How to Invest With Little Money

• by Jackie Lam, January 2, 2018 in Saving Money

When I was in my 20s, I thought I needed a good chunk of money before I could get my feet wet with investing. But after poking around the internet, I stumbled upon an article on investing with just $100 a month,  alternating between various index funds to get a diverse mix of investments. This simple strategy helped me get over this misconception that I needed thousands of dollars to be an investor.

Fast forward to the present. With the financial tech boom, there are plenty of products, services and apps to help you invest with very little money. If you don’t have a whole lot to invest, here are some strategies to help you get started investing in stocks.

Try a Micro-Investing App

There are a handful of micro-investing apps such as Stash Invest and Acorns that you can get started with for as little as five dollars. Acorns rounds up the transactions from your bank account and invests your spare change, and Stash Invest has featured portfolios so you can invest in causes or companies you care about. Plus, the monthly fee for such micro-investing apps is only around a dollar a month.

Another type of micro-investing service is Stockpile, where you can buy fractional, or partial, shares of stocks. You only need five dollars to open an account, and there are thousands of stocks to choose from. It costs 99 cents per trade, plus a three percent fee if you pay with a debit or credit card.

Make It a Part of Your Budget

Pay yourself first and create a monthly investment plan of $25, $50 or $100, recommends Larry Ludwig, founder and editor-in-chief of Investor Junkie. “Treat it like a bill,” says Ludwig. “But instead of paying something off, you’re sending it to your brokerage account.”

It doesn’t really matter how much you set aside, as long as you’re saving something. If you’re saving a small amount, such as $20 a month, you can make a single investment every few months.  

Put Your Pay Raises Toward Investing

For every raise you get at work, put aside an amount (e.g., 50 percent) toward investing, like an employee-sponsored 401(k) plan, suggests Ludwig. “Not only are you saving more with every paycheck, you also have some reward for the increased salary.” Plus that pay increase won’t go toward something willy-nilly, or cause lifestyle inflation.

You can also make a commitment to put aside a set amount on a consistent basis, recommends Laura D. Adams, personal finance author and host of the Money Girl Podcast. For instance, if you’re already investing, make a goal to increase your contribution by at least one percent per year. “You’ll build wealth faster and have a comfortable retirement to look forward to,” says Adams.

Invest in Your Company’s 401(k)

Take advantage of your employer-sponsored retirement fund, whether it’s a 401(k), 403(b), or 457, recommends Adams. “I recommend making it your go-to investment choice because it’s convenient, cuts taxes, and may come with free matching funds from your employer,” says Adams. “You typically choose mutual funds, index funds, or exchange-traded funds from an investment menu.”

Even if you only have $50 or a month to invest, don’t be ashamed to participate in a retirement plan, says Adams. Remember: There’s no minimum amount you must invest each year, and you can increase or decrease your contribution amount at any time.

If you’re not making contributions to an employer-sponsored fund that offers a match, you’ll be leaving money on the table. Try to contribute at least enough to get the full match. If you have questions, reach out to your human resources department or your plan representative.

Invest in Low-Cost Funds

When you’re investing, you’ll want to be aware of all the fees involved, such as expense ratios, which is a percentage of your investment, a fee to open and close accounts, transfer funds, front-load and back-load fees, and the costs per trade.

You’ll always want to be mindful of the fees involved when you invest, but this especially rings true when are investing with smaller amounts. Consider investing in low-cost index funds and exchange traded funds (ETFs), recommends Stephen Rischall, a financial advisor and founding partner at 1080 Financial Group. “By investing in a fund, you can diversify your holdings and spread the risk across many different companies,” says Rischall.

Some major online brokerages don’t charge any transaction costs, and investing platforms such as Robinhood don’t charge fees. (However, there are separate FINRA and U.S. SEC fees.)

Automate Your Savings 

Don’t make the mistake of thinking that you can’t start investing if you only have a small amount to put aside, points out Adams. “Even on a tight budget, there are many options to make your money grow,” says Adams. “The best strategy is to automate it.”

“Automation works because it forces you to maintain good savings habits and prevents you from spending money that you shouldn’t,” says Adams. “It’s a barrier you set up that allows you to outsmart yourself so you manage money wisely.”

To start, set up an auto transfer that deposits a set amount from your checking account to you investing account, service or app each month. Be sure to choose a date that coincides with your payday, and keep an eye on it to make sure you aren’t overextending yourself. If you want to be cautious, automate a small amount, and bump it up over time.

As you can see, you don’t need a ton of cash to started with investing. You can get the ball rolling with just five bucks every month. It’ll help you learn the ins and outs of investing, and make it a priority. In turn, your money will grow and help you build wealth.

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7 Ways to Tackle Credit Card Debt in the New Year

by Sean Bryant, December 27, 2017 in Credit & Debt

According to the Federal Reserve, the average American household has roughly $16,425 in credit card debt. While that’s a frightening number for many, some experts are paying closer attention to how many of those households are actually paying their bill each month.

A new report released by the Fed in November showed that 4.6% of all credit card debt had become at least 90 days delinquent during the third quarter of 2017. While this is well below the Great Recession, when it was as high as 11%, it’s up from 3.5% in the second quarter of 2016.

If you are one of the millions who carry credit card debt from month to month, then 2018 needs to be the year you kick the debt for good. Even though it might seem like an insurmountable task, it can be done. It takes a solid plan and some hard work.

To help you get started on the right path, here are some tips to help you eliminate your credit card debt and keep it away for good.

Consolidate Your Debt to a Single Card

According to Gallup, the average American has 2.6 credit cards. While this might not seem like a lot, it includes the 26% of all Americans who don’t carry any credit cards at all. If you are carrying debt on one card, the chances are high that you have debt on others as well. If so, one of the first things you can do is consolidate.

Consolidating your credit card debt can be done a few different ways, but the best option is to use a balance transfer card. These credit cards are specifically meant to help reduce the interest you’re paying each month and pay off your debt. By moving your credit card balances to one card, it will allow you to pay one monthly payment instead of several.

Balance transfer cards are pretty simple. Most will offer an introductory 0% APR period up to 21 months long. This will allow you to focus on paying down your balance without accruing additional interest. Just make sure you have a plan in place because once the introductory period is over, you will once again be subject to finance charges.

Pay Off the Card with the Highest APR

If you don’t feel comfortable taking on a new credit card, that is completely acceptable. Another strategy that people find useful is focusing on the credit card with the highest APR first. This is commonly referred to as the debt avalanche method.

Getting started is easy. List out all of your credit cards on a sheet of paper, starting with the card with the highest APR moving down to the lowest. Each month, pay the amount you have budgeted toward the card with the highest APR. Once the first card is paid off, move to the next card on the list. The debt avalanche method is the best way to minimize the amount you’re paying each month in interest.

Pay Off the Card with the Lowest Balance

Another popular method is the debt snowball method. Instead of focusing on the credit card with the highest APR, you’re going to focus on the lowest balance first. List all your cards starting with the lowest balance and working your way to the highest. The objective here is to pay off credit card debt while crediting yourself with small victories each time a card is paid down.

Many people find this tactic to be very helpful because it provides motivation to keep going. However, you will end up paying more in interest than you would with the debt avalanche method.

Ask Your Card Issuer for a Lower Rate

If you have been a cardholder for a lengthy period of time, then a phone call to your issuer could save you hundreds of dollars. Credit card companies are more than willing to work with customers who make timely payments and have a good credit score. Ask them if they would be willing to reduce your rate based on your past history. You might be pleasantly surprised.

“The credit card industry is extremely competitive, and card issuers are willing to go to great lengths to keep their valuable customers,” says Jason Steele, a credit expert with Offers.com. “You have nothing to lose by asking for a lower rate, and you are likely to get one if your credit has improved since you opened your account.”

Another angle that you could use as a negotiating point would be showing off a competitor’s offer. Most of us receive credit card applications weekly. If you find one that is offering a lower interest rate, use that to negotiate.

No matter which option you use, you should come away with a lower rate and more money in your pocket.

Understand How You Got to This Point

Paying off your credit card debt is only half the process. You also need to make sure you don’t find yourself back in the same position in the future. Before you can start making a change, you need to understand what habits and behaviors led you to this point. Credit cards can be a valuable financial tool, but they need to be used the right way.

Start Purchasing Only What You Can Afford

Most people find themselves with credit card debt because they didn’t stop to think about what they were purchasing. Instead, ask yourself if this purchase is something you can truly afford. If you needed to pay off the charge immediately, would you have the money in your bank account to do so? If not, then it might be a good time to rethink the purchase.

Don’t Miss Any Payments

Missing a credit card payment can be harmful in a couple of different ways. It can cause your credit score to take a hit. Payment history makes up roughly 35% of a person’s FICO score. Missing a payment can also start you down a path you don’t want to head. Now, instead of having just one payment due, you would need to pay two payments plus a late fee.

Know the Signs That Credit Card Debt Might Be Looming

Knowing what the warning signs were the first time around is the best way to make sure you avoid credit card debt in the future. One of the more common signs that a problem might be on the horizon is when you feel the need to use your credit card to start paying for necessities like rent, food and clothing. Other signs might include skipping a payment on one card so that you can pay another card. Or maybe you completely ignore the credit card statements when they arrive in the mail. These are all signs that you’re heading down the wrong path and need to take a quick step back.

As you start making your way through a new year, credit card debt should be a priority. But don’t stop once you pay off the last credit card bill. You need to understand why you were in that position to start with and what you need to do moving forward.

5 Hacks for Snow Removal to Get You through Winter

by Allison Saunders, December 11, 2017 in Home Improvement

For most of us who live in a state with four seasons, you know the dread that starts to creep in every December. Trust us when we say that it’s pretty hard to sing “It’s the Most Wonderful Time of the Year” with a straight face when you’re shoveling snow for hours on end.

Winter is coming, and with it, comes a slew of snow, sleet and slush. If you’re not seasoned with the season of snow, we’ve got five hacks for snow removal that will blow your mind, and hopefully, your snow!

Get the Right Shovel

If you choose to go down the shoveling route, the first hack for snow removal is to make sure you have the right shovel.

A lightweight plastic or aluminum blade, coated with a nonstick finish, is your best bet, according to This Old House. Based on which surface you’re shoveling, such as wood decking, make sure you’re using the correct blade material, like plastic blades for softer materials.

Additionally, you’ll want a shovel that has an ergonomic, S-shaped shaft. This will protect your back from strain and require less bending when you’re shoveling.

Best practices for shoveling snow are to only remove as much snow as you’re comfortable with lifting. Back injuries and falls are common this time of year, so it’s best to only take on what you can handle.

That being said, This Old House recommends shoveling several times, even when snow is still falling, so that the snow doesn’t bond to surfaces like your driveway, sidewalks or deck. Additionally, it’s a lot easier to shovel two inches rather than five, so stay on top of snowfall to prevent pileup and back injuries from lifting.

Wipeout Snow Windrows as They Appear

Speaking of pileups, you probably didn’t think there was a fancy term for the pile of snow left at the bottom of your driveway after the snow-plow passes through your street. And if you did, it’s probably not fancy or a word we can use on this blog!

However, snow windrows are very real and even more annoying. If left unattended, you’ll be unable to pull out of your driveway without getting stuck.

There are a few ways to combat the buildup of snow at the end of your driveway, but the best is just to get rid of them as they appear.

Much like tackling snowfall, inch by inch as it comes, make sure you clear your snow windrow as soon as you can. Leaving it will risk it fusing together and making it difficult to shovel. Especially if it’s a sunny day – leaving your snow windrow unshoveled on a warm, sunny day could possibly result in the snow melting and later freezing into solid ice.

The best practice is to shovel your snow windrow as soon as possible and only lift as much as you’re comfortable with, protecting your back and neck from strain.

Using a Snow Blower is Faster

Now that we’ve covered best practices and products for shoveling, let’s talk about a much faster method for snow removal – using a snow blower.

According to This Old House, using a snow blower is by far faster when clearing large, flat areas. The site recommends using one where there’s a minimum of two inches of snow on the ground.

Speed is also a factor for snow blowing, according to Consumer Reports, as going too slow will shorten your arc of blowing snow and going too fast will cause snow to spill through the side of your machine. Make sure you test out a good speed before beginning.

The best practices for clearing snow is to start in the middle of the surface you’re clearing, blowing the snow toward one edge of the driveway. Make a U-turn, as you come to the end of each pass, and come back down the opposite side. This alternation will prevent you from throwing snow on top of pavement that’s already cleared.

Of course, you need to consider the upfront cost to buy a snow blower, which includes fuel an basic maintenance costs. You just need to decide if you have the money and want to spend it for the convenience of not having to manually lift snow.

However, Make Sure You Get the Right Snow Blower

While snow blowers can be a helpful tool for removing snow in winter, make sure you know how to use it and in which circumstances to use it.

How to Use a Snow Blower on a Gravel Driveway

For example, if you’re using a snow blower on a gravel driveway, you may run the risk of sucking up rocks and throwing them all over your (or your neighbor’s) lawn. This can be hazardous as flying gravel can hit cars, windows or even your next-door neighbor themselves!

That being said, if you have a gravel driveway or sidewalks surrounding your home, Perfect for Home suggested a two-stage snow blower.

Essentially there are two types of snow blowers. Single-stage is designed to come into direct contact with the surface on the ground and is more ideal for paved surfaces.

Two-stage snow blowers allow you to adjust the height of the blades so that your blower is not coming into direct contact with the ground. You can also adjust the discharge shoot (the vessel that shoots out the sucked-up snow) to aim in a safe direction, away from cars, windows, people, etc.

How to Use a Snow Blower in Wet Snow

Additionally, if you’re using a snow blower in wet snow, there are a few techniques that you need to be aware of, as wet snow is heavier and can possibly cause more injuries if not handled correctly.

It can be tempting to take down wet snow full-speed ahead with your snow blower. However, when dealing with wet snow, it’s actually safer to move slower and take in less snow at a time. Moving too quickly on wet snow can cause your snow blower to clog and the machine to wear out.

The best practice for wet snow removal using a snow blower is to move slowly and take smaller sections of snow in each pass, about one-third to one-half the width of the machine, suggested Family Handyman. It’s a lot easier for the machine to take in and it also allows for it to throw the snow farther, preventing the snow from falling into your freshly blown path.

Rock Salt is Your Best Friend

Lastly, while this is not necessarily a snow removing tip, it is a best practice for dealing with snowy or icy pathways.

Rock salt is relatively cheap, said The Old House. Using it on surfaces prone to ice and snow can be a great way to lower the risk of falls and injuries.

If you choose to use salt, This Old House suggested gloves when spreading salt or any deicer instead of by bare hand. If you are salting a larger area, you can also use a push spreader to cover larger surfaces at a quicker pace.

Lastly, make sure you store the deicers off the floor or in a sealed bucket, to keep them dry.

While salt is a common option for deicing, it can also be harmful to plants or grass in your yard. It’s also known to eat away at concrete in large quantities, resulting in an uneven surface and costly repair expenses.

If you’re looking for a less harmful and expensive way of providing traction to slippery surfaces, you can use sandbox sand or even cat litter to add traction to your driveway and sidewalks.

Get Hacking!

If you live in a state of four seasons, or just expect some snowfall this year, knowing these five hacks to remove snow are just one of the ways to get you through winter.

Can You Get a Mortgage with Bad Credit?

by Kevin Graham, November 29, 2017 in Credit & Debt

It’s not hard to get a couple of blemishes on your credit report. Whether it’s the mistakes of youth or an unexpected medical procedure that puts you behind on bills, it’s easy to have your credit dip if you’re not careful.

If you have less-than-optimal credit, it’s more difficult to prepare to get a mortgage, but just because your credit score is suboptimal doesn’t mean you have to give up on your dream of homeownership.

In this post, we go over what it means have a low credit score, the difference between bad credit and no credit, and how to improve your score. Finally, we’ll go over the best loans for people with less-than-perfect credit.

Defining Low Credit

We can talk about credit all day long, but it doesn’t make much sense if you don’t know what to measure it against since you’ll have no idea where you stand.

The main credit scoring system used by most mortgage lenders is FICO. Scores range from 300 to 850. With a credit score below 580, it’s difficult to get a mortgage. While possible, you’ll have higher rates and less favorable loan terms. For the purposes of getting a mortgage, a low credit score would be considered below 580.

Low Credit vs. No Credit

Having a low credit score due to late payments or something like a bankruptcy is different from having no credit. If you have no credit, you need to do something to build it up before getting a loan.

If you have no credit and your score is currently at around 300 because you’ve never had credit before, there are a few steps you can take.

Secured Credit Cards

One good way to build credit when you’re first getting started is to get a secured credit card. With this card, you put down a deposit of your own money that serves as the credit line. As you charge things and make the payments every month, your score will start to increase. After maybe six months or a year, your score should be high enough that you can get a more traditional credit card where the credit card company is putting up their own funds based on their faith in your ability to make the payment.

Ordinarily, we don’t advise closing any credit lines because part of your credit score is how many lines of credit you have open that you can manage responsibly. However, secured cards sometimes come with monthly maintenance fees that you don’t want to pay forever, and you want your deposit back.

If you do choose to eventually close this line of credit, be sure to have a couple of other cards open and be aware that your score will take a temporary hit.

Become an Authorized User

You can also piggyback off someone else’s good credit rating by becoming an authorized user on their card. When they make their payment on time every month, your credit score goes up. This is a great way for parents to help their kids get started with good credit.

Understanding Your Credit Score

If you have bad credit due to past negative events, the first thing you need to do is know exactly what’s on your credit report so that you can know where you need to improve.

Our friends over at QLCredit can help you get your VantageScore 3.0 credit report and score for free from TransUnion every two weeks without affecting your score. This will not only show you what’s on your credit report but also give you ideas on where you can improve.

There are five main factors that influence your credit score:

• Payment history (35%): On-time payments help your score, while late payments hurt.
• Balances owed (30%): Your credit utilization is the amount you owe compared to your overall balance. The lower your credit utilization, the better your score.
• Length of your credit history (15%): The longer you have your credit accounts open, the better.
• Credit inquiries (10%): If you’re applying for credit or any kind of loan, it’s considered a hard inquiry and affects your score. If you apply for the same type of loan over the course of 30 days while rate shopping, it all counts as one inquiry. Also, soft inquiries on sites like QLCredit to find out what’s on your report don’t count.
• Credit mix (10%): Another thing creditors want to see is that you have various types of loans and credit. You want to have not only a credit card but also a car or a personal loan.

Other items, like bankruptcies, judgments, collections and charge-offs, can also affect your score. These are bit beyond the scope of this post, but there are things you can do to take care of them.

Explaining Your Low Credit Score

Communicating with a lender during the process is important. If you know what’s going on with your credit, they may be able to help you come up with steps you can take in order to get your credit fixed and get qualified.

This will also help the lender set appropriate expectations for you. If you’ve had a bankruptcy or foreclosure in the past, there may be a waiting period before you can get a mortgage again. Whether you can get a mortgage or not, you’ll know what to expect going in.

Getting a Mortgage with a Lower Credit Score

If you have a less-than-perfect credit, probably the easiest loan to qualify for is FHA. You can get a loan with a credit score is low as 580, assuming you meet other qualifying factors.

If you have a credit score of 620 or higher, you can also qualify with a slightly higher debt-to-income (DTI) ratio – a measurement of the amount of your monthly income that goes to debt payments – of up to 55%, depending on the loan purpose and your other qualification factors. These are Quicken Loans requirements. Other lenders may have different policies.

It’s worth noting that if you make the minimum 3.5% down payment on an FHA loan, you’re going to have to pay mortgage insurance for the lifetime of the loan. With that said, you can always refinance into a conventional loan once your credit score gets to 620 or higher. On a conventional loan, mortgage insurance payments stop once you reach 20% equity.