Category Archives: Finance

Financial Planning

Young people have it made. They have their whole lives ahead of them and ample time to plan for retirement. The trouble is that few actually plan. Even those who save a decent percentage of their take-home pay, rarely plan for the future and fund tax advantaged accounts like they should. The good news is that you can achieve your financial goals, if you start early enough. To that end, below are some tips that will help you have a comfortable retirement.

Saving
How much should you save? There is no perfect answer to this question, however, you should save as much as you can, without adversely impacting the quality of your life. In other words, it’s OK to indulge in a night out once in a while, or a latte from Starbucks, as long as it doesn’t become such a regular occurrence that you aren’t left with money to save. (To read more, see Enjoy Life Now And Still Save For Later and The Beauty Of Budgeting.)

Ideally, everyone should strive to save at least 10% of their salaries each year. That may not always be possible, after all, nearly everyone has months where they can’t save a dime. Perhaps you have to shell out for a new washing machine, or for new tires and brakes for the car. When you do have one of those months, however, you should really try to tighten your belt the following month.

Also, consider your spending habits. Do you really need the super sports cable television package, the magazine subscription, the big minute cell phone plan, or the high-end brand name clothes? Sure, when you are young, this might seem extreme, but in the long run, you’re building good habits and saving money in the process.

By cutting back on a few of the following expenses, you can set yourself on a path to financial success, even if you don’t have a big salary.

  • Reducing cable TV expenses: $15
  • Coupon savings for both food and consumer goods: $25
  • Buying generic brand items: $30 (-10% is conservative, assuming monthly food/toiletries cost of $300).
  • Initiating a cheaper cell phone plan or, better yet, eliminating your home line and just maintaining your cell phone: $30
  • Buying regular gas instead of premium: $10 to $20

As you can see, a few small savings opportunities can really add up, especially if you put the money you’ve saved into a retirement account. (To learn more about the benefits of starting young, see Why is retirement easier to afford if you start early?)

Your Home
Many people live above their means; they lay out big money for that high-end apartment, or build a big house and take on a mortgage that is way over their heads. This is a mistake. Live comfortably, but not above your means, no matter what the Joneses next door are doing. If you do otherwise, you are unlikely to have anything left to save at the end of the month and you may even rack up a pile of debt. Debt
So many financial advisors recommend using a low-rate loan to consolidate debts and reduce annual interest expenses. This is usually a great idea, but it’s even better if you avoid racking up any debt to begin with. Home equity loans range anywhere from 8% and up, while credit card rates are around 20% per annum; running a monthly balance will cost you big money. Don’t put anything on your credit card you won’t be able to pay for at the end of the month. Don’t take out a home equity loan unless absolutely necessary, and don’t finance appliances or home improvements. In other words, wait until you have the money in your pocket before you spend it. (To learn more, see Digging Out Of Personal Debt.)

Funding Retirement Vehicles
When you get your first full-time job, consider setting up a 401(k) plan. This will allow you to put about 15% of your gross income into the plan. The money will come out of your check pretax, and you won’t have to pay capital gains year to year, but rather upon distribution when you are 59.5.

Also, consider funding a Roth IRA. With a Roth IRA you take after tax money and put it into an account that can be invested in a mutual fund, stocks or bonds. The advantages to this type of account are you don’t have to lay out any money on capital gains each year, nor do you have to pay tax upon distribution. The catch, however is there are, like the 401(k), some income limitations; consult your advisor as these are based upon tax brackets. However, each individual can currently deposit up to $4,000 each year in their account. That’s huge! Over time you can build up a tremendous savings with this vehicle.

Young people often don’t think about taxes, but they should. Before buying a home or living in a certain area, consider checking what the property tax rate is. Perhaps it makes more sense to live in the next town over. If you are in a job as a consultant, start up your own business, or have other expenses that are not reimbursed by the company you are working for, those expenses may be deductible. As for income tax, be sure to apply for any deductions for which you may be eligible.

In many cases, it may be wise to avoid doing your own taxes and to visit a certified public accountant (CPA). Spend the $175 they’ll probably charge you, because the odds are they’ll be able to identify deductible expenses, or recommend tax advantaged ideas better than you ever could. When all is said and done, paying up for this type of expertise is usually worth it.

Planning for a Family
Whether you are getting married, buying a house, having a child or making some significant change in your life, you should always re-evaluate your financial situation. Are you saving enough? Will you have enough money to retire, pay for the kids’ college or buy that sports car you always wanted when you retire?

Know Bank Breaking Money Myths

Unfortunately, one of the factors that will prevent many people from becoming financially successful is a false belief about money. In fact, widespread financial myths can negatively impact both your short- and long-term net worth. Throw away these top 10 money myths, and you’ll avoid the consequences of believing them.

1. If I get a raise that bumps me into a higher tax bracket, I’ll actually take home less money.
Thankfully, this isn’t true. Moving into a higher tax bracket only increases the rate of tax paid on the last dollars you earn. Suppose you’re filing single, your old salary was $30,000 a year and your new salary is $33,000 a year. According to the IRS’s 2007 federal tax rate schedules, when your salary was $30,000, your marginal tax rate was 15%. With a salary of $33,000, your marginal tax rate is now 25%.

The key to unlocking this myth is the word “marginal”. In this scenario, your first $31,850 of income is still taxed the same way it was before you got your raise. With a $30,000 income, your take-home will be $25,891.25. If you make $33,000, you will take home $28,326.25. This is because only the extra $1,150 above $31,850 is taxed at 25% – not the whole $33,000. (To learn more, read How does the marginal tax rate system work?)

 

2. Renting is like throwing away money.
Do you consider the money you spend on food to be thrown away? What about the money you spend on gas? Both of these expenses are for items you purchase regularly that get used up and appear to have no lasting value, but which are necessary to carry about daily activities. Rent money falls into the same category.

Even if you own a home, you still have to “throw away” money on expenses like property taxes and mortgage interest (and likely more than you were throwing away in rent). In fact, for the first five years, you are basically paying all interest on your mortgage. For example, on a 30-year, $250,000 mortgage at 7% interest, your first 60 payments would total about $100,000. Of that you “throw away” about $85,000 on interest payments. (To learn more about mortgage payment schedules, read Understanding The Mortgage Payment Structure.)

3. You get what you pay for.
Higher-priced items are not always higher quality. Generic drugs are medically considered to be just as effective as their name-brand counterparts. A million-dollar home that falls into foreclosure and is repurchased for only $900,000 may still have $1 million worth of value. When the price of Google’s stock drops on a random Tuesday because investors are panicking about the market in general, Google isn’t suddenly a less valuable company..

While there is sometimes a correlation between price and quality, it isn’t necessarily a perfect correlation. A $3 chocolate bar may be tastier than a $1 bar, but a $10 bar may not taste significantly different from a $3 bar. When determining an item’s value, look past its price tag and examine its true indicators of value. Does that generic aspirin stop your headache? Is that home well-maintained and located in a popular neighborhood? Then you’ll know when paying the higher price is worth it when it isn’t (and you’ll be on your way to understanding the venerable Benjamin Graham’s principles of value investing, too). (To learn more, read Guide To Stock-Picking Strategies: Value Investing.)

4. I don’t have enough money to start investing.
It’s true that some brokerage firms require you to have a minimum amount of money to invest in certain funds or even to open an account. However, if you wait until you meet one of these minimums, you may get frustrated and have a harder time reaching your goal.

These days, it’s easy to start investing with very little money thanks to the proliferation of online savings accounts. While traditional bank savings accounts generally offer interest rates so low that you’ll barely notice the interest you accrue, an online savings account will offer a more competitive rate based on how the market is currently doing. In 2007, it was common to find online banks offering 5% interest, which is a pretty good return on your low-risk savings account investment when you consider that stocks historically return an average of 9-10% annually. Also, some online savings accounts can be opened with as little as $1. Once you’re in a position to start investing in stocks and mutual funds, you can transfer a chunk of change out of your online savings account and into your new brokerage account.

Alternately, you could open a brokerage account with minimal funds through one of the online trading companies that have cropped up. However, this may not be the best way to start investing because of the fees you’ll pay each time you purchase or redeem shares (generally $5 – $15 per trade). While these fees have been drastically reduced from when you had to trade through human stockbroker, they can still eat into your returns. (To learn more about getting started, read Start Investing With Only $1,000.)

5. Carrying a balance on my credit card will improve my credit rating.
It’s not carrying a balance and paying it off slowly that proves your credit worthiness. All this strategy will do is take money out of your pocket and give it to the credit card companies in the form of interest payments. If you want to use a credit card as a tool to improve your credit score, all you really need to do is pay off your balance in full and on time every month. If you want to take it a step further, don’t charge more than a small percentage of your card’s limit because the amount of available credit you’ve used is another component of your credit score.

6. Home ownership is a surefire investment strategy.
Just like all other investments, home ownership involves the risk that your investment may decrease in value. While commonly cited statistics say that housing appreciates at somewhere between the rate of inflation and 5% per year, if not more, not all housing will appreciate at this rate. In fact, it is perfectly possible for your home to lose value over the years, meaning that if you want to sell, you’ll have to take a hit. The only way you’ll avoid realizing a loss in such a situation is if you continue to own the home until you die and pass it on to your heirs.

Even in a less drastic situation, a job transfer, divorce, illness or death in the family could compel you to sell the house at a time when the market is down. And if your house appreciates wildly, that’s great, but if you don’t want to move to a completely different real estate market (another city), the profit won’t do you much good unless you downsize because you’ll have to spend it all to get into another house. Owning a home is a major responsibility and there are easier ways to invest your money, so don’t buy a home unless you are attracted to its other benefits. (For more insight, check out Measuring The Benefits Of Home Ownership.)

7. One of the major advantages of home ownership is being able to deduct your mortgage interest.
It doesn’t really make sense to call this an advantage of home ownership because there is nothing advantageous about paying thousands of dollars in interest every year. The home mortgage interest tax deduction should only be looked at as a minor way to ease the sting of paying all that interest. You are not saving as much money as you think, and even the money you do save is just a reduction in the costs that you pay. Interest tax deductions should always be considered when filing your taxes and calculating whether you can afford the mortgage payments, but they should not be considered a reason to buy a home. (To learn about this popular tax deduction, see The Mortgage Interest Tax Deduction.)

 

8. The stock market is tanking, so I should sell my investments and get out before things get any worse.
When the stock market goes down, you should really keep your money in. This way, you can ride out the dip and eventually sell at a profit. In fact, stock market lows are a great time to invest even more. Many seasoned investors consider a decline in the market to be a “sale” and take advantage of the opportunity to pick up some valuable investments that are only experiencing a temporary dip. Believe it or not, investors who continued putting money into the stock market during the Great Depression actually fared quite well in the long run. (To find out more on investing in a down market, read Survival Tips For A Stormy Market.)

9. Income tax is illegal.
Sorry, folks. There are quite a few different arguments here, but none will hold up in court. One is that the tax code says that paying taxes is voluntary. Another is that the IRS is not an agency of the United States. The IRS considers all of these arguments to be tax evasion schemes and will punish so-called tax protesters with penalties, interest, tax liens, seizure of property, garnishment of wages – in short, whatever it takes to get tax evaders to pay the full amount due when they’re caught. Most tax protester arguments and the IRS’s rebuttals can be found on the IRS website. Don’t fall for this shenanigan – it will ultimately cost you much more than you were hoping to save by not paying your taxes. (To learn more, check out the Income Tax Guide.)

10. I’m young – I don’t need to worry about saving for retirement yet. / I’m old – it’s too late for me to start saving for retirement.
The younger you are, the more years of compound interest you have ahead of you. Compound interest is like free money, so why not take advantage of it? Someone who starts saving and earning interest when they’re young won’t need to deposit as much money to end up with the same amount as someone who starts saving later in life, all else being equal. (To learn more, read Why is retirement easier to afford if you start early? and Compound Your Way To Retirement.)

That said, you shouldn’t despair if you’re older and you haven’t started saving yet. Sure, your $50,000 nest egg may not grow to as much as a 20-year-old’s by the time you need to use it, but just because you may not be able to turn it into $1 million doesn’t mean you shouldn’t try at all. Every extra dollar you invest will get you closer to your goals. Even if you’re near retirement age, you won’t need your entire nest egg the moment you hit 65. You can still sock away money now and make a considerable sum by the time you need it at 75, 85 or 95.

Learn More About Credit And Debt Management

America is addicted to debt. Just call us the credit nation, from the highest levels of government all the way down to Main Street USA. America and Americans are obsessed with credit and rely on debt every day. Even as the nation and its consumers struggle under record debt levels, we continue to rack up more.

Like it or not, we need credit. As we have established during and since the global financial meltdown of 2008, credit keeps the wheels of the global money machine well greased. Concepts, such as buying a home, starting a business, or buying an investment property often could not become realities without some form of credit. In fact, utility companies, banks, landlords and even employers often require credit checks before extending services or employment. Consider the following statistics:

  • As reported by the Federal Reserve Board (FRB), the size of total U.S.consumer debt grew nearly five times in size from $824 billion in 1990 to nearly $2.2 trillion in 2005.
  • According to Experian, without factoring in mortgages, in 2008 the average American held over $16,635 in debt.
  • According to ComScore, in 2008 55% of Americans maintained a running balance on their credit card accounts.
  • According to Visa and MasterCard, in 2006 alone there were 984 million bank-issued Visa and MasterCard credit and debit card accounts in the United States.
  • Mail Monitor, a credit card direct mail tracking service, reports that roughly 4.2 billion credit card offers were made to U.S. households in 2008.
  • An online poll conducted by CardTrak.com reports that the average rate for bank credit cards reached a whopping 19% in March 2007, whereas the average rate in 2003 was 16.5%.

Credit and its associated debts are a part of our reality, and will continue to be for the foreseeable future, and it is up to each individual consumer to not let credit ruin them. Unfortunately for many, it already has. The level of consumer debt has grown exponentially in the U.S., where tens of millions of credit consumers find themselves overwhelmed by their personal debts.

If you find yourself in a credit or debt bind, keep reading. This tutorial will provide an overview of credit and debt management concepts that every consumer should know about so they know how to live with credit.

Improve Your Credit Score

If you need to boost your credit score, it won’t happen overnight.

A credit score isn’t like a race car, where you can rev the engine and almost instantly feel the result.

Credit scores are more like your driving record: They take into account years of past behavior you can find on your credit report, not just your present actions.

1. Watch those credit card balances

One major factor in your credit score is how much revolving credit you have versus how much you’re actually using. The smaller that percentage is, the better it is for your credit rating.

The optimum: 30 percent or lower.

To boost your score, “pay down your balances, and keep those balances low,” says Pamela Banks, senior policy counsel for Consumers Union.

If you have multiple credit card balances, consolidating them with a personal loan could help your score.

What you might not know: Even if you pay balances in full every month, you still could have a higher utilization ratio than you’d expect. That’s because some issuers use the balance on your statement as the one reported to the bureau. Even if you’re paying balances in full every month, your credit score will still weigh your monthly balances.

One strategy: See if the credit card issuer will accept multiple payments throughout the month.

2. Eliminate credit card balances

“A good way to improve your credit score is to eliminate nuisance balances,” says John Ulzheimer, a nationally recognized credit expert formerly of FICO and Equifax. Those are the small balances you have on a number of credit cards.

The reason this strategy can boost your score: One of the items your score considers is just how many of your cards have balances, says Ulzheimer. He says that’s why charging $50 on one card and $30 on another instead of using the same card (preferably one with a good interest rate), can hurt your credit score.

The solution to improve your credit score is to gather up all those credit cards on which you have small balances and pay them off, Ulzheimer says. Then select one or two go-to cards that you can use for everything.

“That way, you’re not polluting your credit report with a lot of balances,” he says.

If you can’t afford to pay these small balances off at once, moving them to a balance transfer credit card might help.

3. Leave old debt on your report

Some people erroneously believe that old debt on their credit report is bad, says Ulzheimer.

The minute they get their home or car paid off, they’re on the phone trying to get it removed from their credit report, he says.

Negative items are bad for your credit score, and most of them will disappear from your report after seven years. However, “arguing to get old accounts off your credit report just because they’re paid is a bad idea,” he says.

Good debt — debt that you’ve handled well and paid as agreed — is good for your credit. The longer your history of good debt is, the better it is for your score.

One of the ways to improve your credit score: Leave old debt and good accounts on as long as possible, says Ulzheimer. This is also a good reason not to close old accounts where you’ve had a solid repayment record.

Trying to get rid of old good debt “is like making straight A’s in high school and trying to expunge the record 20 years later,” Ulzheimer says. “You never want that stuff to come off your history.”

4. Use your calendar

If you’re shopping for a home, car or student loan, it pays to do your rate shopping within a short time period.

Every time you apply for credit, it can cause a small dip in your credit score that lasts a year. That’s because if someone is making multiple applications for credit, it usually means he or she wants to use more credit.

However, with three kinds of loans — mortgage, auto and more recently, student loans — scoring formulas allow for the fact that you’ll make multiple applications but take out only one loan.

The FICO score, a credit score commonly used by lenders, ignores any such inquiries made in the 30 days prior to scoring. If it finds some that are older than 30 days, it will count those made within a typical shopping period as just one inquiry.

The length of that shopping period depends on the credit score used.

If lenders are using the newest forms of scoring software, then you have 45 days, says Ulzheimer. With older forms, you need to keep it to 14 days.

Older forms of the software won’t count multiple student loan inquiries as one, no matter how close together you make applications, he says.

“The takeaway is, don’t dillydally,” Ulzheimer says.

5. Pay bills on time

If you’re planning a major purchase (like a home or a car), you might be scrambling to assemble one big chunk of cash.

While you’re juggling bills, you don’t want to start paying bills late. Even if you’re sitting on a pile of savings, a drop in your score could scuttle that dream deal.

One of the biggest ingredients in a good credit score is simply month after month of plain-vanilla, on-time payments.

“Credit scores are determined by what’s in your credit report,” says Linda Sherry, director of national priorities for Consumer Action. If you’re bad about paying your bills — or paying them on time — it damages your credit and hurts your credit score, she says.

That can even extend to items that aren’t normally associated with credit reporting, such as library books, she says. That’s because even if the original “creditor,” such as the library, doesn’t report to the bureaus, they may eventually call in a collections agency for an unpaid bill. That agency could very well list the item on your credit report.

Putting cash into a savings account for a major purchase is smart. Just don’t slight the regular bills to do it.

6. Don’t hint at risk

Sometimes, one of the best ways to improve your credit score is to not do something that could sink it.

Two of the biggies are missing payments and suddenly paying less (or charging more) than you normally do, says Dave Jones, retired president of the Association of Independent Consumer Credit Counseling Agencies.

Other changes that could scare your card issuer (but not necessarily hurt your credit score): taking cash advances or even using your cards at businesses that could indicate current or future money stress, such as a pawnshop or a divorce attorney, he says.

“You just don’t want to do anything that would indicate risk,” says Jones.

7. Don’t obsess

You should be laser-focused on your credit score when you know you’ll soon need credit. In the interim, pay your bills and use credit responsibly. Your score will reflect these smart spending behaviors.

Are you getting ready to make a big purchase, such as a home or car? At least a few months in advance, have a look at your credit score, Consumer Action’s Sherry says.

While the score that you get through your bank or a service may not be the exact same one your lender uses, it will grade you on many of the same criteria and give you a good indication of how well you’re managing your credit, she says. It will provide you with specific ways to improve your credit score — in the form of several codes or factors that kept your score from being higher.

Know Best And Real Work at Home Jobs

Searching for jobs, particularly home-based work, used to be a matter of scanning the Sunday classifieds for offers to get rich quick by stuffing envelopes. Now, working from home is easier than before because exposure to at-home opportunities has multiplied.

A wide variety of job ads are just a click away, but so are the scams.

In 2007, when Rat Race Rebellion — a company that helps people find home-based work — began tracking at-home jobs, there were 30 scams for every legitimate opportunity. Now, with 4,500 to 5,000 work-at-home job ads screened weekly, the website finds 60 phonies for every one that’s for real, says Christine Durst, co-founder and principal of Staffcentrix LLC, the company that owns and manages RatRaceRebellion.com.

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Nevertheless, there’s no shortage of workers who dream of beating the odds and earning a living from home.

Durst, whose company Staffcentrix develops home-based and virtual career training programs, says those interested in work-at-home jobs primarily are:

  • Parents who say they want to spend more time with their children.
  • Trailing military spouses who, according to Durst, by virtue of their spouse’s career need to pick up and move every few years.
  • Retirees needing supplemental income.
  • People with disabilities.

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It’s not easy to be a good parent and simultaneously work well at home, says Durst, because most jobs require blocks of uninterrupted time to complete tasks, and children’s schedules are less than predictable. For those who do choose to walk the tightrope between paid work and parenting, consider deadline-oriented work. Durst says it’s generally better for those with younger children than schedule-oriented hourly work.

Steven Rothberg, president and founder of CollegeRecruiter.com, says “an increasing minority” of entry-level workers, are attracted to these jobs. He says he believes social introverts make good candidates. “They like working with people (but) they like interacting by email and by being on the phone. They dislike working in person with a lot of others,” he says, because of meetings and other “time-sucking problems” at an office.

Self-motivation, discipline, job skills and independence are key traits for at-home workers, says Stephanie Foster, a former medical transcriptionist who runs the website HomeWithTheKids.com.

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A growing number of employers appears to believe telecommuting is a good arrangement for them, as well. It cuts overhead costs, allows access to talented workers who may not be available locally, provides off-hours support and helps retain employees, says Sara Sutton Fell, CEO of FlexJobs.com, a website that aggregates hand-screened telecommuting/work-at-home jobs. “We’ve seen a real broadening of the audience of both employers and job seekers.”

Consider these 10 jobs — some rather traditional and others unexpected — for engaging at-home work and good (if competitive) prospects.

1. Virtual assistant

This is a job with much potential, in part because the title description covers many things. “You can fit your offerings to what you know how to do,” says Foster. One can own a virtual assistant business or work from home for a company that makes you available to other employers or clients. HomeWithTheKids.com, for example, currently features several such companies. Small businesses hire virtual assistants to help when they can’t justify a permanent employee. The International Virtual Assistants Association, which Durst co-founded in the 1990s, began with 28 members and has grown to more than 600. They charge from $37 for a six-month student membership to $137 per year for a regular member.

2. Medical transcriptionist

As Foster knows, being a medical transcriptionist is a demanding job, and nearly every company listed on her site seeks applicants with experience and/or training from certain schools. The work involves listening to and typing up dictation from doctors — some of whom have thick accents, slur words, and even “eat, drink, chew gum (and) talk to other people in the room” while dictating, she says. But hearing about medical matters can be interesting, and good transcriptionists are in very high demand. According to the Bureau of Labor Statistics’ 2015 data, the median hourly rate for transcriptionists is $17.17.

3. Translator

People with fluency in more than one language translate audio files or documents, not just word for word, but often with cultural differences in mind. “Companies can access home-based translators with hard-to-find language skills without being held back by geographic location,” says Fell.

Foster’s site lists jobs for home-based translators. The U.S. Bureau of Labor Statistics’ Occupational Outlook Handbook 2012-13, which groups translators and interpreters, notes a projected employment increase of 29 percent by 2024, much faster than the average for all occupations.

4. Web developer/designer

Information technology is the sector, Durst says, where most of the home-based hiring is being done. Terri Orlowski, a virtual assistant and Web developer based in Pittsburgh, offers services such as custom website design, template modification and redesigns, code updates, hosting and usability reviews. She previously held administrative positions in a variety of industries and makes a higher per-hour rate now. Out of the many new monthly work-from-home job postings on Upwork.com, Web developers are in high demand, says former CEO Gary Swart.

5. Call center representative

When you phone to order something from a catalog or infomercial, a big office with rows of cubicles may come to mind. But the person on the other end of the line is likely to be sitting in a home office. “It’s a huge and growing industry,” Durst says of companies that hire independent contractors to take calls from home. She says the “home-shore movement” started in response to complaints about the many companies that looked offshore for workers.

While some websites such as Sykes Home actually hire representatives, most use subcontractors. Just be aware that the pay may be by the minute rather than by the hour, so you may not be paid for time you spend waiting by the phone. A list of companies that hire call center reps can be found at HomeWithTheKids.com.

6. Tech support specialist

Call centers also hire technical support specialists to work remotely. Kate Lister, co-author of “Undress for Success: The Naked Truth About Making Money at Home,” names it as one of her top three “best-bet work-at-home jobs.” And according to the Occupational Outlook Handbook, jobs for computer support specialists (on-site and remote combined) were expected to increase by 12 percent from 2014 to 2024 — faster than the average for all occupations — with 88,800 new jobs.

7. Travel agent

Scams abound in the travel industry — particularly organizations that charge for information on how to break into the field. But operating a home-based travel agency can be an excellent business, says Tom Ogg, founder of HomeBasedTravelAgent.com. “Real home-based travel agents have experienced robust growth over the last decade, and there are probably 40,000-plus of them and growing.” A growing (although small) number of people earn $100,000 or more a year, he says. “A solid business concept and plan focused on profitability will take you a long way to achieving your monetary goals.” There’s also the joy of helping others enjoy their leisure time.

8. Teacher

From postsecondary education to elementary schools, there are opportunities for students to learn virtually. Along with that comes opportunities to teach (and tutor) virtually. While distance learning is not new, advanced technology, collaborative multimedia software designed for schools and high-speed Internet connections have created more opportunities for teachers and students to work together from afar, says Fell.

Durst has also noticed more teacher jobs being posted, and she knows of one professor who works mainly online and makes six figures — although income “depends on how many hours you’re applying to it and the type of classes you’re teaching.” A resource center for online teaching jobs can be found at GetEducated.com.

9. Writer/editor

Yes, the print publishing industry has been suffering, but Durst is seeing frequent listings these days for writing, editing and proofreading, particularly for the internet. Even those without writing experience can join the blogosphere. Not only can blogging be lots of fun, Foster says, but also there’s money to be earned blogging for someone else’s site, getting paid to post on your own blog or through revenue-sharing arrangements.

10. Franchise owner

It’s a no-brainer: Owning a business can be the road to at-home work. For an initial investment, franchises may offer a ready-made business with brand awareness, a system and a territory, says Leslie Truex, founder of the website WorkAtHomeSuccess.com. Her advice: Consider businesses that target the over-50 crowd or the self-employed, involve health and wellness, relate to the “green” movement, or involve electronic or online devices.

Money Market Account

Hear the initials “MMA” and — particularly if you’re a sports fan — you’re more likely to think of Ronda Rousey beating some unlucky woman’s head in the Octagon than you are to think of higher interest rates on your savings.

But when shopping around for a bank account, you’re likely to see a less bruising type of MMA, or money market accounts, offered alongside conventional savings. So, what exactly is different about these MMAs?

Money market account

A money market account is a savings account that allows a limited number of checks to be drawn from the account each month. How much interest a money market account pays, and whether it’s the highest-paying deposit product offered, varies for each account from bank to bank.

MASTERING YOUR MONEY: Make this the starting point on your money road map.

Where money market accounts came from

A few decades ago, there was a legal cap set by the government on the interest rates a bank could offer customers. Banks couldn’t try to outdo one another by offering higher rates, so instead they sold themselves with good customer service and free swag like toasters and slow cookers for new account holders.

Capped rates became unworkable in the early 1980s. Market interest rates were rising, but savings rate caps stayed relatively low in order to help banks, which had made many loans at lower interest rates in previous years, stay afloat by limiting how much they had to pay out in interest to customers.

In response, consumers seeking higher rates took their money out of the banks and put it into money market mutual funds that paid market rates of interest. These funds invested in short-term debt securities but were not federally insured like bank accounts.

Still, consumers’ savings flowed out of banks, leaving them with little money to lend out and eventually forcing Congress to pass the Garn-St. Germain Depository Institutions Act of 1982.

SEARCH RATES: See the latest national money market account rates now at Bankrate.com.

That law let banks offer money market deposit accounts that paid a “money market” rate of interest to attract deposits, rather than a capped savings rate.

What money market accounts do

At their core, MMAs are basically just a type of savings account, with some minor variations. How much interest an MMA pays, and whether it’s the highest-paying deposit product offered, varies from bank to bank.

The best way to think of MMAs is as a hybrid of checking accounts and savings accounts, says Dan Geller, executive vice president of Market Rates Insight, a source of pricing data for financial institutions.

“It comes under the umbrella of savings, but it has limited checking capabilities, which makes it more attractive than just pure savings accounts,” Geller says.

Don’t get too excited about that checkbook (or, in some cases, debit card), though; banks typically limit your check writing to about 3 checks a month, Geller says.

Beyond that, the total number of transactions you can make is limited by the Federal Reserve, says Denyette DePierro, vice president and senior counsel for the American Bankers Association.

“A money market account is a savings account that allows you to make up to 6 transactions a month out of it,” DePierro says. “It’s different from a checking account because a checking account is unlimited.”

Those who exceed the transaction limit will begin receiving warning notices from their bank. And if you keep it up?

“At some point in time, if you continuously move money more than 6 times out of that account, the bank is required — it’s not their choice; they’re required by the Federal Reserve — to move you … into a checking account,” DePierro says.

And don’t worry about losing your balance if the bank fails. Like savings and checking accounts, money market accounts are federally insured.

As times have changed, you’d think MMAs would have become less relevant:

  • The transactional capabilities of MMAs look pretty pathetic compared with a typical rewards checking account, which can pay substantially more in interest each month with no limitations on the number of transactions you can make.
  • Some banks are beginning to pay more interest on savings account deposits than MMAs, making money market accounts seem ever more redundant.

But in recent years, MMAs have held record amounts of Americans’ cash, in the trillions of dollars, Geller says.

“It has to do with uncertainty about the economy among consumers,” he says. “That’s where they like to park their money until they figure out which way they want to go.

Know Financial Tips For Young Adults

Unfortunately, personal finance has not yet become a required subject in high school or college, so you might be fairly clueless about how to manage your money when you’re out in the real world for the first time.

To help you get started, we’ll take a look at eight of the most important things to understand about money if you want to live a comfortable and prosperous life.

Learn Self-Control

If you’re lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you’ll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it’s better to wait until you’ve actually saved up the money. Do you really want to pay interest on a pair of jeans or a box of cereal? (To learn more about credit, check out Understanding Credit Card Interest and our Credit And Debt Management feature.)

Take Control of Your Own Financial Future

If you don’t learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based financial planners. Others may be well-meaning, but may not know what they’re doing, like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage.

Instead of relying on others for advice, take charge and read a few basic books on personal finance. Once you’re armed with personal finance knowledge, don’t let anyone catch you off guard – whether it’s a significant other that slowly siphons your bank account or friends who want you to go out and blow tons of money with them every weekend. Understanding how money works is the first step toward making your money work for you. (To find out how to have fun and still save money, see Budget Without Blowing Off Your Friends.)

Know Where Your Money Goes

Once you’ve gone through a few personal finance books, you’ll realize how important it is to make sure your expenses aren’t exceeding your income. The best way to do this is by budgeting. Once you see how your morning java adds up over the course of a month, you’ll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise.

In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time. If you don’t waste your money on a posh apartment now, you might be able to afford a nice condo or a house before you know it. (Read more on budgeting in our Personal Finance feature.)

Start an Emergency Fund

One of personal finance’s oft-repeated mantras is “pay yourself first.” No matter how much you owe in student loans or credit card debt, and no matter how low your salary may seem, it’s wise to find some amount – any amount – of money in your budget to save in an emergency fund every month.

Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly “expense,” pretty soon you’ll have more than just emergency money saved up: you’ll have retirement money, vacation money and even money for a home down payment.

Don’t just sock away this money under your mattress; put it in a high-interest online savings account, a certificate of deposit or a money market account. Otherwise, inflation will erode the value of your savings.

Start Saving for Retirement Now

Just as you headed off to kindergarten with your parents’ hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you’ll have to invest to end up with the amount you need to retire and the sooner you’ll be able to call working an “option” rather than a “necessity.”

Company-sponsored retirement plans are a particularly great choice because you get to put in pre-tax dollars and the contribution limits tend to be high (much more than you can contribute to an individual retirement plan). Also, companies will often match part of your contribution, which is like getting free money. (To learn more, see Understanding The Time Value Of Money and Retirement Savings Tips For 18- To 24-Year-Olds.)

Get a Grip on Taxes

It’s important to understand how income taxes work even before you get your first paycheck. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. Fortunately, there are plenty of online calculators that have taken the dirty work out of determining your own payroll taxes, such as Paycheck City. These calculators will show you your gross pay, how much goes to taxes and how much you’ll be left with, which is also known as net, or take-home pay.

For example, $35,000 a year in New York will leave you with around $26,399 after taxes without exemptions in 2016, or about $2,200 a month. By the same token, if you’re considering leaving one job for another in search of a salary increase, you’ll need to understand how your marginal tax rate will affect your raise and that a salary increase from $35,000 a year to $41,000 a year won’t give you an extra $6,000, or $500 per month – it will only give you an extra $4,144, or $345 per month (again, the amount will vary depending on your state of residence). Also, you’ll be better off in the long run if you learn to prepare your annual tax return yourself, as there is plenty of bad tax advice and misinformation floating around out there. (To learn all about your taxes, visit our Income Tax Guide.)

Guard Your Health

If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you’re uninsured, don’t wait another day to apply for health insurance; it’s easier than you think to wind up in a car accident or trip down the stairs.

You can save money by getting quotes from different insurance providers to find the lowest rates. Also, by taking daily steps now to keep yourself healthy, like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol in excess, and even driving defensively, you’ll thank yourself down the road when you aren’t paying exorbitant medical bills.

Guard Your Wealth

If you want to make sure that all of your hard-earned money doesn’t vanish, you’ll need to take steps to protect it. If you rent, get renter’s insurance to protect the contents of your place from events like burglary or fire. Disability-income insurance protects your greatest asset – the ability to earn an income – by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury.

If you want help managing your money, find a fee-only financial planner to provide unbiased advice that’s in your best interest, rather than a commission-based financial advisor, who earns money when you sign up with the investments his or her company backs. You’ll also want to protect your money from taxes, which is easy to do with a retirement account, and inflation, which you can do by making sure that all of your money is earning interest through vehicles like high-interest savings accounts, money market funds, CDs, stocks, bonds and mutual funds.

Know Financial Tips For Millennials

Managing money is generally not taught in elementary school. About 17 states require students to take a personal finance course in high school, but only a handful require testing on the topic, according to the Council for Economic Education.

When it comes to money, it’s better to learn from other people’s mistakes than to make your own. Follow these tips when you’re young to avoid financial hardship in life.

1. Go to college

You may want to do something that doesn’t require a college degree, such as playing professional golf. But give serious consideration to enrolling in college anyway. Yes, it’s a major investment, but if your parents are unable to help you pay for it, make it happen yourself, even if it means taking out loans. Just don’t get in over your head; try to borrow no more than the amount you expect to earn the 1st year after graduation. That way you can pay off the loans within 10 years. One way to save on costs: Go to a community college first; then transfer to a 4-year university after 2 years.

It’s easier to get a degree when you’re young than when you have a home, family and all the attendant adult responsibilities. Your earnings potential increases significantly with a college degree — which will come in handy if your other dreams don’t materialize. Plus, you will likely experience a love of learning that you will never outgrow.

2. Find your purpose

If you’re having trouble figuring out what you want to do with your life, look within. You were born with certain talents and natural abilities. You know which subjects you excel in and which ones you struggle with. Choose a career that enables you to maximize your gifts in a way that fulfills you or helps others. As you grow, your career may change along with your desires. But for now, gravitate toward a field that feels like home.

3. Begin retirement planning with your 1st job

This tip is so important. If the company you work for offers a 401(k) plan, sign up at your 1st opportunity. If there’s no such plan, divert some of your paycheck into an IRA. Believe it or not, if you’re lucky, one day you’ll find you are older, so it’s best to be prepared. Setting up automatic contributions to either one of these retirement vehicles at a young age will help you build wealth painlessly.

Naturally, the more you earn, the more you can stash. Sock away at least 7% of your earnings in the beginning, and increase it each year until you’re diverting 15% a year.

4. Place a value on money

It doesn’t buy happiness, but it can certainly make you comfortable. Just understand what it’s worth. Money is what you earn in exchange for your time in some productive pursuit. Let’s say you earn $20 an hour at your job, and you’re considering purchasing a TV for $500. You may calculate that you spend 25 hours, or about 3 days, earning that money. It’s worth it, you may think. But that’s not an accurate value estimate. If you’re single, you’re in the 25% tax bracket, so you actually spend about 33 hours earning the net income required to make the purchase. It still may be worth it, but there may be competing demands for that money, such as rent and car payments, not to mention your retirement fund. Each purchase represents a trade-off. Make these decisions wisely.

5. Use the credit card sparingly

This tip is also really vital. It’s easy to spend now with plastic and much harder to pay later. Use credit responsibly. Comparison-shop for your card. Remember that you’ll be relying on your future earnings to pay for today’s credit card purchases. And if you keep a running balance, you’ll also be paying interest, sometimes at usurious rates. Don’t fall into this trap. Instead, save money to meet financial goals.

6. Follow the golden rule

Contrary to popular belief, the duplicity and craftiness of Machiavellian tactics won’t really help you survive. Instead, they’ll engender mistrust in your relationships. Treat others fairly, the way you wish to be treated. No one looks good when trying to make others look bad. When you’re on the job, avoid gossip. Beware that when someone takes you into his or her confidence to point out someone else’s foibles, it’s only a matter of time before your foibles come to light.

7. Select your partner wisely

Choose someone whose values match your own — not just where money is concerned, but more importantly, ethical and moral values. Get to know your soul mate over the course of at least a year. Passion is important, but trust even more so. Make sure you are free to be yourself. If you hook up with an angry or overly critical partner, you will be subjected to hostility and may lose your sense of self. Conversely, if you’re the one with anger issues, resolve them before they poison a perfectly good relationship. Learn to make decisions with your heart, along with your head.

8. Be prepared for the unexpected

Someday you may lose a job through no fault of your own. Prepare today by stashing money into an accessible emergency fund. The easiest way to do this is to automatically divert a portion of your earnings into a savings account in addition to the amount you’re contributing to a 401(k) plan or IRA.

Try not to use that 401(k) money for emergencies. It will cost you plenty, between income and penalty taxes. For instance, if you have $10,000 in your account and you’re in the 25% tax bracket, you’ll lose $2,500 to taxes, plus pay another $1,000 penalty for breaking into the money before you reach age 55. (For IRAs, the early withdrawal penalty applies up to age 59 1/2, with certain exceptions.) Bottom line: Your $10,000 dwindles to $6,500. Worse, you will have lost the opportunity for that money to compound and build wealth for your retirement.

9. Learn about investing or hire help

It’s not rocket science; in the beginning you just need to overcome fear and select 1 or 2 good, cheap mutual funds. After you’ve amassed some wealth, it may be time to hire someone. If you do, you will obviously have to pay for the service. Get referrals and then check out the qualifications and credentials of a prospective financial adviser or broker.

Make sure you understand the fee structure of the services. Is it commission-based or do you pay an hourly fee or a percentage of assets or some combination of these fees? Ask for a complete breakdown. Also, check with the appropriate authority to see if any disciplinary actions have been taken against a certified financial planner or broker before you initiate contact. If you’re confident enough to choose your own investments, you might find that going with a robo-adviser is the best bet.

10. Be thankful for your good fortune

It’s not all about money. If you work at it, you will have abundance — through strong family ties and solid relationships, as well as monetary assets. Take some time out each day to reflect on the good in your life. Spend at least 1 day a week in a recreational activity or hobby that you enjoy, and take a minimum 1-week vacation annually if you possibly can so you can totally unplug and unwind. Again, save for the trip.

If you have children, spend as much time as you can with them when they’re still young and dependent on you. Before you know it, they’ll be old enough to get a driver’s license, and you’ll see less and less of them from that point on.

How to Repay Student Loans Fast

Treat the loan like a mortgage

If you can afford it, treat the loan like a mortgage and simply make larger payments to cut the principal more quickly, says financial planner Allan Katz, CFP professional, president of Comprehensive Wealth Management Group in New York’s Staten Island.

For example, a $25,000 student loan with 6.8% interest with a 10-year payback period would cost $288 a month. Paying $700 a month instead of $288 enables the borrower to repay the loan in just over three years, Katz says.

Another strategy is adding payments and sending in checks every two weeks rather than monthly.

Once that college loan is repaid, the benefits proliferate. “It’s one less debt you owe. The money you make is now free to be invested and applied to owning a house, saving for retirement or putting a child through college,” Katz says.

Create a 3- to 5-year plan

Clayton Shearer, a wealth manager at A&I Financial Services in Englewood, Colorado, urges clients to create a three- to five-year plan to pare college debt.

Knowing exactly when the loan ends is comforting for many clients. Clients “have a goal in place, they’re committed to it and they know exactly what to pay monthly,” Shearer says.

For example, two clients had $50,000 combined in college debt and were making around $100,000 a year jointly. To pay it off, they established a budget and cut back on spending. Their budget was helped by two sizable bonuses from work, resulting in their sending $800 per month for two years to cancel their college debt. Had they not prepaid, it would have taken about 15 years to pay off the loan.

Establish a college repayment fund

Having money moved automatically into savings is effective because it’s forced, Katz says. It enables people to set aside money to grow that otherwise would be spent on clothes or dining out, Katz says.

Just make sure to set up an account that will be used only for paying back your college debt. Don’t use checking or savings accounts you already have because you might use that money for something other than your student loan.

Start early with a part-time job in college

Getting a part-time job while attending college is one way to keep college debt in check because it generates money to help offset student loans.

If a student can put away $1,000 a month, “that’s $12,000 (a year) less in student loans and not having to take that money out in loans — a big savings,” Shearer says.

Avoid the usual traps

The most compelling barrier stopping people from repaying loans faster is the need for “instant gratification,” Shearer says. People can lose sight of their future financial goals, live for today and “fall off the budgetary wagon,” he says. The most effective way to reduce debt is to plan ahead, make some sacrifices, focus on future financial goals and delay instant gratification.

Katz agrees. Maintaining financial discipline is a difficult hurdle for many people, he says. “Most people don’t have the discipline to save. Most people spend like goldfish eat, which is nonstop,” Katz says.

The people who succeed at cutting college debt are those who “live within their own means and are conscientious about saving,” Katz says.

How To Repaying Student Loans

Your college diploma is a little piece of paper with a big impact on your financial future. Unfortunately, so is your student loan promissory note.

Now that you’ve graduated, it’s time to pay the piper for the loans that have been putting you through school all this time — and playing dumb or pleading ignorant isn’t going to cut you any slack. Here’s what you need to know to pay back what you owe and protect your financial future.

Figuring out what you owe

Most federal loan programs offer a grace period of between six and nine months after graduation before your repayment period begins. Knowing when the repayment process begins and making sure that your lender has a current address for you is crucial. Missed payments can heavily impact your credit score and could result in a number of nasty fiscal consequences including additional fees, losing your federal and state income tax refunds to the government and wage garnishment.

Get ready to start the repayment process by boning up on what kind of loans you have, who your lender is, how much you owe, how long you have to pay it back, what you should be paying each month, and what fees you’re responsible for. To find out where you stand:

  • Dig up all the paperwork related to your loan, including the promissory note you signed at the beginning. If you don’t have it immediately on file, ask your parents, who may have been smart enough to file it all away. Or you can download a copy of your note at the Department of Education’s Federal Student Aid website.
  • Log on to the Department of Education’s Federal Student Aid website if you haven’t already. By entering in some personal information and your Department of Education PIN, you can access a list of what you owe on all your federal student loans. (Note: If you don’t have a PIN already, you may request one at the site.)
  • Contact your university’s financial aid office. A counselor will be able to provide information on private, nonfederal loans that have been disbursed to you through the university so that you can get in touch with your lender. If you have private loans on top of federal ones, reach out to those lenders directly to make sure that you’re fully aware of your payment responsibilities.

Picking a repayment plan

Although your student debt is just as serious as, say, your electric bill or your rent, you generally have more flexible options for repayment. Before your grace period ends, work with your lender to find the easiest plan to pay back what you owe without going broke:

  • Standard repayment. The most direct method of paying off your student loan, a standard repayment plan expects you to pay a fixed amount, at least $50, each month. You’ll also have up to 10 years to pay off the loan. Although your monthly payments will be slightly higher than they would be under the other repayment plans, you’ll wrap up the debt more quickly, which means you’ll pay less in interest.
  • Extended repayment. As with the standard repayment plan, you’ll still pay a set amount each month, but you’ll have longer to pay off the debt: up to 25 years, depending on how much you owe. To qualify, you must have more than $30,000 in federal student loan debt. It’s a good idea if you have a hefty loan, but consider the extra interest you’ll accrue.
  • Graduated repayment. Most recent college grads start out with a small paycheck that increases over time. The graduated repayment plan mirrors that expected salary life cycle. You’ll start off making small payments in the first few years after graduation, then work up to larger monthly payments. While initially you’ll be required to pay the interest only or half the payment you’d make under the standard repayment plan — whichever is greater — eventually you’ll pay substantially more. The plan does come with a few protections. Under this plan, your payments will never increase to more than three times the payment amount you started with.
  • Income-contingent/income-based repayment. Each year, you can have your monthly payments adjusted to an affordable level based on how much you’re earning. As your payments increase or decrease along with your income, you’ll have greater flexibility to chip away at your debt without stressing your family finances. In both plans, if you make consecutive payments for 25 years, the federal government will forgive any remaining debt you still have.

Switching plans

Although you select a payment plan when you first begin repaying the loan, with federal loans you can always switch plans if your financial situation changes. Not all plans are available for all loans, and some loans carry limits on the number of times you can switch repayment plans each year. Private loans offer their own set of repayment options and frequently don’t include income-based plans. Check with your lender for specifics on what’s available to you.

Other ways to ease the burden

Tacked onto your student loan are origination and administrative fees. You may be able to reduce your fees on private loans by negotiating with a customer service representative at the loan-holding institution. Other lenders will shave a point off your current interest rate if you agree to make your loan payment online or allow the payment to be automatically deducted from your checking account each month. You can get time off for good behavior, scoring a reduced interest rate for making a certain number of consecutive monthly payments on time. Unfortunately, the only borrower benefit federal loans offer is a 0.25 percent reduction in your interest rate for paying by electronic debit. Contact your lender about money-saving options.