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    To the average American, saving money is a mythical topic. In a recent CareerBuilder report, 78% percent of full-time workers said they live paycheck to paycheck, up from 75% in 2016.

    Retirement savings can seem unnecessary when you're barely getting by. That said, you and your spouse will need about $1 million to live comfortably during your golden years, and waiting for a financial windfall isn't the best use of your time.

    Take these steps to prioritize savings with the resources you have.

    Trim your spending

    It's not easy or fun, but cutting unnecessary spending is the most effective way to take control of your finances. The good news: According to a study by Hloom, 8 out of 10 Americans admit to wasting money, so there's a decent chance that you're not as broke as you feel. Start small by eliminating things that aren't overly painful, and work your way up to making significant cuts across the board. An efficient budget will help you form better savings habits.

    Change your spending perspective

    The opportunity to save money is vast if you know where to look. For example, suppose you have a $5,000 credit card balance with a 22% interest rate. If your credit score is decent, your bank may be willing to lower the rate, which will help you repay the debt more quickly. This is just one example of how a frugal mindset can change your lifestyle, and you'll be surprised by how easy it is to negotiate savings. For instance, while you probably wouldn't think to haggle at big box stores like Home Depot, most are willing to price match their competitors. The same goes for internet and phone providers, office supply stores, baby stores, and even online retailers like Amazon. Prioritize savings by finding discounts in every corner of your budget.

    Find a side gig

    The idea of working after work probably sounds awful, but there are plenty of ways to earn extra income without feeling burnt out. If you're a homeowner, consider renting out a room on the weekends via Airbnb or another rental site. If you're artistic, use your talents to sell goods through Etsy. Or, if your day job skills are in high demand, consider selling yourself as a part-time consultant who commands a high fee. There are 44 million people working side gigs in the U.S. alone, and even modest savings can add up. For example, at a 7% return, investing $500 a month will yield nearly $592,000 in 30 years. Take stock of your passions and financial goals to find the perfect fit.

    Control your debt

    One of the biggest roadblocks to retirement savings is lingering debt. Whether you're paying off student loans, credit cards, an auto loan, or a mortgage, controlling your cash means making deliberate choices. For example, paying off credit balances with variable, high interest is usually the best choice. That said, it might not make sense to make accelerated payments on fixed loans with low interest, especially if it prevents you from investing in retirement. Review your finances and strike a balance between long-term savings and immediate expenses.

    Use your employee benefits

    Saving for retirement is easier with the support of your employer, but the sad truth is that only about one-third of Americans are taking advantage of their 401(k)s or other tax-deferred retirement plans. If you haven't already, redirect your savings as soon as possible, and be sure to ask whether your company matches a portion of your contributions. There's nothing quite as satisfying as free money, and your employer's 401(k) matching offer is exactly what you need to supercharge your efforts.

    While you're at it, don't forget to learn about the other ways your employer can help you save money. If your company offers a health savings account (HSA), your out-of-pocket medical expenses are tax-free, which frees up a portion of your income to save for retirement. The same goes for flexible spending, which can include expenses like child care, home improvement supplies, and more.

    Open your own savings vehicle

    There are ways to save for retirement even if you don't have access to an employer-sponsored plan. The value of compound interest means that your money has the power to grow until the day you retire, and it's important to take advantage of the time you have between now and then. Consider opening an individual retirement account (IRA), which allows you to contribute up to $5,500 a year or $6,500 a year if you're over age 50.

  • laughing friends drinking wine

    Investing is anyone's game. And putting money in the stock market while you're young is one of the best — and easiest — ways you can set yourself up for a comfortable retirement.

    But the reality is many people don't invest — especially younger Americans, who keep as much as 70% of their portfolio in cash, according to a recent BlackRock survey.

    In a recent blog post, ESI Money, a blogger who retired at 52 with a $3 million net worth, said "waiting to invest" is one of the "worst money moves anyone can make."

    After all, investing your savings in the stock market, rather than stashing it in a traditional savings account, could amount to a difference of up to $3.3 million over 4o years.

    Luckily, investing isn't as complicated as it seems. According to ESI Money, there are three factors that determine how well your investments will perform:

    1. Your timeline

    ESI Money crunched the numbers and found that time is the most important factor in how well your investments perform. "[T]he longer you wait to save and invest, the more you're costing yourself," he said.

    In other words, it's all about maximizing the benefit of compound interest.

    Take a look at the chart below, which illustrates the difference in savings for a 15-year-old who puts $1,000 of their summer job earnings into a Roth IRA — a retirement account where your savings grow tax-free — for four years and then stops, and a 25-year-old who puts away $1,000 until age 28 and stops.

    Assuming a 7% annual rate of return, the early saver will have nearly twice as much money saved by age 65 as the late saver, with no extra effort whatsoever. Even if the late saver continued putting away that same amount until age 30, they'd still come up short.

    The best way to maximize earnings is to keep saving and investing consistently, but the idea remains: The more time your money has to grow, the more you'll end up with.

    2. How much you invest

    How much money you earn will be based partially on how much you invest. The good news is that you don't have to invest a ton of money to earn a lot over time. You can easily start by contributing 15%, 10%, or even 5% of your pre-tax income to a retirement account, like a 401(k) or IRA.

    If you're worried about investing too much money for fear of losing it, don't be. Stock market investors had over a 99% chance of maintaining at least their initial investment — the same as a traditional savings account, according to a recent NerdWallet analysis of 40-years of historical returns.

    3. The return rate

    The NerdWallet analysis also found that investors had a 95% chance of earning nearly three times their initial investment, while traditional savers had less than a 3% chance of tripling their investment.

    Still, the rate at which your money grows is completely out of your control. That's the nature of the stock market — not even legendary investor Warren Buffett can guarantee big returns.

    Ultimately, you're doing well if your investment outpaces inflation, which won't happen if your money is shored up in a bank account with super low interest rates. To minimize risk, diversifying your investments across different types of companies, industries and countries is key.

    You can start by investing in a low-cost index fund that does the diversification for you — like the Vanguard Total Stock Market Index Fund. Another increasingly popular tool for novice investors are robo-advisors, which use an algorithm to build and manage your portfolio for a small annual fee. Or, you can follow Buffett's advice to stick with a simple S&P 500 index fund, which invests in the 500 largest US companies.

    These are commonly called "set it and forget it" investments that grow over time, regardless of short-term performance. Just make sure you're not paying annual fees higher than 0.5% or it'll eat into your returns.

    ESI Money sums up the winning formula best: "Save early, save often, and save more as time goes by."

  • Startup investing is a funny thing. Sometimes it feels like you are on fire. You see exciting companies and founders coming one right after another. Other times, nothing coming through the pipeline feels quite right, no matter how many you are seeing. After experiencing several of these hot and cold cycles, I was curious how normal this is. I decided to take a look.

    Let’s begin with an idea that many investors strive for: investing at a steady pace. Simple, right? Investing at a steady pace sounds intuitive enough. The only problem is that it's a bad idea.

    The reality is that the best opportunities are not evenly distributed over time. Randomness is clumpy. If you invest in only the best opportunities, whenever they arise, you will have busy and slow periods. Smart investing plans for the clustering.

    Consider the math. I randomized 10,000 scenarios to understand how the ten best investments I see every year will be distributed over that time. The results are interesting for any investor. If you want to run your own scenarios, feel free to use the basic model I built here.

    I target ten investments a year. You might think that I would aim for 2-3 investments per quarter. But actually, the randomized scenarios make it clear that a “normal” quarter only happens half of the time. I am just as likely to have a sleeper quarter (0-1 deals) or a slammed quarter (4-6 deals).

    A few other highlights from my analysis:

    • In 3 out of 4 years, there will be one sleeper and one slammed quarter—big ebbs and flows are the norms. You should plan on this, not on steady investing over a year or a fund's life
    • In 1 out of 3 years, half or more of the best opportunities will come in a single quarter
    • In 1 out of 4 years, you will have a quarter with zero opportunities

    The lesson is clear: investors who try to invest at a steady pace will not be investing in the best opportunities. To only invest in the best companies, you need a flexible investing calendar.

    This math assumes that the best deals are randomly distributed throughout the year. If you believe that there is seasonality driven by accelerators, school graduations, or founders quitting jobs at the end-of-year, then the opportunities will be even more clustered.

    I struggle with this myself sometimes. Recently, I had made two back-to-back investments when a third exciting startup also caught my attention. At the time, I questioned whether I was being too eager, perhaps having too optimistic an outlook that month. The reality, though, is that opportunities very often cluster, and I did make that third bet—a clear win in hindsight.

    There are of course some advantages to investing at a steady pace. Remaining active in the market keeps your networks active, your brand fresh, and your knowledge relevant. It simplifies planning for a fund's manager and limited partners. And it prevents you from letting good opportunities pass you by, waiting for a perfect deal that doesn't exist. Venture will always be about taking risks and putting your neck out there.

    So, how do you know when to bet? The key is to find balance.

    The wrong approach is to hold yourself and your team to strict investment quotas per quarter or year. A better approach is to set a range that incorporates the natural ebbs and flows of randomness, and to discuss expectations with your team and limited partners. Running scenarios against your portfolio size and investment period will help you understand the clumpiness expected in your own model.

    Understanding the randomness of opportunities will help you plan smarter. Steady investing, rather than pursuing the best companies when they actually are ready for investments, will ensure sub-par investing and returns. It will cause you to miss out on excellent deals—don't make that mistake.

  • 7 absolutely important questions to ask before investing

    Adhil Shetty

    Investing in the right instrument is what an investor vies for. After all, it is his hard earned money that he wants to multiply along with ensuring a financial stability for his golden years and difficult times. Saving is a key to any kind of investment, but merely saving would not guide you through uncertain time. To be a successful investor, the saving needs to be invested in the right kind of instruments.

    For an effective investment strategy, it is very important to ask yourself these seven crucial questions.

    What is my objective?

    This is the most basic question to ask before you begin any kind of investing. Like any other work, you should ask yourself why you are investing. You should be clear about your objective. Is your investment for creation of wealth, for income flow in retirement, for helping you buy an asset, or something else? Once decided, you will start developing an idea of how far out in time this objective is, how much money you need to fulfill it, and what kind of challenges your current income poses in achieving this objective. Once you see the contours of the objective, you will identify it as short-term, mid-term or long-term investment goals. It will lead you to further questions as below.

    What is my investment tenure?

    Just as your investments should have an objective, they will also have a due date. This is also referred to as the “investment horizon”. This would decide the tenure of the investment. For example, your child’s marriage will be due in approximately 15 years. Your goal would lead you to invest accordingly for a predetermined tenure to accomplish it successfully. This tenure should be evaluated from time to time and the investment should be altered accordingly. This would mean that the tenure of any investment should be such that you can avail them as per your objectives set.

    What is my capacity for monthly contribution?

    You should ask yourself about the amount that can be separated from your income towards investment. This would take you to next question of whether you will go for a lump sum payment or monthly contribution towards the investment. You should be careful and realistic while deciding on this amount and allow your money to flourish gradually. You are the best judge of your own resources as well as your investment horizon. While lump sums can useful for equity investors during market slumps, a fixed monthly contribution can provide the advantage of rupee cost averaging.

    What are the risks?

    You must ask yourself if you prefer risks or are averse to them as an investor. Risks could be of many kinds, emanating from markets, inflation, returns, mis-selling, interest rates, currency fluctuation, and so on. There’s rarely such a thing as a risk-free investment, and even the most reassuring investment carries risks. For example, equity mutual funds carry market risks which can erode your wealth in the short term. Endowment insurance plans carry returns risks where you may achieve returns less than the prevailing inflation rate. Debt mutual funds react to interest rate movements. You must examine the investment risks thoroughly before getting in.

    Is this investment tax efficient?

    You should ask about the tax efficiency of your investment. Returns from most investments are taxed as per various norms, and you should question what your post-tax returns will be. For example, a fixed deposit offers you 7% per annum, but if you’re in the 30% tax slab, your post-tax returns would be 4.9%, which is poor. You should consider instruments that have lower tax incidence. For example, for long-term debt investing, Public Provident Fund is your best option since the investment is completely tax-free. Gains from equity investments whose tenure is longer than one year are tax exempt. If you want to save tax under Section 80 C and earn market-linked returns, you can choose an Equity Linked Saving Schemes (ELSS), which also provides tax-free returns. The more tax-efficient your investment is, the faster you can achieve your objective.

    What commission & charges am I paying?

    There’s always a relationship manager or sales agent trying to hard-sell you an investment option. You as the investor have a right to know what they will earn when you sign the dotted line. Never be rushed into providing your signature. Several forms of investment carry charges. You should ask what these charges are going to be. You should know what part of your contribution will be used to pay these charges and commission, and what your absolute returns net of these costs will be.

    How can I exit this investment?

    Before you sign the dotted line, ask how you can exit an investment. You may need to exit an investment for many reasons. You may be in short-term need of money; you are not happy with the instrument; you have found a better instrument, and so on. The point is, your money should be available to you when you need it. Often, investments have lock-in periods, exit loads, withdrawal limits etc. You should have an absolute understanding of how and when you can leave your investment, and avoid rude surprises at the time of need.

    Lastly, it’s not enough to take the verbal assurance of the person selling you an investment option. Often, investors are misled about returns, charges, lock-ins etc. by sales persons looking to make a quick buck. It’s your right to know these things in writing. Armed with these questions, you’ll surely make the best investment choice for yourself and reap satisfying returns.

  • After spending several years fighting with creditors, you decided to file for bankruptcy. You never thought to find out how long bankruptcy can affect your credit score. And now that your credit score and confidence have taken a hit, you feel hopeless. But don’t fret because there’s a light at the end of the funnel. Keep reading to discover how to start rebuilding your financial life.

    Ways to Recover From Bankruptcy

    1. Shift your mindset

    If you’re going to pick up the pieces and rebuild, a mindset shift is paramount. It’s normal to feel like a failure. But the goal is to focus on getting to the root of the problem so you can move forward.

    2. Create a spending plan

    Once you’re committed to improving your financial situation, create a budget. A few factors to keep in mind:

    Expenses should always be lower than income. If not, trim unnecessary expenses.

    Filing for bankruptcy should have alleviated some of those debt payments.  So, use the extra money to pay off other debts and start saving.

    Always be realistic with your expenses and income or you’re setting yourself up for failure.

    3. Build a cushion

    Each time you get paid, it’s important to set aside a part of your income into a savings account. As the balance builds, you’ll have an even greater cushion to fall back on if a financial emergency arises. Even better, you won’t have to rely on debt to get by or put yourself at risk of falling back into the same trap that led to the initial bankruptcy.

    4. Start rebuilding credit

    Are you thinking that filing for bankruptcy bans you from the credit world for several years? Think again. The easiest way to start rebuilding credit is by using credit responsibly. There are lenders that will give you a second chance without charging a fortune in interest. But it’s usually in the form of a secured credit card or loan product.

    Both need a deposit for collateral in the event you default. Start with your financial institution when researching options. They may be more willing to approve you on the strength of your positive account history. But be sure to keep your balances low to derive the greatest benefit.

    You could also become an authorized user on some else’s credit card to start rebuilding credit. You’ll benefit from positive account activity without being liable for the debt.

    Lastly, don’t forget to see investigate chexsystems to see if have an account listed. It may have been removed but if it hasn’t, now is the time to take care of it.

    5. Avoid late payments at all costs

    Payment history accounts for a whopping 35 percent of your credit score. In fact, one late payment on a credit card or installment account can tank your credit score by up to 100 points. Even worse, the negative mark will remain on your credit report for seven years. So, if you’re serious about rebuilding your credit score post-bankruptcy, you can’t afford to let accounts slip through the cracks.

    Instead, use your budget to stay on top of your expenses and due dates. You may also want to take it a step further by automating payments to avoid missing any due dates. And if you know you’re going to be short on funds, call the creditor in advance to set up a payment arrangement.

    6. Keep an eye on your credit report

    When was the last time you checked your credit report? The thought of taking a peek may be frightening. But your report could contain material errors that are dragging down your credit score. In fact, one in five credit reports contain errors. So, visit AnnualCreditReport.com to retrieve your free copy and dispute any mistakes.