FHA loan requirements are simple; they’re different than conventional loan requirements. For a conventional loan, for example, you will need a good credit score. However a FHA loan credit score is only 580.
If you’re a first time home buyer and need a first time home buyer loan to purchase your dream home, then keep reading to find out how an FHA loan is right for you.
Click here to compare the rates if you’re thinking of applying for an FHA loan. It’s totally FREE.
In this article, we will cover several topics around the FHA loan requirements. As a first time home buyer, you will need to be aware of these requirements so that your home-buying process can go as smoothly as possible.
Here’s what we will cover: FHA loan limits, FHA loan rates, FHA loan credit score, FHA lenders, and so many others. In addition, we will address the difference between conventional loan requirements versus FHA loan requirements.
Click here to apply for a FHA loan.
FHA Loan Requirements – Guideline & Limits:
Buying a house through an FHA loan, while exciting, can be daunting, especially as a first time home buyer. Taking a few moments to familiarize yourself with the FHA loan requirements can save you from costly mistakes during the home buying process. Below is an overview of FHA loan process
FHA loan definition
What is an FHA loan? Simply stated, an FHA loan is a loan that is insured by the Federal Housing Administration. These type of loan are popular among first time home buyers because they allow them to put as low as 3.5% down payment and require a very low credit score.
So if you’re a first time home buyer with a bad credit, then an FHA loan makes more sense.
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FHA loan limits
FHA loan limits refers to the maximum amount of loan the FHA will give you. For 2019, for example, in low cost areas, FHA loan requirements have been set in place allowing the maximum amount for a single family home to be $314, 827. Whereas for a four-plex, the maximum amount is $605,525.
FHA loan limits – low cost areas
Single
Duplex
Triplex
Fourplex
$314,827
$403,125
$487,250
$605,525
For high cost areas, the FHA loan limits for a single family home is $726, 525 and for a duplex, the FHA limit is $930, 300. Those limits, of course vary depending on your states and they are update annually. So visit your state to determine what the FHA mortgage lending limits are.
FHA loan limits – high cost areas
Single
Duplex
Triplex
Fourplex
$726,525
$930,300
$1,124,475
$1,397,400
Click here to compare current FHA loan mortgage rates
FHA loan vs conventional
When it comes to get a home loan for presumably the biggest purchase you’ll ever make in your life, you certainly have to know the key differences between an FHA loan and a conventional loan. While it’s easier to get approved for an FHA loan, it’s important so that you can make the best decisions.
FHA loan requirements
FHA credit score loan requirement
The FHA loan requirements are fairly simple and straightforward. Here’s what they require: 1) You must have a credit score of at least 580.
2) A 3.5% down payment is required. (*note, if your FICO score is between 500 and 579, then you will have to put 10% down payment). 3) You will have to pay Private Mortgage Insurance (PMI);
4) Your debt to income ratio must be < 43%. Your debt to income ratio is the percentage of your income that you spend on debt, including mortgage, car loan, student debt, etc..
5) The home you intend to purchase must be your primary residence. You must also occupy the property within 60 days of closing.
Click here to shop for FHA mortgage rates in your area
It can’t be an investment property. However, you can buy a duplex or triplex, live in one unit and rent the other units. As long as you reside in the property, you will satisfy that requirement. Also, the house must meet FHA loan limits (see above).
6) Finally, and of course, you must have a steady income and proof of employment. I will discuss later whether a FHA loan is better than a conventional loan. For more information about FHA loan requirements in general, visit the FHA website.
Conventional loan requirements
The requirements for a conventional loan, however, are much stricter. By the way a conventional loan or traditional loan is not insured by the Federal Housing Administration. But instead it is guaranteed by a private lender such as a bank, credit union, mortgage companies, etc…
Of course whether you will qualify for a conventional loan vary from lenders to lenders, but the following are required:
1) A credit score of at least 680 (of course the higher the score is, the more likely you will get qualified, and the lower your interest rate on the loan will be.
2) A down payment of at least 20% of the house purchase price. If you have less than 20%, you still can get the loan. But the problem is, you will have to take out private mortgage insurance, pay its premiums until you achieve at least 20% equity in the house.
3) Your debt to income ratio needs to be around 36% and no more than 43%.
Should you apply for an FHA loan or conventional loan?
As you can see above, the FHA loan requirements are less strict than the conventional loan requirements. However, which one you choose to apply to depends on your personal circumstances.
But if you are a first time home buyer, there are a lot of good reasons why an FHA loan would seem more appealing to you. For one, the down payment is only 3.5% (compare that with a 20% down payment a conventional loan requires). A down payment is the upfront money you need to to make when buying a home.
As a first time home buyer, saving for a 20% down payment on a house can be a big burden. Homes are expensive. For example, saving for $450,000 home can take you years to accomplish, especially if you have other debt like student debt, credit card debt, car loan, etc… So a 3.5% down payment makes it easier for you to buy your own home.
Second, the FHA loan credit score is only 580. Although, you should always take steps to raise your credit score, sometimes certain changes in your life may leave you with a low credit score. Perhaps, you had to file for bankruptcy which resulted in a low credit score.
Or maybe you never had a credit card, which means that you don’t have an established credit history. Or maybe you’re a victim of identity theft which lowered your credit score. So there are several reasons why you could have a low credit score.
However, that shouldn’t mean you can’t buy a house. That’s why the FHA loan requirements make it easier for folks who otherwise would not have been qualified for a conventional loan.
Related Articles:
5 Signs You’re Not Ready To Buy A House
The Biggest Mistakes Millennials Make When Buying a House
How Much House Can I afford
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The post FHA Loan Requirements – Guideline & Limits appeared first on GrowthRapidly.
Have you ever wondered, "How many credit cards should I have? Is it wise to have a wallet full of them? Does having multiple credit cards hurt my credit score?"
If you’ve been following this blog or the Money Girl podcast, you know the fantastic benefits of having excellent credit. The higher your credit scores, the more money you save on various products and services such as credit cards, lines of credit, car loans, mortgages, and insurance (in most states).
Even if you never borrow money, your credit affects other areas of your financial life.
But even if you never borrow money, your credit affects other areas of your financial life. For instance, having poor credit may cause you to get turned down by a prospective employer or a landlord. It could also increase the security deposits you must pay on utilities such as power, cable, and mobile plans.
Credit cards are one of the best financial tools available to build or maintain excellent credit scores. Today, I'll help you understand how cards boost your credit and the how many credit cards you should have to improve your finances.
Before we answer the question of how many credit cards you should have in your wallet, it's important to talk about using them responsibly so you're increasing instead of tanking your credit score.
5 tips for using credit cards to build credit
Make payments on time (even just the minimum)
Don’t rely on being an authorized user
Never max out cards
Use multiple cards
Keep credit cards active
A common misconception about credit is that if you have no debt you must have good credit. That’s utterly false because having no credit is the same as having bad credit. To have good credit, you must have credit accounts and use them responsibly.
Having no credit is the same as having bad credit.
Here are five tips for using credit cards to build and maintain excellent credit scores.
1. Make payments on time (even just the minimum)
Making timely payments on credit accounts is the most critical factor for your credit scores. Your payment history carries the most weight because it’s an excellent indicator of your financial responsibility and ability to pay what you owe.
Having a credit card allows you to demonstrate your creditworthiness by merely making payments on time, even if you can only pay the minimum. If the card company receives your payment by the statement due date, that builds a history of positive data on your credit reports.
I recommend paying more than your card’s minimum. Ideally, you should pay off your entire balance every month so you don’t accrue interest charges. If you tend to carry a balance from month-to-month, it’s wise to use a low-interest credit card to reduce the financing charge.
2. Don’t rely on being an authorized user
Many people start using a credit card by becoming an authorized user on someone else’s account, such as a parent’s card. That allows you to use a card without being legally responsible for the debt.
Some credit scoring models ignore data that doesn’t belong to a primary card owner.
Some card companies report a card owner’s transactions to an authorized user’s credit report. That could be an excellent first step for establishing credit … if the card owner makes payments on time. Even so, some credit scoring models ignore data that doesn’t belong to a primary card owner.
Therefore, don’t assume that being an authorized user is a rock-solid approach to building credit. I recommend that you get your own credit cards as soon as you earn income and get approved.
3. Never max out cards
A critical factor that affects your credit scores is how much debt you owe on revolving accounts (such as credit cards and lines of credit) compared to your total available credit limits. It's known as your credit utilization ratio, which gets calculated per account and on your accounts' aggregate total.
A good rule of thumb to improve your credit scores is to keep your utilization ratio below 20%.
Having a low utilization ratio shows that you use credit responsibly by not maxing out your account. A high ratio indicates that you use a lot of credit and could even be in danger of missing a payment soon. A good rule of thumb to improve your credit scores is to keep your utilization ratio below 20%.
For example, if you have a $1,000 card balance and a $5,000 credit limit, you have a 20% credit utilization ratio. The formula is $1,000 balance / $5,000 credit limit = 0.2 = 20%.
There's a common misconception that it's okay to max out a credit card if you pay it off each month. While paying off your card in full is smart to avoid interest charges, it doesn't guarantee a low utilization ratio. The date your credit card account balance is reported to the nationwide credit agencies typically isn't the same as your statement due date. If your outstanding balance happens to be high on the date it's reported, you'll have a high utilization ratio that will drag down your credit scores.
4. Use multiple cards
If you need more available credit to cut your utilization ratio, there are some easy solutions. One is to apply for an additional credit card, so you spread out charges on multiple cards instead of consistently maxing out one card. That reduces your credit utilization and boosts your credit.
Having the same amount of debt compared to more available credit instantly reduces your utilization and improves your credit.
For example, if you have two credit cards with $500 balances and $5,000 credit limits, you have a 10% credit utilization ratio. The formula is $1,000 balance / $10,000 credit limit = 0.1 = 10%. That’s half the ratio of my previous example for one card.
Another strategy to cut your utilization ratio is to request credit limit increases on one or more of your cards. Having the same amount of debt compared to more available credit instantly reduces your utilization and improves your credit.
5. Keep credit cards active
Credit card companies are in business to make a profit. If you don't use a card for an extended period, they can close your account or cut your credit limit. You may not mind having a card canceled if you haven't been using it, but as I mentioned, a reduction in your credit limit means danger for your credit scores.
A reduction in your credit limit means danger for your credit scores.
No matter if you or a card company cancels one of your revolving credit accounts, it causes your total amount of available credit to shrink, which spikes your utilization ratio. When your utilization goes up, your credit scores can plummet.
Anytime your credit card balances become a higher percentage of your total credit limits, you appear riskier to creditors, even if you aren't. So, keep your cards open and active, especially if you're considering a big purchase, such as a home or car, in the next six months.
In general, I recommend that you charge something small and pay it off in full several times a year, such as once a quarter, to stay active and keep your available credit limit in place.
If you have a card that you don't like because it charges an annual fee or a high APR, don't be afraid to cancel it. Just replace it with another card, ideally before you cancel the first one. That allows you to swap out one credit limit for another and avoid a significant increase in your credit utilization ratio.
If you're determined to have fewer cards, space out your cancellations over time, such as six months or more.
How many credit cards should you have to build good credit?
Now that you understand how credit cards help you build credit, let's consider how many you need. The optimal number for you depends on various factions, such as how much you charge each month, whether you use rewards, and how responsible you are with credit.
There's no limit to the number of cards you can or should have if you manage all of them responsibly.
According to Experian, 61% of Americans have at least one credit card, and the average person owns four. Having more open revolving credit accounts makes you more likely to have higher credit scores, but only when you manage them responsibly.
As I mentioned, having more available credit compared to your balances on revolving accounts is a crucial factor in your credit scores. If you continually bump up against a 20% utilization ratio, you likely need an additional card.
You can keep an eye on your credit utilization and other important credit factors with free credit reporting tools such as Credit Karma or Experian.
Also, consider how different credit cards can help you achieve financial goals, such as saving money on everyday purchases you're already making. Many retailers, big box stores, and brands have cards that reward your loyalty with discounts, promotions, and additional services.
If you continually bump up against a 20% utilization ratio, you likely need an additional card.
I use multiple cards based on their benefits and rewards. For instance, I only use my Amazon card to get 5% cashback on Amazon purchases. I have a card with no foreign transaction fees that I use when traveling overseas. And I have a low-interest card that I only use if I plan to carry a balance on a large purchase for a short period.
There's no limit to the number of cards you can or should have. Theoretically, you could have 50 credit cards and still have excellent credit if you manage all of them responsibly.
My recommendation is to have a minimum of two cards so you have a backup if something goes wrong with one of them. Beyond that, have as many as you're comfortable managing and that you believe will benefit your financial life.
If you don’t have the time, the money or the expertise to buy individual stocks or bonds to build your investment portfolio, then consider the best Vanguard index funds.
Index funds are a good way to start saving and investing for retirement.
One reason is because the chance of making more money investing in index funds is far higher than it is investing in individual stocks, especially if you are a beginner investor.
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As the master of value investing, Warren Buffett, once said “a low-cost index fund is the most sensible equity investment for the great majority of investors.” “By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals.”
But how do you find and choose among the best Vanguard index funds? Don’t worry, GrowthRapidly can help make your choice easier.
On this page:
Index funds vs mutual funds
Index funds are one of the easiest and cheapest ways to invest in the stock market. As opposed to a mutual fund, which is actively managed by a fund manager, index funds are passive.
This means that index funds attempt to track the performance of a particular index, such as the Standard & Poor’s 500 index of 500 large U.S. company stocks or the CRSP US Small Cap Index.
So, when you invest in the Vanguard S&P 500 Index fund (which we’ll discuss in more detail below), you’re essentially buying a piece of the 500 largest publicly traded US companies.
Index funds don’t jump around; they stayed invested in the market. Again, they simply track the performance of the stock index.
Related: What is a mutual fund?
Whereas with a mutual fund, fund managers might make mistake by not being invested when the market goes up or by being too aggressive when the market goes down.
That doesn’t mean mutual funds are not good investments. In fact, they are great investment vehicles. But when it comes to long term investments, index funds are the best. However, these 8 mutual funds are great for long term investing.
Like a mutual fund, you can buy an index fund through a fund company like Vanguard.
The main advantage of a Vanguard index fund is its low-cost, which is usually less than 1% annually. Another benefit of Vanguard index funds is that they are diversified. Like mutual funds, they invest to multiple companies, thus spreading out the risk.
One of the downside with index funds, however, is that they won’t outperform the market they track.
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Why choosing the best Vanguard index funds to invest your money?
There are thousands of fund companies (such as Fidelity, Schwab, JP Morgan) where you can buy index funds. Different companies have different experiences and expertise with different type of funds. So, it can be difficult to know which one is the best.
Here are four main factors to consider when looking to buy the best index funds for long term investments:
The company: Is it a reputable and well-known company with a great track record?
Fees: Another major factor to consider in picking a fund company is its cost. Excessive fees have a negative effect on your investment return. These fees are deducted from your index fund’s balance every year. Other fees can apply as well. So always find a company with a low fee.
Reasonable minimum investment: Will you be able to invest with as little as $1000?
Performance: Although past performance does not guarantee future performance, look for a fund company with a strong record of performing well against its competitors over the short and long term as well.
If you are an intelligent investor who has done his or her research, you will conclude that among the various fund companies out there, Vanguard comes out on top.
Jack Bogle, who recently died and who founded the firm Vanguard Group, invented the index fund in 1976.
Today, Vanguard is one of the World’s biggest and the best investment funds with approximately $5.6 trillion in assets.
Moreover, Vanguard has the best index funds because of their ability to keep their operating fees so low. Vanguard has all types of stock and bond index funds and their fees are the lowest.
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The advantages and disadvantages of Vanguard Index funds.
Pros of the best vanguard index funds
By now, you know that an index fund is well diversified. But you might know these two other pros that make Vanguard index funds the best:
Good return: Vanguard index funds generally delivers a good return because their expenses are relatively low. The average Vanguard Index fund has an expense ratio of 0.2% per year (compare that to the average index fund operating expenses of 1.4% per year.) A 1.2% difference can be a significant difference on your return. Operating expenses are also lower because ongoing research is not needed to identify companies to invest in.
Tax-friendly: not only Vanguard index funds have lower operating expenses, which help increase your returns, they are also tax-friendlier when you invest outside of retirement accounts. Because a mutual fund is actively managed, they tend to jump around by selling and buying stocks more frequently. By doing that, it increases a fund’s taxable capital gains distribution. Whereas an index fund stays invested and not trying to jump around.
Cons of the best Vanguard index funds
Despite their low costs and tax-friendliness, their minimum investment while seem reasonable, might not be for the beginner investor with little money to invest.
Most Vanguard index funds requires a $3,000 minimum initial investment. Retirement account investors who plan on starting with less might be at a disadvantage.
Moreover, Vanguard has an overwhelming number of index funds to choose from. That can make it tedious for an investor to decide which ones are the best. But that’s why we have compiled the top Vanguard index funds for you.
The 10 Best Vanguard Index Funds to Buy in August 2020:
Now that you know what an index fund is and why investing Vanguard index funds makes good sense, in no particular order, below are 10 of the best Vanguard index funds to add to your investment portfolio.
Vanguard S&P 500 Index Admiral (VFIAX)
Of all the Vanguard index funds in this list, the Vanguard S&P index fund, which tracks the Standard & Poor’s 500, is perhaps the best Vanguard index fund. One reason is that the fund invest in 500 of largest U.S. companies with a few a midsize stocks.
Some of the big name stocks in this index fund includes Apple (AAPL), Microsoft (MSFT), and Google/Alphabet (GOOGL). Another reason to select this fund is that the cost is pretty low, (0.04%) if not the lowest of all the index funds.
Index fund cost is an important factor in choosing an index fund to invest in, because fees are deducted from your balance and thus reduced your rate of returns. The last reason to invest in the VFIAX is because the initial minimum investment is also low ($3,000).
So if you’re looking for an index fund that maintains low operating expenses while enjoying a good rate of return, the Vanguard S&P 500 Index Admiral is for you.
Vanguard Developed Market Stock Index Admiral
For diversification, you should consider in your investment portfolio some index funds that invests in foreign countries. International funds are diversified because they invest in countries around the world. If so, the Vanguard Developed Market Stock Index Admiral fund (VTMGX) is a fine choice.
This Vanguard index fund tracks the performance of the FTSE Developed All Cap ex US Index. It invests in large cap stocks in 24 developed countries. Some of its several blue-chip multinational companies include the Toyota Motor Corp (7203), Royal Dutch Shell (RDS.A.), Nestle SA (NESN), making it one of the best Vanguard index funds.
This index fund has a minimum investment of $3,000 and an expense ratio of 0.07%.
Vanguard Emerging Markets Stock Index Admiral
While Vanguard index funds invested in U.S. stocks tend to perform better than Vanguard index funds invested in emerging markets, emerging markets in Latin America, Asia, and Eastern Europe should not be overlooked.
If you don’t mind investing in emerging economies, consider checking out the Vanguard Emerging Markets Stock Index Admiral (VEMAX), which is currently one of the best Vanguard index funds to buy now.
In fact, some of the big name foreign companies included in this index fund are Alibaba Group Holding Ltd ADR (BABA), Tencent Holdings Ltd (TCEHY), Taiwan Semiconductor Manufacturing Co Ltd (2330.TW), and China Construction Bank Corp Class H (00939).
This investment attempts to track the performance of the FTSE Emerging Markets All Cap China Inclusion Index.
One of the downside of this index fund is that it has an expense ratio of 0.14%, but it still has a low minimum initial investment of $3,000.
Vanguard Total Stock Market Index (VTSAX)
The Vanguard Total Stock Market Index (VTSAX) is one of the best Vanguard index funds. It captures the total market.
That means it gives investors broad exposure to the entire U.S. equity market including large cap, mid cap and small cap growth and value stocks.
Some of the big name companies included in this Vanguard fund are: Facebook, Alphabet, JPMorgan Chase, Apple, and Microsoft.
This Vanguard index fund has an expense ratio of 0.04% and a minimum initial investment of $3,000.
So, if you’re looking for a well diversified Vanguard fund and don’t mind a little volatility, this index fund is for you.
Note that you can purchase this index fund as an ETF as well. It start at the price of one share.
Vanguard Mid-Cap Index Admiral
The Vanguard Mid-Cap Index Admiral fund (VIMAX), which tracks the CRSP U.S. Midcap Index, may be appropriate for you if you have a long term perspective.
That is because the index fund, which consists of midsize and smaller stocks, performs better in the long term rather than the short term, making it one of the best Vanguard index funds to include in your investment portfolio.
The fund targets midsize companies. The minimum investment is $3,000 with an operating expense of 0.05%.
So if you’re looking for a Vanguard index fund to use for retirement investingand you don’t expect to tap into your investment money for 10 years or more, the Vanguard Mid-Cap Index Admiral fund is for you.
Vanguard Small-Cap Index Admiral
The Vanguard Small-Cap Index Admiral (VSMAX), as the name suggests invests in stocks of smaller companies.
This index fund tracks the CRSP U.S. Small Cap Index. Some of its holdings include DocuSign, Inc (DOCU), Leidos Holdings Inc (LDOS), Tyler Technologies, Inc (TDY), Equity Lifestyle Properties, Inc (ELS), etc…
This index fund, just like the Vanguard Mid-Cap Index Admiral fund, tends to perform better in the long term. Therefore, invest in this Vanguard fund if you don’t plan to use your money within the next five years.
So if you’re looking for a broadly diversified index of stocks of small U.S. companies, the Vanguard Small-Cap Index Admiral is a good choice. This index fund has a minimum initial investment of $3,000 and an expense ratio of 0.05%.
Vanguard Short-Term Corporate Index Admiral
If you want to invest in short term bonds to use your money in the next five years to buy a house, or if you plan to withdraw the money from your retirement account, then the Vanguard Short-Term Corporate Index Admiral fund (VSCSX) is for you.
This bond index fund tracks the performance of the Bloomberg Barclays U.S. 1-5 Year Corporate Bond Index.
While you shouldn’t expect a return of no more than 2 to 3% annually on this bond index fund, corporate bonds in general are safe, and this fund is pretty stable.
Because of this stability, this short-term bond index fund makes it an appropriate investment. The Vanguard Short-Term Corporate Index Admiral has an expense ratio of 0.07% expense and a minimum initial investment of $3000, making it one of the best Vanguard index funds around.
Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF (VYM), as the name suggests, is a “dividend” fund. It attempts to track the performance of the FTSE High Dividend Yield Index.
This index ETF allows investors to earn dividend through growth companies. Some of the big companies with a strong record of paying dividends are AT&T, Intel, and Exxon Mobil.
As of 2/27/2020, this ETF has an expense ratio of 0.06%, making it one of the best Vanguard index funds for income. It starts at the price of one share.
So, if you’re looking for an index fund with the best long term investments growth potential, and you don’t mind the stock market volatility, this income-focused fund is appropriate for you.
Note that the Vanguard High Dividend Yield is also available as an Admiral share with a minimum investment of $3,000.
Vanguard Information Technology
Vanguard Information Technology Index Fund Admiral Shares (VITAX) is a sector fund. This investment attempts to track the performance of the MSCI US Investable Market/Information Technology 25/50.
Sector funds invest in stocks and/or bonds in specific industries. And the Vanguard Information Technology Index Fund, as the name suggests, focuses only on technology.
Generally, you should avoid sector funds mainly because they lack diversification. However, there is an exception with this Vanguard index fund. It focuses on technology, which makes it one of the best Vanguard funds.
In addition, this index is made up of stocks of large, mid-size, and small U.S. companies within the technology sector.
Nowadays, technology has shaped our daily lives. From computers, TVs, tablets, etc, everything is connected to the internet. Therefore, this means that there is and there will be continued growth in the years ahead.
The top companies included in this Vanguard fund are Apple, Microsoft, Visa, Adobe, PayPal, etc.
This index fund has an expense ratio of 0.10 %, but a minimum investment of $100,000. This can be high for the beginner investor.
However, this Vanguard index fund is available as an ETF, starting at the price of one share.
Vanguard Real Estate
The Vanguard Real Estate Index Fund Admiral Shares (VGSLX) is another sector fund. It focuses on real estate investment trusts (REITs), which are companies that buy office buildings, hotels and other real estate properties.
This Vanguard fund seeks to track the performance of the MSCI US Investable Market Real Estate 25/50 index.
Just as any other sector funds, this Vanguard real estate index fund may lack diversification. So, it makes sense to have this index fund in conjunction with another a more broadly diversified Vanguard fund.
Despite the lack of diversification, however, this fund distributes higher dividend income than other funds, allowing it to be among the best Vanguard index funds for income.
This Vanguard fund has an expense ratio of 0.12%. It has a minimum initial investment of $3,000.
Note that this Vanguard fund is also available as an ETF, starting at the price of one share.
Final tips for buying the best Vanguard index funds
In general, index funds are a good investment vehicle to use. So whether you’re looking to invest money for retirement, or you’re looking to add diversification to your investment portfolio, these Vanguard index funds are a great choice for you. They are great quality funds. They produce superior returns comparing to other similar funds.
Indeed, the best Vanguard Index funds will not only save you money in fees throughout the years. But also, these low-cost index mutual funds and exchange-traded funds (ETFs) will give you a wide exposure to different asset classes.
Speak with the Right Financial Advisor
If you have questions beyond knowing which of the best Vanguard index funds to invest, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
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In 2020, around 55% of American adults invest in the stock market. That’s down from a peak of 65% in 2007 but around the average over the past 10 years. Do you want to get a piece of the action? Before you jump all in, make sure you know the basics of how to invest in stocks.Â
A quick note before we dive in: we’re not investment experts or advisors. So if youâre seriously considering investing, you should work with professional brokers, financial advisors or other knowledgeable experts when you invest. That’s especially true if you plan on investing a lot.
1. Decide on a Budget for Investing
Start by deciding how much you want to use to invest in stocks. Hereâs a good starting placeâmake the potential stocks youâd invest in a percentage of your portfolio. A rule of thumb that many advisors go by is to take 110 or 120 and subtract your age. That’s how much of your investment portfolio you should keep in stocks.
For example, if you’re 30, then youâd keep between 80 and 90% of your portfolio in stocks. If that feels a little aggressive for your financial goals, start with 100 and subtract your age from that.
You also need to decide how much you can invest overall. That depends on your own income, what financial obligations you have and your overall budget. While investing is important, you shouldn’t invest money at the sake of paying your bills, for example.
2. Open an Account for Making Your Investments.
Stocks aren’t like retail goods. You can’t just buy them here and there when you see one you like on display on an ecommerce site. You typically need an account to purchase your stocks through. Some options you can choose include:
Opening a brokerage account. This lets you buy and sell stocks through a professional service. You can opt for a brokerage where you do your own research and push the buttons on buying and selling, or you can choose a managed option where someone provides advice or handles these things on your behalf.
Using a robo-advisor. This is an app or software program that lets you set goals for your investments and uses machine learning, AI and algorithms to handle your investments. One popular robo-advisor is Acorns, which is an app that lets you round up your purchases with connected debit cards and put the change into investments. While you’re making many micro investments, the total can add up over time.
3. Get Help Creating an Investment Plan
An investment plan is a comprehensive approach to wealth building. Stocks may play an important part in that, but you typically want to ensure you’re well diversified. A diversified portfolio just means you have various types of investments. This way if one isn’t performing well, the others might offer some protection.
One option for getting investment advice is by signing up for an Ellevest account. You pay a monthly membership for this robo investment app, but you gain access to investment and other financial coaching and educational materials.
4. Learn More About Stocks
You don’t have to be a stock expert or financial advisor to have success investing in stocks. But you do have to know a bit about what you’re investing in, especially if you’re going to make very specific stock choices.
You might be familiar with the concept of buying and selling stocks as seen in television and movies. While you canbuy and sell specific stocks because you want to invest in a specific company, you don’t have to invest like that. You can also invest in groups of stocks via stock mutual funds. When you invest in a stock mutual fund, you’re actually buying many different stocks or pieces of stocks. That spreads your risk out over a wider range of assets.
You should also understand the trends associated with the stock market, at least in general. For example, stocks do tend to rise over time barring big economic downturns. On any particular day, the chance that stocks will rise is around 53%. The chance that they will fall is around 47%. But if you look at the long-term, such as a 12-month period, stocks typically have a chance of rising of 75%.Â
5. Use Other Tools to Make Investing Easy as You Get Started
Start by getting your immediate financial house in order. Understand what your budget is, and check your credit to ensure there are no surprises looming. You can sign up for ExtraCredit to get a comprehensive understanding of where your credit score is. Once you know where you stand, you can start creating an investment plan with confidence. You can even rely on ExtraCredit’s Reward It feature for cashback offers when signing up for Credit.com partners that provide investment apps and other financial services.
Sign up for ExtraCredit today!
Start Investing in Stocks Today
So, should you invest? Honestly, thatâs up to you. Take a good look at your finances and, if you need guidance, try working with a professional. If you do decide to start investing, start easy and slow. Thereâs no need to jump all in right at once. Hopefully, if investing works out, youâll reap some serious rewards.
The post How to Invest in Stocks: A Guide to Getting Started appeared first on Credit.com.
When you have an insurance policy, you may have to foot the bill for some of your medical expenses before your insurance company starts chipping in. This initial amount is your insurance deductible. The size of deductibles can vary depending on the specifics of your plan, and youâll want to consider the deductible as one of many factors when youâre choosing your health insurance.
The Basics of Insurance Deductibles
Your insurance deductible is the amount of money that youâll have to pay before the insurance company will provide any assistance. So, if you have a $600 deductible for your health insurance, that means youâll need to pay $600 out of your own pocket for any doctorâs visits, prescriptions, tests or any other medical services before insurance contributions will commence.
Deductibles apply for many different types of insurance, the most notable being health insurance, car insurance and homeowners insurance. Weâll go through details specific to each type in turn.
Health Insurance Deductibles
Health insurance deductibles will vary in amount depending on the type of insurance plan you have. Typically, plans with a high deductible have lower monthly premiums, while plans with lower deductibles will tend to have higher premiums. In other words, if you have to spend a lot to reach your deductible, the tradeoff is you pay less in premiums every month. The extreme version of this is the high-deductible health plan (HDHP), which has a deductible of at least $1,350 for an individual and $2,700 for a family. HDHPs also come with access to a health savings account (HSA), which allows you to save up for medical expenses with pre-tax money.
Once you reach your deductible, thatâs when cost-sharing measures like copays and coinsurance come into play. Some plans will have copays for certain services that apply before you hit your deductible, but not all.
Homeowners and Car Insurance Deductibles
With a car insurance deductible, your insurance company will typically pay for any repairs necessary after you hit your deductible, provided you have a plan that covers the costs of repairs. The same is true with homeowners insurance. This differs from a health insurance deductible, where you will almost surely have to keep paying at least part of the bill after you hit it.
The calculus for choosing your deductible is slightly different with these two insurance types than with health insurance. With the latter, itâs highly unlikely that you wonât have any medical expenses during the course of the year. Most people that have health insurance are going to use it. With homeowners and car insurance though, thatâs not the case. Itâs very possible that you go a year without getting in a car accident or your house burning down or getting burglarized.
Choosing Your Deductible
Odds are youâll have options to choose from when selecting your health insurance plan. Those options will likely have varying deductibles. When making the choice between these options, consider the state of your health.
Is there a good chance youâll have an annual check-up but not much else? If thatâs the case, you may be suited for a plan with a higher deductible and lower premiums. If instead you expect to have one or more procedures during the year or you require expensive medication, you may be better off accepting the higher premiums in exchange for a lower deductible.
Of course, many of your medical expenses will be impossible to predict beforehand. Therefore, youâll also want to consider how risky you want to be with your deductible. If you have plenty of savings and could handle a few hefty medical bills, you may be more inclined to take the gamble on a high deductible. If youâre stretched thinner, this may not be the case. You may not want to risk opting for the high deductible and then getting hit with a huge bill thatâs all your responsibility.
The Takeaway
Because of deductibles, youâll still have pay a portion of your medical expenses before you can rely on your insurance company. When youâre considering which insurance plan is right for you, make sure to factor the deductible into your decision. If you have plenty of savings and youâre fine with some risk, you may want to opt for a higher deductible and lower premiums. If youâre more risk averse, you may decide to accept the higher premiums in exchange for a lower deductible.
Tips for Protecting Against Risk
Having an emergency fund in place can help provide a cushion that allows you to choose a higher deductible. You can stash your emergency fund in either a CD ladder or a high-yield savings account.
If youâre not sure how an unexpected medical expense would fit into your finances, consider working with a financial advisor. Finding the right financial advisor that fits your needs doesnât have to be hard. SmartAssetâs free tool matches you with financial advisors in your area in 5 minutes. If youâre ready to be matched with local advisors that will help you achieve your financial goals, get started now.
Buying a second home is a major expense. You might have several reasons for wanting to buy a second house. Perhaps, you’re buying a second home for vacations or weekend getaways. Or, it might be that you want to use it as a rental property for rental income. However, there are things to consider before buying a second home.
The benefits of buying a second home
If you’re buying a second home for rental income, you’ll benefit from many perks, especially tax advantages.
For example, you will be able to deduct interest, property taxes, homeowners insurance and other expenses against the property’s income.
Even if the value of the property declines, you will still be able to deduct depreciation from your taxes.
While these benefits are great, the mortgage requirements for a second home are much stricter than for a mortgage on your primary residence. So, make sure you can afford it.
8 Things To Consider WhenBuying A Second Home
1. Financing options: When you bought your first home, you had available to you what’s called an FHA loan – a government loan program.
FHA loans are an appealing and favorite choice among first time home buyers due to their relatively low down payment requirement.
FHA loans require a 3.5% down payment and a relatively low credit score of 580. However, FHA loans are not available to second home buyers.
That is because FHA requires the home to be the borrower’s primary residence. So, if you’re thinking of buying a second home, you will need to either use a conventional loan or financing it with your own cash.
2. A larger down payment: If you’re using a conventional loan for your second home, you will need to come up with a larger down payment.
Lenders for a conventional loan usually requires a 20% down payment of the home purchase price.
But for a second home which will be used as a rental property or vacation home, expect lenders to ask for 30% or even 35%.
3. A higher credit score. For an FHA loan, you only need a credit score of 580 to qualify. But for a conventional loan on a second home, you will need much higher credit score — usually 750 or higher.
4. Expect a Higher Interest Rate: Lenders will likely charge you a higher interest rate on your second home than your primary residence.
The reason is because they see a second home — be it a vacation home or a rental property — as riskier. They feel that you are more likely to default on a mortgage on your second home than on your primary residence.
5. Do your research: Just as you did your homework when you bought your place to live in, buying a second home is no different.
In fact, you’ll need to spend more time researching rental property. That means researching the neighborhood you will want to invest in, knowing the zoning laws for a particular area, the sales price for the homes in the area.
You will need to know if the area has adequate public transportation, schools, grocery shopping, etc,– things that potential tenants will need.
6. Be prepared to be a landlord: if you’re buying a second home to rent, be prepared to be a landlord.
And be prepared to deal with all of the headaches that come with being a landlord. Do you have sufficient time? Can you deal with problems?
Owning a rental property and being a landlord is time consuming. It is also hard hard work and you have to do your due diligence.
You can hire a property manager to run the property for you. But if that is not feasible, you’ll have to do it yourself.
That means, screening new tenants, collecting rent, dealing with delinquent tenants, fixing problems in the property, such as a broken pipe.
So before buying a second home, make sure you have sufficient time and make sure you can deal with the day-to-day headaches that come with being a landlord.
7. Do you have a stable income? Dealing with a second mortgage on your second home is doable.
While you may be able to afford upfront costs, if you don’t have a stable income, you may have to think twice about whether it is a good idea.
Plus, you still have to consider the additional expenses of owning a second home such as insurance, property taxes, maintenance, repairs, property management fees, etc.
8. Are you out of credit card debt? If you have paid off outstanding and high interest credit card debts, then purchasing a second home may make sense.
But if you’re still struggling to pay your debt, you may need to put buying a second home on hold.Â
The bottom line
If you’re thinking about buying a second home, whether it is for investment or vacation, be prepared to save some money, budget for expenses, and come up with a bigger down payment.
More importantly, spend as much time, if not more, researching for the home just as you did when your purchased your primary home.
Speak with the Right Financial Advisor
If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post Buying A Second Home? 8 Things To Consider appeared first on GrowthRapidly.
If you’re one of those investors with very little time to research and invest in individual stocks, it might be a good idea to look into investing in mutual funds.
Whether your goal is to save money for retirement, or for a down payment to buy a house, mutual funds are low-cost and effective way to invest your money.
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What is a mutual fund?
A mutual fund is an investment vehicle in which investors, like you ad me, pool their money together. They use the money to invest in securities such as stocks and bonds. A professional manages the funds.
In addition, mutual funds are cost efficient. They offer diversification to your portfolio. They have low minimum investment requirements.
These factors make mutual funds among the best investment vehicles to use. If you’re a beginner investor, you should consider investing in mutual funds or index funds.
Investing in the stock market in general, can be intimidating. If you are just starting out and don’t feel confident in your investing knowledge, you may value the advice of a financial advisor.
Types of mutual funds
There are different types of mutual funds. They are stock funds, bond funds, and money market funds.
Which funds you choose depends on your risk tolerance. While mutual funds in general are less risky than investing in individual stocks, some funds are riskier than others.
However, you can choose a combination of these three types of funds to diversify your portfolio.
Stock funds: a stock fund is a fund that invests heavily in stocks. However, that does not mean stock funds do not have other securities, i.e., bonds. It’s just that the majority of the money invested is in stocks.
Bond funds: if you don’t want your portfolio to fluctuate in value as stocks do, then you should consider bond funds.
Money market funds: money market funds are funds that you invest in if you tend to tap into your investment in the short term.
Sector funds. As the name suggests, sector funds are funds that invests in one particular sector or industry. For example, a fund that invests only in the health care industry is a sector fund. These mutual funds lack diversification. Therefore, you should avoid them or use them in conjunction to another mutual fund.
Additional funds
Index funds. Index funds seek to track the performance of a particular index, such as the Standard & Poorâs 500 index of 500 large U.S. company stocks or the CRSP US Small Cap Index. When you invest in the Vanguard S&P 500 Index fund, youâre essentially buying a piece of the 500 largest publicly traded US companies. Index funds donât jump around. They stay invested in the market.
Income funds: These funds focus invest primarily in corporate bonds. They also invest in some high-dividend stocks.
Balance funds: The portfolio of these funds have a mixed of stocks and bonds. Those funds enjoy capital growth and income dividend.
Related Article: 3 Ways to Protect Your Portfolio from the Volatile Stock Market
The advantages of mutual funds
Diversification. You’ve probably heard the popular saying “don’t put all of your eggs in one basket.” Well, it applies to mutual funds. Mutual funds invest in stocks or bonds from dozens of companies in several industries.
Thus, your risk is spread. If a stock of a company is not doing well, a stock from another company can balance it out. While most funds are diversified, some are not.
For example, sector funds which invest in a specific industry such as real estate can be risky if that industry is not doing well.
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Professional Management.
Mutual funds are professionally managed. These fund managers are well educated and experienced. Their job is to analyze data, research companies and find the best investments for the fund.
Thus, investing in mutual funds can be a huge time saver for those who have very little time and those who lack expertise in the matter.
Cost Efficiency. The operating expenses and the cost that you pay to sell or buy a fund are cheaper than trading in individual securities on your own. For example, the best Vanguard mutual funds have operating expenses as low as 0.04%. So by keeping expenses low, these funds can help boost your returns.
Low or Reasonable Minimum Investment. The majority of mutual funds, Vanguard mutual funds, for example, have a reasonable minimum requirement. Some funds even have a minimum of $1,000 and provide a monthly investment plan where you can start with as little as $50 a month.
Related Article: 7 Secrets Smart Professionals Use to Choose Financial Advisors
The disadvantage of mutual funds.
While there are several benefits to investing in mutual funds, there are some disadvantages as well.
Active Fund Management. Mutual funds are actively managed. That means fund mangers are always on the look out for the best securities to purchase. That also means they can easily make mistakes.
Cost/expenses. While cost and expenses of investing in individual stocks are significantly higher than mutual funds, cost of a mutual fund can nonetheless be significant.
High cost can have a negative effect on your investment return. These fees are deducted from your mutual fundâs balance every year. Other fees can apply as well. So always find a company with a low cost.
How you make money with mutual funds.
You make money with mutual funds the same way you would with individual stocks: dividend, capital gain and appreciation.
Dividend: Dividends are cash distributions from a company to its shareholders. Some companies offer dividends; others do not. And those who do pay out dividends are not obligated to do so. And the amount of dividends can vary from year to year.
As a mutual fund investor, you may receive dividend income on a regular basis.
Mutual funds offer dividend reinvestment plans. This means that instead of receiving a cash payment, you can reinvest your dividend income into buying more shares in the fund.
Capital gain distribution: in addition to receiving dividend income from the fund, you make money with mutual funds when you make a profit by selling a stock. This is called “capital gain.”
Capital gain occurs when the fund manager sells stocks for more he bought them for. The resulting profits can be paid out to the fund’s shareholders. Just as dividend income, you have the choice to reinvest your gains in the fund.
Appreciation: If stocks in your fund have appreciated in value, the price per share of the fund will increase as well. So whether you hold your shares for a short term or long term, you stand to make a profit when the shares rise.
Best mutual funds.
Now that you know mutual funds make excellent investments, finding the best mutual funds can be overwhelming.
Vanguard mutual funds.
Vanguard mutual funds are the best out there, because they are relatively cheaper; they are of high quality; a professional manage them; and their operating expenses are relative low.
Here is a list of the best Vanguard mutual funds that you should invest in:
Vanguard Total Stock Market Index Funds
Vanguard 500 Index (VFIAX)
Total International Stock index Fund
Vanguard Health Care Investor
Vanguard Total Stock Market Fund
If you’re looking for a diversified mutual fund, this Vanguard mutual fund is for you. The Vanguard’s VTSAX provides exposure to the entire U.S. stock market which includes stocks from large, medium and small U.S companies.
The top companies include Microsoft, Apple, Amazon. In addition, the expenses are relatively (0.04%). It has a minimum initial investment of $3,000, making it one of the best vanguard stock funds out there.
Vanguard S&P 500 (VFIAX)
The Vanguard 500 Index fund may be appropriate for you if you prefer a mutual fund that focuses on U.S. equities. This fund tracks the performance of the S&P 500, which means it holds about 500 of the largest U.S. stocks.
The largest U.S. companies included in this fund are Facebook, Alphabet/Google, Apple, and Amazon. This index fund has an expense ration of 0.04% and a reasonable minimum initial investment of $3,000.
Vanguard Total International Stock Market
You should consider the Vanguard International Stock Market fund of you prefer a mutual fund that invests in foreign stocks.
This international stock fund exposes its shareholders to over 6,000 non-U.S. stocks from several countries in both developed markets and emerging markets. The minimum investment is also $3,000 with an expense ratio of 0.11%.
Vanguard Health Care Investor
Sector funds are not usually a good idea, because the lack diversification. Sector funds are funds that invest in a specific industry like real estate or health care. However, if you want afund to complement your portfolio, the Vanguard Health Care Investor is a good choice.
This Vanguard mutual fund offers investors exposure to U.S. and foreign equities focusing in the health care industry. The expense ration is a little bit higher, 0.34%. However, the minimum initial investment is $3,000, making it one of the cheapest Vanguard mutual funds.
Bottom Line
Mutual funds are great options for beginner investors or investors who have little time to research and invest in individual stocks. When you buy into these low cost investments, you’re essentially buying shares from companies.
Your money are pooled together with those of other investors. If you intend to invest in low cost investment funds, you must know which ones are the best. When it comes to saving money on fees and getting a good return on your investment, Vanguard mutual funds are among the best funds out there.
They provide professional management, diversity, low cost, income and price appreciation.
What’s Next: 5 Mistakes People Make When Hiring A Financial Advisor
Speak with the Right Financial Advisor
If you have questions beyond knowing which of the best Vanguard mutual funds to invest, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
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The post What Are Mutual Funds? Understanding The Basics appeared first on GrowthRapidly.
Summer camp is a rite of passage. A place where traditions begin and memories are made. A unique venue with a structured opportunity for kids to grow and learn new skills. As enriching as it may seem, embarking on the process each year can be intense: How do I choose a camp? Should it have a philosophy? How do I know my child will have fun? But often the question at the top of the list is, “How do I budget for summer camp?”
Whether you’re scrambling for camp arrangements for this year or getting a jump-start on next summer, you’re in need of a working budget for summer camp. “As a parent who sent several kids to summer camp for many years, I know how expensive it can be,” says Leslie H. Tayne, author and founder of debt solutions law firm Tayne Law Group.
Read on for expert budgeting tips for summer camp and how to save money on summer camp so you can make the best decisions concerning your wallet and your child’s wish list:
1. Get a handle on camp tuition
According to the American Camp Association, sleep-away camp tuition can range from $630 to more than $2,000 per camper per week. Day camp tuition isn’t too far behind, ranging from $199 to more than $800 per week.
One of the best ways to budget for summer camp and prepare for tuition costs is to understand your needs for the summer as well as your child’s interests. This will help you determine ‘how much’ and ‘what type’ of camp you want: Is day-camp coverage important all summer because of work? Does your child want to experience sleep-away camp for a portion of the time? Is a camp with a specific focus (say a sport or hobby) on the list?
Depending on your circumstances and child’s expectations, it’s not unusual to be looking at a combination of campsâand tuition costsâin one season. If you have multiple kids at different ages, with different interests, creating a budget for summer camp and understanding how much you’ll need to dish out in tuition becomes especially important.
Once your camp plan is in place, assess how much you’ll need to pay in tuition for the summer months with school out of session. The sooner you’ve arrived at this figure, the easier it will be to work the expense into your household budget, says Heather Schisler, money-saving expert and founder of deal site Passion for Savings. “It’s much easier to set aside $30 a month than it is to come up with $300 to $400 at one time,” Schisler says.
Sleep-away camp tuition can range from $630 to more than $2,000 per camper per week. Day camp tuition ranges from $199 to more than $800 per week.
2. Plan for expenses beyond tuition
One of the biggest budgeting tips for summer camp is planning for the many costs outside of tuition. Tayne points out that sleep-away camp usually comes with a longer supply list than day campâsuch as specific clothing or gear and toiletries to cover the length of stay. If your child is heading to a sleep-away camp far from home, your budget for summer camp may also need to factor in the cost of transportation or the cost to ship luggage. Day camps can also have fees for extended hours or transportation if your child rides a camp bus each day.
Once you’ve selected a campâday camp or sleep-awayâcheck its website for camper packing lists and guidelines. Most camps offer checklists that you can print out, which can be good for tracking supplies and costs as you go. After you enroll, your camp may provide access to an online portal that can help you manage tuition and track additional expenses, like canteen money, which is cash your child can use for snacks and additional supplies while away.
3. Create a year-round savings strategy
By calculating the necessary expenses ahead of time for the camps you and your campers have chosen, you’ll be able to determine an overall budget for summer camp. A budgeting tip for summer camp is to save money monthly throughout the year. To determine a monthly savings goal, divide your total summer camp costs by the amount of months you have until camp starts. If camp is quickly approaching and you’re feeling the budget crunch, you may want to start saving for next year’s costs once it’s back-to-school time so you can spread out your costs over a longer period of time.
Once you start saving, you’ll need a place to put it, right? When it comes to budgeting tips for summer camp, consider placing your cash in a dedicated account, which will keep it separate from your regular expenses and help you avoid tapping it for other reasons. “Then you can have your bank set up an auto draft [for the summer camp money] so it automatically goes into your account each month and you will have the money you need when summer rolls around,” Schisler says. If you use a Discover Online Savings Account for this purpose, you’ll also earn interest that can be put toward camp expenses.
âIt’s much easier to set aside $30 a month than it is to come up with $300 to $400 at one time.â
4. Find ways to fund your summer camp account
To boost cash in your summer camp savings account, consider asking relatives and family friends to gift your children cash for camp in lieu of birthday and holiday gifts, says Tracie Fobes of budget blog Penny Pinchin’ Mom. “If your child has his or her heart set on sleep-away camp, they may be willing to forgo a gift or two,” Fobes says.
Another budgeting tip for summer camp is to put your cashback rewards toward your budget for summer camp. For example, if you open a checking account with Discoverâcalled Cashback Debitâyou’ll earn 1% cash back on up to $3,000 in debit card purchases each month.1 You can enroll to have that cashback bonus automatically deposited into your Discover Online Savings Account so it remains designated for camp costs (and can grow with interest).
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Lastly, if you don’t have your tax refund earmarked for another financial goal, you could use the windfall to kick-start your summer camp savings fund. Depending on the refund amount and your total camp costs, it could reduce your monthly summer camp savings goal significantly.
5. Reduce camp-related costs
Despite having your budget for summer camp in full view and planning in advance, camp can still be expensive. Here are some ways to save money on summer camp by cutting down on camp costs:
Ask about scholarships and grants: “Some camps offer scholarships or discounts for children and families,” Fobes says. Research your camp to see if they have anything similar to help offsetâor even pay forâthe cost of tuition.
Use a Dependent Care Flexible Spending Account (DCFSA): A Dependent Care Flexible Spending Account is a pre-tax benefit account that can be used to pay for eligible dependent care services. You can use this type of account to “cover dependent care [costs], and camp may qualify,” Fobes says.
Negotiate price: “Many people don’t think about negotiating the cost of summer camp, but it is possible,” Tayne says, and more and more camps are open to it.
See if there’s an “honor system”: Some camps have what’s known as an honor system, where the camp offers a range of costs, or tiered pricing, and parents can pay what they can comfortably afford. Every child enjoys the same camp experience, regardless of which price point, and billing is kept private.
Take advantage of discounts: Attention early birds and web surfers: “There are sometimes discounts offered when you sign up early or register online,” Fobes says.
Volunteer: If your summer schedule allows, “offer to work at the camp,” Fobes says. If you lend your servicesâperhaps for the camp blog or cleaning the camp house before the season startsâyour child may be able to attend camp for free or a reduced rate.
Don’t let summer camp costs become a family budget-buster. Plan ahead and look for money-saving opportunities and work your budget for summer camp into your annual financial plan.
To save money on summer camp, remember that you only need to focus on camp necessities. “Don’t spend a lot of extra money on new clothing, bedding, trunks or suitcases,” Schisler says. “Remember, summer camp is all about the experience, not the things.”
1 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.
The post Your Guide to Budgeting for Summer Camp appeared first on Discover Bank – Banking Topics Blog.
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While women have certainly made strides in many areas of the business world, when it comes to entrepreneurship, a significant gender gap remains. Around 10.2% of women between ages 18 and 64 are new entrepreneurs, a rate around three-quarters that of men, according to the 2018-2019 Womenâs Report from The Global Entrepreneurship Monitor. Though thereâs clearly still room for growth, women who are starting their own businesses have the opportunity to take ownership of their long-term financial goals, including how much they sock away in a savings account. But not all locales are equally conducive to their success. As such, SmartAsset sought to uncover which metro areas are best for women entrepreneurs.
To do this, we compared 50 of the largest metro areas across the following metrics: number of female-owned businesses, percentage of businesses owned by women, women-owned businesses as a percentage of businesses with greater than 500 employees, new businesses as a percentage of total businesses, new business applications in 2020 relative to previous years, percentage of businesses that had profits or broke even, startup survival rate, women-to-men pay ratio, 2019 female unemployment rate and September 2020 unemployment rate. For details on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below.
This is SmartAssetâs second study on the best places for women entrepreneurs. Read the 2019 version here.
Key Findings
The percentage of women-owned businesses is paltry, but especially so for large companies. Five metros in our top 10 â Los Angeles, Atlanta, Denver, Seattle and Miami â rank in the top 10 for our metric tracking the percentage of businesses owned by women, with Atlanta leading that pack at 21.92%. Though women-owned businesses only constitute about a fifth of all business at the top, the numbers are even more meager for women-owned businesses with greater than 500 employees: in New York, which ranks first for this metric, women own only 3.56% of all businesses of this size.
Despite the pandemic, new businesses are still being formed. While the COVID-19 pandemic has had major impacts on the fortunes of many businesses, entrepreneurs in the U.S. are still founding new companies. Data from the Census Bureau shows that the number of new business applications in 2020 thus far is up 5% compared to the average over the past few years, indicating that amid this crisis, increasingly more entrepreneurs still want to form new firms.
1. Minneapolis-St. Paul-Bloomington, MN-WI
For the second consecutive year, the Twin Cities metro area of Minnesota-Wisconsin is the best place in the country for women entrepreneurs. The unemployment rate for women in this area was 1.8% in 2019, the lowest rate for this metric in the study. Furthermore, 84.49% of businesses in the Minneapolis area had a profit or broke even in 2017, the second-highest percentage across all metro areas we analyzed. Women-owned businesses make up a little less than 3% of all businesses with greater than 500 employees in this metro area. While relatively low, that figure is actually the eighth-highest percentage for this metric in the study.
2. Los Angeles-Long Beach-Anaheim, CA
The Los Angeles-Long Beach-Anaheim, California metro area, which includes parts of Orange County, is the No. 2 place in the nation for women entrepreneurs. Due in part to its large population, Los Angeles area has 64,632 women-owned businesses overall, the second-highest number for this metric in the study (behind only the New York City metro area). Los Angeles also ranks ninth out of 50 in terms of the percentage of businesses that are owned by women, at 20.99%, and third out of 50 in terms of women-owned businesses as a percentage of businesses with greater than 500 employees, at 3.20%.
3. Atlanta-Sandy Springs-Alpharetta, GA
There are also a substantial number of women-owned businesses in the Atlanta metro area. The raw total is 24,130, sixth-highest in the study, and that represents 21.92% of all businesses, the fourth-highest in the study. Women in the Atlanta area earn 76.79% as much as men, the 12th-best rate for this metric across all 50 metro areas we analyzed. The metro area also benefits from the fact that Georgia ranks first for the number of new state-wide business applications in 2020 relative to the previous five years, at 142.77%.
4. Denver-Aurora-Lakewood, CO
New businesses represent 10.22% of all establishments in the Denver-Aurora-Lakewood, Colorado metro area, the third-highest percentage for this metric in our study. A lot of the establishments in the area at least break even, too â 83.90% to be specific, the seventh-highest percentage we observed for this metric in the study. The Denver area also ranks seventh-best for the percentage of businesses that are owned by women, 21.78%.
5. Sacramento-Roseville-Folsom, CA
Sacramento is the capital of California, and the metro area around the city takes the No. 5 spot in terms of the best places to be a woman entrepreneur. The Sacramento-Roseville-Folsom metropolitan area saw 84.70% of businesses either turn a profit or break even in 2017, the highest percentage we observed. The startup survival rate in California is 81.33%, placing the Sacramento area fifth in that metric. New businesses in the area represent 9.10% of all businesses, good for 12th overall.
6. Tampa-St. Petersburg-Clearwater, FL
Women in the Tampa-St. Petersburg-Clearwater, Florida metro area earn 79.68% as much as men, the sixth-best ratio of the metro areas included in this study. Tampa also benefits from the fact that Florida fares well in terms of new businesses created in 2020 (a state-wide metric): The total new business applications filed this year is 113.42% of the average filed over the past five years, the ninth-highest rate. Tampa also finishes in 11th place out of 50 for both unemployment metrics we measured. The unemployment rate for women in 2019 was 2.4%, and the overall unemployment rate in September 2020 was 6.1%.
7. Seattle-Tacoma-Bellevue, WA
There are 17,724 businesses owned by women in Seattle-Tacoma-Bellevue, Washington metro area, ranking 10th of 50. That figure represents 21.25% of all businesses in the Seattle metro area, the eighth-highest percentage in the study. The pay gap in Seattle, though, remains large. Women earn just 68.21% as much as men there, placing the area 46th out of 50 for this metric.
8. Charlotte-Concord-Gastonia, NC-SC
The Charlotte-Concord-Gastonia, North Carolina-South Carolina metro area comes in at No. 8. Women-owned businesses make up 3.26% of all businesses with greater than 500 employees. The only other metric for which the Charlotte area finishes in the top 10 is the percentage of businesses that broke even or turned a profit, coming in ninth at 83.14%. The area has just 8,581 female-owned businesses, putting it near the middle of this list at 24th out of 50.
9. Miami-Fort Lauderdale-Pompano Beach, FL
In the Miami-Fort Lauderdale-Pompano Beach, Florida metro area, there are 36,496 businesses owned by women, representing 21.88% of all the businesses in the metro area. That places Miami in fourth and fifth in those two metrics, respectively. The Miami area hasnât been doing well in terms of employment lately, though. The unemployment rate in September 2020 was 10.1%, in the bottom five of this study. That said, the metro area ranks fifth out of 50 for women-owned businesses as a percentage of businesses with greater than 500 employees (3.17%). Furthermore, it ranks ninth overall for the statewide metric of new business applications in 2020 relative to previous years (113.42%) and third overall for women-to-men pay ratio (81.19%).
10. Dallas-Fort Worth-Arlington, TX
The final area in the top 10 of this study is Dallas-Fort-Worth-Arlington, Texas. There are 24,383 businesses in the area owned by women, the fifth-highest rate for this metric in the study. Of the businesses in the metro area with more than 500 employees, 3.19% of them are owned by women, which is the fourth-highest percentage for this metric across the 50 areas we analyzed. A lot of businesses in the area donât fare as well as they would probably like, though: Only 79.42% break even or turn a profit, 44th out of 50 in the study. However, the metro area ranks sixth overall for the statewide metric of new businesses as a percentage of total businesses, at 9.54%.
Data and Methodology
To find the best metro areas for women to be entrepreneurs we compared 50 of the largest metropolitan areas in the country across a number of metrics. Though weâve done this study in previous years, we added two metrics this year to give more timeliness to our results: new business applications in 2020 compared with the average of the previous five years, and the unemployment rate in September 2020. Here are all the metrics we used:
Number of women-owned businesses. Data is for businesses with paid employees and comes from the Census Bureauâs 2018 Annual Business Survey.
Percentage of women-owned businesses. Data is for businesses with paid employees and comes from the Census Bureauâs 2018 Annual Business Survey.
Percentage of businesses with at least 500 paid employees that are women owned. Data comes from the Census Bureauâs 2018 Annual Business Survey.
New businesses as a percentage of total businesses. This includes businesses established in 2015, 2016 and 2017 as a percentage of all businesses. Data is for businesses with paid employees and comes from the Census Bureauâs 2018 Annual Business Survey.
New business applications in 2020 relative to the 2015-2019 average by state. Figures for new business applications are not seasonally adjusted and include only those with planned wages for workers. We compared the number of new business applications from Week 1 of 2020 through Week 42 of 2020 (i.e. December 30, 2019 through October 24, 2020) to the average number of applications filed during those first 43 weeks of the year for the five-year period spanning from 2015 through 2019. Data comes from the Census Bureauâs Business Formation Statistics.
Percentage of all businesses that had profits or broke even. Data is for businesses with paid employees and comes from the Census Bureauâs 2017 Annual Business Survey.
Startup early survival rate (by state). This is the percentage of startups that are still active after one year. Data comes from the Kauffman Indicators of Entrepreneurship report and is for 2019.
Women-to-men pay ratio. Data comes from the Census Bureauâs 1-year American Community Survey and is for 2019. It accounts for both part-time and full-time workers.
Unemployment rate for women. Data comes from the Census Bureauâs 1-year American Community Survey and is for 2019.
Overall unemployment rate for September 2020. Data comes from the Bureau of Labor Statistics.
First, we ranked each metro area in every metric. We then found the average ranking for each metro area, giving a full weight to all metrics except for the two new business metrics and the two unemployment metrics, all of which received a half-weight. We then came to a final ranking based on these averages, with the top metro area receiving an index score of 100 and the bottom metro area receiving an index score of 0.
Tips for Entrepreneurs
Invest in professional advice. If you are looking for help with your money or your business, consider finding a financial advisor to help you. Finding a financial advisor doesnât have to be hard. SmartAssetâs free tool connects you with financial advisors in your area in five minutes. If youâre ready to be matched with local advisors, get started now.
Taxes donât always have to be taxing. Knowing your tax burden is key to a successful financial life and running your business efficiently. Use SmartAssetâs free tax calculator to see what you might owe.
Nail down your elevator pitch. Want to make sure you are a successful entrepreneur? Make sure you know what your product is and what your audience is before you even actually start the business.
Questions about our study? Contact press@smartasset.com.
, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.
