Category: John J. Bowman Jr

The Benefits and Drawbacks of Certificates of Deposit For Investing

Certificates of deposit are a less exciting investment than the stock market or other investing methods that gain more attention, but they’re also a durable option that many investors appreciate. Like any investment, CDs have pros and cons worth considering before deciding what’s best for your financial needs.

The Benefits of Certificates of Deposit

They offer better returns than a savings account. Even with a high-yield savings account, you can often find certificates of deposit (CDs) with higher return rates for your money.

Your returns are predictable. One of the comforting advantages of a CD is that you will be locked into the term’s interest rate. When you invest in the CD, you will know exactly how much money you’ll be getting back at the end of the terms.

You have a lot of options. There are certificates of deposit available at financial institutions everywhere so that you can shop around for the best deal. This means looking at the highest interest rates for your return. It also means that you can find the timeline that works best for your needs.

It’s a safe option. Investing in the stock market comes with all kinds of risks. A certificate of deposit is done at a federally insured institution and is a predictable and safe way to invest your money.

The Drawbacks of a CD

Your money will be temporarily inaccessible. When investing with CDs, you are locking your money into the certificate of deposit until an agreed-upon date. While you could cash out in an emergency, this takes time and loses your returns. With a high-yield savings account, you can still have access to your money at any time.

Returns are low compared to other investment methods. The risk is also lower, but CDs are not the best option if you’re looking for significant returns.

There is a risk of inflation. If you put money into a five-year CD, it is possible that the low interest rate on your returns could be less than the inflation rate. Ideally, this won’t be true, but it happens.

Strategies For Building An Emergency Fund

One of the best things you can do to support your financial health is to create an emergency fund. This fund can be used in case of a medical emergency, a sudden visit to the veterinarian, a home repair, or other unexpected costs that could lead you to take out a small high-interest loan to cover the emergency.

Eventually, it can also be a way to cover your expenses if you lose your job.

These kinds of incidents, both large and small, put people into debt and their finances in a tangle for years.

By building an emergency fund, you develop a financial safety net for yourself.

Many people see the suggestion of saving for six months of expenses and feel that goal is far out of reach; they don’t even want to try. This is a big mistake. If you’re in that situation, first focus on building a small emergency fund of five hundred to fifteen hundred dollars. If this takes you a little time, it’s still worth having. Having a thousand dollars at your back can keep your finances well in hand on a tight budget.

How do people save a sizable emergency fund on any budget?

Open a High Yield Savings Account

Your emergency fund should be accessible, so you don’t want this invested in a 401k or stocks. Put this somewhere it can accrue the most interest and still be at the ready.

Use An App For Automatic Savings

There are many apps that can help you automate your savings in various ways, so it happens without you having to think about it. This makes building an emergency savings something you never have to consider again. 

Some people prefer to have a specific amount taken from every paycheck that comes in; others like to round up their purchases. Choose a path that works for your goals.

Prioritize Your Emergency Savings

Keep your emergency savings in that separate account. Never mix it with your vacation savings fund or anything else. You don’t want this money to go toward other things on a whim.

Save At Least Half of Your Tax Refund

Your emergency fund can get a big boost when you earn a bonus during the holiday season or receive your tax refund. Put away at least half of this money to help your savings grow.

How to Choose a Credit Card

There are hundreds of credit cards on the market today. Some of these are tied to regional banks, but the most popular come from some of the biggest banks in the United States. With so many options, it’s important to know which card will provide the most benefit before applying.

Check Your Credit

Before researching credit cards, it’s a good idea to get a credit report. A credit report will provide a record of any open accounts and usually includes a credit score. Banks will run a credit check before extending credit to consumers. Those with a low score will be limited in the types of cards they’ll be able to access.

Decide What The Card Will Be Used For

Will the card be used for everyday spending? Is it intended to transfer an outstanding balance on another card for an interest-free introductory period? Does a card pay out a hefty signup bonus? The reason a person needs a card should influence the final choice they make. If a person is looking for a card that provides cash back on everyday spending, a card without an annual fee that pays out at least 1.5% per dollar spent would likely be best. When getting a card for a cache of travel points, it’s a good idea to identify a card that has vendors that operate in the intended vacation destination.

Consider The Annual Fee

Many cards come with an annual fee. The high-end cards can come with a fee of $500 or more each year. It’s important to assess whether the card provides enough benefit to justify paying the fee. It might be a good idea to get a card and hold it for a year if the bank waives the fee for the first year. Those looking for cash-back cards can opt for a card that charges no annual fee. There are plenty available.

Getting a credit card is a big financial step to take. It provides credit, but it also requires a great deal of discipline to avoid going into debt. Credit cards come with high interest rates, but those who pay off their cards each month will avoid these charges. For those who have the discipline to avoid spending more than they can pay off, credit cards can provide some impressive rewards.

When is a Financial Risk Worth Taking?

Every single day, there are many risks that we must face. Each risk poses a reward, and usually, the higher the risk, the greater that reward. Financial risks are among the most common risks that we face in our day-to-day lives. Everyone can make a risky financial decision, even if that means losing a bit of value in your investment.

While financial risk may lead to bankruptcy, it is not worth taking it. While leaving savings in a bank account may seem overly cautious, there are times when losing that money can be devastating. When is it appropriate to pursue a monetary risk? Which risks pose the most significant rewards without sacrificing your financial security?

Starting Your Own Business

Some people don’t consider entrepreneurship to be the best venture, but in reality, it is the best opportunity to utilize the resources you have. Such resources include work experience, education, unique skills, and the desire and ability to be your own boss. In fact, successful entrepreneurship can lead to incredible gains—if you own a business, you may see higher earnings throughout your life! 

Going Back to School

Some opportunities, whether those be professional or financial, require finely-tuned skills. And, some of those skills can only be learned from field or industry experts. Going back to school will help you gain more knowledge, thus allowing you to acquire new skills and improve upon existing ones. Whether you want to finally earn your undergraduate degree, or have always dreamed of pursuing a Ph.D., going back to school can reap incredible rewards.

Professional certificates are an alternative to higher education. For instance, accountants can enroll for management skills and human resource training to expand their job opportunities and build upon their current skills.

Buying a House

Purchasing a home for your family is another great investment. It may not seem like an investment, but being a homeowner means investing in a neighborhood and the future of your spouse and children. In urban areas, monthly rent for apartments is the standard. However, if you move out to the suburbs, you’ll want to look into pursuing a mortgage. Once the mortgage is paid off, you can rent or sell the home. If you’ve kept up with the home through repairs and additions, you may be able to sell at an increased price!

Be persistent and think less about failure

While some of the above financial risks might bring short-term losses, be patient and have faith that temporary losses will lead to future returns. When you put more effort and focus on succeeding, success will follow. At the end of the day, persistence is what matters—not failure.

3 Key Money Moves to Make Before You Retire

Proper planning is necessary for a successful retirement, as many essential moves are made years before a retiree leaves the working world. Here are three of the most crucial money moves you should be making in preparation for your retirement to live out the rest of your life comfortably.

 

Eliminate as Many Debts as Possible

Once you retire, you’ll likely be living on a primarily fixed income provided by a blend of pension payments, social security, and investments. Interest on debt payments can rapidly eat into this income, so you must pay off as much debt as possible before you retire. This means paying off all of your credit card balances, car payments, and mortgage, if possible. By getting rid of interest payments, you’ll make the most of your retirement income each month.

 

Adjust Your Portfolio’s Risk Level

For young investors, riskier investment strategies are often beneficial in producing long-term growth. As you approach retirement, though, you’ll need to re-balance your portfolio to reduce your risks and ensure that you won’t be wiped out by changes in the market. Often, this is accomplished by increasing the ratio of bonds to stocks held in investment accounts. A common rule of thumb is that your portfolio should be split evenly between stocks and bonds when you expect to live another 15 years.

 

Use Your Last Few Working Years to Bulk Up Your Savings

The final 5-10 years of your working life are some of the most important for successful retirement planning. These years should be spent saving as much income as possible while reducing expenses in preparation for retirement. If you remain healthy and avoid major financial pitfalls, you should be able to substantially take advantage of your late-career years to increase your retirement savings.

 

By taking these three necessary steps, you can set yourself up for the best possible retirement. While retiring takes years of planning and preparation, these essential money moves will help you navigate the process more efficiently and give you financial peace of mind after you leave the workforce.

How an Accountant Can Help You Combat Debt

A fiduciary gives you insights into your finances that effectively help you fight a history of toxic debt. Accountants understand financial concepts and can communicate those ideas in simple, understandable terms. With a fiduciary, you’ll get help in navigating the legal parameters for any class of debt you hold. However, you should be fully aware of how your accountant will work and what they’ll do. Below are steps an accountant will take to get rid of your debt.

Creating a Financial Portfolio
Your certified public accountant (CPA) needs a clear overview of your finances before evaluating them adequately.

A financial portfolio is created by forming a list of all of your assets, which even includes a dog if you have one. A professional fiduciary will then list your income sources along with any financial liabilities you have. Insurances, investments, and retirement funds are things to account for within a financial portfolio. As you help an accountant to organize your finances, be honest about any outstanding bills and the debt you have.

Starting with Student Loans
Most CPAs begin to target the debt of their clients by immediately looking at their student loans.

Student loans often account for the most significant portion of the debt that borrowers have, so accountants target it to get rid of the bulk of money owed. Or, if you owe $25,000 in debt, and 75% of it is from a car, then your accountant will work to reduce your vehicle debt first.

Strategizing a Payment Plan

The general picture created by your outstanding debt and financial portfolio gives an accountant sufficient data to form a payment strategy. Here are some of the strategic points that an accountant can use to devise a suitable plan that pays off your debts:

Budgets—An accountant can substantially improve how you spend money by verifying your needs versus your wants.

Taxes—Tax accountants are trained to allocate your tax returns to pay off any outstanding debts that you have.

Prioritizing—Above all, your accountant determines how to prioritize your payments so that the damaging debts you owe are paid off first.