By Dawn Berryman Marketing plans can be intimidating. But, every good business owner knows that they need one. Marketing plans do not have to be overwhelming and extravagant. If you keep it simple and targeted, you can do it yourself; even if you’ve never written one before. Let’s walk through the process so that you […]
The post How to Create Your Marketing Plan and Essentials to Include appeared first on The Work at Home Woman.
Happy holidays! Now it’s time to do your shopping.
All together now: MOAN. Groan. Ugh! Noooooooo. Oh, please God, noooooooo!
Yessiree, that’s the holiday spirit! Zip-a-dee-doo-dah and all that, right?
OK, let’s get serious. Fact is, I hate Christmas shopping even more than you do. For me, there are only two things that make it tolerable:
That’s how I roll during the holidays. If, like me, you’re dreading the holiday-shopping season, you might try out this strategy.
An app called Earny gets me money back on purchases I make online whenever there’s a price change. It works for a bunch of retailers, too, including Amazon, Gap, Jet, Kohl’s, Nordstrom, Old Navy, Overstock, Target, Walmart and Zappos.
Here’s the catch: You have to keep your email receipts. But other than that, you do nothing. Nothing at all.
Just a personal note about me: I’m really good at doing nothing. Maybe you are, too.
Here’s how it works:
Again, you do nothing after you sign up. This is what you call a “set-and-forget” app. Earny is a busy little bot, and it doesn’t need your help.
It also prevents you from grinding your teeth in frustration when you buy something from Amazon, and then the price unexpectedly drops a day later. Aaarrrgghh, I hate that.
Call it buyer’s remorse. Post-purchase depression.
Practically nothing is more irritating than finding a recently purchased item available for a cheaper price. It’s like the opposite of finding money on the street.
Earny’s price-protection magic powers are good for 90 days after your purchase.
Theoretically, any of us could do the same thing Earny does. But let’s get real: We’re not going to. According to Mastercard’s research, American consumers walk away from more than $50 billion in price drops each year.
That’s because we’re unaware of cheaper offers, or because getting one of these refunds generally requires a lot of effort and tedious paperwork.
So here’s what you do:
Happy holidays!
Mike Brassfield (mike@thepennyhoarder.com) is a senior writer at The Penny Hoarder. He just looooooooves Christmas shopping.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.
Wish you could work from home to make a little extra cash?
Wish you could work from home in a way that feels less like work and more like browsing social media all day? (Let’s face it: We’d all rather be home forming calluses on our Facebook-scrolling fingers anyways.)
Then boy oh boy, do we have a cool opportunity for you.
Lionbridge, the marketing services company, is looking for social media evaluators to work from home right now.
As an evaluator, you’ll rate social media ads and other content for for relevancy and quality as you scroll your feeds every day.
This is a part-time position, so you’ll be expected to work about an hour per day at least five days a week. You’ll never work more than seven hours in any given week.
You schedule is self-directed, so you decide when you want to scroll work.
Pay for this position isn’t listed, but we’ve contacted the company and will update this post when we hear back.
Requirements for this gig include:
You should also be an active daily social media user, be based in the U.S. and should have a strong understanding of American culture including entertainment, sports, business, news and media.
Go here to apply to become a part-time social media evaluator with Lionbridge.
Grace Schweizer is a junior writer at The Penny Hoarder.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.
It’s finally happened.
You spent decades raising your kids, and now they’ve all moved out. They’ve gone off to college or gotten their own places.
The house is weirdly quiet.
You’re an empty nester. What are you supposed to do now?
Don’t make the same mistake too many empty nesters make. Intoxicated by their newfound freedom, they blow way too much money on lavish vacations, expensive hobbies, dinners at nice restaurants or costly home improvements.
Don’t do that. Do this instead.
This is a major life event, on par with getting married or having a baby. It’s an ideal time to sit down, rethink your finances and plan a smart strategy for this next phase of your life.
Here’s our checklist of six things empty nesters need to do.
News flash: Americans aren’t saving enough for retirement.
A new report from the Economic Policy Institute finds the average family has nowhere near enough money in retirement funds.
Not sure how your savings stack up? Try this calculator. It’ll tell you how much to start saving to stay on track toward a decent retirement. Better yet, sit down with a financial adviser.
Not sure if you have the right amount invested in stocks versus bonds? Sign up for a robo-advisor like Blooom, an app that’ll optimize and monitor your 401(k) for you.
Track your expenses and draw up a new monthly budget. Now that your kids are out of the house, you may be spending less on certain things.
Like we said earlier, resist the urge to splurge. Many empty nesters don’t save more money. A recent study by Boston College found that the 401(k) savings of empty nesters only increase by a puny 0.3% to 0.7%.
Basically, they’re spending about what they were spending before.
Decide what to do with that vacant bedroom or two. Maybe turn one into a study or sewing room.
Or try listing a room on Airbnb to make extra money. Google “Airbnb empty nester,” and you’ll find tons of people doing exactly that.
Seniors, and especially female seniors, are the fastest-growing group of Airbnb hosts in the U.S. If you’ve never been an Airbnb host and you have questions about it, here’s a good place to start.
Now that your nest is empty, it might be time to downsize it.
Moving into a smaller home can save you money on your mortgage and power bill. Moving into an apartment can save you money on maintenance, landscaping and property taxes.
Start downsizing at home first. To save time and aggravation when moving, get rid of stuff you don’t need.
Clear out your old DVDs, Blu-rays and CDs with the Decluttr app. Scan the barcode with your phone, and Decluttr will make you an offer. Right now, it’s offering an extra $5 to orders when you use the code FREE5 at checkout.
You can also sell nearly anything through the Letgo app. Just snap a photo of your item and set up a listing in about 30 seconds.
Sit down with your kids and set realistic expectations for how much you’ll be supporting them once they’re out of the house — whether it’s tuition, housing, insurance or food.
Speaking of food, it’s time to revamp your grocery shopping list.
Shopping for food should be cheaper with fewer mouths to feed. But without kids in the house, you might not want to cook as much, so you’ll spend more money eating out.
Plan home-cooked meals that can be done on a smaller scale.
Since we’re talking about groceries, here’s our master list on how to save money at the supermarket.
And if you’re eating out more, here are our tips for saving money at restaurants. And you should definitely check out Ibotta, a free cash-back app that offers rebates at grocery stores, restaurants and bars.
In conclusion, enjoy your new empty-nest adventure! The smarter you are about it, the better off you’ll be.
Mike Brassfield (mike@thepennyhoarder.com) is a senior writer at The Penny Hoarder. He still has a full house.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.
Anyone with at least a modicum of interest in fashion knows the feeling: You see an item of clothing on a celebrity, social media influencer or TV character, and you know in an instant you have to have it.
But finding the look — or something similar at a less-cringey price — can be challenging and time-consuming.
What’s a busy, budding fashionista to do?
Well, there’s an app that wants to help.
Kim Kardashian West is an adviser for a new Apple and Android app called ScreenShop, which invites you to upload screenshots of outfits for convenient fashion matchmaking. Choose to sort results by similarity, price or brand to find a version of the celebrity’s look that works for you.
It’s free to use, with partner brands sharing revenue with the app.
“I’ve never seen an app where you can screenshot something and within seconds bring up a whole digital fashion store to be able to pick out from all range prices and sizes of similar things to what you’re wearing,” Kardashian West told Buzzfeed News.
The idea of being able to find a budget-friendly version of stars’ looks turned this Penny Hoarder’s head. With a database of 10 million products from about 460 stores, it’s got to be foolproof, right?
No. Not yet, at least.
I initially uploaded photos I screenshoted from Instagram: a look from a favorite indie designer and a picture of a yoga teacher posing in chic pair of leggings.
ScreenShop had issues with both of them, showing me only tank tops instead of yoga pants and presenting nary a blouse matching my favorite designer’s offering.
I got a little creative and uploaded a photo of Taylor Swift in a light blue romper at the 2014 MTV Video Music awards. While ScreenShop spit out plenty of rompers, none of them with the red carpet cachet I was hoping for.
Next I tried Rihanna at the 2015 Met Gala, where she had donned an elaborate, luxurious fur-trimmed gown. I expected ScreenShop to offer yellow ball gowns, but all the results were slinky slip dresses that would make me look like a swollen banana if I wore them to the club.
OK, maybe I had taken the experiment too far.
I uploaded an Instagram photo of three news show hosts standing together, hoping I’d get something close to at least one of their dresses. ScreenShop latched onto a black dress with white, vertical, dotted lines that pooled into a wide hem of white dots.
The app generated rows of horizontally striped dresses, but as I kept scrolling, there popped up one dress that was pretty close to one of the dresses. The hem was different, but the silhouette was the same. I considered it a match, and the dupe, which was from NY Collection and available at Macy’s, had a reasonable $60 price tag.
Lisa: 4, ScreenShop: 1.
Then this experiment went completely off the rails.
I know where I bought all my clothing and how much I spent, so I started uploading photos of myself and random images from the depths of my phone.
My best friend in an Old Navy sundress got uploaded, as did a random screenshot I had taken of a protective mesh hoodie to keep mosquitos away (#FloridaProblems). Up went my high-school graduation photo, a random workday ensemble, an ‘80s party getup, a leather jacket selfie in the office elevator and my boss’s dog dressed up like a lumberjack.
ScreenShop tried really, really hard.
It couldn’t match my friend’s sundress, although it provided a few alternatives ranging between $10.99 (Forever 21) and $1,495 (Dolce & Gabbana). A gray sleeveless button-up generated green, long-sleeved shirts to browse. My leather jacket photo pulled up lots of leather jackets, but none of them in the two-tone style I had worn. A selfie of me wearing a gray T-shirt and a pink bandanna around my neck resulted in options for maroon men’s V-neck tees. For my ‘80s night portrait, ScreenShop offered bracelets to match the crease in my wrist.
The dog, however, produced plenty of winter beanies to choose from.
Verdict: ScreenShop seems like a magical, glamorous unicorn here to help picky shoppers, but its science isn’t perfect yet. If you like browsing the ShopStyle app, stick with it. If you curate fashion looks on Pinterest, keep pinning. But don’t expect ScreenShop to simplify your shopping life any time soon.
Lisa Rowan is a senior writer and producer at The Penny Hoarder.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.
Looking for full-time work?
That you can do remotely?
With a well-known, reputable company?
Check, check and check: American Express is hiring full-time Virtual Customer Care Professionals.
Here’s how to apply.
(And if you’re looking for a work-from-home job but this one’s not quite right for you, be sure to like our Jobs page on Facebook — we post awesome work-from-home opportunities there all the time!)
In this position, you’ll work from home answering calls in a fast-paced environment and delivering extraordinary customer service. You can choose to work a flexible, nontraditional schedule.
Your duties will include evaluating account information and offering tailored solutions to customers.
To be eligible, you must live in any state except Alaska, California or Hawaii, and have a distraction-free home office and experience “successfully interacting with customers.”
If you live within 35 miles of one of its centers (Phoenix, Arizona; Salt Lake City, Utah; or Sunrise, Florida) then you’ll want to review its on-site positions.
You’ll start out earning “competitive” pay of at least $15.73 an hour, with the opportunity to earn “monthly performance-based incentives.”
Not only is training paid (and from home), the company will also cover the connection cost and monthly fees for “dedicated telephone and Internet service from an American Express-approved provider in your area.”
The company will reimburse you up to $100 for setup fees if there isn’t an American Express-approved provider in your area but you can find a provider that offers the same required cable or DSL connections — and you’ll get a monthly allowance to help cover service costs.
Woohoo!
Plus, you’ll be eligible for benefits like health insurance, retirement plans and tuition assistance from day one!
Sounds like a pretty good gig, right? Click here to learn more and apply.
Susan Shain, freelance writer, is always seeking adventure on a budget. Visit her blog at susanshain.com, or say hi on Twitter @susan_shain.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.
When you need a tradesperson to pop round and do an urgent job, it can be difficult to find someone to do it quickly at the right price. So, many people take what they can get.
That’s not great, is it? In an ideal world we would be able to call on a trusted trader who would do a bang-up job and charge a fair price. In the real world, we often have to rely on someone we’ve found online and the price they charge is not always clear.
Let’s face it, many tradespeople don’t help themselves by being unclear about charges – the most common complaints are expensive unjustified call-out fees and elastic timing.
I’ve had many plumbers, electricians and roofers visit my home to do small jobs and, on many occasions, I’ve been left with the feeling I’ve been stung by overcharging.
That’s what happened to reader SM of Bromley in Kent. When there was a blockage in her kitchen sink, she found a company called London Drains Direct, which quoted just £20 for half an hour for hand tools and £78 per half hour if its engineer needed to use a machine.
She thought that seemed reasonable, so booked an engineer to come around.
SM takes up the story: “The engineer came out, talked about what he would do, then went to his vehicle to get his machine and tools and started working. My husband noted the work did not actually begin until 15:30 and went to check on the engineer at 16:00, who at this point had said he had finished.
“The engineer then put all his tools away in his vehicle and then filled out the invoice, which reported that the engineer arrived on site at 15:18 and finished at 16:10. My husband questioned the timings on the invoice as it did not match how long the work actually took.”
And here’s the crux of the issue: SM reckons she should only pay for the time worked, so £78 for half an hour, but was charged an extra £78, for the time the engineer was on site.
When she complained to the firm, she was told that it was “quite standard to charge from arrival time on site”.
That didn’t please her. She told Moneywise: “We are happy to pay for the work that was done but we felt that we have been misled and taken advantage of by this company.
OUTCOME: London Drains Direct agrees to be clearer about its charging
What’s your company’s growth strategy?
Businesses need continuous development to get out of a plateau.
I’ve spoken to many people about their marketing plans, and most of them are trying to come up with new ways to add more customers.
While customer acquisition is great, it’s not always necessary if your primary goal is to increase revenue.
Focusing on your existing customers will save and make you money too.
Don’t believe me?
Calculate your customer acquisition cost:
That’s how much money it takes for you to get just one new customer.
Was it higher than you thought it would be?
If you’re spending too much money on customer acquisition, it could bleed your company’s bank account dry.
Now, divide that number by 7.
Do you think that’s a little bit more reasonable?
Well, that’s how much it will cost you to retain an existing customer:
Plus, it’s easier to retain a customer.
They are already familiar with your brand, products, or services. There’s no learning curve and no need for the proof of concept with these customers.
You just have to keep them engaged and give them a reason to keep coming back.
If your current growth strategy isn’t working, it’s time to put a new one to the test.
Instead of focusing on new customers, put more effort into your existing ones.
Evaluate your process.
What’s the step-by-step procedure a customer needs to go through to complete a sale?
Put yourself in the shoes of a consumer, and build a customer journey map.
This will help you determine the strengths of your organization as well as areas needing some improvement.
Having repeat customers doesn’t mean your system is perfect.
Your customers may not be completely satisfied, but they’re waiting for you to make the necessary adjustments.
Anything you can do to make things easier for the customer will improve their experience.
That’s why nearly 90% of businesses say customer experience is a driving force for loyalty and retention.
Here’s why that’s important.
Eighty-eight percent of consumers said they would pay more for a better customer experience.
That’s right.
Your existing customers are willing to pay more for your products and services if you can improve the existing process.
But here’s a problem I see all the time. Businesses don’t know how to identify those areas that need improvement.
Earlier I suggested building a customer journey map, but that doesn’t work for everyone. You need to ask your customers directly.
Create surveys.
Conduct interviews.
Give your customers an opportunity to speak their minds.
Even if they are complaining, it’s good for your business.
For every 26 unhappy customers, 25 will leave without saying a word.
You still have the opportunity to salvage the relationships with the ones who complained.
Chances are if one customer has feedback about your company’s product or service, they aren’t the only one who feels that way.
Take the results of your surveys and interviews very seriously.
Here are some examples of improvements you can make:
I realize it’s tough to implement lots of changes at the same time. But don’t get overwhelmed.
Focus on one thing at a time, and make sure each adjustment improves the customer experience.
Loyalty is a key factor in customer retention.
Just because your repeat customers continue to buy from your business does not mean they are loyal.
Your company may just be convenient for them at the current time.
Here’s a hypothetical scenario to illustrate my point.
Let’s say you own a local coffee shop.
You have a customer who comes in nearly every day for their morning espresso.
This customer doesn’t like going to national chains, and you’re the closest local spot to their home.
They don’t mind the 10-minute drive each day as long as they are supporting a local business.
However, a new local coffee shop just opened up, and it’s only 2 minutes away from the customer’s house.
A loyal customer will continue to make the 10 minute drive to your place.
See the difference?
It also depends on your industry:
Look at where coffee is in this graphic.
It’s a retention-dependent industry whereas a low-frequency purchase, such as a vehicle, is more dependent on acquisition.
The average American has a car for 6.5 years. It’s difficult for an auto sales company to maintain customer loyalty over such a long period of time.
But it’s not impossible, especially if you can get that customer to keep coming back for regular maintenance and services on their vehicle.
What’s the best way to create loyalty?
In the ecommerce industry, you have to have strong email and social media marketing skills.
Both of these channels keep customers engaged, allowing you to establish personalized connections with them.
I’ll elaborate more on these topics as we continue.
Don’t make it complicated.
Email marketing may be simple, but it’s super effective.
Make sure your messages provide value to the recipient.
Don’t send emails just for the sake of starting a new campaign.
Consider the following reasons for contacting your subscriber list via email:
Don’t spam your customers.
Receiving emails too frequently can be a major turn off for them and cause them to unsubscribe from your list.
That’s counterproductive.
For retail businesses, email marketing had the most significant impact on customer retention rates:
Here’s something else to consider.
Not all your current customers are subscribed to your email list.
Converting your existing customers into your subscribers should be part of your retention strategy.
You just have to give them an incentive to sign up.
Offer a discount.
Look at how Perry Ellis does this on their website:
You can use the same strategy on your site as well.
Ecommerce stores can also include an opt-in CTA in the order confirmation messages to those who checked out as guests.
You’re contacting these people regardless, so it makes sense to give them this option.
To give the customer some extra incentive, you can include a discount or exclusive offer here as well.
Personalize your communication when contacting customers via email.
Include their first name in the message.
Consider your tone when you’re writing.
Your voice shouldn’t sound robotic (even though the message might be automated).
Which one of these opening lines sounds better to you?
“Dear valued customer,”
or
“Happy Friday, Susan!”
The second option is much more personal.
This strategy will increase your open rates.
You can use your email marketing strategy to re-engage with customers who haven’t been active in a while.
This message will show them you appreciate their business.
If you can re-connect with a customer who hasn’t bought anything from your brand in the last 6 months, it will help increase your revenue.
Here’s an example from St. Jude Children’s Research Hospital:
Even if your company isn’t a nonprofit organization, you can still employ the “we miss you” tactic.
If you want to have high customer retention rates, you can’t slack off in the social media department.
Consumers use Facebook for much more than just uploading pictures from their most recent vacations.
They want to interact with brands as well.
There are over 65 million local businesses on Facebook’s platform.
Your customers are significantly more active on these social channels than they are on your website.
It’s much more convenient for them to contact you here.
This goes back to what we discussed earlier regarding the customer experience.
If the only way your customers can contact you is Monday through Friday via telephone between 9:00 AM and 5:00 PM, that’s going to limit customer satisfaction.
But if you’re active on social platforms like:
your customers have more options and can select one based on their preference.
If you can find ways to increase engagement with your current customers, your revenue will grow as a result.
Live video streaming can help you accomplish this.
Consumers love live video content.
Compared to a pre-recorded video, people watch live streams three times longer, which means they’re engaged.
Think of your stream as a television show.
Don’t just come on randomly whenever you feel like it.
Schedule a time once a week to broadcast so your followers know exactly when they can expect to hear from you.
Getting weekly viewers can establish brand loyalty, which we discussed earlier.
Marketers who currently use live video to engage their existing customers believe it establishes a more authentic interaction with the viewers.
Here are some additional social media engagement tips:
That last point is one of my favorite techniques, especially if you’re trying to create an effective customer retention strategy.
Everyone loves to get something free. So, give the people what they want. Or at least give them a chance to win.
Starbucks does this all time:
Their #RedCupContest encourages customers to design a cup and share their photos on social media.
It’s a brilliant strategy in terms of brand exposure in addition to the customer retention benefits.
You can generate more revenue from your current customers by getting them to spend more money each time they make a purchase.
Here’s how it works.
Upselling encourages a customer to buy something similar to their initial purchase, but “higher end” (and more expensive).
Cross-selling entices the customer to make a purchase that will compliment something else they’ve bought.
These strategies are effective regardless of your industry.
It doesn’t have to be a tangible product.
For example, if you run a website to generate revenue, you can offer a more expensive monthly subscription to your users as an upselling strategy.
Businesses offering a service such as insurance cross-sell to their customers by offering home insurance as well as auto insurance.
Make sense?
Find out how you can apply these strategies to your business.
B2B companies have adopted this strategy too.
The more products or services your customers buy from you, the more likely they are to become emotionally invested in your business.
This establishes customer loyalty, the importance of which cannot be overstated.
While getting new customers is always exciting for a business, it’s not the only way to increase your revenue stream.
Look at your customer retention strategy first.
It’s often easier and significantly less expensive to implement than the customer acquisition strategy.
The customer experience is vital.
Focus on ways you can make adjustments that enhance your current process, structure, and platforms.
If you’re struggling to identify areas needing improvement, ask your customers for feedback through a survey or interview.
You need to increase customer loyalty.
Recognize that repeat customers are not necessarily loyal customers.
It’s important to know the difference.
The top two ways to increase loyalty and retention are:
Mastering these strategies will improve retention rates throughout the customer life cycle:
Personalize your email campaigns.
Make sure your email provides value to the subscriber.
Try to get your existing customers to opt in to your email list if they haven’t subscribed yet.
When you’re interacting with customers on social media, you need to encourage engagement.
That’s why live video streams are such an effective strategy.
You can also increase revenue by getting your existing customers to spend more money each time they purchase something.
Cross-selling and upselling techniques can accomplish this for you.
You need to promote your most profitable products and services while learning how to recommend other complementary purchases.
If you follow these tips, you’ll generate more revenue without having to add new customers.
What kind of social media promotion are you going to run in order to engage your followers and increase customer retention?
Glynn Bilby (pictured above) is a 57-year-old, semi-retired HGV driver from Sheffield. He lives with his wife Kim, a clerk, who is also aged 57 and semi-retired. They have no financial dependents.
Glynn has been drawing on a defined contribution workplace pension since he was 55. This gives him an income of £7,200 a year. He also has £34,000 in his current workplace pension, which he has not taken any money from. He will also receive a one-off payment of £4,000 from a former employer when he turns 65.
Kim has a defined benefit pension from her employer, which is worth £3,000 a year. Both Glynn and Kim are still contributing towards their workplace pensions. In terms of savings, the couple has:
They are keen to get some guidance from an independent fi nancial adviser (IFA) as they don’t think they are making the most of their savings.
This is where Raj Shah (pictured below), an independent financial adviser (IFA) and owner of Blue Wealth Capital in Sheffield, comes in to help. In 2016, Raj was shortlisted for Unbiased’s financial planner of the year award and Moneyfacts’ investment adviser of the year award. Raj’s advice for the Bilby’s is as follows.
You should always keep some money immediately accessible to cover any unforeseen emergency expenditure that may arise. I would normally recommend an emergency fund equal to three months’ expenditure within an instant-access deposit account as a bare minimum. Based on the couple’s outgoings, they should keep £10,000 of their savings in cash as an emergency fund.
The remaining £26,000 should be moved into stocks and shares Isas in a bid to boost returns – I explain more on this below.
Glynn says: “We’ve always had plenty put by. It’s a good idea to have something set aside in case of emergency, so we’ll certainly keep doing this.”
I would recommend that Glynn and Kim sell their £23,000 in direct shares as this type of investment is simply too risky. They should, however, consider the potential tax liabilities first.
Moneywise says: Capital Gains Tax (CGT) is applicable to any gains made by selling shares that are not in an Isa.
Gains, other than those made from selling property, are taxed at 10% for basic-rate taxpayers and 20% for higher-rate and additional-rate taxpayers. However, you do have an annual tax-free CGT allowance, which stands at £11,300 per person.
The couple should repay their mortgage early – and my advice would be to use £13,00 from the sale of their direct shares.
Moneywise adds: When considering repaying your mortgage, always check with your lender first if any early repayment fees are applicable and calculate whether the overpayment is worth it.
Glynn and Kim should also consider repaying their car finance in full, if the terms of the deal allow for this and any early repayment fees don’t outweigh the savings made from repaying early.
Glynn comments: “We’re not looking at the car finance yet as it’s not costing us anything on a 0% card. However, we have recently used one of Kim’s Cash Isas to repay the mortgage, so we’re now mortgage free. It has freed up around £450 a month. I don’t want to sell our shares – it’s something I enjoy doing and I have been earning a good dividend.”
Now that they have repaid their mortgage and set up a rainy-day fund, if they were to think again about selling their shares they would have £36,000 left in liquid savings, which I would recommend they invest in two Stocks and Shares Isas in each of their names.
This tax year, you can invest up to £20,000 in a Stocks and Shares Isa, and these products provide the potential for capital growth, savings are easy-access, and any gains made are tax-free.
I suggest Glynn and Kim’s Stocks and Shares Isas are set up on the Wealthtime platform because this company is financially strong, its charges are competitive, it provides access to a wide range of funds, which can be switched free of charge, and it has provided our clients with excellent service in the past.
Moneywise says: This platform is only available to IFAs and similar professionals.
In terms of what the couple should invest in, I’ve analysed their attitude to risk using the FinaMetrica risk-profiling questionnaire to determine the most suitable options.
I’ve risk-profiled Glynn’s investment appetite as ‘moderately adventurous’, while Kim’s is ‘moderately cautious’. Both have a low capacity for investment loss as their investment time horizon and financial circumstances dictate that only minor short-term volatility can be accepted before their standard of living becomes affected.
I therefore recommend that Glynn invests in the Vanguard LifeStrategy 60% Equity fund*, while Kim invests in the Vanguard LifeStrategy 20% Equity fund*.
I have recommended these passive funds as they both provide exposure to a range of asset classes and global market sectors resulting in greater diversification and reduced risk, and they’ve performed well compared to their benchmark.
These funds also reflect the couple’s attitudes to risk as the LifeStrategy 60% fund invests roughly 60% in equities (company shares) and about 40% in fixed income securities (government and corporate bonds), while the LifeStrategy 20% fund invests about 20% in equities and about 80% in fixed income.
For me to implement these investments, I would charge an initial set-up fee of £1,479, plus a 1% ongoing annual management fee. The couple would also incur a 0.3% fee from Wealthtime and a 0.22% fee levied by the fund itself. This means a total ongoing charge of 1.52% on the amount invested, excluding the initial set-up fee.
One other consideration to make is that now that they have repaid their mortgage in full, it has released around £450 a month. This means that jointly, there is a disposable income of around £1,780 a month.
The couple could therefore consider making regular investments into their new Vanguard Isas or making additional contributions to their pension plans. Paying into their pensions is tax-efficient and, given they’re paying tax on the pension income they’ve started taking, this would create a taxneutral position.
Glynn says: “I have looked into the Vanguard funds and if I did go ahead with the investment, I would probably just do it using the TD account I hold my shares in. I am also looking into the Scottish Mortgage investment trust*.”
Moneywise says: If Glynn and Kim wanted to set this up themselves, they could use the Cavendish Online investment platform, Moneywise’s platform recommendation for smaller portfolios of less than £50,000. This charges just 0.20% a year on top of the fund charges, so a total ongoing charge of 0.45% on the amount invested. For more details visit: http://ift.tt/2yAvO4v
Scottish Mortgage investment trust would make a good choice for a long-term investment.
The couple set up wills in 2003, so I’d recommend they review these to ensure they’re up to date. Glynn and Kim don’t, however, have Lasting Power of Attorneys (LPA) in place so I’d advise them to consider setting this up.
Moneywise says: An LPA is a legal document that lets you appoint one or more people to help you make decisions or to make decisions on your behalf if you become unable to do so. There are two types: one for health and welfare and one for property and financial affairs. You can choose one type or both. It costs £82 to register each LPA at the Office of the Public Guardian.
In terms of whether the couple need any insurance products, this is something I would need to look into further if the couple decide to use my lifetime cashflow modelling services as part of their money makeover.
Glynn says: “Our wills were written in 2003 so will need updating. When we do this, we’ll ask about setting up LPAs too.”
On the overall Money Makeover experience, Glynn adds: “It has encouraged us to think about our position and it has flagged up some helpful issues such as updating our wills and setting up LPAs. However, I enjoy looking at shares and investment trusts and doing my own research, so I’m not sure I would ever pay for financial advice.”
*The Vanguard LifeStrategy 60% Equity and Vanguard LifeStrategy 20% Equity fund, as well as the Scottish Mortgage Investment trust, are members of the Moneywise First 50 Funds for beginner investors.
This article was written in response to a reader’s financial situation. If you would like a free money makeover, which will appear in Moneywise, email editorial@moneywise.co.uk or fill in our online Money Makeover form. We will try to arrange a one-to-one meeting for you with an FCA-regulated independent financial adviser in your local area, who will discuss your financial concerns and goals for the future, and draw up a bespoke financial plan for you.
None of the above should be regarded as advice. It is general information based on a financial report conducted by Raj Shah, an independent financial adviser (IFA) and owner of Blue Wealth Capital.
What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Real estate investing 101
2. Frugality and thinking ahead
3. TSP or Roth IRA?
4. “Bang for buck” work clothes?
5. Follow up questions about notes
6. Cheap eggs?
7. Saving for college each month
8. Inexpensive shaving besides safety razors
9. Rejected for a checking account
10. Buying old trading cards
11. Hand soap refill question
12. Cheapest holiday card?
There are days in which the world opens before me like an oyster. Ideas fall from my brain and onto paper like water through a downspout. I have more ideas than I know what to do with. I write and I learn and I write and I have ideas and I lose track of time.
On other days, ideas don’t come. Words don’t come. Everything feels tight and forced and unnatural.
I wish I knew the magic recipe for having more of the former kinds of days than the latter. I know that having a good night of sleep helps, but not too much sleep – my magic number is right around seven hours. I know that coffee and green tea and some protein in my belly, all together, tends to help, too. I also know that some mild deadline stress can help, and getting started early in the morning can help, but sometimes a walk can really help, too. Ambient background noise helps, too, far more than silence.
Still, there is no magic, perfect formula. I can nail all of those things and it still doesn’t happen, or I can do almost none of them and words and ideas still flow. Those things just seem to increase the odds of good outcomes, or maybe they’re just false positives in my head.
On to the questions…
Can you explain how real estate investing works to me, because I don’t understand it unless there’s some kind of bubble going on. From what I can tell, real estate nationwide goes up at a rate a little higher than inflation, about 3% or so. If you have to take out a loan at 4% or 5% to do that, how do you make money?
– Max
I loved this question, Max!
Let’s start with an example. Let’s say you buy a $200,000 property that will go up 3% in value per year. You have enough cash for a 20% down payment, so you take out a 30 year mortgage for $160,000 at 4% to cover the rest. Got it?
So, let’s throw that $160,000 mortgage into a mortgage calculator. You’ll be making a monthly payment of $764 on that mortgage.
Let’s roll four years down the road:
+ You’ve made a total of $36,672 in payments.
+ Your remaining balance on that mortgage is $148,022.
+ The house is now worth $225,102 – it’s grown at 3% a year.
+ You sell the house, repay the mortgage, and you’re left with $40,408. Congratulations, you made $408 in profit!
Doesn’t seem impressive? Well, if you’re an investor, you’re looking for better returns than that. Maybe you can get a mortgage at 3.5% by shopping around. Maybe you can find a market where the value is increasing more than 3% a year (maybe you can speculate on property on the edge of a growing city, for example). Maybe you’re making money on the property while it’s sitting there by renting it out – if it’s farmland on the edge of a city, maybe you’re leasing it to a farmer. Maybe you hold it for longer than that (the returns accelerate if you hold it for a while). All of those things increase your returns.
At the same time, there are costs. You’ll likely have property taxes. You may have maintenance costs or other expenses, too.
The point is this: what you’re doing is taking advantage of the fact that you’re only putting 20% down on the property. The amount you’re actually investing is relatively small compared to the total value of the property.
This is also why your primary home isn’t a great investment. By living there, you cut yourself off from the ability to rent out the property to make more money, which is one of the big avenues for really making money in real estate.
Let’s do one final calculation. Let’s use the exact same scenario above, except that you get a 3.5% loan (reducing your monthly payment to $718 a month) and you find someone to lease the land for $2,000 per year. The land also grows in value at 4%.
Let’s roll four years down the road:
+ You’ve made a total of $34,464 in payments.
+ Your remaining balance on that mortgage is $148,022.
+ The house is now worth $233,972 – it’s grown at 4% a year.
+ You made an additional $8,000 from the leases.
+ You sell the house, repay the mortgage, and you’re left with $59,486. Congratulations, you made $19,486 in profit on a $40,000 investment in just 4 years!
That’s what real estate investment is all about. It’s not a complete picture, but it gives you an idea of what’s going on. People are seeking out those edges – a bit lower mortgage rate, a bit better increase in land value, a bit more annual return on the property when you own it.
I appreciate the concepts of frugality but the problem is that they require you to have money up front or at least most of them do. Buying things in bulk and buying clothes in March for next November requires you to have money now to spend a lot less later but it doesn’t help if you don’t have money now. It’s like frugality for people who aren’t struggling.
– Erica
You’re quite right in identifying that some of the “buy low” frugality strategies aren’t necessarily the first step in the equation for a lot of people. It’s pretty hard to take advantage of those things if you don’t have money now.
That’s why, if you’re in a situation where you don’t have any money to spare, you start small. Very small. You start with things like your dinner table. Tonight, make a really really super cheap dinner. Use whatever you have in your pantry, or if you have to go to the store, get really cheap ingredients. Buy a box of cheap pasta and some tomato sauce and a small jar of Italian seasoning. Make a big batch of spaghetti and eat it with your family. Save the leftovers and eat them for lunch in a day or two.
Right there, you’ve probably reduced the cost of that supper and that lunch by $5.
Instead of buying a cup of coffee somewhere, make some cold brew at home in a pitcher by putting some coffee grounds in a cotton bag (say, half a cup of grounds) and putting that cotton bag in half a gallon of cold water and waiting for a day. Boom – you have ultra-cheap and very good coffee without a coffee maker. Pour yourself a cup of that each morning and microwave it instead of hitting Starbucks. If you want it sweet and creamy, add milk and a bit of sugar and stir. Boom, you’re saving a few bucks.
Do lots of those small little things that save you $1 here and $2 there and $5 there. Then, take that money and use it to buy one of those jumbo packs of toilet paper. Suddenly, you don’t have to buy toilet paper for a long time.
Keep doing that. Take little frugal steps, then translate the small amount you save from that into investing in something a little bigger and a little bigger. What you’ll notice is that your overall grocery bill starts getting smaller and smaller and smaller and smaller.
The key thing here is to make sure you don’t start spending that money elsewhere on unnecessary stuff. If you’re now spending $30 less at the store each week, roll that $120 a month into saving for your next car and make a nice down payment on it, which will get you a better car loan with lower interest and WAY lower payments.
That’s really what it’s all about. You have to do the steps you can do now to fuel some of the other steps later on. You’re not going to ever transform everything overnight.
Start with supper.
New federal employee here. I’m 23 and plan to stick with this job until they eliminate it or I retire. I want to start saving now for retirement so if I need to I can cut back later when I am married and have kids.
My plan is to put away 20% approximately of my income into retirement savings. I have been looking at TSP options and I am wondering what I should be doing. Should I be using it? Roth or Traditional? What about a Roth IRA of my own? It feels like there are infinite options.
– Tommy
Regardless of what other decisions you make, you should be contributing at least 5% to your TSP. The reason for that is employer matching funds. A 5% contribution means that your employer also contributes that same 5% amount as a bonus to you, turning that 5% into 10%. You want to get every dime of that.
So, the question is whether you want to put your money in Traditional TSP (meaning it’s pre-tax) or Roth TSP (meaning it’s post-tax). Pre-tax contributions are ones that reduce your taxes now, but you’ll have to pay income taxes on them with you take the money out in retirement. Post-tax contributions are ones where you pay the taxes now, but you don’t have to pay taxes when you withdraw it in retirement. There are good arguments both ways, but it really comes down to whether taxes will go up in the future and how much you expect to earn now compared to retirement.
If you expect your income level to go up while in the federal employ, meaning you’re going to jump eventually into higher pay grades and slowly move up within your own pay grade, you’re probably better off doing the Roth contributions early on and then switching to Traditional contributions later on, probably at some point when you make a significant pay grade jump. This is because Roth contributions are generally better if you think your tax rate will be lower right now than it will be in retirement, and Traditional is better if you think your tax rate is higher right now than it will be when you’re retired.
Now, how much should you put into TSP versus a Roth IRA? If I were you, I’d follow this basic order. I’d contribute the 5% needed to get full TSP matching, then I would fully fund a Roth IRA, then if I still wanted to contribute more, I’d contribute more to TSP. This is because, with a Roth IRA, you have a lot more control over the investments and you have the option of taking out your contributions early if you so choose without tax penalty.
What is your recommendation for the best “bang for the buck” work clothes? Might seem like a strange question but I am spending more and more time doing outdoor projects. We have lived in the country for years but I mostly just commuted into work and came home. Now I am starting to really appreciate what we have. I want clothes for clearing brush and setting up an outdoor fire pit and tasks like that. I have a couple pairs of jeans from a local farm supply store but they seem to be instantly wearing out. Most of my clothes fall under “business casual.” Also, recommendations online seem to go all over the place.
– Andrew
It depends heavily on your climate. The best answer is going to be different in a warm climate versus a cold one, in a dry climate versus a wet one, and so on.
In general, when I’m working outdoors, I start off wearing layers of clothes, probably more than I expect to need for the weather. I can always remove a layer if I’m hot, or put one back on if I’m cold. In an upper Midwest winter on a cold day when I’m going to be outside for a while, I’ll generally have a short-sleeve tee shirt on top, a long sleeved one on top of that, a hooded sweatshirt, overalls, and a coat on top of that, with a stocking hat and thick gloves. On the bottom, long underwear, then sweatpants, then loose fitting jeans, then overalls. You won’t get cold. In fact, you’ll probably sweat.
What kinds of stuff do I buy? For the outermost layers, I generally trust Carhartt in terms of bang for the buck. I have a green Carhartt winter coat I’ve had for years that I wear all the time outdoors when I’m doing any work or even on non-working casual moments. However, having said that, I generally expect dry conditions. I don’t anticipate being soaked or staying that way for long. If I do, I cover up with an additional layer of something waterproof.
For inner layers, anything works. The inner layers generally don’t receive a ton of wear and tear – the snags and dirt collect on the outer clothing after all.
For pants, which are the clothes that generally receive the most wear and tear when doing lots of outside work, your best routes are cheap denim (which you already have) which can be found very inexpensively but doesn’t last too long, or authentic work pants from somewhere like Duluth Trading Company, which costs significantly more but will last a lot longer. Dickies and LL Bean both also have good reputations.
The thing that wears out clothes the most? Washing. Don’t wash your clothes unless they are genuinely dirty. If you can’t observe that they’re dirty and they smell fine, don’t wash them. I’m completely 100% dead serious about this.
If your area is in a different climate than the Midwest (fairly dry, widely varying temperatures throughout the year with very cold winters and fairly hot summer), I’d suggest talking to people locally who do a lot of outdoor work. They may have different recommendations.
I enjoyed your answer last week about taking notes on thoughtful books. Would you mind filling in some details for me? What exactly do you do with the Post-It notes? Do you stick them right in the book? Do you leave them there? And what about the notes afterward?
– David
So, last week, I described my usual method of digging into a book that I really want to absorb and learn something from. My method is to read such books – ones I’m not reading solely for entertainment, but to grow – slowly and deliberately.
I keep a pack of ordinary Post-It notes nearby and whenever I come across a passage in the book that’s interesting, I write on the Post-It note sideways, with the sticky side either on the left or right. My goal is to be able to stick the note to the page with the non-sticky edge pointing out of the edge of the book so it can easily be found later. I stick this at the top of wherever the section of interest is, and if I have anything extra I want to remember, I jot it down on the Post-It. The size usually doesn’t matter, but I typically use the tiny Post-Its that are about half an inch wide and maybe 3 inches long.
I also stop if I come across terms or concepts I don’t understand and look them up, generally on Wikipedia, until I understand enough that I can keep reasonably moving forward.
When the book is done, I generally let it sit for a few days and then I’ll take a couple of hours and set them aside, maybe in two or three sessions. I go through the book, from Post-It to Post-It, and jot down anything of real importance from those notes. It ends up being a mix of quotes, my own ideas, broader explanations of concepts, and so on.
I find that this process ends up causing most of the content of the book to stick in my head. I remember the book in detail months later, whereas if I just blow through the book, it doesn’t stick like that.
It does take time, but it’s worth it in terms of my personal growth.
Is there any reason not to buy the cheapest eggs at the grocery store? What advantage is there to cage less or omega 3 or organic eggs? Aren’t they just eggs? Can’t get straight answers anywhere.
– Tammi
The number one consideration here is how much value you place on the treatment of the chicken from which the egg was harvested. The absolute best option that you can find in a store in terms of the treatment of the chickens themselves is organic, pasture-raised eggs.
What about the health differences? Omega-3 enriched eggs are simply eggs from chickens that were fed a chicken feed supplemented with extra omega-3 fatty acids, and you’re likely to get more in your own diet by just eating fish and nuts. So, not something to worry about. Egg color is basically meaningless in terms of the nutrition of the egg. Laying hens are rarely given antibiotics to begin with, so antibiotic free doesn’t mean much, either.
In other words, I generally agree with Bon Appetit: “Ideally the best egg is organic, pastured (or free-range), USDA A or AA, stamped with the Certified Humane or Animal Welfare Approved seal.” In general, the other labels and slogans don’t really matter.
What about health, though? It appears as though there’s almost no difference in the nutritional value of eggs, regardless of what features they may have. The differences between eggs mostly boil down to humane chicken treatment.
Your best bet? Try to find someone who sells eggs directly and allows people to check out their operations. That way, you can decide for yourself.
How much do I need to put in a 529 each month to pay for all of college?
– Shelley
I’m going to add a couple of assumptions here, without which it’s impossible to answer this question.
We’re going to assume that this is a monthly amount from birth to age eighteen. We’re also going to assume that this is going into a 529 plan that will have an average annual return of 7% over those years. We’re also going to assume that the cost of a year of education at a good public university will be about $40,000, based on this data, so the total will have to be $160,000.
So, how much would you have to contribute each month to an investment returning 7% per year to have $160,000 at the end of 18 years? My calculation is that you’ll need to put away $371 per month, with those assumptions, to reach your goal.
What if you want to be safe? $400 a month is better. What if you’re thinking private school? Given that private school, on average, costs more than double as much, you should be contributing around $900 a month.
If that number seems painful, that’s because it is, but that’s the reality of the growth of the cost of college education. It’s also why college is becoming less and less of an answer for some students, because there are a lot of students who will never make up that ground if they have to take on that kind of expense via loans.
Want to shave money off of shaving lol but the only ideas I can find are safety razors which make me break out and get lots of nicks. Cheapest way to shave daily without a safety razor?
– Urban
You’re right – the most inexpensive way to shave is the safety razor, but they are really rough on sensitive skin. Even for non-sensitive skin, safety razors take some time to get used to.
The best solution I’ve found is to use your preferred cartridge razor and couple it with a disposable razor “sharpener.” I prefer the RazorPit Slide for this purpose. Basically, once you’re done shaving and have cleaned the blade, you just run it across the RazorPit a time or two and the blades are honed again. Also, I highly recommend shaving in the shower with excess shampoo from the head or excess soap off the washcloth serving to moisten your face and raise your facial hairs for shaving.
Aside from using an actual safety razor, that’s the cheapest solution I’ve found. It causes cartridges to last and last and last. In my experience it quadruples the life of a cartridge or more, which means that it doesn’t take long to pay off that RazorPit investment.
I tried to open a checking account at two different banks and got rejected. My boss wants to direct deposit my checks and doesn’t believe me that I don’t have a checking account. What can I do?
– Maurice
The first thing you should do is figure out why you were turned down, and you find that out by asking them. Go to one of the banks that turned you down and ask to speak to a banking rep, then ask that person why you were declined. There’s likely a specific reason for it. Your job is to fix that reason.
The most common reason for being denied is that there’s something bad on your checking account history. There is a service that provides a shared checking account history between banks called ChexSystems; if your report on there has a red flag due to earlier banking mistakes, other banks won’t let you get an account without someone else on the account.
If that doesn’t sound like your situation, ask for a copy of the reports that they used to deny your account and see if there are errors on that report. If there are, you’ll have to try to get them corrected, likely by contacting whatever institution gave them the false report.
If you’re still stuck, I suggest going to a local credit union, who will likely be more friendly. They may be more willing to let you open an account, and if not, they’re likely to be more helpful in helping you figure out the next steps to take.
In general, is it a good idea to buy old trading cards at a garage sale if you don’t know anything about them? I’ve heard a lot of stories of people buying boxes of Pokemon or Magic cards for a few bucks at a garage sale and flipping them for a nice profit.
– Carl
That kind of flipping can happen – I’ve actually done it myself with some vintage Magic cards – but it’s pretty rare. Most of the time, the cards you find at a garage sale have been stripped of the valuable cards already by the collection’s original owner, leaving you with the dregs.
In general, if you find Magic cards for less than $5 per 1,000 cards, you can more than break even on theme even if there’s nothing of value in there. For other trading cards, you’ll probably not want to pay more than $1 per 1,000 unless you’re certain individual cards are valuable.
If you go in there and plop down $20 for a box of 500 cards without knowing anything, you’re likely to be disappointed unless you’re wanting to actually play a game with the cards.
Are hand soap refills worth it?
– Jenny
In my experience, it’s far cheaper to buy a giant jug of hand soap and refill the bottles at your sink regularly than to keep buying new little bottles of hand soap. It’s not even close.
Another tip I’ve learned from having kids: make your own foam hand soap. My kids use WAAAAAAAAAAY too much gel hand soap, so it’s way cheaper to just make your own foam soap.
Here’s how to do it. Just buy a bottle of foam soap at the store and use it up, then buy normal gel refill. When you need to refill the foam soap, add about half or three quarters of an inch of the gel soap refill to the bottom of the foam soap dispenser, fill it up with water, and then gently swirl it around with the bottom end of the dispenser for 30 seconds or so. Pop on the cap and you’re good to go – foam soap comes right out of the dispenser!
The thing is, this actually stretches out the soap a lot. If they take four big squeezes of the foam, it’s way cheaper than four big squeezes of straight gel and they’re still getting far more soap than they need to actually get clean.
I want to send out a bunch of holiday cards with a picture of our family on it this year but they’re so expensive! What’s a cheaper way of doing this?
– Nancy
The most inexpensive way to do this is to have someone take a nice family picture of you with a good smartphone camera, get a bunch of very inexpensive prints of that picture at your local drugstore (usually around $0.15 a pop or so), and then buy some very inexpensive basic holiday cards (maybe $0.25 each) and just put a print inside of each one. That way, the total cost of each card you send out, including postage, is under $1.
Compare that to the total cost of some custom-made card with your pictures embedded in it and custom printing. It really, really adds up. Getting 50 of those can often break the $100 mark, even before postage.
The best part? If you send a simple print, they can use it however they want. If your aunt wants to stick it in a picture frame somewhere, she certainly can. If your grandpa wants to put it on his refrigerator all year long, he certainly can, without having to look like he’s hanging onto old holiday cards.
Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.
The post Questions About Real Estate, Work Clothes, Shaving, Eggs, and More! appeared first on The Simple Dollar.
I’m from Wisconsin, and I live in Florida now, so I’m quite familiar with the term “snowbird.”
If you’re not, it’s simple: A snowbird is someone who leaves a cold, snowy place — like Wisconsin — for the winter to travel to a warm, sunny place — like Florida.
In Wisconsin, we use the term with affection: “Grandma’s turning into a snowbird!” I’ve learned in Florida, not so much affection. It’s usually more like, “When will these snowbirds learn how to drive?!”
Regardless, the snowbirds make the trek every year, keeping Southern economies alive — and leaving Northern homes vacant for months on end.
Folks in the warm, sunny tourist spots have figured out how to cash in on these recreational migrants. But have you considered making money with that home you leave empty in the frozen North?
If you travel with the seasons each year, you might already be familiar with Airbnb. It’s a peer-to-peer app that connects travelers with people who have spare rooms or other available space.
When you’re a traveler, the app can help you save money on lodging, because you can often find a room through Airbnb cheaper than a hotel.
For hosts, it’s a pretty cool way to earn extra money.
Think about that space you leave behind when you travel every winter. Say you’re out of town from mid-December through mid-March — that’s three months you could potentially earn money for almost no work!
True, unless you live near a ski hill, your area probably isn’t the most popular destination this time of year. That’s why you’re leaving, right? But you can still cash in.
Here are a few ideas:
Bonus: Your house won’t sit empty, so you won’t have to ask your neighbor to stop by to water the plants and run the faucets every week.
If you don’t already have an account, here’s how to get started:
Because you’re going to be out of town, consider hiring someone nearby (a neighbor, friend, family member or assistant) as a point person for your guests.
That will help you ensure good, prompt service if the guests have any concerns. That person can also pop in to clean and check on the space between guests. Offer to pay per hour or a percentage of what you earn.
Or, Airbnb has a feature called co-hosting that can help. Basically, you get to choose an experienced Airbnb host to handle the logistics of getting people into and out of your space and making sure they have a good experience. You can be as involved as you like.
Rates for Airbnb vary based on location, space and time of year. Like any other lodging, the greater the demand in your area, the more you’ll be able to charge for your space.
Browse other Airbnb listings around you to find out how much others charge. You can also check their ratings and reviews to find out what other hosts offer that make guests willing to pay their prices.
Ready to check it out? Here’s the link to sign up with Airbnb.
Dana Sitar (dana@thepennyhoarder.com) is a senior writer/newsletter editor at The Penny Hoarder. Say hi and tell her a good joke on Twitter @danasitar.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.
Earlier this year, I did something I should have done years before – I bought another term life insurance policy to add to the coverage we already had. I’ve had life insurance since I was 25 years old, but our needs have changed and I was starting to feel insecure. I was child-free when I purchased our first policy, after all. Now, more than a decade later, I’m 37 with two young kids and a lot more responsibilities. I earn more money now, too, which means I need a larger policy to replace my income.
Since I used to work in the mortuary business and my husband was a mortician for more than 10 years, I am well aware of what happens when someone dies uninsured or underinsured. I’ve seen the aftermath with my own eyes; the family goes into a panic, not only because they’re grieving for mom or dad, but because they know how perilous their financial situation will soon become.
If I die young, the last thing I want is to pass away knowing I left my husband and children vulnerable.
So, I added another $750,000 in term life insurance coverage to what we already had, and I’ve slept a lot better since. We probably have more coverage than we need now, but I would rather err on the side of caution when it comes to my kids.
The craziest part about buying life insurance is just how easy it’s become. Where you once had to schlep into an insurance office or multiple offices if you wanted multiple quotes, you can now complete the entire process online. The policy I purchased through Haven Life was also the type that doesn’t require a medical exam – a perk you may qualify for if you’re of average weight and in excellent health.
When I bought my new $750,000 term life policy, I applied in the morning and had coverage that afternoon.
But, what’s even crazier is how inexpensive term life insurance coverage is. For a $750,000 policy that will last 20 years, until I’m 57 years old, I pay $27.88 per month.
Before I purchased this term policy, however, I was contacted by an insurance agent who wanted to sell me a different kind of life insurance – whole life. Where term life insurance only lasts for the term you select upfront (for this policy, 20 years), whole life insurance is set up to offer a death benefit no matter how old you become.
I instantly balked at the idea of buying whole life, and for more reasons than one. Here’s why I would never buy whole life insurance, and why term life insurance policies suit our family just fine:
When someone contacted me about buying whole life insurance, I instantly shut them down. I thought it was peculiar they suggested I buy whole life insurance without knowing anything about our finances or the type of coverage we might need anyway, so I didn’t let them bombard me with their entire sales pitch.
So no, I don’t know exactly how much they wanted me to pay for the amount of coverage I wanted – $750,000. But, it’s not that hard to figure it out, either.
State Farm actually has a calculator that provides basic quotes for term life insurance and whole life so you can compare. After entering my birthdate, height, and weight along with my level of health (excellent), their calculator spit out a few numbers. For a 20-year term policy like the one I purchased, they suggested I’d pay $62.40 per month or $717.50 annually. For whole life insurance, on the other hand, my suggested premium was $859.13 per month – or $9,875.00 annually.
Obviously, this is just one estimate from one insurer, and I might pay more or less for whole life insurance based on the provider I select. Still, it just goes to show how much more expensive whole life insurance can be versus term coverage. In this case, it costs more than 10 times as much for the same level of coverage.
One of the biggest selling points of whole life, or permanent life insurance, is that it builds cash value you can borrow against. Many whole life insurance policies also pay dividends, but they aren’t guaranteed. As a result, some companies falsely market whole life insurance policies as a complicated mix of life insurance and investments.
But, it’s hard for me to understand the benefit of overpaying (possibly tenfold) for a life insurance policy just to build a quasi-savings account I can potentially access. It can certainly be more nuanced and complex than that, and I’m aware that whole life insurance can be a smart way for wealthy families to leave tax-free money to their heirs. Still, is there actually a benefit for the average family to pay so much for whole life just to build cash value and potentially score dividends?
Consumer Reports sure doesn’t think so. For a study they conducted, they asked for several life insurance quotes for a 40-year-old Illinois man in excellent health. Through their research – and through quotes offered via AccuQuote – they found that this theoretical guy would need to pay $660 annually for his 30-year term policy for $500,000, and $6,760 annually for whole life insurance with the same level of coverage.
While the “excess premiums” go to guaranteed savings that build cash value over time, Consumer Reports showed how you could accomplish the same thing by buying term life insurance coverage and investing the difference.
“Alternatively, you could buy the 30-year term policy and each year invest the difference between the whole- and term-life premiums in conservative 10-year Treasury notes,” they write. After running the numbers, Consumer Reports found that Treasury notes earning 2.17% would provide a higher return on your money. However, they also note there would be no death benefit once the term policy expired.
The bottom line: I don’t see the point in buying an overpriced life insurance policy that builds cash value when I can buy term insurance then save and invest the difference on my own.
In the example policy I shared above from State Farm, I would save more than $9,000 annually by choosing the available term policy over whole life. Most people would be better off saving and investing that money themselves versus pouring it into a quasi-investment like whole life.
Another purported benefit of whole life insurance is the fact it’s guaranteed to offer a death benefit no matter when you die, unlike a term policy that only pays out if you pass away within the 20- or 30-year time frame. This is a huge boon if you’re worried about not having money for funeral expenses or leaving a legacy behind. Of course, it would be great to pass away at age 90 and know that your policy is still intact.
But I don’t see why I would possibly need life insurance when I’m elderly. The main function of life insurance, as I see it, is to replace my income while I’m young and still working – while my family is depending on me. If I pass away in the next 20 years, I want to know our bills are covered and my two children will have money for college.
What could life insurance possibly cover when I’m 80 or 90 years old? My children will be adults at that point, and we will have been debt-free for decades. We’re also saving a large percentage of our income and saving for the future, so having a life insurance policy in my golden years will likely be overkill.
Another big arguing point for whole life insurance is that it helps you leave behind a legacy for your kids. I won’t argue against that; obviously, any loving parent would want to leave a nest egg for their children if possible. Instead, I would argue that you don’t need whole life insurance to accomplish that.
Instead of pouring money into a whole life insurance policy and hoping it pays off, I would much rather keep more of my money in my own hands. That way, I can continue saving cash, maxing out our retirement accounts, and investing in real estate. Why pay a third party to help you build a legacy when you can use your own money and ingenuity to build one on your own?
As Consumer Reports notes, several factors make it difficult to figure out whether whole life insurance is ideal. For starters, they note, insurers aren’t required to disclose what part of the annual premium goes to pay life insurance and which part builds cash value. As such, it can be difficult to calculate or even surmise any sort of “rate of return.”
Not only that, but the huge commissions agents earn selling whole life serve as ammunition for the hard sell. Brian Fechtel, a financial analyst and life insurance agent, told Consumer Reports that commissions on whole life insurance can be as much as 130% to 150% of the first-year premium, which can easily be $10,000 dollars or more. How can you trust an agent’s advice when your decision to buy – or not buy – could easily mean a difference of thousands of dollars for them? In my opinion, you can’t.
But, that’s not the only reason I would never buy whole life insurance. At the end of the day, I try to keep our lives – and our finances – as simple as possible. For me, that means buying a cheap term life insurance policy and keeping control over as much of our hard-earned cash as we can. If I want cash value I can borrow against, I would rather build it in a savings or investment account with my name on it.
Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.
Related:
Have you ever purchased whole life insurance? Why or why not?
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