on your knuckles there and stuff. So tell us a little bit about that.

Steve: [00:02:47] Yeah. So yeah, so much of the stuff, it’s funny, how it all it, to your point, a lot of the experience and you just learn and will tell people if you guys are watching this today and you’re newer to the business or [00:03:00] newer to business in general. A bunch of you guys are gonna be like, yeah, you’re, you’re probably 25 and making more money twice, as much as your parents ever made or three times as much together.

And it doesn’t really matter that you’re working all the time kind of, and you’re probably not going to listen to some of this. And then when your old guys like us, like I can, now you’re going to be like, Oh man, those guys were right. But, um, you know, I I’ve got, I know my kids are older, mine are teenagers now.

So I just have this different perspective on things, but, um, No. My quick story is I came out of business school in mid nineties, and then I

Mike: [00:03:36] started consulting

Steve: [00:03:37] in the tech world. And so my first clients were.com clients. And I was like, Oh, I just thought you had to like sneak it. So to a napkin with a business plan, and someone gives you five bucks.

I have to make a product to make a prototype, to go to a dog and pony to try to raise a hundred million dollars. And then everybody lies and just says how it’s going to be a a hundred million dollar company. And. In five years or whatever. And

Mike: [00:03:59] so

[00:04:00] Steve: [00:03:59] it was just really, it was an interesting time to come out.

There was also a lot of, uh, I worked for a big company called EDS. It was actually Ross Burroughs and being in Texas, you know,

Mike: [00:04:07] not, not too far from, uh, where I live actually. Yeah, five miles. I lived

Steve: [00:04:12] in Plano for three months when I started there, the pod, the, uh, Plano headquarters, you know, getting out was interesting during that time, because we had, we had clients that were crazy.com clients.

And then we had the defense department was one of our clients. Like literally, you know, the $10 million toilet seats that are probably paying for in other countries and stuff, there was all this like super, extra secret comply, uh, secret, uh, like trying to get compliance and everything to be in the building.

It was, it was kinda interesting, but, um, it was a cool time because I learned so much, but I had this business degree that I didn’t pay a lot of attention. You know, I was more into my fraternity and intermural sports and things like that. But. I had this business law classes, accounting and strategy classes, and I didn’t really pay a lot attention.

And that’s now all I really care about. Um, [00:05:00] and I had the foundation of business and then I went out and I was consulting for companies who really didn’t care. Like the government didn’t listen to anything. We said like, literally as a consultant for them, they just, it was so bureaucratic. It was crazy.

And then the startups would listen to everything we said, no matter how stupid it was, there was no oversight. It was like two totally weird. And I’m 25 and no, no one should have been listening to me anyway. But, um, but that was my entree into the business world. So it was interesting. And I had a front row seat in 98, 99, 2000 for the.com bust.

And, um, you know, everybody found out you can’t make money on the internet. At least that’s what they thought until you know, now Zuckerberg and everybody’s come around Amazon, you know, Bezos. Luckily they figured the internet out, but. Yeah, that was crazy. And then on the back end of that, there was a lot of Y2K projects in that tech business where they thought all the computers were going to shut down when it turned, you know, 2000 and January 1st, whatever.

And, um, you know, I, I went through all that. I didn’t even [00:06:00] realize it was a recession. Then I had no idea. And I just was getting kind of promoted up through the ranks and growing and doing different things. Um, you know, nine 11 kind of extended that recession a little longer. But when he came out of the back end of that, I continued to grow in my.

In the business world, but I had gotten bitten by the entrepreneurial bug, like pretty early. Um, and so I would say by 2003, two or three, I was getting out a startup that I got involved with and I really wanted to do something. Um, so for about a year, I was just kinda like try thinking of all these different ideas.

So I started reading a lot of different things that led me into stuff like. Think and grow rich and rich dad, poor dad. And I don’t have this story where rich dad, poor dad turned me on to real estate or whatever. Actually, I was just a guy that I played pickup basketball with at the gym was like my dad.

And I just got done. You might know some of these guys, Chris Kershner if you remember that guy. I know that name. Yeah. He was a sell houses on lightening. He was all subject to and, um, Ron Legrand and [00:07:00] then. We actually the first, anyway I met, so I met this guy and he’s telling me, I’m like, Hey man, I’ve got to start a business.

I’m sick of being in the corporate world. He’s like, well, my dad and I just dropped 30 grand going to all his real estate courses and we’re dropping mail, but now my dad was going to retire and do this and he’s not doing it. So now I’ve got 30 grand invested in bootcamps. We have three ring binders with CDs, by the way, back at that time.

And, um, he

Mike: [00:07:26] didn’t say eight tracks.

Steve: [00:07:28] No. I know. I’m sure that, you know, that was pretty bad.

Mike: [00:07:30] I definitely remember in my family, we had, uh, the, uh, cause it was like cassette tapes and it opened up this big, like plastic binder and I like six or eight cassette tapes.

Steve: [00:07:40] I had some of those too back in the day, but, um,

Mike: [00:07:43] Carlton sheets.

Steve: [00:07:44] Yup, absolutely. So anyway, kind of condensed that down, you know, he was sending out postcards then you know what to do. And I’m like, I don’t know. I mean, I. Worst cases, we’ll buy some rentals. He’s like we can get really good deals. I’m like, all right, I didn’t even want to flip a house. I was like, I’ll own some rentals.

That’s cool, but I’m going to start a [00:08:00] business. So my head was all around

Mike: [00:08:02] a business

Steve: [00:08:03] and what’s funny is I shifted. And then I saw real estate. I’m like, Oh, well, at the time, this was 2004. When I got in, um, when I started and within that first year, I quit my corporate gig, which was pretty good. And I went full time in it because you could just fog a mirror.

Like I didn’t made 15 grand every time I bought a house. Yeah, it would appraise for a hundred. I’d buy it for 80, you know, get a 90% loan on it. And I take, put 10 grand my pocket and it’d be on a three, one arm with Washington mutual. And my pain, you know, my payment would be like all in, it was like 400 bucks a month or something crazy stupid, but it was on an adjustable rate mortgage, but, and I was like, man, we could just, if I just to buy one house a month, I can make six figures and then I’ll flip a little on the side.

And so I kinda got into this and it just. Literally to what we were talking about a minute ago to kind of preface that as all I want to do is start their business. And I ended up like literally jumping into a hustle. And then when I got in, I literally committed to the hustle because I’m like, Oh, I can just hustle around and like [00:09:00] trade my time for, you know, dollars.

And I’ll just flip it up and chase money. And anyway, so, you know, I D I, we ramped up to doing up to five rehabs a month that after that first year, when I was full time and. Owning several rentals. Within a couple of years, we had 35 40 rentals. And, um, that was about the time when we saw things slow down with the market.

And so. I shifted to do rent to owns instead of flipping to from bank owns to selling to homeowners that were going to live in the property, a traditional flip, you shifted to doing rent to owns. And then within a year that subprime blew up and then it was rent rent. There was no, it wasn’t part of the deal anymore.

And so we had to too high basis and all these houses compared to the reds, you know, we had nice houses with fake 30 grand equity that we were going to get as a 30 grand pop on the back on all of them. But when we shifted her into, um, Oh, and we didn’t really care about cashflow. We just cared about the equity and I learned that rentals are a little different.

So, [00:10:00] um, during that time we started focusing differently. And once I learned that I started doing bus tours with some out-of-state RIAs and they started bringing people in and they’re like, well, find deals for me. Like you find them. And so we got into, I guess, kind of wholesale, but now I didn’t know what wholesaling was.

Mike: [00:10:16] Um,

Steve: [00:10:16] but I was just finding deals for them and they would buy them off me. And deals. I didn’t, I kinda would rather make quick money on. And then they’re like, well, if it was rehab, it’d be a lot nicer, you know, if I didn’t have to rehab it and when you’re already managing your rentals, can you manage mine?

And so like many turnkey operators, probably some people that are watching

Mike: [00:10:33] this,

Steve: [00:10:34] somehow it turned into, Oh, I can make money on the rehab. I can make money on a

Mike: [00:10:38] sale. I’ll

Steve: [00:10:39] make 10% arrests. It seems like all these revenue streams is what people talk themselves into, but it’s such a slippery slope. And I literally have watched over the last, you know, 16 years I’ve watched so many good people get destroyed on once, either as a client or the actual person in the turnkey business.

I’m sure you have too. Yeah, it is a tough, [00:11:00] tough business. Yeah. And, um, I got heavy into that. I did three, four, 500 of those, like. We do about 500 deals in a three or four year timeframe. Not all of them are turnkey, um, but they were all part of that. Um, but we really cut our teeth and we got a couple of clients out of it.

And then somehow I came up for air in 2013 and I’m like, man, we’re managing 350 houses. We’re doing 20 rehabs at a time. We’re not really wholesaling as much as we used to. Um, one reclaim, we made 600 offers for it. In that year and we got 110 houses, maybe on all those that all I’m a less offers. We had a whole team of agents.

Oh, wow. I mean, we had an office full of people, like 30 subs that worked for me in the construction. I had two different project managers that made like 50 grand a year salaries on top of like, it, it was the most silly thing. And Mike, I’m a super deep visionary. If anybody watching this as a, you know, us kind of person, I’m not an integrator.

[00:12:00] And now I can pretend to be one in spurts because I understand what it means to my bottom line and my sanity. But

Mike: [00:12:06] you have to have that. Yeah.

Steve: [00:12:07] Yeah. I just, um, it’s crazy. I looked up one day, we had a construction company, a brokerage property management company and the investment company. I was running a Rhea.

You know, it was the first year we did seven figures of business. It was literally like the most miserable year of my life. And. EOS traction. I got introduced to that actually at, um, I was at an Infusionsoft, um, conference in 2013 and some girl there who was her and her mom owned a bunch of, um, Keller Williams franchises.

And she turned me onto the book and I started reading it and I couldn’t get back to the core values. I read the book like three times, and then I made every one of my management team read it. And then we kept sitting down and trying to do the first chapter of core values. And every time they’re like, no, we don’t like what you came up with.

Here’s what we think our clients would like. And I’m like, I hate all that stuff. And then one day at lunch, I was like, the only way I can see [00:13:00] this is going to work is if we quit doing construction, quit managing houses. It’s like the core tenant of what we did. And I set it out of frustration and they all looked at me like, Oh yeah, right.

And then I’m like, wait a minute. It’s like, like the light bulb went off, you know? And I’m like, maybe we need to quit doing all that. And. I had gone from being a strategic visionary guy that everybody wanted to come get information from. And they want to know about my strategy and what I think about the market and who I like and network with me and get to know me and all this stuff.

And it turned into the only time I talked to clients anymore was, Hey, why are the reports late this month? Or my maintenance I’m getting screwed on maintenance or this tenant left too early, or your leasing is taking too long. It’s like, Oh, this horrible toilets, tenants, contractor.

Mike: [00:13:44] Yup.

Steve: [00:13:44] It was junk and, um, it was really hard.

And so I hit a reset button in 2014 and that started, um, at the end of 2014, I started a whole like 2015 was a big transition. Your form is really hard. Um, in fact, in 20, the second half [00:14:00] of 2015 to the middle of 2016, during that year, I am positive. I spent more money than most people make on therapists, coaches, counseling, uh, psychological tests.

Like I had a trainer at the gym. I had a, uh, um, a nurse practitioner. I was taking guitar lessons with my kids golf lessons. I was like, I’m going to go do all this stuff. And I’m going to like re-engage. And I, it was just interesting. Um, and I really kind of just reinvented. I didn’t even reinvent. I finally came back out of who I thought I wanted to be, and I really got to really know myself.

And, um, you’re coming out of that. We got heavy into wholesaling. And we kind of screwed around with it. Um, this will resonate with some of you guys that are watching probably, but we paid Joe McCall and one of his buddies, Peter,

Mike: [00:14:50] um,

Steve: [00:14:51] it was some stupid, like 15 grand to just set up our Podio. I mean, it was literally remember my, my, the guy that I met that that’s now my [00:15:00] business partner, Brian who’s literally like my sole business mate integrator.

I remember trying to convince him why we were going to wire them 15 grand. He’s like for what? He’s like Podio it’s free. And I’m like, Yeah, but they said they set up your carrot website and he’s like, but that’s 99 bucks a month. Like why? It was just funny, but you know, that commitment we made to spending money with somebody like that much, like why we use you as a disclaimer, I’m a client of Mike’s everybody with investor machine is

Mike: [00:15:30] literally

Steve: [00:15:31] in spite of our own issues.

We paid Joe’s office a thousand bucks a month, uh, to, to just throw mail out for us. Plus plus the spend or whatever it was. And I think it was only like 750 postcards every, every two weeks. So it’s 1500 postcards a month that was always sent. And so literally after 10 months of that, we would forget we weren’t using Colorado back then.

We used a number of years. We used number. Remember I

[00:16:00] Mike: [00:15:59] haven’t used it, but I’m familiar with it. Yeah. Like

Steve: [00:16:01] every couple of weeks we’d be like, Hey, we better go look at that and we’d go look into leads and we’d be just like, no, no, hang up, hang up. Oh, here’s a voicemail. And that really motivated, hang up, hang up voicemail, not very motivated.

We get like 20 calls in and be like, Oh, here’s one where they said they got sell tomorrow. Let’s call him back.

Mike: [00:16:17] And so some of you

Steve: [00:16:18] guys are probably laughing watching this, but like, I know you do that in your business. And if you don’t, your lead manager does and your acquisition guy does, but you’re just totally seeing we were sandbagging.

But in, in that, in that year, um, actually it was 2016 was when we did this. We spent 10 grand on marketing that, that year basically, and we did 229,000 revenue, like screwing around, like I was selling off houses still. And then my business partner was flipping some houses and we were just kind of like loosely partnering on this wholesale thing.

And we were like, gosh, I mean, what if we did that full time? You know? And of course we thought that it would all just magnificently, like. Quadruple and all that kind of stuff. But, [00:17:00] um, that was the beginning of it, man, at that point. But I was bound to build things differently and also know who I am and then have the right people around me.

But, you know, we went on from there to, um, build a team, the neck. So we went into build it. Right. But then the next big learning lesson for me was that we built a team really, really poorly that next year. And we had to dismantle all that at the end of 2017. And. Um, well, middle of 2017, it start to rebuild using cognitive testing and personality testing.

And you know, we’ve talked about this. One of the businesses I own is it helps people do that kind of stuff, but, but, but literally hiring the right people makes all the difference in the world. No. We started using vendors in 2016. I got my head straight about what I really wanted in life, which is probably the number one thing.

Most people have wrong. We started using vendors to do the things we needed to support our business. Then we started hiring the right internal people and then like in 2017, it kind of, it’s not all been roses, but it started to click. And [00:18:00] so, um, we’ve been able to run this business now and we have, we flips and wholesales and Indianapolis market.

I spent a couple hours a week in it. Probably sometimes not even that much. I mean, one of the, our dispositions guy is the direct report of mine. And we do a weekly call at noon on Wednesdays. And like, sometimes that’s the only time it’s like an open live coaching call for people. Sometimes that’s the only time he gets to talk to me.

So he’ll be asking me, Hey, can you, uh, look at your email or something on that call in front of everybody else? Cause he, like, he just can’t even, I don’t even put time into it. So. Um, anyway, I got super long winded there, but I, but I wanted to take that chance, Mike, to start to talk about some of the pivot points too.

So it’s been a weird road for the last 20 years for me, but, um, but there’s some component I started just gonna say, there’s some components we’ve learned that aren’t even about real estate. It’s literally about business. And so my current heart is, is just helping people understand how to run a business instead of on a job, which is what you started out by saying.

Mike: [00:18:57] Yeah. Yeah. Let’s talk about that for a moment. [00:19:00] So now, like, you know, it’s, it’s easy. To look back over 10 years, 15 years, a long time and say, well,

Steve: [00:19:08] now with what I know, I could have

Mike: [00:19:10] figured that out in like six months. Right. But that’s hindsight. Right? So, but the key is, is what I hope people, some people that are listening probably have gone through this as

Steve: [00:19:19] well.

You get to a point where you,

Mike: [00:19:21] you either, you know,

Steve: [00:19:23] di like proverbially, like from,

Mike: [00:19:25] well, hopefully not literally, but

Steve: [00:19:27] proverbially from like.

Mike: [00:19:28] I, this isn’t for me, I just need to go get a job or work for somebody else or whatever, if your goal is to be an entrepreneur and, um, and have your own business, like, hopefully

Steve: [00:19:37] you get to a point where you learn

Mike: [00:19:38] how to do it better, just like you did.

I’ve I have a lot of experiences like that too. But for those that are

Steve: [00:19:46] earlier in their career, not kind of where you want to be at, and you feel like

Mike: [00:19:49] you’re at a job, like maybe it will take a couple minutes to talk about like how to jump that learning curve because. You can do that by surrounding yourself with people that have been through that before.

And basically [00:20:00] just it’s a quantum leap forward, right? It’s like, I don’t have to go through all those things. I don’t have to touch the hot stove to learn. I shouldn’t touch a hot stove. It’s like, no, let me just tell you don’t touch a hot stove. Right. And so, uh, But some people, some people are, and they just have to learn.

Like, my son is 13 and my wife talks about it all the time. He’s, you know, he like stuck his finger awhile back in, uh, you know, it was just it’s, they’re not like cigarette lighters in your car anymore. It was just like a power Jack, but apparently you can still get burned from sticking your finger in there.

Cause that’s when I saw it, it’s just like that he has to learn. He has to smell his own burning flesh before he. I told him not to do it and he did it anyway. And it’s like, that’s just how he is. He just has to experience it, to learn what not to be wished. Some people are like that. I’m probably like that in summer yards, but you know, if you surround yourself with the right people, if you listen to people that have been through this before, um, you can jump in.

Let’s talk about that a bit. How can folks, what are some of the kind of key lessons that you’ve learned about treating, do like a business, um, and not getting stuck in a [00:21:00] job cause so many, most. Get stuck in a job at best might be if they do well, maybe they’re a high paid, they have a high paid job, but it’s still a job, right?

Steve: [00:21:09] Yeah, for sure. Um, so I could talk on this for years, so I’ll try to keep it concise, but I do have to start with something funny that I have twin boys and they’re a 14, so about the same age as your son, but, um, I remember. Getting kind of annoyed at my wife being so diligent about one, all those plug covers in the plate.

You know what I mean? When a child proof things. Yeah. I remember telling her one time, like those are so stupid once the kids get a little older, but like when they’re toddlers and run around, I’m like, you ha you would have to have some small little metal object that could shove inside of it. At least like half an inch to actually get shocked.

I’m like, it’s so dumb. And then one day, somehow one of my boys found some metal thing and had to shut up, short it out. Uh, I mean, that’s incredible. I was like, it will never happen. But anyway, you have teenage boys, like when they’re young, anything will happen

Mike: [00:21:58] by the way.

Steve: [00:21:59] You know, [00:22:00] I think Mike, to answer your question.

Um, so yeah, there’s four, there’s four pieces. And so one of the businesses you are talking about, you know, one of the places where I spend. Um, the business I spend the most time in, which is maybe five to 10 hours a week is the CEO nation. And then we have a, this four pillar model in there. And so I’ll kind of answer it that way to keep myself on track or else I’ll talk for an hour again.

But, um, I’m going to go in reverse order because we teach them in a certain order because I think they’re easier to implement, but you’re going to go in order of importance, starting with the most important. Is the alignment in the business is personal alignment. Like having the business set up to give you what you want.

And here’s the problem. I don’t think setting the business up to give you what you want is the hard part. I think most people fail at it. Um, but it’s actually pretty easy. It’s not so it’s, I’m sorry. It’s pretty simple, but it’s not very easy, but actually the hard part of that is the other side of the equation of setting the business up to know what you want to give [00:23:00] you what you want.

It’s actually knowing what you want. I w if we do this thing, um, if you’re keeping score at home, you guys can do this exercise. We won’t have time to do it on here, but in our, when we do mastermind events or different live events, there’s a couple of things we do that are really cool. So one of them is the four questions and it’s more powerful if I took time, but I’ll just run through it.

So it’s, what do you want, what are you doing to get it? How’s that working for you and what are you going to do next? And when you ask them slowly and meticulously and be like, pick one area of your life, what do you want? Most people have don’t even know what they want. A lot of what they want is. And I’ll just share this with you guys, especially, um, if, if you’re young, it’s hard to have a lot of perspective.

I’m not slamming anybody. Who’s not married with kids yet, but you get a lot of world’s perspective. Once you have kids and you get married and then other people’s lives, like I’ve got two dogs, a cat, three teenage kids, and a wife. And literally they will all die. If I don’t do my part to take care of them, I guess I could probably [00:24:00] die.

They wouldn’t die, but you know what I mean?

Mike: [00:24:02] They might thrive, you know, somebody

Steve: [00:24:05] like to

Mike: [00:24:05] believe that they would, uh,

Steve: [00:24:07] they might be like, pretty sure couldn’t get out, but, uh, but when they’re babies, right? Like you gotta take care of it. It’s so funny. You just get this different perspective. But my point is you get a lot, you get a lot of what, what.

You when you’re forced with these decisions about marriage and kids and life and owning the business for years and taxes and all, all of a sudden you start to really hear differently about life. And you’re like, Oh, I have an opinion on things I didn’t think I used to care about. So it’s hard when you’re young.

It’s also hard when you get stuck in a rut, which a lot of us have, which is like, go to school, get a job, put, pay your dues work, you know, Work hard, get promoted, you know, whatever, um, jumped jobs, but only do it every year and a half. Cause it doesn’t look as bad or whatever it is, but you get stuck in this rut and then it’s like, this is the best way I can explain it.

When you go to a [00:25:00] superhero movie, you don’t sit there the whole time and get pissed because well Superman’s flying and people can’t fly. So I don’t want to watch this movie cause that’s not real. Like you suspend reality when you’re watching a movie, but. We don’t do that when we dream anymore. When we get old, especially when you have kids and a family and a corporate job, you start thinking about what moves you could like.

Well mean, I make 150 grand a year salary plus benefits. So you start thinking how much I got to hit that exact number, right? Like if you just, or my wife, because of this, or my husband, like, I need to be here for this, or I couldn’t work weekends or whatever it is, but you, you get caught in like the expectations of the people around you.

Right. And what you think you’re good at what you don’t think you’re good at. And so you don’t dream openly anymore with being detached from reality. So

Mike: [00:25:51] one,

Steve: [00:25:52] one big segment of people in business that are younger, don’t have a lot of life perspective to really know what matters to them yet, because they just don’t know.

I mean, and it’s fine. [00:26:00] I don’t know what’s possible. Yeah. And they don’t know what they care about or they haven’t got to know themselves. Um, And another set of people that get older that find entrepreneurship later in life are kind of already stuck in it. Right. And so they, they start formulating they’re there, they have blinds, massive blind spots like, or got our blinders on.

Right. And, um, those two things suck for helping you dream to create a business that will give you what you want. And what it really sucks for is deciding what you want. And so that was the biggest epiphany for me and the other ones all fall into place. After that, I mean, Once you really know what you want.

When you’re honest with yourself about what you want, then you just have to know how much money and time do I need you do that stuff. And it’s not like I want to make a million bucks. If I want to make a million bucks, I’m going to use it for where my kids are going to go to school. Where do I vacation?

How many homes do I? What kind of car do I drive? How much do I give to my church? How much time do I work out? What do I eat? Like getting really clear about what you want out of [00:27:00] life is the number one thing. And then after that you said some key lessons and they fall into place where it’s like, okay, well, what business model can give me that?

And then after that there’s businesses business, like, like you said, I just pay cash. I mean, I don’t have to figure anything out anymore. I can pay somebody. I can pay a coach or I can hire an operator or I can pay for a training. Whatever, like the tech part of it is what so many people I’m sure in coaching, because you’re so much, you’ve done so much more coaching than me.

I can’t imagine how many times you’ve been asked all these technical questions. Like people think that they need to learn how to wrap a subject to deal and do a double closing and they want to know all that stuff and that’s not really their problem. Right. And so I just think that’s the big setup is knowing what you want.

And then after that, going out and finding a business model that can give that to you. I mean, those are the two big pieces. Then everybody misses. Cause they get inserted right in behind the business model and they just start doing deals. Right. [00:28:00] You really pick the model, you know, and they didn’t pick the model cause they knew what they wanted.

They just got inserted and they started making money, like you said, and they’re just like throwing money off and now they’re like stuck in the middle of something. Yeah.

Mike: [00:28:10] There’s a couple of things. I think people, especially if you left corporate America,

Steve: [00:28:14] you’re,

Mike: [00:28:14] you’re used to being this employee mindset.

Like I, I

Steve: [00:28:18] work right. And

Mike: [00:28:19] I don’t, so I don’t know how to not work. Cause I just that’s that’s I like to work. I’m a hard worker, you know, work ethic from my family that, um, has carried me a long way, but it’s hard for me to do nothing, but which I don’t ever do. Cause I can’t do it. Can’t do it. Um, but uh, I think when you have that employee mindset, like sometimes people are like, well, I can hire somebody to do my first off.

We either think, well, nobody else could do my job, which is. Not true for anybody, like literally not

Steve: [00:28:50] in real estate. Um,

Mike: [00:28:52] cause you’re not as good as you think you are. Uh, and by the way, you don’t want, you don’t want that to be the case. Like you want to be able [00:29:00] to hire somebody to replace you and take you out.

Right. And so, or people say, well, when I, when I’m, when my business starts to do better, I can afford it. Right. And it’s like, well, what if you can’t afford not to do it? Right. So one of the things that’s interesting about, um, Ben David Richter is in our investor people group and been spending some time with him talking about the profit first model.

Cause he’s, he’s actually kind of licensed profit first

Steve: [00:29:23] for,

Mike: [00:29:26] and you know, it’s just this idea of, well, how much are you worth? Like what should you pay yourself? And start to think about what that seed is worth, not you, what is the seat worth? What’s the role worth? Because once you develop that role, it’s like, okay, well that’s that job pays 60,000 a year or whatever.

It’s like, okay, But then you’re going to find out that you’re sitting in a seat half the time. That’s like a $10 an hour job. It’s like, okay, I need to replace myself there because I’m worth more than that. And even the $60,000 job or 80 that whatever, whatever it is, like find a way to do enough business to offset that because that’s, that’s what you do as a business owner.

You’re [00:30:00] not, that’s how you get out of the employee kind of rut, right. Start to think of. I kind of advise people there. Here start to think about every job in your company, every seat, whether it’s an admin or acquisitions manager, disposition manager, lead generator, whatever it is, lead manager, like what, what does that job pay and what job, what seats are you sitting in and how do you get yourself out of those seats?

Cause you know, you should believe in your mind that you’re way too expensive for any of those seats. No,

Steve: [00:30:27] absolutely. Yeah. Working on your business versus ENA is no joke. I mean, there’s a reason to work in it. Hustling grind is not a business model or a strategy, but if it’s done correctly, it’s, it’s part of mastering your business and innovating and creating best practices.

And then you do that to study it and master it and be able to hand it off and know how long it takes and knowing what to do. The leading activity metrics are. And you understand as you, but you don’t do it just to get done and make money, but you do it so that you’re making money while you’re learning as they can train somebody.

Right. There’s a means [00:31:00] to an end there. Yeah. Right?

Mike: [00:31:01] Yup. Well, let’s talk real fast about, um, you know, sometimes we build a team to do stuff. Sometimes we

Steve: [00:31:06] bring

Mike: [00:31:07] in vendors or we outsource stuff to somebody that’s virtual assistants on it’s call centers, lead generation stuff. There’s a number of ways that you can.

You know, if it’s, this is how I kind of, how I think about it. If it’s not a full time job for somebody in your business, or even if it is like, I know for a lot of people that I hire, I’m

Steve: [00:31:24] like, we could figure

Mike: [00:31:25] that out, but we’re going to be playing catch up with somebody that does that professionally forever.

Like if that’s all they do, we’re never going to be as good as them. So why not just hire them? And so, but just talk about, you know, how you think about what parts to outsource versus what parts to kind of build internally.

Steve: [00:31:40] Yeah, absolutely. Um, I put some notes here too. I want to. I’ll answer your question, but I want to start, cause I know we don’t have a ton of time.

I want to circle back to something on, on employees I think will tie in really well. Um, but here’s the key like, think of it this way. I like to think of an analogy is I think this will help people. So when we w w well, this, this is what [00:32:00] predicates it. So when we did the turnkey business, all the time, guys would be like, well, I just want to buy the house off you, and then I’m going to manage it.

And I’d be like, okay, why do you want to manage it? I already know it’s cause they think they’re going to save 10%. Right? Think they’re going to say money. And they were like, Oh, it’s cause I want to learn. I want to kind of get my feet well that I want to understand. And I’m like, all right, if that’s really your philosophy, like literally the only reason you would ever do that because you want to become a property management company.

Like that’s literally like going to back to school for five years to get an accounting degree and then sitting for the CPA exam and passing it. Just so that you know, what the account is going to do when he did it as your taxes like that is no. Nobody could do that. Your point. I mean, one of the reasons we hire several vendors in, I mean, just like for instance, you guys were the investor machine.

I, I can buy list source stuff, dirt cheap. I can skip trace probably in a very similar way, dirt cheap. We have spent years accumulating all this access to do things, and it is a fricking nightmare to deal with it. And then one of the things I said about John [00:33:00] McCall, when they were doing our mail and what, what, what did I love about you guys now?

All these years later, we look at it as a, um, we plugged you guys into a need. When I did it with Joe, all those years later, I didn’t know what I was doing. But like, we would get busy with our lives and no matter what, all of a sudden we’d be like thinking team, Oh, nail hit. Because like all of a sudden we’re getting all these notifications.

So in spite of our busy schedule, it was like, we still had leads. And that’s a big key you guys with, with these vendor relationships and things, whether it’s like building a website or, or like with investor machine with you guys, that’s the way we use you guys for that. Or. Um, just, we do several things with title and there’s other pieces of components where just to do all that, just like that property management example, people think I’m saving 10%, but there’s two real costs.

One of them is a physical cost of spending your time doing stuff.

Mike: [00:33:56] Yeah. And secondly,

Steve: [00:33:58] there’s a huge opportunity cost, [00:34:00] not only of spending your time, not doing something else, but there’s an opportunity cost of sucking management. That’s right here to property manager and your vacancies are twice as long.

And your maintenance projects go out of hand and you don’t know how to proactively look around the corners cause you haven’t done it. Right. And you don’t get economies of scale. Like with printing with PR with, with mailers or whether it’s your property manager, that’s doing mow and yards. Cause there they’re more than 400 of them.

It’s, you know, it’s just crazy that people are constantly tripping over dollars to pick up pennies in the business. And we’re kind of wired that way as real estate investors. We think we’re getting a deal, but just because something the cheapest or we’re in control of it, it absolutely doesn’t. It’s not part of owning a business.

If you’re a street hustler and you want to get the best deal. Cool. But my dad used to like drive halfway across the city to fill his gas tank up because it was like 3 cents cheaper. And I’m like, right. Yeah. I’m like quite positive. That’s not worth your spot. [00:35:00] Yeah. But

Mike: [00:35:00] you know, what’s funny is, uh, and I’m still, you know, when you’re a real estate, you’re always kind of frugal, right.

I I’ve always been a cheap ass, so, but, uh, I’m getting better. What I’ll say now is I appreciate like services and stuff. That’s like gonna save my time. I used to, like for many, many years, I w if I was going to buy something online, I always like sort, and. Usually it’s sorted by like price lowest to highest or whatever.

And so now there’s a whole bunch of stuff that I, the first thing I do is filter. What’s the highest price thing. It’s weird, but it’s like, I’m trying to buy my time back. Like I

Steve: [00:35:31] don’t, if it’s time-related or I don’t,

Mike: [00:35:34] I don’t really buy a lot of like junk. I mean, I buy some junk. My wife says every day is Christmas for me.

Cause I get an Amazon package when it’s usually like mosquito spray. I’m just like buying stuff on it. It’s not like I’m like. Buying myself gifts every day. I’m buying stuff that we think we need and I saved my time going to the store, but I often look at like, what’s the highest price thing. It’s not that I always buy that, but I’m

Steve: [00:35:54] like,

Mike: [00:35:54] I want, what’s the best.

I don’t want it to break. If it’s a service, like tell me what the best is [00:36:00] because I’m trying to buy my time back,

Steve: [00:36:01] you know?

Mike: [00:36:01] So not everybody’s in that position and I’m not saying that to brag because I’m not talking about, you know, I’m not looking at like the most expensive cars, like necessarily, right.

But.

Steve: [00:36:12] I just value

Mike: [00:36:13] quality, like the product and time, uh, over anything else right now,

Steve: [00:36:19] you know, young that way too. I mean, I just, I overlap the user ratings or consumer ratings out high price. So I do the highest price funds and the consumer ratings. I look for the highest rated. Highest price one. I like the balances there, you know, but it’s funny.

I don’t, I don’t have fences. She watches like now I’m sure I have a more, I don’t want to watch him

Mike: [00:36:44] 15 years. I mean, I don’t, I don’t it’s it’s right here on my phone. Like, why do I

Steve: [00:36:48] need that? Exactly. But I’m the same way as you, like, if I go anywhere VIP or upgrade or like, I mean, when I go the airport, I just, I always valet park [00:37:00] because.

It’s an extra hundred bucks. If I’m gone for three or four days to like literally have my car dropped off at the door that I walk in and it’s running for me, either warm or cool, what I need to do it. But like, you know, that’s convenience is a big deal and that’s, but, but, but getting back to something that we were talking about to drive this point home, I think is that when you really understand what you want and you and I have decided that.

Having crap that breaks that’s cheap. Like I’m going to exactly the same way you are. Like, I get pissed when my wife will buy stuff and it’s always like, she’s like I was trying to save money and I’m like, but now we don’t have whatever it is. Cause it broke or it wore out or I would’ve much rather got something that was nicer.

But, um, Hey, I want to say, I know I’m probably breaking a flow a little bit. We’re probably short on time, but I think this would be super helpful for your people. If I can, can I throw three things in really quick?

Mike: [00:37:46] Let’s

Steve: [00:37:46] do it. Okay. So we recovered something that I wrote notes down. Like while you were talking, I was like feverishly.

Cause you really reminded me of something important when people are hiring somebody, there should be a return on investment that’s with a [00:38:00] vendor or a person. And so when you’re bringing a vendor on, you would look at, don’t look at it as an expense. This is, I wrote it down when we were talking. I appreciate it too.

Right. But I want you guys to think about this. Um, Because it goes for vendors or employees. And I think this is there’s three reasons that what we found with the CEO nation, you know, the research and stuff we’ve done is what people get limited, why they don’t outsource stuff and why they don’t hire people.

Um, number one is they don’t, they think it’s an expense, but it’s really an investment. And the typically you’re going to get a three to five X return on a good employee or a good vendor. Hmm. I don’t have time to break that down to. I know we’re trying to stay on time. Just realize. The money you put in should have a three to five X bottom line effect into your business over the coming months, or it could take a year.

Sometimes it just depends on what it is. Um, but, but even if you hire a $30,000 a year admin, I mean, That person should be freeing up. Somebody who frees up somebody who frees up your sales guy [00:39:00] that goes out and does a hundred grand more business. You know, it should, that three X is legit and we’ve seen it time and end time out is what you should be looking for.

Um, another thing is just think about it this way. If you don’t think someone’s as good as you, like, you can, you can do your magic. They’ll do better than anyone in the world or whatever. You have a screws, first of all, but, um, or you can do acquisitions better than anybody. So even if you’re 120% good, like you’re a hundred percent is great.

You’re 120% of that activity, but you’re doing five things at any given time, right?

Mike: [00:39:30] Let’s call it six things

Steve: [00:39:31] for easy math. You’re 120% good, but you only do it 20% of your time. That’s effectively. If I make up my Steve math, that’s 24% effectiveness cause I did. It’s 20% of time, 120%. Good. But if I found someone who an employer and a vendor is even only 80% good, but they do it a hundred percent of their time.

I mean, I’ve literally got like a triple that’s that three times X, like literally they’re 80% effective. Cause their 80% is good, but they’re 100% of their time. Right. And so [00:40:00] that’s how that comes into play. So they don’t have to be as good as you. Right. And the second and the third thing, um, people don’t think they can afford somebody else.

But if you bring someone on, especially like an employee, like hiring a 2000 or $36,000 a year, employee, girl, or gal to work in your office is three grand a month. It’s not $36,000 check. Right. And just like, when you hire a vendor, if you’re going to pay five, 10 grand, or 20 grand a month for a vendor, some of our marketing vendors are expensive.

Um, our VA’s are people. We look at like that, right. But they have an immediate return on the bottom line. And so all we have to do is affordable. We call it runway. So like when you hire someone, you just have to know when the break, even point of that person, that circus usually going to take about a month to find out about a month, you get them in trained in about a month or ramp up.

So about nine 90 days, they should be paying for themselves by effect on your bottom line. Same with the vendor. It’s not overnight. So you can’t bring someone on for a month and quit or hire someone to fire them two months later. But I know I want to, I [00:41:00] know we’re running on time and I wanted to, I say those Mike, because I just think if, if we wanted to leave people with really important stuff on how to own a business, instead of a job.

I think thinking that things are expenses thinking nobody’s as good as me and thinking I can’t afford things are literally three of the worst, like cancerous thoughts that you can have in your head. And it’s, they’re so normal for people to have, especially when you’re entrepreneurial and you’re smart.

Yeah, I know. And nobody works as hard as me and they’re just all lies that we tell themselves and not even lies. It’s just, we don’t have the right perspective. So anyway, go box.

Mike: [00:41:34] No, you’re good. You’re good. Hey buddy. Yeah, I know. You’re, you’ve got to run here shortly and we’ve been going at this for a while, so we could probably talk all day about this stuff, but I’m real fast that folks wanted to connect with you.

You’ve got a number of things going on. You’ve got your own podcast now, where do they go to kind of connect? I want to be able to share some links. Yeah,

Steve: [00:41:49] appreciate that. Um, so just. Steve Richards on Facebook. That’s a great way to go.  DMA if you want to chat, but I’m the CEO nation. So our podcast is iTunes or [00:42:00] Stitcher.

Wherever you listen. The CEO nation, we have a Facebook group, thus CDO nation. And I’m the CEO nation.com. It’s okay. Anywhere around there is where I’m my heart. Is there the team architect? Yeah, we have that helps people, teams kind of filter through their real estate business. We do some coaching. We do all kinds of different things, but everything.

For me filters through trying to create impact for entrepreneurs. And it all starts with the CEO nation. So you have me on it’s been

Mike: [00:42:27] cool. Absolutely. And I was on your show here for the reason. I think he just publish that one. So, uh, um,

Steve: [00:42:33] you and your twin. Yeah.

Mike: [00:42:36] Does it Dave?

Steve: [00:42:37] Yeah.

Mike: [00:42:42] yeah.

Steve: [00:42:43] Yeah. So I’ve

Mike: [00:42:44] been called, I always say I’ve been called worse.

Steve: [00:42:47] Yeah.

Mike: [00:42:48] Cool, man. Well, Hey, appreciate you spending some time with us. We’ll have links for a bunch of these things down below in the show notes here. For those of you, uh, by the way, were,

Steve: [00:42:55] I could say we were

Mike: [00:42:56] recording the show live. Of course we record every show live.

We’re actually broadcasting [00:43:00] live when we recorded this and, uh, our Facebook group, which is called the professional real estate investor network long name. But if you go to flipnerd.com/professional, we’ll redirect you there. So we’re shooting about one show a week, the professional real estate investor show on average about one show a week, live in the group.

And if you joined the group, we’ll notify you when the shows are coming up and. You can join live. We can do a little Q and a when we have time. So go to flipper.com/professional to join our group and, uh, and learn more. And it’s, it’s, it’s not a huge group. It’s whenever going to be a group of tens of thousands of people, because, uh, again, professional as the name sounds is not a new beast.

We love newbies. If you’re new, that’s great. We were all new ones too, but there’s a lot of other groups that service you guys, and not a lot that really focus on professional folks that are doing a lot of volume and have a lot of questions. So, um, Steve, thanks again for joining us today. Great to see you, my friend.

Steve: [00:43:49] Yeah, I just want to enclose it and say it, the reason why I’m here for any show you do or asked you to be on my podcast or connect with, you know, this Facebook group, I’m excited for it to grow [00:44:00] because everything you do is top notch, brother. I appreciate everything you do. And anyone

Mike: [00:44:03] less than 10

Steve: [00:44:04] words should be check out anything Mike’s dealing because, um, I think very highly of you and what you’ve done.

So I appreciate it. I appreciate that, man. I appreciate

Mike: [00:44:11] that. It means a lot. Sometimes you wonder, what were you doing? Podcasts? I’d be like, is anybody listening? Right. Well, that’s a,

Steve: [00:44:17] anyway, I appreciate those kinds of words. And everybody

Mike: [00:44:19] we’ve been at this for a long time. This jazzes me up just to get, to spend time with friends and bring you folks that can share some, some great insights and knowledge and wisdom.

And some it says for sure. So you can check out all of our podcasts on flipnerd.com and again, go to  dot com slash professional to join our professional real estate investor group. So everybody have a great day. We’ll see you on the next show. Thanks for joining me on today’s episode, there are three ways I help successful real estate investors take their businesses and their lives to the next level.

First, if you’re in search of a community of successful real estate investors that help one another, take their businesses to the next level and a life changing [00:45:00] community of lifelong friends. Please learn more about my investor fuel real estate mastermind. By visiting investor fuel.

Steve: [00:45:11] If

Mike: [00:45:12] you’d like a cutting edge solution for the very best done for youth lead generation on the planet

Steve: [00:45:18] where we’re handling the lead generation

Mike: [00:45:20] for many of America’s top real estate investors, please learn more@theinvestormachine.com.

And lastly, if you’re interested in them, Free online community of professional real estate investors that isn’t full of spam solicitations and newbie questions. Please

Steve: [00:45:39] join my free

Mike: [00:45:41] professional real estate investor Facebook group by visiting flipnerd.com/professional. [00:46:00]

 

 

Source: flipnerd.com

15 Financial New Year’s Resolutions To Make In 2021

2020 is ending (finally) and it is time to start setting resolutions for 2021. Why not try to improve your financial health by following ones, or more, of these financial New Year’s resolutions?2020 is ending (finally) and it is time to start setting resolutions for 2021. Why not try to improve your financial health by following ones, or more, of these financial New Year’s resolutions?

The post 15 Financial New Year’s Resolutions To Make In 2021 appeared first on Money Under 30.

Source: moneyunder30.com

Don’t Get Tricked: Identity Protection Tips You Need

A woman sits on a gray couch with a laptop on her lap, drinking a cup of coffee

The weather is turning, fall is in the air, and Halloween is around the corner—which means it’s National Cybersecurity Awareness Month. How can you ensure October is full of treats while not falling for any scammers’ tricks? By arming yourself with these identity protection tips.

Every American should understand the basics of identity theft protection. According to the most recent report by the Bureau of Justice Statistics, 10% of people 16 and older have been the victim of identity theft. That’s why we’re encouraging people to educate themselves on identity protection tips this autumn. After all, there’s nothing quite as scary as identity fraud!

Here are some identity theft tricks to watch out for and identity security treats to take advantage of.

Trick: Using Your Data to Open New Accounts

According to the FTC, credit card fraud—including opening new credit card accounts—was the most commonly reported form of identity theft in 2019. Thieves can rack up hundreds of dollars’ worth of bills before you know it happened.

Here are a few things to keep in mind when it comes to your cybersecurity to avoid your data being used to open new accounts in your name:

  • Never use the same password across multiple accounts. Switch your passwords up.
  • Never use a password that’s easy to guess. This includes passwords that include your birthday, first or last name, or address.
  • Use passwords that are random combinations of numbers, letters, and symbols.
  • Enable two-factor authentication whenever it’s offered.
  • Don’t share or write down your passwords.
  • Never click on unknown email links or pop-ups on websites.
  • Make sure websites are secure before entering your payment information.
  • Never connect to public Wi-Fi that isn’t secure.
  • Never walk away from your laptop in public places.
  • Enable firewall protection.
  • Monitor your accounts and credit reports for unusual activity.

Treat: Check Your Credit Reports

Identity theft protection starts by being proactive and regularly monitoring your information for suspicious activity. That includes monitoring your credit report.

Did you know that you’re entitled to one free copy of your credit report each year from all three credit reporting agencies? In honor of National Cybersecurity Awareness Month, make October the month that you request your reports and go over them with a fine-toothed comb. Make sure you recognize all the open accounts under your name.

[Note: Through April 2021, you can review your credit reports weekly.]

An added bonus of checking your reports early in the month is that you can give your credit a good once-over before the upcoming holiday shopping season. Unexplained dips in your credit score could be a sign that something is wrong.

When you request your free credit report from the credit bureaus, your report does not come with your credit score—you have to request that separately. Sign up for ExtraCredit to get 28 of your FICO® scores and your credit reports from all three credit bureaus. You’ll also get account monitoring and $1 million identity theft insurance.

Protect Your Identity with ExtraCredit

Trick: Charity Fraud

October also happens to be Breast Cancer Awareness Month, and everywhere you look, pink is on display. With so much national attention on breast cancer, it’s easy to fall for scams that claim to be legitimate charities.

Consumers should also be on the lookout for phony COVID-19 related scams this fall and winter. For example, watch out for fake charities that pretend to provide COVID relief to groups or families but are simply stealing money.

Even worse than handing over money to these heartless fraudsters is that you may have handed over your credit card numbers or other personally identifiable information in the process.

Treat: Know Your Worthy Causes

Before donating to a charitable cause, do your homework. You can use websites such as Charity Navigator, CharityWatch, and the Better Business Bureau’s Wise Giving Alliance to check a charity’s reputation. Additionally, consider contacting your state’s charity regulator to confirm the organization is registered to raise money in your state.

After you’ve verified the status of the charity, consider making donations directly through the national organization. Avoid giving money or financial information directly to someone that reaches out to you through email, phone calls, or door-to-door interactions.

It might be a bit of extra work, but at the end of the day, you can feel good knowing your money is going to support a real cause. If you want to support October’s Breast Cancer Awareness Month, consider donating directly on the national website. An added bonus is that you’ll receive a receipt you can use for tax deduction purposes.

Trick: Tax Refund Fraud

Every year, the Internal Revenue Service announces its “dirty dozen” scams. These are the tax fraud scams the IRS determines to be the most common for the year. The 2020 list includes refund theft. A tax thief gains access to your information, files a fraudulent return in your name before you do, and has the funds paid out them. The only way you find out about it is that your legitimate tax return—the one you submit—is rejected for having already been filed.

Another way individuals fall victim to tax refund fraud is by using an unscrupulous return vendor. Dishonest vendors and ghost preparers steal personal information to file a tax refund and pocket the money or use that information for other types of identity fraud.

It’s unclear what exactly the next round of stimulus legislation will include, but if another stimulus check is included, watch out for attempts to steal your COVID stimulus checks. Remember that the IRS never contacts you via email, social media, or text.

Treat: File Early

It may feel like you just finished filing your 2019 taxes, but it’s never too early to start preparing for next year. While filing your taxes might be the last thing you want to think about this month, it’s crucial to stay on top of your tax return documents so you’re ready to file as early as possible. This is especially true for individuals who have reason to believe that their personal data has already been breached.

Always ensure you work with a reputable tax return vendor. You can look at the vendor’s online reviews before considering them as an option for tax return help.

Additionally, individuals that are paid to assist with or prepare federal tax returns must have a Preparer Tax Identification Number (PTIN). Paid preparers must sign and include their PTIN on returns. Always ask for this number before you hire an individual and hand over your personal information.

If you file early, you can beat out someone filing before you and receiving your return first. The earliest you can file is January.

Trick: Social Media Scams

Our social media accounts allow us to stay connected with friends and family. Unfortunately, scammers understand this and have started using social media to commit identity fraud.

There are many variations of social media phishing scams, but the basics are generally that a scammer creates an account to gain your trust and gather personal information from you. For example, many people have their name, birthday, and workplace information on their Facebook or other social media account. Those three things alone could be enough for someone to gain everything else they need to create a credit card application under your name or access your existing accounts.

Treat: Be More Exclusive and Private

Consider taking a quiet October morning to comb through your social media accounts. Start with your followers. Consider deleting everyone you don’t know personally.

If a follower base is important to you, consider another approach. Go through each social profile and scrub any personal details. Change the spelling of your last name slightly, delete your birthday, and remove other personal information, such as place of work. Ultimately, this can reduce the risk of being an easy target for identity fraud.

These core identity protection tips should help you stay safer online. With COVID-19 causing people to feel scared, individuals are more vulnerable to being tricked. Remember that identity fraud happens to millions of people every year, and it’s important to remain vigilant.

Stay Vigilant This Fall

Identity theft can have long-lasting consequences. If you’re recovering from identity fraud or simply unhappy with your credit score, consider signing up for ExtraCredit. ExtraCredit is a five-in-one credit product that provides tools to helps you build, guard, track, reward, and restore your credit.

Sign Up Now

The post Don’t Get Tricked: Identity Protection Tips You Need appeared first on Credit.com.

Source: credit.com

I taught English in China to pay off my student loans

Hello! Here’s a guest post from a reader, Nick. Nick was feeling stuck a few years ago and wasn’t making progress on his student loans. He ended up researching a lot about salaries and the cost of living for English teachers in China and realized that he would be able to save far more money in China than back home. Even without teaching experience, and still living very comfortably, including taking vacations, it has been easy for him to save $20,000 in a year. For him, it had a huge impact on his life and financial freedom. Enjoy his story on how to teach English in China below!

I taught English in China to pay off my student loans #teachenglish #movetochina #makeextramoneyIt must have been about 4.5 years ago. I remember walking out of an interview in Chicago feeling completely dejected.

The interviewer mentioned the salary, and along with it, how most new hires take on a second job during the weekend. 

I wasn’t expecting to find an amazing job, but this was just too much. None of my past decisions looked particularly good on a resume. I had just returned from a 3.5-year stint traveling around Latin America while earning a very modest living playing online poker.

But, I was burnt out, making no progress on my student loans, and realizing it was time to get a normal job. I was actually really excited to do so but job hunting was incredibly frustrating and when I realized how little money I’d be earning, I began looking for alternative options. 

Somewhere along the way, I had heard about teachers in Asia making good money and motivated by the frustration of the job search, I began looking into it more seriously.

After spending countless hours reading online, I ended up settling on China as that seemed to be where it’d be easiest to save the most money. 

I’ve since been in China for four years, paid off my student loans, and finally feel comfortable with my finances. 

Without a doubt, moving to China isn’t for everyone or even most people. However, for those that are a little bit adventurous, not opposed to working as a teacher, and want to save money fast, it’s an option worth considering. 

It’s not at all difficult to save $20,000 per year, without needing to be particularly frugal, and still have plenty of vacation time. 

Related articles on how to make extra money:

  • 12 Work From Home Jobs That Can Earn You $1,000+ Each Month
  • 30+ Ways To Save Money Each Month
  • The Best Online Tutoring Jobs

How to start teaching English in China.

 

The demand for teachers in China

Chinese parents spend an average of $17,400 per year on extracurricular tutoring for their children. 

More than 60% of students receive tutoring outside of school at an average of six hours per week and English is among the most popular subjects for after school tutoring. 

While these numbers look insanely high from my Midwestern American point of view, it barely scratches the surface for the demand for English tutoring in China. 

In fact, English is a required subject in Chinese schools. Private schools often take this a step further, with many classes and programs taught exclusively in English. Meanwhile, the online tutoring industry has created lots of opportunities to teach English online

Chinese parents are obviously willing to pay for English education. This demand for English teachers becomes even more apparent when you consider just how huge of a country it is. With a population of over 1.3 billion people, there are 32 cities with more people than Chicago

 

The requirements to be an English teacher

It’s not difficult to become an English teacher in China. The huge demand has made for relatively lax requirements. These are…

  • A bachelor’s degree
  • Two years of work experience
  • 120 hour TEFL certificate
  • Clear criminal background check
  • Pass a health check
  • Native English speaker

The bachelor’s degree doesn’t need to be in any specific subject, nor do the two years of work experience. The 120-hour TEFL is easy and pretty cheap to do online. 

Of course, having these doesn’t necessarily mean you’ll be able to get a great job right off the bat. Some of the best schools will have a very rigorous hiring process. However, even a standard first job in China can allow you to save a lot of money. 

 

The types of English teaching jobs in China

Most foreign teachers in China come to teach English. However, there are other opportunities as well, such as with teaching sports, a specific subject, or as a homeroom teacher who teaches a variety of subjects. 

There’s a wide range of salaries and teaching environments, with the main positions being in kindergartens, public schools, international schools, training centers, and universities. Salaries, working hours, and work environment can vary quite a bit depending on the type of school.

Additionally, the chosen city will have a large impact on your life with bigger cities paying more but also having a higher cost of living. ESL Authority has a good breakdown of the different salary ranges for different school types and locations. 

My teaching experience in China has exclusively been in Beijing at two public schools and one international school. I’ll share a bit about my experiences and salary at these schools. 

 

Teaching at a public school in China

Public school teaching jobs typically focus on oral English, meaning you’ll help students with their speaking and listening comprehension. The class sizes tend to be quite large. I often had 30-40 students in a class and would see each class only a couple of times per week, while often teaching multiple classes and different grade levels. In a given week I’d see 200-300 students. 

At the public schools I taught, I earned around $1,600 per month, which included a round-trip plane ticket to America, and housing. A typical schedule for public schools would be Monday-Friday, from 8 am – 4 pm, with 16-20 classes per week, with each one lasting around 45 minutes. There would be a lot of down-time during the day which I used to study Chinese

Many public schools, but not all, will let foreign teachers leave if they don’t have classes. Both public schools I taught at while in Beijing allowed me to leave when my classes were finished, which meant I’d often be done for the day around 2 pm. 

Vacation time is very generous, exceeding 3 months for summer and winter vacation, plus all of the national holidays during the year. Both public schools I’ve taught at allowed foreigners to finish the semester earlier and start later than their Chinese counterparts which makes sense as foreign teachers aren’t usually responsible for grading homework or preparing exams. 

The salary at public schools is more than enough to live comfortably and save quite a bit of money. Still, many teachers use their substantial free time to teach extra on the side with private students or at training centers. Doing so can be quite lucrative with an average rate of around $30 per hour. 

Having said that, it’s not exactly legal to teach with a different school than the one that sponsored your visa. If you got caught, it could get you in trouble and you could have your visa canceled and your time in China cut short. But, it’s one of those things that nearly everyone does and almost nobody gets in trouble for. So, if you choose to teach on the side, you should be aware of the risks. 

It isn’t difficult to teach an extra six hours per week during the ~8 months of the school year. This would earn an extra $5,760. Teaching 20 hours per week during 2 months of the summer/winter vacation would earn an extra $4,800. Combining these with the public school salary would make your yearly after-tax income $29,760 – with housing already paid for.

Plus, you’d still have close to two months’ vacation throughout the year. 

While I didn’t keep good track of my earnings and expenses while teaching at the public schools, these numbers are very close to my own experience. 

 

My experience teaching at an international school in China

If you’re more interested in teaching a subject like history or math, as opposed to English, an international school would be your best bet. 

These are the schools where wealthy Chinese and expats typically send their children to study. Teaching positions at some of the better schools can be very competitive, often requiring a teaching license, graduate degree, and a number of years of experience. Of course, those who qualify for these positions will earn higher salaries. 

However, a large number of international schools don’t have any additional requirements for teachers above the bare minimum required to teach in China. 

The work at these schools can be very demanding, much like teaching in America would be, requiring things like communicating with parents, creating exams, giving and grading homework, and plenty of meetings. Vacation periods are typically shorter than those for public school teachers. Likewise, working hours may be from 8 am – 5 pm, but most international school teachers will find themselves with very little downtime throughout the day. 

On the plus side, class sizes are generally much smaller and salaries higher. While teaching at an international school, I earned around $2,800 per month or $33,600 per year after taxes, with housing and a round-trip plane ticket included. 

However, due to the shorter vacations and more tiring day-to-day work, I didn’t have any interest in tutoring on the side. 

 

What does a typical budget look like for an English teacher?

This can be hard to say as everyone has a different lifestyle and things they’re willing or not willing to spend money on. I’ll share my budget below. 

Housing and Healthcare – $0/mo – In China, especially in the bigger cities, rent would make up the largest portion of a budget. Fortunately for foreign teachers, most schools include housing or a housing allowance. Housing would typically be a one-bedroom apartment, which may be on or off-campus, depending on the school. Some teachers may choose to add some of their own money to the housing allowance so that they can stay in a nicer place. But, I’ve been happy with the provided accommodation and didn’t pay any extra.  Health insurance is also provided and many schools have gyms on campus that you can use for free. 

Food – $350/mo – You can spend a lot of money on food or not much at all, depending on your preferences. Cheaper meals can be had for under $3 but you could easily spend $30 on a meal if you choose to go to fancier places. It also depends on how much you cook vs eat out and whether you like buying imported groceries. Most schools will offer free lunch to their teachers. Even so, I tend to spend quite a bit on food but am cheaper in other areas, so my food budget would be something like:

Groceries: $150

Restaurants: $200

Entertainment – $100/mo – Being the old man I am, I rarely go out for drinks at bars and my preferred entertainment is also the cheaper kind – hanging out, eating, and playing games with friends. Still, my wife and I will go to the occasional show. 

Transportation – $60/mo – Public transportation in China is fantastic and a single trip on the subway or in a bus can cost less than 50 cents. Shared bikes are everywhere and extremely cheap. Even using Didi, the Chinese version of Uber, is very affordable.  This is another area where I spend more than necessary, often taking a Didi out of laziness when there are cheaper options. 

Utilities – $15/mo – I think most schools typically pay for household utilities, like electricity and water. At least, the schools I worked at did. So, the only expense here is my phone which is on a pay as you go plan.

Travel – $250/mo – Living in China and working as a teacher opens up lots of travel opportunities, both within China and around Asia. Unfortunately, although plentiful, teacher’s vacation time is usually during national holidays when the cost of tickets is a bit higher.  Still, I tend to go on at least one international trip a year and also like to travel within China. Plus, almost every school also provides a round-trip ticket to your home country. If I were to guess, I probably spend around $3,000 per year on travel. I know people who spend much more and others who spend much less, so this cost will depend a lot on each individual’s preferences. 

Miscellaneous – $50/mo – These are other expenses such as buying household appliances, clothes, and other random things. I’m not a big shopper, but random things do come up. 

Total Expenses – $825/mo or $9,900/year

Although I’m conscious of my spending, I wouldn’t say that I’m especially frugal while in China. Far much less than I’d be if I were still living in Michigan. 

Some people might consider my spending extravagant while others might think I’m cheap. For me, it’s a good balance of comfort and enjoying my lifestyle with saving for the future. 

 

How much money can you save teaching English in China?

In my experience, I earned between $29,760 and $33,600 per year with expenses around $9,900 per year. This led to savings between $19,860 and $23,700 per year. Unfortunately, I didn’t track my exact earnings and spending each year, but these ballpark numbers are pretty accurate. 

It’s not particularly difficult to save $20,000 in a year of teaching in China while still living comfortably, traveling, and leaving yourself with enough free time to pursue other interests.

Plenty of people save more than this each year. There are also opportunities to increase your earnings as you gain more experience. 

However, like most places, life can be as expensive as you make it. If you’re bad with money back home, it’s unlikely you’ll suddenly become good with money by moving abroad. In fact, the money may disappear even faster than it would back home as there are lots of exciting ‘once in a lifetime’ opportunities. 

But, if you’re somewhat frugal and work fairly hard, you’ll have no problem saving a lot of money. 

 

How to find a job teaching English in China

There are tons of websites with job listings for English teachers in China. I can’t comment on most sites as all the jobs I found started with a search on the eChinacities job board

The start of your job search can be a bit overwhelming, especially if you’re still not sure where you’d like to live in China. This isn’t helped by the fact that a lot of recruiters will earn more money if they can get a teacher to accept a lower salary. 

I’ve known teachers that came to China and received terrible salary packages, earning less than half of what a typical salary would be and with an apartment far from the school. These people tended to not do enough research beforehand and accepted the first offer they received.

I would strongly recommend talking with lots of recruiters before accepting any position. Be sure to ask tons of questions, and be willing to say no to a jobs that don’t fit your criteria. There is no shortage of opportunities, so be patient when looking for your ideal position. 

Before accepting any position, be sure to do your due diligence on the school.

Most schools are fine and professional, but there are some sketchy ones. You won’t always find much information online about the school, but if they’ve done shady things in the past, you’ll probably see people talking about it.

Asking to speak with any current or former teachers can give you a bit more insight into the school as well.

 

Final thoughts on teaching English in China

Not everyone will be excited to live in China and I can understand that. It’s far from home, the language is difficult, and many people have a negative perception of the country. 

However, I’ve really enjoyed my life here and the experience has been exceptionally positive. Sure, there are small annoyances, but these will happen anywhere. Plenty of people worry about air quality, and while still not great, it has been improving every year

Beijing is extremely modern with no shortage of interesting and unique things to do. Moving here has been one of the best decisions I’ve made. 

I came here with only a few thousand dollars in the bank and what felt like an endless pit of student loan debt. In only a few years, I’ve been able to completely turn around my finances, pay off my loans, and save up a nice nest egg. 

I know that it’s not for everyone, but if you’re open to new experiences, can see yourself enjoying teaching, and want to save a lot of money, moving to China to teach English is an option worth considering. 

Nick Dahlhoff is an English teacher living in Beijing. Since moving there in 2016, he’s paid off his student loans, studied Chinese, gotten married and started a blog. At All Language Resources, he tests out lots of language learning resources to help language learners figure out which resources are worth using and which ones are better off avoiding. 

Would you take a job in another country to pay off your debt? Would you start teaching English in China?

The post I taught English in China to pay off my student loans appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

You CAN Reach Retirement! Avoid These Top 5 Retirement Mistakes

retirement mistakes

Wondering what retirement mistakes will ruin your retirement? Here are the biggest retirement mistakes we all make.

Have you ever checked in to see if you are on track for retirement? I know this can feel like a daunting task, but preparing yourself for retirement can help you save more and avoid common retirement mistakes.

For some, retirement means quitting their job after 40+ years, but it can also mean working towards early retirement, in your 20’s, 30’s, 40’s, and so on.

I know that’s not for the “average” American, but by avoiding some of the retirement mistakes I will talk about today, you can start preparing for retirement at any age.

Related: How To Save For Retirement

The thing about retirement is that sadly many out there are not saving enough money. In fact, according to Zacks Investment Research, 72% do not save enough for retirement each month.

Also, according to surveys done by Bankrate, 20% of people aren’t saving any money, and 61% of Americans have no idea what they will need to save for retirement.

These numbers are very alarming.

Saving money in general is an important thing to do, but if you don’t want to work for the rest of your life, saving for retirement should be something that you are thinking about. And, I believe that saving for retirement is possible if you start working towards it and avoid retirement mistakes when it comes to planning and saving.

While many believe the economy ruins their chances for retirement, in reality most retirement mistakes come from specific beliefs people have about retirement. Some of these beliefs come from expectations of what their budget will be during retirement, that they can rely on their pension or social security, and more.

There are many reasons for why a person might not be saving for retirement, and by looking at the various retirement mistakes you might be making, I feel that more people can be aware of and overcome their retirement preparation problems.

Here are five retirement mistakes and how they might be hurting your chances for retirement:

 

1. You ignore saving for retirement altogether.

Many people skip out on saving for retirement for several reasons, including:

  • Believing you don’t have enough money to save for retirement.
  • Thinking that you’re too young to care about retirement or that it’s too late to start.
  • Relying too much on pensions and social security.

No matter how young or how old you are, you should be saving and preparing for retirement. You never know when you will need it, and I am all for a person being in charge of their own retirement plan instead of relying too much on other sources of retirement (such as relying on social security 100%).

Millennials are especially at risk and according to an article by Business Insider, a shocking 40% of millennials have nothing saved for retirement. This is a scary number because these people will all have to retire one day and I’m not sure what they will do when the time comes.

But, it isn’t just young people who aren’t saving for retirement. Bankrate found that only 60% of people aged 45-54 have some type of retirement savings. You can read more crazy retirement statistics here.

It is important to realize that part of the reason for these low savings rates is that many are currently living paycheck to paycheck, which makes it hard to even approach saving for retirement. Fortunately, you can start investing with very little money, and you can learn how to start investing for beginners if you are wanting to start planning for retirement.

There is never a bad time to start saving for retirement, and you can correct this retirement mistake by starting today.

Side note: I highly recommend that you check out Personal Capital if you are interested in gaining control of your financial situation. Personal Capital allows you to aggregate your financial accounts so that you can easily see your financial situation. You can connect your mortgage, bank accounts, credit card accounts, investment accounts, retirement accounts, and more. And, it’s FREE!

 

2. You take on debt for others and don’t think about your future.

I talked about this topic in the post Should I Ruin My Retirement By Helping My Child Through College? This is a hard thing for a lot of parents especially as student loans are out of control, and I am hearing from parents nearly every week saying that they cannot afford to retire because they are paying for their child to go to college.

If this is your situation, I want you to STOP making this one of your retirement mistakes. Unless you are on track for retirement, I honestly think you need to seriously start prioritizing your future. Your child will be fine without your monetary support.

There are lots of ways to support your child through school that don’t involve leveraging your future for their education. You can help them find a job, find scholarships, be an emotional support, and more.

You can take out loans for college, but you cannot take out loans for retirement.

 

3. You think you’ll never have to retire.

Recently, I read an article about someone who made hundreds of thousands of dollars a year, had a monthly budget of around $30,000 (yes, MONTHLY!), and yet hardly saved anything. This person said they didn’t really feel the need to save for retirement because they enjoyed their job so much. That’s just crazy!

See, even wealthy people make retirement mistakes.

Assuming you will love your job forever can be a huge mistake. While it’s great that you love your job now, it’s hard to judge what you will love decades down the line.

Also, you never know if something will come up in the future that will completely prevent you from working, such as a medical issue or some sort of major life change. Beyond realizing that you will need to prepare for retirement, an emergency fund should be something you already have or are working on – emergency funds are there to protect you from the what-ifs.

Related articles:

  • Everything You Need To Know About Emergency Funds
  • Is A Credit Card Emergency Fund A Smart Idea?

 

4. You miscalculate how much money you’ll spend in retirement.

For some reason, many people just assume they will spend less money in retirement, but that is not always the case.

While you might find some ways to save money on things like commuting expenses, work clothes, lunch if you weren’t bringing it, you will probably experience a very similar budget to the one you had while working.

You are still going to spend money on housing (even if you pay off your home completely, you will still need to pay property taxes, utility bills, etc.), food, clothing, entertainment, and so on.

Many retirees also take up new hobbies or activities. And, some retirees just have more time to pursue things they’ve already been doing, which can add up to a lot of extra expenses.

Plus, medical expenses may come up, you might decide to travel more, and like I said, the truth is that retirement spending is not usually much different than what you are currently spending.

Some make plans to become super frugal after they enter retirement, but life doesn’t always work out so perfectly. To make sure this isn’t one of the retirement mistakes you are making, I recommend starting to cut down your budget now.

By living frugally before you retire, you will be able to save more, will have less expenses going into retirement (the less money you spend, the less you need in the future), and you might even reach retirement sooner. Really, if you cut your spending now and become more frugal, you will be used to living with less. I’ve been living a more frugal and minimalist lifestyle since we moved onto our boat, and it can be a life changing thing.

 

5. You use your retirement funds for expenses other than retirement.

This is one of the worst money mistakes out there, and unfortunately many young people are making it. I’ve actually heard far too many stories about people taking money out of their retirement funds in order to pay for a vacation, a timeshare, pay off low interest debt, and more.

When preparing for retirement, this is a HUGE mistake.

While I don’t know everything about taking money out of retirement funds, I do know that this can usually hurt you more in the long run. Taking funds out of a retirement account can lead to large penalties and paying extra towards taxes.

The other thing about saving for retirement is that the longer you have funds invested, the more you will have for retirement. Compound interest is a powerful thing, and if you are taking money out of your retirement account it means that you don’t get the full benefit of it.

You should always just use your retirement funds purely for retirement. If you are struggling with debt or need help differentiating between wants and needs, it’s time to make a change. Don’t wreck your future by making this huge retirement mistake.

What retirement mistakes have you seen? Do you think you will have enough money to retire and how are you preparing for retirement? What age do you expect to retire?

The post You CAN Reach Retirement! Avoid These Top 5 Retirement Mistakes appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

What Is the Self-Employment Tax?

Working for yourself, either as a part-time side hustle or a full-time endeavor, can be very exciting and financially rewarding. But one downside to self-employment is that you're responsible for following special tax rules. Missing tax deadlines or paying the wrong amount can lead to expensive penalties.

Let's talk about what the self-employment or SE tax is and how it compares to payroll taxes for employees. You’ll learn who must pay the SE tax, how to pay it, and tips to stay compliant when you work for yourself.

What is the self-employment (SE) tax?

In addition to federal and applicable state income taxes, everyone must pay Social Security and Medicare taxes. These two social programs provide you with retirement benefits, disability benefits, survivor benefits, and Medicare health insurance benefits.

Many people don’t realize that when you’re a W-2 employee, your employer must pick up the tab for a portion of your taxes. Thanks to the Federal Insurance Contributions Act (FICA), employers are generally required to withhold Social Security and Medicare taxes from your paycheck and match the tax amounts you owe.

In other words, your employer pays half of your Social Security and Medicare taxes, and you pay the remaining half. Employees pay 100% of federal and state income taxes, which also get withheld from your wages and sent to the government.

When you have your own business, you’re typically responsible for paying the full amount of income taxes, including 100% of your Social Security and Medicare taxes.

But when you have your own business, you’re typically responsible for paying the full amount of income taxes, including 100% of your Social Security and Medicare taxes.

Who must pay the self-employment tax?

All business owners with "pass-through" income must pay the SE tax. That typically includes every business entity except C corporations (or LLCs that elect to get taxed as a corporation).

When you have a C corp or get taxed as a corporation, you work as an employee of your business. You're required to withhold all employment taxes (federal, state, Social Security, and Medicare) from your salary or wages. Other business entities allow income to pass directly to the owner(s), so it gets included in their personal tax returns.

You must pay the SE tax no matter if you call yourself a solopreneur, independent contractor, or freelancer—even if you're already receiving Social Security or Medicare benefits.

You must pay the SE tax no matter if you call yourself a solopreneur, independent contractor, or freelancer—even if you're already receiving Social Security or Medicare benefits.

How much is the self-employment tax?

For 2020, the SE tax rate is 15.3% of earnings from your business. That's a combined Social Security tax rate of 12.4 % and a Medicare tax rate of 2.9%.

For Social Security tax, you pay it on up to a maximum wage base of $137,700. You don't have to pay Social Security tax on any additional income above this threshold. However, this threshold has been increasing and is likely to continue creeping up in future years.

However, for Medicare, there is no wage base. All your income is subject to the 2.9% Medicare tax.

So, if you're self-employed with net income less than $137,700, you'd pay SE tax of 15.3% (12.4% Social Security plus 2.9% Medicare tax), plus ordinary income tax.

Remember that your future Social Security benefits get reduced if you don't claim all of your self-employment income.

What is the additional Medicare tax?

If you have a high income, you must pay an extra tax of 0.9%, known as the additional Medicare tax. This surtax went into effect in 2013 with the passage of the Affordable Care Act (ACA). It applies to wages and self-employment income over these amounts by tax filing status for 2020:

  • Single: $200,000 
  • Married filing jointly: $250,000 
  • Married filing separately: $125,000 
  • Head of household: $200,000 
  • Qualifying widow(er): $200,000

What are estimated taxes?

As I mentioned, when you’re an employee, your employer withholds money for various taxes from your paychecks and sends it to the government on your behalf. This pay-as-you-go system was created to make sure you pay all taxes owed by the end of the year.

You must make quarterly estimated tax payments if you expect to owe at least $1,000 in taxes, including the SE tax.

When you’re self-employed, you also have to keep up with taxes throughout the year. You must make quarterly estimated tax payments if you expect to owe at least $1,000 in taxes, including the SE tax.

Each payment should be one-fourth of the total you expect to owe. Estimated payments are generally due on:

  • April 15 (for the first quarter) 
  • June 15 (for the second quarter) 
  • September 15 (for the third quarter) 
  • January 15 (for the fourth quarter) of the following year

But when the due date falls on a weekend or holiday, it shifts to the next business day. Your state may also require estimated tax payments and may have different deadlines.

How to calculate estimated taxes

Figuring estimated payments can be extremely confusing when you’re self-employed because many entrepreneurs don’t have the faintest idea how much they’ll make from one week to the next, much less how much tax they can expect to pay. Nonetheless, you must make your best guesstimate.

If you earn more than you estimated, you can pay more on any remaining quarterly tax payments. If you earn less, you can reduce them or apply any overpayments to next year’s estimated payments.

If you (or your spouse, if you file taxes jointly) have a W-2 job in addition to self-employment income, you can increase your tax withholding from earnings at your job instead of making estimated payments. To do this, you or your spouse must file an updated Form W-4 with your employer.

The IRS has a Tax Withholding Estimator to help you calculate the right amount to withhold from your pay for your individual or joint taxes.

How to pay estimated taxes

To figure and pay your estimated taxes, use Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations. These forms contain blank vouchers you can use to mail in your payments, or you can submit funds electronically.

When you have a complicated situation, including having business income, one of your new best friends should be a tax accountant.

For much more information about running a small business successfully, check out my newest book, Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers. Part four, Understanding Business Taxes, covers everything you need to know to comply and stay out of trouble.

From personal experience, I can tell you that when you have a complicated situation, including having business income, one of your new best friends should be a tax accountant. Find one who listens well and seems to understand the kind of work you're doing.

A good accountant will help you calculate your estimated quarterly taxes, claim tax deductions, and save you money by helping you take advantage of every tax benefit that's allowed when you're self-employed. In Money-Smart Solopreneur, I recommend various software, online services, and apps to help you track expenses, deductions, and tax deadlines that will keep your business running smoothly.

Source: quickanddirtytips.com

Am I On Track to Retire?

The only way to retire with financial security is by saving for retirement ASAP.  Although setting aside retirement savings is a solid start in the right direction, making sure you’re saving enough toward your retirement goal is just as important.

Once you’ve decided how much you’ll contribute to your retirement fund, you’ll be closer to knowing if your savings are on track. Here’s how to get started.

Compound Earnings Catapults Your Retirement Fund

Building your retirement savings isn’t something you can do on a whim, work on for a few years, and then abandon. You need to set up a plan — and the earlier in life, the better — then commit to it for decades.

Why? Because compound earnings over time is what gets you to your retirement goal faster. 

When you invest into your retirement, your funds earn interest. That interest is reinvested to earn more interest. This is the concept behind “compound interest”. To successfully plan for retirement, putting your contributions on auto-pilot is essential to maximize your compounded earnings.

This starts with opening the right to retirement plan, or even a combination of plans. From there, you can set up payroll deductions or automatic transfers from your bank account to fund whatever retirement plan you’ve chosen.

Choosing the Right Retirement Plan

You can start saving for retirement by participating in a workplace retirement plan, if your employer offers one. This will typically be a 401(k), 403(b), 457 or Thrift Savings Plan (TSP).

Under current tax contribution laws, you can contribute up to $19,500 per year to any of those plans, or $26,000 if you’re 50 or older. Some employers also offer a matching contribution that grows your savings fund more quickly.

A limitation of an employer-sponsored plan is that you’re often on your own to manage it. There might also be limited investment options, including some that have high investment fees. A good workaround for this problem is to sign up with a 401(k)-specific robo-advisor, like Blooom. 

It’s a service that creates and manages a portfolio within your employer-sponsored plan, including replacing high-fee funds with those that charge lower fees. And it provides this service for a low, flat monthly fee. Your employer doesn’t need to be involved in the process — just add Blooom to your existing plan.

If You Don’t Have an Employer-Sponsored Retirement Plan

If you don’t have access to an employer-sponsored plan, you have a few options depending on your situation. Here are other types of retirement plans to consider: 

  • Traditional IRA or Roth IRA. It can either include brokerage firms if you prefer self-directed investing, or robo-advisors if you’d rather have your investments managed for you. IRA contribution limits for either type of retirement plan let you contribute up to $6,000 per year, or $7,000 if you’re 50 or older. Here are a few places to open an IRA account.
  • SEP-IRA. If you’re self-employed and a high-income earner, a SEP-IRA is the best way to build up a large retirement portfolio in less time.  Rather than an annual contribution limit of $6,000 for traditional and Roth IRAs, the limit for a SEP-IRA is a whopping $57,000.
  • Solo 401(k). A Solo 401(k) is also designed for self-employed workers (though it can also include a spouse who participates in the business). It has the same employee contribution limit as a standard 401(k) at $19,500 per year, or $26,000 if you are 50 or older. But a solo 401(k) lets you make an additional employer contribution to the plan up to $57,000 (or $63,500 if you are 59 or older). Employer contributions are also capped no more than 25% of your total compensation from your business.

General Retirement Find Milestone Guidelines

The number of variables involved in retirement makes it impossible to come up with a specific savings goal to aim for in your situation. But like any plan, you’ll need to have milestones to let you know if you’re on track to retire or not.

Although there are different methods of calculating retirement milestones, the Fidelity Retirement Widget offers the best ballpark figure. The widget is incredibly user-friendly, produces easy to understand results, and is absolutely free to use.

It determines how much money you should have at each age, based on your answers to three questions:

  • What is your current age?
  • What age do you expect to retire?
  • What do you think your lifestyle will be in retirement? (You can choose below average, average, and above average.)

The last question about your lifestyle in retirement is admittedly vague, but an educated guess is enough.

Plugging in a starting age of 25, with an expected age of retirement of 67, and an average lifestyle in retirement, Fidelity provided the following retirement milestones in five-year increments:

Each bar represents a multiple of your current annual income at a specific age. For example, at age 30, your total retirement savings should roughly equal your annual income. At 35, you should’ve saved double your income, and so on until age 67 when you retire. 

At that point your retirement savings should be 10 times the amount of your annual income just before retiring. (It will be 12X your income at 67 if you expect an above average lifestyle, but just 8X if you expect to live a below-average lifestyle.)

How Accurate Are These Retirement Savings Milestones?

There’s no guaranteed method to project your exact future earnings or how much your retirement fund will compound over time. The best we can do is a ballpark estimate, especially if you’re only in your 20s or 30s.

But let’s work a loose example to demonstrate the validity of the Fidelity estimate.

Let’s say you reach 67, your final salary is $100,000, and you’ve accumulated 10 times that income in your combined retirement savings (i.e. $1 million).

It’s not reasonable to assume a $1 million portfolio will consistently generate 10% annual returns, fully replacing your $100,000 pre-retirement income.

General Rule of Thumb for Retirement Savings

Generally, you can plan on replacing 80% of your pre-retirement income. That means $80,000 per year of income in retirement. The reduction assumes you won’t have work-related expenses, like commuting, or making additional retirement contributions. It also assumes a lower annual tax bite. After all, once you retire, you’ll no longer be paying FICA taxes.

If you have a $1 million retirement portfolio, you can withdraw 4% per year without draining your portfolio to zero. This is what’s frequently referred to as the safe withdrawal rate.

Withdrawals of 4% will come to $40,000 on a $1 million portfolio. That will represent 50% of the $80,000 in needed retirement income.

Presumably, the rest will come from a combination of Social Security and any available pension income. You can use the Social Security Quick Calculator to determine what your benefits will be at retirement.

Using a Retirement Calculator to Track Your Goals

With your estimated Social Security benefits in mind, a retirement calculator can help you understand the remaining gap between your savings and how much you need for retirement. 

For example, let’s say you’re 25-years-old, earning $50,000 annually, and your employer offers a 401(k) plan. For each of the remaining examples, we’ll assume your employer doesn’t match contributions, and assume a 7% annual rate of return on investments reflecting a mix of stocks and bonds in your plan.

If you want your 401(k) plan balance to match your salary by age 30, you’ll need to contribute

17% of your income — or about $8,500 per year — to your plan. With a 7% annual rate of return, that’ll give you a balance of $50,717.

If you expect to be earning $75,000 per year by the time you’re 35, you’ll need to have $150,000 in your plan by the time you reach that age.

Assuming your income averages $62,500 per year between the ages of 30 and 35, you’ll need to contribute 21% of your income, or $13,125 per year, to reach the $150,000 threshold in your plan. 

The Magic of Saving for Retirement Early

Looking long-term, at retirement at age 67, let’s assume your income will grow to $100,000 between age 35 and 67. In this scenario, your average annual income is $87,500. Since you expect to earn $100,000 just before retiring, you should have $1 million sitting in your 401(k) plan.

What will it take to reach that goal?

Absolutely nothing!

One of the biggest and best secrets of retirement planning is the earlier in life you begin saving, the less you’ll need to save later on in life. And sometimes that’s nothing.

In this case, since you already have $150,000 in your plan at age 35, simply by investing the money at an average annual return of 7% for 32 years your plan will grow to $1.3 million. That’s without making even a single dollar of additional contribution.

And for what it’s worth, if you simply made the maximum 401(k) contribution of $19,500 each year between 35 and 67, your plan would have more than $3.4 million by the time you reach retirement.

The most fundamental rule of retirement savings planning is: save early and often!

Planning for Early Retirement

If you’re 25 years old and you want to retire at 50, decide how much income you’ll need to live on by the time you reach 50. Since you won’t have the benefit of Social Security or a pension, you’ll rely entirely on your retirement savings.

Let’s say you’ll need $40,000 per year to live in retirement. In this case, you’ll need to have $1 million in your retirement portfolio based on the 4% safe withdrawal rate.

How Much to Save for an Early Retirement

To get from $0 to $1 million in your retirement plan between 25 and 50, you’ll need to make the maximum 401(k) contribution allowed at $19,500 each year for 25 years. Assuming your investment produces a 7% return, you’ll have $1,181,209 by the time you reach 50. That’ll be a little bit higher than your $1 million retirement goal.

It’ll be difficult to carve out the full $19,500 on a $50,000 income you’re earning at age 25, but it gets easier as the years pass and your income increases. You might even decide to lower your contributions in your 20s, and work up to the maximum by the time you’re 30.

Just be aware that the foundational strategy of reaching early retirement is based on saving a seemingly ridiculous percentage of your income. Although others are saving 10% or maybe 15% of their income each year, you’ll need to think more in terms of 30%, 40%, or 50% savings. It all depends on how early you want to retire.

What to Do if You’re Not on Track to Retire

Unfortunately, this describes the majority of Americans. But it doesn’t need to be you, even if you’re not currently on track to retire.

Let’s say you’re 45 years old and earning $100,000, and you currently have $100,000 in total retirement savings. That means that at age 45 your retirement fund is where Fidelity recommends it should’ve been at age 30.

Don’t give up hope.

If you make the maximum contribution of $19,500 per year between ages 45 and 50, then increase it to the maximum of $26,000 per year from ages 50 to 65, you’ll have just over $1.3 million in your plan by the time you reach 65.

You won’t benefit from compound earnings that you would’ve seen had you started saving aggressively in your 20s, but your situation is far from hopeless.

The main takeaway is that you can get on track to retire at just about any age. But you have to be willing to commit to saving as much as you can and on a completely consistent basis.

The post Am I On Track to Retire? appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

Should I Take Money Out of My 401(k) Now?

Is taking money from your 401(k) plan a good idea? Generally speaking, the common advice for raiding your 401(k) is to only take this step if you absolutely have to. After all, your retirement funds are meant to grow and flourish until you reach retirement age and actually need them. If you take money from your 401(k) and don’t replace it, you could be putting your future self at a financial disadvantage.

Still, we all know that times are hard right now, and that there are situations where removing money from a 401(k) plan seems inevitable. In that case, you should know all your options when it comes to withdrawing from a 401(k) plan early or taking out a 401(k) loan.

401(k) Withdrawal Options if You’ve Been Impacted by COVID-19

First off, you should know that you have some new options when it comes to taking money from your 401(k) if you have been negatively impacted by coronavirus. Generally speaking, these new options that arose from the CARES Act include the chance to withdraw money from your 401(k) without the normal 10% penalty, but you also get the chance to take out a 401(k) loan in a larger amount than usual. 

Here are the specifics:

401(k) Withdrawal

The CARES Act will allow you to withdraw money from your 401(k) plan before the age of 59 ½ without the normal 10% penalty for doing so. Note that these same rules apply to other tax-deferred accounts like a traditional IRA or a 403(b). 

To qualify for this early penalty-free withdrawal, you do have to meet some specific criteria. For example, you, a spouse, or a dependent must have been diagnosed with a CDC-approved COVID-19 test. As an alternative, you can qualify if you have “experienced adverse financial consequences as a result of certain COVID-19-related conditions, such as a delayed start date for a job, rescinded job offer, quarantine, lay off, furlough, reduction in pay or hours or self-employment income, the closing or reduction of your business, an inability to work due to lack of childcare, or other factors identified by the Department of Treasury,” notes the Consumer Financial Protection Bureau (CFPB). 

Due to this temporary change, you can withdraw up to $100,000 from your 401(k) plan regardless of your age and without the normal 10% penalty. Also be aware that the CARES Act also removed the 20 percent automatic withholding that is normally set aside to pay taxes on this money. With that in mind, you should save some of your withdrawal since you will owe income taxes on the money you remove from your 401(k).

401(k) Loan

The Cares Act also made it possible for consumers to take out a 401(k) loan for twice the amount as usual, or $100,000 instead of $50,000. According to Fidelity, you may be able to take out as much as 50% of the amount you have saved for retirement. However, not all employers offer 401(k) loan options through their plans and they may not have adopted the new CARES Act provisions at all, so you should check with your current employer to find out. 

A 401(k) loan is unique from a 401(k) withdrawal since you’ll be required to pay the money back (plus interest) over the course of 5 years in most cases. However, the interest you pay actually goes back into your retirement account. Further, you won’t owe income taxes on money you take out in the form of a 401(k) loan. 

Taking Money out of Your 401(k): What You Should Know

Only you can decide whether taking money from your 401(k) is a good idea, but you should know all the pros and cons ahead of time. You should also be aware that the advantages and disadvantages can vary based on whether you borrow from your 401(k) or take a withdrawal without the intention of paying it back. 

If You Qualify Through the CARES Act

With a 401(k) withdrawal of up to $100,000 and no 10% penalty thanks to the CARES Act, the major disadvantage is the fact that you’re removing money from retirement that you will most certainly need later on. Not only that, but you are stunting the growth of your retirement account and limiting the potential benefits of compound interest. After all, money you have in your 401(k) account is normally left to grow over the decades you have until retirement. When you remove a big chunk, your account balance will grow at a slower pace.

As an example, let’s say you have $300,000 in a 401(k) plan and you leave it alone to grow for 20 years. If you achieved a return of 7 percent and never added another dime, you would have $1,160,905.34 after that time. If you removed $100,00 from your account and left the remaining $200,000 to grow for 20 years, on the other hand, you would only have $773,936.89. 

Money you have in your 401(k) account is normally left to grow over the decades you have until retirement. When you remove a big chunk, your account balance will grow at a slower pace.

Also be aware that, while you don’t have to pay the 10% penalty for an early 401(k) withdrawal if you qualify through the CARES Act, you do have to pay income taxes on amounts you take out. 

When you borrow money with a 401(k) loan using new rules from the CARES Act, on the other hand, the pros and cons can be slightly different. One major disadvantage is the fact that you’ll need to repay the money you borrow, usually over a five-year span. You will pay interest back into your retirement account during this time, but this amount may be less than what you would have earned through compound growth if you left the money alone.

Also be aware that, if you leave your current job, you may be required to pay back your 401(k) loan in a short amount of time. If you can’t repay your loan because you are still experiencing hardship, then you could wind up owing income taxes on the amounts you borrow as well as a 10% penalty.

Note: The same rules will generally apply if you quit your job and move out of the United States as well, so don’t think that moving away can get you off the hook from repaying your 401(k) loan. If you’re planning to leave the U.S. and you’re unsure how to handle your 401(k) or 401(k) loan, speaking with a tax expert is your best move. 

Keep in mind that, with both explanations of a 401(k) loan and a 401(k) early withdrawal above, these pros and cons are predicated on the idea you can qualify for the special benefits included in the CARES Act. While the IRS rules for qualifying for a coronavirus withdrawal are fairly broad, you do have to be facing financial hardship or lack of childcare due to coronavirus. You can read all the potential qualification categories on this PDF from the Internal Revenue Service (IRS). 

If You Don’t Qualify Through the CARES Act

If you don’t qualify for special accommodation through the CARES Act, then you will have to pay a 10% penalty on withdrawals from your 401(k) as well as income taxes on amounts you take out. With a traditional 401(k) loan, on the other hand, you may be limited to borrowing just 50% of your vested funds or $50,000, whichever is less.

However, you should note that the IRS extends other hardship distribution categories you may qualify for if you’re struggling financially . You can read about all applicable hardship distribution requirements on the IRS website.

Taking Money Out of Your 401(k): Main Pros and Cons

The situations where you might take money out of your 401(k) can be complicated, but there are some general advantages and disadvantages to be aware of. Before you take money from your 401(k), consider the following:

Pros of taking money out of your 401(k):

  • You are able to access your money, which could be important if you’re suffering from financial hardship. 
  • If you qualify for special accommodations through the CARES Act, you can avoid the 10% penalty for taking money from your 401(k) before retirement age. 
  • You can take out more money (up to $100,000) than usual from your 401(k) with a 401(k) withdrawal or a 401(k) loan thanks to CARES Act rules. 

Cons of taking money out of your 401(k):

  • If you take money out of your 401(k), you’ll have to pay income taxes on those funds.
  • Removing money from your 401(k) means you are reducing your current retirement savings.
  • Not only are you removing retirement savings from your account, but you’re limiting the growth on the money you take out.
  • If you take out a 401(k) loan, you’ll have to pay the money back. 

Alternatives to Taking Money from your 401(k)

There may be some situations where taking money out of your 401(k) makes sense, including instances where you have no other option but to access this money to keep the lights on and food on the table. If you cash out your 401(k) and the market tanks afterward, you could even wind up feeling like a genius. Then again, the chances of optimally timing your 401(k) withdrawal are extremely slim. 

With that being said, if you don’t have to take money out of your 401(k) plan or a similar retirement plan, you shouldn’t do it. You will absolutely want to retire one day, so leaving the money you’ve already saved to grow and compound is always going to leave you ahead in the long run.

With that in mind, you should consider some of the alternatives of taking money from a 401(k) plan:

  • See if you qualify for unemployment benefits. If you were laid off or furloughed from your job, you may qualify for unemployment benefits you don’t even know about. To find out, you should contact your state’s unemployment insurance program. 
  • Apply for temporary cash assistance. If you are facing a complete loss in income, consider applying for Temporary Assistance for Needy Families (TANF), which lets you receive cash payments. To see if you qualify, call your state TANF office. 
  • Take out a short-term personal loan. You can also consider a personal loan that does not use funding from your 401(k). Personal loans tend to come with competitive interest rates for consumers with good or excellent credit, and you can typically choose your repayment term. 
  • Tap into your home equity. If you have more than 20% equity in your home, consider borrowing against that equity with a home equity loan or home equity line of credit (HELOC). Both options let you use the value of your home as collateral, and they tend to offer low interest rates as a result. 
  • Consider a 0% APR credit card. Also look into 0% APR credit cards that allow you to make purchases without any interest charged for up to 15 months or potentially longer. Just remember that you’ll have to repay all the purchases you charge to your card, and that your interest rate will reset to a much higher variable rate after the introductory offer ends. 

The Bottom Line

In times of financial turmoil, it may be tempting to pull money out of your 401(k). After all, it is your money. But the ramifications to your future financial wellbeing may be substantial. The CARES Act has introduced new options to leverage your 401(k), without the normal penalties. Find out if you qualify and take time to understand the details behind the options. We recommend speaking to a tax expert if you have any questions or concerns regarding possible tax penalties.

The traditional wisdom is to leave your retirement untouched, and we agree with that. If you’re in a financial bind, consider other options to get you through the rough patch. Tapping into your 401(k) should really be your last resort.

The post Should I Take Money Out of My 401(k) Now? appeared first on Good Financial Cents®.

Source: goodfinancialcents.com