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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.

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.

Debunking Common Myths about Personal Finance

It’s possible that the only obstacle to reaching your financial dream is your lack of financial knowledge. Having a job and paying taxes and rent doesn’t qualify you as financially literate. Like many of us in the United States, you’re bound to encounter repeated mistakes with money—many of which are based on false preconceived notions. It’s time to debunk some common financial myths.

That Finance is Corrupt

Start building your financial literacy by accepting the fact that money, itself, isn’t reserved for the corrupt. You need to stay true to yourself as you build your wealth, and if you find yourself in trouble due to money, a closer look will reveal that you got yourself into that trouble. At the same time, though, you can always get yourself out!

That Budgeting Alone is What Saves Money

You can’t save money just by organizing your fixed and variable costs. Your discipline, as you live according to your budget, means nothing if the influences of spending later deter you. One of the largest expenses that people fail to account for is the fact that sellers invest time and money into convincing you to casually give your money away. You won’t save money “if you keep falling into spending sprees.”

That Your Savings Equals Wealth

Money is what you earn, but wealth is only obtained from assets that create an income. Savings won’t make you wealthy, since cash is exposed to inflation, taxes, and spending. Building wealth is about positioning your money to duplicate itself without your direct effort. Your savings, though valuable and necessary, are only useful if used to acquire assets that generate more income for you.

That Retirement is the Goal

Another mistake that promising Americans make with their finances is in organizing them solely for retirement.

Retirement is paradoxical since wealth, which is money that doesn’t deplete, must come from multiple assets that produce an income. If you, at this very moment, hope to reach a point in life where you do nothing, then this mindset will reflect in and limit your personal finances. You should expect to retire, but shouldn’t sacrifice your potential for financial improvement. 

Basic Budgeting Tips

Many Americans have trouble with their finances. For some, it’s due to a lack of income. For others, it’s difficult to figure out how to divvy up money each month. That’s why it’s so important to maintain a budget. Budgets give households permission to spend a specific amount of money during a given month. A budget is a good way to track spending, and many millionaires claim that this step was an important key to their financial success.

Start With A Zero Balance

A family should account for every dollar when setting up a budget. Having a zero-based budget simply means that every dollar is accounted for at the beginning of the month. It does not mean that every dollar gets spent. Some of the money should go toward savings, but it should not be left without a home in the savings portion of the budget.

Save Automatically

That money that gets saved should get automatically deducted at the beginning of the month. Ideally, this will be the result of an automatic draw from a direct deposit. By saving automatically, there will be less of a temptation to spend the money on frivolities. Any cash that gets saved should be put toward an emergency fund, a long-term savings goal like a mortgage down payment or investments.

Prioritize Debt Repayment

Any money that’s left over after accounting for all necessary expenses should go toward paying off debt. One of the biggest drains on the average family’s finances is interest expense. By cutting out interest expenses and debt payments, many people who have financial stress could breathe much easier. Making more money and cutting expenses are the best way to accelerate debt repayment. Fewer payments going to debtors leaves more money for more enjoyable purposes.

Allow for Miscellaneous Spending

Setting aside some petty cash for small and unexpected expenses is a good way to avoid going into debt or dipping into an emergency fund. Few months are alike when it comes to expenses, so having a little cash on hand to deal with unusual expenses is a great step to take.

Budgeting is an important key to financial success. Rather than constraining a family, a budget can actually be a very freeing process. A budget allows for an easy assessment of where a family’s money is going. By gaining an understanding of where a household’s income is going, it’s possible to make adjustments to provide for more efficient use of that money.

Tips for Starting a College Fund

For many industries, a decent college education is a requirement. However, college isn’t exactly easy; from picking a major and career path to writing detailed term papers and theses, plenty of challenges stand in a student’s way. One of the greatest obstacles is the cost. Similar to buying a house or car, investing in a college education is one of the biggest financial moves that anyone will make.

College may be rewarding in terms of education, but it can destroy someone financially. However, it doesn’t have to be that way. If you establish a college fund, you can get the ball rolling and enjoy less debt.

Here are a few tips to start a college fund.

Determine the Best Way to Save

Starting a college fund isn’t as simple as it may seem. Most people can’t just throw over $60,000 in a bank account and call it a day. They need to have a savings plan in place if they want to keep things simple.

There are multiple types of saving plans to choose from including:

  • 529 Plans
  • Uniform Gift to Minors Act (UGMA) Accounts
  • IRA Accounts
  • Coverdell Education Savings Accounts

It’s important to remember that not every savings plan is for everyone. For instance, one might have an easier time having a 529 plan than an IRA. Do your research before investing in any of these plans. 

Apply for a Scholarship

Because college can be so financially demanding, scholarships are the way to go. Scholarships are essentially how people can pay for college without going into debt. Furthermore, a scholarship can range from anything such as math and gymnastics.

For parents, it’s crucial to encourage a child to apply for a scholarship, so they don’t have to worry about the hardships that come with debt. With all the options out there, you’ll be hard-pressed to not find a scholarship that fits your interests.

Put in Time for Work

Getting a job is a surefire way to make money to put towards college. Aside from paying for tuition, a job also gives a person experience in a specific field that they can put on a resume later on. This is a great starting point for those looking to get hands-on experience for their dream job as well.

Being able to afford a college education isn’t always easy, but it is possible with a little advanced planning and strategic thinking.

How to Slash Your Grocery Bill

Most working-class people find it hard to control how much they spend on groceries. After paying critical bills like rent, electricity, and phone bills, what is left is allocated to grocery money and other minor expenses. This kind of lifestyle can quickly lead to poor health due to a poor, budget-focused diet, however. Maintaining a healthy diet while saving money is very possible when a few selective shopping practices are followed.

Shopping at Various Stores and Supermarkets

Some stores might not be grocery stores but have many of the same food items, sometimes at discounted prices. For example, individuals and families who frequently eat canned foods and snack foods should consider buying these food items at family discount stores like Dollar General or Family Dollar. Then they can buy their favorite meats, produce, and other foods they need and want at the more premium grocery stores. Shopping at alternative grocery stores balances out the food budget, but quality and nutrition standards are upheld.

Using All Forms of Coupons

Food coupons come in various forms, and these include newspaper cut-outs, magazine cut-outs, printable online coupons, and online coupons for digital shopping only. If more than one of these are utilized regularly, the savings will add up quickly. Taking the time to sign up for online coupon websites that offer real savings is worth it. While most people don’t read the Sunday paper anymore, they might be surprised to find regular savings on foods they routinely eat.

Learn to Cook

Fresh produce, dairy, and meats are some of the most nourishing foods. Interestingly enough, these are the foods found along the perimeter of most grocery stores. The much less healthy processed foods are found towards the center of the store. Processed foods are generally more expensive than whole foods, and the reasons include the high-priced additives and processes used to manufacture them.

If more people learned to cook their own burgers, fries, and other foods that are commonly processed, they would save money and their health in the process. Fruits and vegetables that are presliced or otherwise pre-prepared for customers are higher in price per-pound than the whole fruits or vegetables themselves. Watching a few online videos and learning some simple cooking skills can improve the standards of living for so many people living on a fixed budget.

Money Moves for Retirement

Retirement planning is one of the biggest financial concerns for many Americans. There are many considerations to make when it comes to savings—retirees should be aware of what income sources they will be relying on in their golden years. It’s also important to be aware of how long investors have before they will need to access those savings. Finally, it’s important to think about how long people expect to live in retirement, and what they estimate their expenses will be. These are the considerations that must be made to accommodate the aforementioned concerns.

Retirement Income Sources

There are many sources of income that retirees can utilize. Social security is a program that most people will qualify for, but it typically is not enough to get by. Some workers may also have a pension to count on, although that’s becoming increasingly rare. Thankfully, savings accounts are one area over which individuals have personal control. Annuities are also an option for savers. Many retirees also look to their property holdings, including real estate and collectibles, as key sources for income in their old age.

Compound Interest

One of the most basic but most important lessons about retirement that everyone should know has to do with the power of compound interest. Compound interest is the accrual of money on interest over time. Saving a little bit while young can help workers build up a healthy amount of savings to fall back on during retirement. Additionally, tax-advantaged retirement accounts like 401(k)s and IRAs allow future retirees to put money aside and reap important tax benefits. However, even a standard savings account can be a good way to start saving. The older an investor gets, the more important it becomes to have money set aside in an account that won’t be touched. It’s also a good idea to look into catch-up deposits in tax-advantaged accounts. Sometimes, investors over 50 are able to exceed the maximum contributions allowed to the rest of the public.

Tax Considerations

Tax considerations should be a key guideline when choosing investments. In some cases, the gains made from selling a home are untaxed. Some investments are subject to capital gains taxes, even in retirement. Even tax-advantaged accounts like IRAs and 401(k)s can be subject to management fees. It’s a good idea to seek professional advice when it comes to specific investment decisions.  Reach out to a local financial advisor with any financial concerns!

When Should You Consult an Accountant for Tax Help?

When people are making plans to file their taxes, they may discover that there is a need for an accountant to help them complete the forms. Those who are uncomfortable with filing should seek an accountant that can help them make sense of the tax rules and what they need to do to file before the deadline. Unusual circumstances, such as changes in marital status and career, may call for additional assistance. In such instances, accountants are a taxpayer’s best friend.

Amended Taxes

Inevitably each year, taxpayers file erroneous forms. There may be mistakes and letters from the IRS that indicate that there is income that has not been accounted for, an incredibly stressful situation for everyone involved. If you’ve dealt with erroneous forms in the past, or if you’ve received notice from the IRS that this year’s submissions contain errors, seek out an accountant to help you readjust and refile. 

Owing Taxes

Anyone who owes taxes can benefit from involving an accountant in the process. After all, taxpayers may take the standard deduction when they could owe less or no money at all, all because they’re unsure how to itemize deductions. It’s an involved process, one that requires an expert eye. For this reason, professional accountants are there to help; by pointing out any overlooked itemized deductions, accountants can provide a better understanding of the deduction process.

Change of Status

Plenty of things can change in a year, not the least of which is household status. A single person that files as head of household may be unaware of changes in deductions when they get married. If you’re unsure about the best way to file taxes when your marital status changes, consider working alongside an accountant. 

First Time Tax Preparation

Filing taxes for the first time can be a confusing process. With all of the paperwork and math required for each form, it’s common for people to struggle to wrap their heads around everything. This situation is precisely what accountants handle regularly. Accountants want to help everyone ensure that all guidelines are followed and numbers are accurate. To pay taxes by the deadline, new taxpayers should schedule early consultations with local accountants. 

Four Easy Ways to Budget This Month

For some, creating and sticking to a budget is a simple task. For others, it’s a strenuous and seemingly impossible task. The temptation to eat out, splurge on clothes, and throw caution and cash to the wind can be huge, so it’s essential to find ways to stay on track. Here are four ways to create a budget that works and stick to it.

Meal Prep

In addition to various forms of outside entertainment, eating out is a considerable expense. Since most restaurants mark food up—sometimes as much as 300 percent—the only sure-fire way to save money on food is to cook meals at home. However, this is a lot more time-consuming and can be difficult for those without much cooking experience.

Take the time to plan meals, including the cost of ingredients, for at least a week’s worth of meals. Also, include the costs of snacks as well. One way to save on food is to buy in bulk. Look for items that can be purchased in larger quantities and divide up for later.

Set Up Autopay

Another way to stick to a budget is by setting up autopay. Instead of having to pay bills and charges every month manually, autopay lets budget-setters know what they pay and when. The same concept can also help track savings. Just have a set amount of money transferred each month into a savings account.

When it comes to paying utilities, look into budget billing. Customers pay a set amount for power and water. After a set time frame, they’re either refunded the difference or charged for any overages.

Entertain at Home

Simply put, going out is expensive. Everything from grabbing drinks to seeing a movie is expensive these days. Instead of breaking the budget, invite friends over and find ways to create a social atmosphere at home. Cocktails made at home cost half the price when ordered out. The same holds true for take-out. If your group wants pizza and a movie, rent a flick and make homemade pizza.

Track Success

Tracking success is a great motivator, so make sure you keep track of how much money you’ve saved over the month. After seeing positive results, you may feel even more motivated to stick to their budgets.

With a little planning, creating and sticking to a budget is easy. Since everyone has different needs, never compare budget planning. Finally, make sure that the budget isn’t so rigid that it’s impossible to follow. Just be sure to leave some wiggle room for the occasional splurge.