First 50 Funds Interview: Peter Ewins, F&C Global Smaller Companies Trust

Fund manager Peter Ewins gives Moneywise’s Helen Knapman the lowdown on F&C Global Smaller Companies Trust – a Moneywise First 50 fund

What is F&C Global Smaller Companies?

The name is the clue – it’s an investment trust that invests in smaller companies listed on the world’s stock markets and aims to provide a one-stop shop for investors. We try to have a diversified portfolio across different markets, sectors and companies so that we deliver a steady return for investors. We also have 47 years of annual dividend growth. This isn’t a high-yielding investment trust but dividend growth is indicative of a healthy portfolio.

Why are your top holdings investments in other funds?

When I took over the investment trust, I looked at the returns we’d been delivering in emerging markets. I found other specialist fund managers in those areas had generated better returns than we had.

So I started to use third party managed funds from around 2006, particularly for Asian funds and I took the same approach in Japan when our in-house Japanese expert left.

Around 21% of the trust is in these funds – of this 21%, 4% is made up of investment trusts with the rest in open-ended funds.

The other 79% of the trust is managed internally and is invested in individual companies in Europe, the UK, and the US. Other global company funds tend only to hold individual companies, so this is a different approach, but it has worked and we’ve done better because of it.

How do you pick the funds and stocks you invest in?

There’s no rocket science to picking funds. I don’t want to be constantly buying and selling funds, but we do change the make-up of funds based on performance and management.

When it comes to company stock picking, three of us pick stocks and we divide the market into sectors. I research financials, engineers, food companies, transport and some other sectors. Over the years, you build up a knowledge base and contacts. We meet a lot of management teams regularly; we interact with analysts; and then we pick a diverse portfolio.

Our style is quality biased – we look to invest where there is a track record of good performance by the company and management team. At the same time, we’re not averse to investing in the cyclical side of the market [buying stocks at the low point in the business cycle and selling at the high point].

We hold around 80 UK companies. We also have a European team with two main idea generators and the same on the US side. We hold about 50 to 60 US companies, while in Europe we’ve got around 40.

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How often do you buy and sell?

Purchases plus sales tend to represent about 60% of the size of the fund at the end of the year. That implies around 30% in and 30% out, which is about a three-and-a-half year holding period.

What have you recently bought and sold?

We’ve introduced two new Asian smaller companies funds, one managed by Pinebridge and the other by HSBC. We exited Advance Frontier Markets investment trust as it was moving towards investing in individual companies rather than other funds.

In the UK, we’ve bought Greencore – a convenience food producer for the likes of Marks and Spencer. It has a good track record of growing its business and serving customers well. It made a big acquisition in the US in 2016, which depressed the share price for a while [making it a good opportunity to buy]. We’ve also dropped some companies that have been profitable over the years, but that are now fully valued. These include engineering firms such as Hill & Smith and Bodycote.

In the US, we’ve bought Monro – a tyre, brakes, and motor repair business. It’s had a challenging year, but the valuation is relatively attractive. In Europe, we’ve bought Fluidra – a Spanish fi rm supplying swimming pools with equipment. The market is picking up and it has announced a merger with a US player. In terms of selling, we’ve sold Interpump – an Italian-based engineering company and we’ve bailed out of CTT – a Portuguese postal operator.

f-c-small-table-2.PNG

What’s been your best and worst investment decision?

Long-term, the best decision has been British property company CLS Holdings, which has been a multibagger [an investment that has risen multiple times the initial investment value]. It’s made sensible acquisitions over the years and has made us a lot of money.

The best recent stock we’ve had is [tonic water company] Fever-Tree – we’ve held it since 2014, but we’ve just sold out of it. The job it’s done in the UK is fantastic, but growth is bound to slow and there have been talks about [rival] Schweppes pushing back. We’ve lost money in a few oil stocks over the years. Bowleven – a Cameroonian gas and oil company – was one of the worst. We thought the process for monetising oil and gas would be easier. We want companies that have existing production.

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What’s your top tip for a beginner investor?

Build a diversified portfolio with funds run by teams with a track record of deliverability and competitive fees. If you’re a beginner, build it up over time – regular saving cuts the risk of buying at the top of the market.

To view Moneywise’s First 50 Funds for beginners, visit www.moneywise. co.uk/fi rst-50-funds.

The man behind the fund

Peter Ewins has been with F&C since 1996 and became the lead manager of F&C Global Smaller Companies in August 2005. Prior to this he worked for Municipal Mutual Insurance and Commercial Union Insurance, as well as ESN Pension Management. Peter has a BA (Hons) in Economics & Statistics from the University of Exeter and is a member of the CFA Society of the UK. 

F&C Global Smaller Companies key stats

Launched: 1889
Fund size: £849.4 million
Number of holdings: Around 200(i)
Yield: 0.9%
Ongoing charges figure (OCF): 0.84%

f-c-small-table-1.PNG

Source: F&C Global Smaller Companies’ December 2017 factsheet (i) Source: Fandc.com, 3 January 2018 

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Why We Don’t Accept Certain Credit Cards

In today’s technology-driven world, there are more options than ever to make a payment, especially for small businesses. For instance, with Square, businesses can allow customers to swipe a card on an iPad or scan their Mobile Wallet on their phone — all for about $50 in equipment!

With these advances, many more people are choosing credit over cash. In fact, there were 33.8 billion credit card payments in the United States worth $3.16 trillion in 2015 — an increase of $6.9 billion since 2012, according to The Federal Reserve Payments Study 2016. On the whole, the study found that credit card payments grew at an annual rate of 8% by number from 2012 to 2015.

However, while credit cards as a whole may be more widely accepted by businesses large and small, not all credit cards are accepted everywhere. Cards like American Express, Discover, and MasterCard may have some limitations.

Why is that, and what can you do as a consumer?

Understanding the credit card networks

There are four major credit card networks within the United States — American Express, Discover, MasterCard, and Visa. Out of the four, Visa is by far the largest, both in the U.S. and globally. Around the world, Visa has 44 million merchant locations (as of Sept. 30, 2016) and 3.1 billion Visa cards issued (as of Dec. 31, 2016), according to their most recent Facts & Figures Report.

In addition to these networks, there are 10 major credit card issuers in the U.S. — American Express, Bank of America, Barclays, Capital One, Citigroup, Discover, JPMorgan, Synchrony, U.S. Bancorp, and Wells Fargo. As of 2014, four of the 10 — Citigroup, JPMorgan, Bank of America, and Capital One — had more than half (57%) of the market share.

Understanding the merchant fees

As we can see above, there are literally billions of credit cards available from all four of the major credit card networks. So, if the top 10 banks control 87.5% of the credit card circulation (as of 2014), why aren’t they accepted everywhere?

The answer: Merchant fees.

What are merchant fees?

Merchant fees is the catch-all term for all of the fees associated with setting up a merchant account so you can accept credit cards, as well as the fees to process those transactions. In general, businesses will face a group of fees to set up and maintain their account as well as pay a fee with each credit card transaction. Some of these costs include a one-time setup fee, monthly account fees, annual account fees, transactional fees, interchange fees, monthly minimum fees, statement fees, network fees, and more.

For most businesses, the setup and maintenance fees are a worthwhile investment — once you create your merchant account, you’re able to accept any form of credit cards. The reason businesses might not accept all credit cards is the transactional fees associated with each card.

How do merchant fees work?

To process a credit card payment, the merchant must pay a fee to three different “middlemen” — the credit card network (Visa, Discover, MasterCard, or American Express), the credit card’s issuing bank (Capital One, JPMorgan, Bank of America, etc.) and the acquiring bank (your banking institution). These fees can range from 1-3%, but for some cards, like American Express, they’re as high as 3.5% per transaction.

As you can see, these fees could start to add up. For instance, let’s say a small business does $100,000 in credit card sales a month:

• If their sales only come from Visa cards that have 1.15% transactional fee, the business will pay $1,150 a month in credit card fees.
• If 50% of their sales come from 1.15% Visa cards and 50% from 3.5% American Express cards, the business will pay $2,325 a month in credit card fees.

That’s a difference of $14,100 a year in credit card fees alone!

Who pays the merchant fees?

Retailers pay all fees associated with setting up their accounts and processing the transactions. However, in 2012, a court settlement made it possible for retailers to pass along transaction fees to consumers in the form of a credit card surcharge. This was repealed and thrown out in 2016, though, putting the fee burden back on the businesses.

Additionally, unlike debit cards, credit cards have no fee caps. As part of the Durbin Amendment included in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, certain debit cards have their interchange fees capped at 21 cents plus 0.05% of the transaction value.

Because no similar sort of legislation exists for credit cards, the card networks and banks can set their own fee rates that retailers have to pay if they want to accept that credit card.

Why do some cards charge higher fees?

It comes down to their business model — do they want to generate most of their income from transactional fees or interest payments? In the case of American Express, their business model is based around generating income from swipe fees, not interest. Many of their most notable cards, such as , charge no interest whatsoever. Because it’s a charge card rather than a credit card, customers must pay their balance off in full each month or face late fees. The card also charges a $550 annual fee.

Alternatives to not-widely-accepted credit cards

Credit cards that aren’t widely accepted, like American Express and Discover, can still be used to make purchases at hundreds of thousands of retailers around the world. However, if you prefer to stick with your Amex or Discover card, you’ll need to have a backup plan in place for when it isn’t accepted.

1. Ask if there’s a spend minimum.

As mentioned above, once a retailer sets up their merchant account, they’re able to accept any of the credit cards. In order to accept a card with high transactional fees, though, they may require you to spend a minimum amount to help offset those costs. If you’d really prefer to use a certain card that isn’t widely accepted, don’t hesitate to ask about the spend minimum first.

2. Carry a backup card, just in case.

Keeping a backup credit card in your wallet is a good idea for those “just in case” moments where your primary card isn’t accepted. For a backup card, it’s a good idea to make it a Visa credit card since they’re accepted at the most locations worldwide.

Additionally, why not make it one of the best rewards credit cards so you can earn points, miles, cash back, and other perks as well? The Chase Sapphire Preferred® Card earns 2x points on travel and restaurants worldwide and 1X points on other purchases. If you want an option without an annual fee, the Chase Freedom® earns 5% cash back on bonus categories (up to $1,500 in combined purchases), and unlimited 1% cash back on other purchases.

3. Keep a debit card handy.

If you’ll recall the Durbin Amendment mentioned above, debit cards have caps on the amount that can be charged on transactional fees. This means that merchants are more likely to accept debit cards over credit cards. As with certain credit cards, though, there may be a spend minimum for debit purchases since there are some small fees.

4. Pay in cold, hard cash.

While we may be using plastic more often, cash is still king when it comes to making payments. If you’d prefer not to carry extra cards, make sure you have cash on hand at all times if your primary credit card is one that isn’t widely accepted.

The bottom line

There’s a lot more that goes into accepting payment for a purchase than just saying “Cash or credit?” Because of varying merchant fees, retailers may choose to accept or not accept certain cards, which means you may not be able to use your preferred method of payment at every business. If your preferred credit card is one that’s not widely accepted, like American Express or Discover, make sure to have a backup plan in place.

The post Why We Don’t Accept Certain Credit Cards appeared first on The Simple Dollar.

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Industry Insider: Winners and losers one year on from Article 50

It is now almost one year since the UK government triggered Article 50 – the clause in the Lisbon Treaty that officially kick-started the UK’s departure from the European Union.

But since the Prime Minister pulled the trigger on 29 March 2017 to 1 February 2018, equity markets across the board – including Britain – continued climbing.

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This will have come as a surprise to those who worried that Brexit-related uncertainty would cause choppy UK market returns and even a prolonged correction – myself included.

As always though, in terms of stock markets there have been winners and losers. Globally-speaking, emerging market and Asia Pacific equities achieved the strongest returns over the period*. This is likely the result of Chinese tech giants such as Alibaba, Baidu and Tencent significantly contributing to the broader region’s market returns.

• ‘UK equities are still deeply unfashionable but that creates investment opportunities’

In contrast, despite hitting record highs over the past year, the US’s S&P 500 and London’s FTSE 100 stock market indices have not quite kept pace with their emerging market peers. In the case of the UK stock market, in particular, a lot of these returns have been driven by companies that reside further down the market-cap spectrum (often with more exposure to the domestic UK economy). While the FTSE 100 returned 5.2%, the FTSE 250 and FTSE Small Cap indices are up 9.2% and 11.7% respectively*.

Due to the stellar gains made in the UK small- and midcap space, the IA UK Smaller Companies sector has been the second-best performer in the Investment Association, with an average total return in sterling terms of 19.5%*.

ind-ins-march-18.PNG

Within this sector, the best performer has been Jupiter UK Smaller Companies fund, which is up 39.5%*. This is followed by Old Mutual UK Smaller Companies Focus and TB Amati UK Smaller Companies, which have returned 30.1% and 27.4% respectively*. In contrast, MI Downing UK Micro-Cap Growth and Schroder UK Dynamic Smaller Companies are the only funds in the sector to have posted single-digit returns with respective gains of 3.6% and 9.4%*.

• Industry Insider: Cautious optimism is the catchphrase in 2018

Meanwhile, the IA UK All Companies sector, which is home to UK equity growth funds that invest across the cap spectrum, is in 13th place for its average one-year total return of 8.2%*. Within this, the top performers have been small-cap biased Elite Webb Capital Smaller Companies Income & Growth and MI Chelverton UK Equity Growth, both of which have returns of more than 30%.

The IA UK Equity Income sector fared slightly worse than its growth counterpart with an average total return of 5.8%. Winners over the past year have been Man GLG UK Income (17.4%*) and MI Chelverton UK Equity Income (16.4%*), a member of Moneywise’s First 50 Funds, while LF Woodford Equity Income (also a First 50 Fund) and Rathbone Blue Chip Income and Growth have brought up the rear.

For UK investors who have held bonds rather than equities since Article 50 was triggered, the year has been less fruitful. The IA UK Gilts sector made a loss on average, down 1%*. Only one fund, iShares Over 15 Years Gilts Index, made it in to positive territory with a tiny gain of 0.08%*.

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Elsewhere in the bond market, the popular IA Sterling Strategic Bond sector has returned 3.5%* on average. While Tideway GBP Hybrid capital and GAM Star Credit Opportunities returned more than 10%, four funds have lost small amounts, with Virgin Income down 2.6%*.

It is surprising that UK-facing smaller companies have been the key drivers behind the UK equity market’s strong performance. Nobody knows what impact Brexit will have but, with only until March 2019 to strike a deal with the EU, investors must tread carefully and be well-diversified.

Darius McDermott is managing director at Chelsea Financial Services and FundCalibre

* Total returns in sterling from 29 March 2017 to 1 February 2018. Source: FE Analytics.

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Mr McDermott’s views are his own and do not constitute financial advice. 

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RESET: Tumultuous Trading Underway After Historic 1,175 Point 'Speed Bump'

The Dow Jones industrial average opened another 500 points lower Tuesday morning, but then quickly bounced back, erasing that additional 500 point loss and climbing into positive terroritory at the start of the day.

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Here the Tax Reform Bonuses 10 Companies Are Offering (Including Twinkies)

Last week, Hostess Brands became the latest company to announce bonuses for its employees in response to the new tax law.

But Hostess is the first to offer free Twinkies.

That’s right, on top of a cash bonus, the company will give each of its employees a free supply of its products for a whole year.

Can you imagine? All the Ho Hos and Ding Dongs you can eat! It’s a good thing I don’t work for Hostess, because I have basically zero self control when it comes to snacks.

Hostess Brands is just one of many companies that has announced bonuses in the past month. Some aren’t just giving out bonuses but are raising wages, as well.

The reason for this sudden influx of raises and bonuses is being largely attributed to the recent tax overhaul. Under the new tax bill, corporate tax rate will drop from 35% to 21%.

Here’s a sample of some of the companies that are getting a tax cut and sharing a portion in the form of bonuses, pay raises, and other benefits.

These Companies are Giving Out Tax Reform Bonuses

Hostess

We already mentioned the free sugar rush Hostess Brands is handing out, but employees will also receive a cash bonus and a 401(k) contribution.

• One-time $750 cash bonuses
  
• $500 in 401(k) contributions
  
• A year’s worth of free products, provided in a multi-pack once a week

Walmart

The retail giant announced it will give out bonuses, raise entry level pay and enhance benefits.

• Bonuses up to $1,000, depending on length of employment
  
• Minimum wage raised from $10 an hour to $11 an hour for all hourly employees
  
• 10 weeks of full-pay maternity leave, up from eight weeks
  
• Financial assistance for employees looking to adopt a child

This news came on the same day as the sudden closings of 63 Sam’s Club stores across the nation.

Wells Fargo

Wells Fargo & Co. chose to raise minimum wage, a change that will go into effect in March. The company also increased its charitable donations for the year.

• Minimum wage raised to $15 an hour, up from $13.50
  
• Plans to spend $400 million in 2018 on philanthropic spending, up 40% from 2017

Fifth Third Bancorp

Fifth Third Bancorp was another company that chose to not only give out one-time bonuses but also bump up its minimum wage.

• Minimum wage raised to $15 an hour, affecting nearly 3,000 employees
  
• $1,000 one-time bonuses distributed to more than 13,500 employees

Bank of America

Another bank, another bonus. Roughly 145,000 Bank of America employees received a bonus in response to the new tax reform.  

• $1,000 one-time bonus for employees earning under $150,000

U.S. Bancorp

Are you seeing a trend here? U.S. Bancorp announced that roughly 60,000 of its employees would receive a one-time bonus and decided to raise entry-level pay.

• One-time $1,000 bonuses
  
• Minimum wage raised to $15 an hour for all hourly employees
  
• $150 million donation the U.S. Bank Foundation

The bank also announced plans to improve its employee health coverage options, but this won’t be in effect until the 2019 enrollment period.

PNC Financial

This is the last bank on the list, I promise.

About 90% of the financial services employees saw a cash bonus in the first quarter of 2018, coming out to around 47,500 employees.

• One-time bonus of $1,000
  
• Raised minimum wage to $15 an hour
  
• $200 million contribution to the PNC Foundation.

Disney

The company behind the happiest place on earth also joined the post-tax reform bonus party, dishing out bonuses to over 125,000 employees.

• One-time $1,000 cash bonus for all part-time and full-time, non-executive employees
  
• $50 million investment in a college tuition program that benefits hourly employees

Starbucks

Not only is Starbucks raising wages for its 150,000 employees, it is also giving out bonuses.

But these bonuses are a little bit different than those of other companies. Rather than giving out one-time cash bonuses, Starbucks employees will receive stock bonuses.

• Stock grants starting at $500 for hourly retail workers
  
• Stock grants of $2,000 for store managers
  
• Raising wages (will vary by region)

The Seattle-based company plans to spend over $250 million on the raised wages.

AT&T

AT&T didn’t decide to raise wages in response to the tax reform, but the company did decide to hand out bonuses to 200,000 of its employees.

• One-time cash bonus of $1,000 to union represented, non-management employees

This is just a sample of major U.S. companies that have responded to the new tax bill with raised wages or bonuses.

Other major corporations include American Airlines, Comcast, Fiat Chrysler, Verizon and more. You can check out a more extensive list here.

Kaitlyn Blount is a junior staff writer at The Penny Hoarder.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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Trust the Process

I’m going to start off in a strange place for an article on The Simple Dollar. I’m going to talk about professional basketball. Please, bear with me; there’s a very key point to where I’m going with this. (Also, if you’re an NBA fan, be aware that I’m simplifying a few aspects of this story to keep it from turning into many, many pages of text.)

In 2013, the Philadelphia 76ers, an NBA team, hired Sam Hinkie to be their general manager. A general manager’s job is to decide what players are going to play on the team. They decide what trades to make, what players coming out of college to add to the team, what players to sign to contracts, and so on.

Theoretically, the goal of a general manager is to use those moves to put the best team on the floor this year or, maybe, try to get players that will be good in a year or two. They want fans to come to the arena and have fun watching their team win, and they want to sell some jerseys of their best players.

Hinkie and the 76ers decided to take a very different approach, one that was informally dubbed “the process.” Hinkie believed that you needed to have a very good foundation in order to win a championship, and if you weren’t close to winning a championship, you should have a laser focus on building that foundation at all costs.

For Hinkie, a very good foundation consisted of a roster full of very solid young players from which one or two true superstars would emerge, surrounded by a bunch of skilled supporting players (I’m summarizing a number of principles all together in one sentence here, but that’s essentially “the process” in a nutshell.) He took the idea that “a bird in the hand is worth two in the bush” to an extreme level in terms of getting those young players. He realized that many teams would rather have a decent player now than the rights to pick a potentially great player out of college two or three years from now.

So, he proceeded to trade away everything he possibly could for those “two years from now” or “three years from now” assets.

What this meant in practice was that in 2013 and 2014 and 2015, the Philadelphia 76ers were historically bad. They stunk up the place. In Hinkie’s third season, they won only 10 out of 82 games, which was very close to the worst record in NBA history. They had traded away almost every decent player they possibly could for more and more “two years from now” and “three years from now” assets and, for the time being, made their team up of extremely marginal players.

Halfway through that third season, the owners gave up patience. What kind of general manager spends three years “building” a team that could only win ten games? The owners brought in someone to “oversee” Hinkie, and at the end of the season, he was basically pushed out the door. He resigned, but it was pretty clearly no longer his team to run.

But a funny thing happened along the way. All of those “two years from now” and “three years from now” assets started to pay off in bunches. Right now, the Philadelphia 76ers are an incredibly young and incredibly exciting team. They have a team absolutely loaded to the brim with young, intriguing players, all of which were Hinkie’s “two years from now” or “three years from now” assets.

As I write this, the team has won half of their games on the back of a roster that’s almost entirely made up of incredibly talented first year and second year players that are just learning how to play the NBA style game. If the playoffs started today, they’d make it. A year or two from now, barring a big rash of catastrophic injuries or inept trades, this team will be an absolute monster.

The entire focus of the team in 2013 and 2014 and 2015 was to build the best team for 2018 and 2019 and 2020 and beyond. I can’t say if it worked yet or not, but the 2018 team is absurdly talented, young, exciting, and very fun to watch.

When you watch a 76ers game right now, you’ll hear the crowd sometimes break out in a chant of “trust the Process” – here’s an example. The poster child of “the Process,” an extremely talented player named Joel Embiid (don’t worry, if you haven’t heard of him, you will unless he gets hurt), sometimes leads the crowd in the chant, waving at them and encouraging the chants.

Trust. The. Process

Right now, the 76ers can legitimately look at themselves as contenders. They’re probably not going to win a championship this year, but they will definitely be a team that no one wants to face in the playoffs because of their giant flashes of brilliance. They are good enough to beat anybody right now and, with some experience, they’ll know how to turn it on to win a lot of games. I would not bet against an NBA championship coming to Philadelphia in the next three years or so.

But what would that team look like without “the Process”? In all honesty, they’d probably be a mediocre, average team, one without a big hope for the future. They would have been far better in 2013 and 2014 and 2015, but today? I think almost anyone would choose “the Process” 76ers today and for the next decade or so.

So let’s bring this back home to me and you.

When I hit my financial rock bottom several years ago, I looked around my life and I saw two choices.

I could either keep bubbling along as I was, barely keeping my head above water, slowly paying down debt, having a life with a lot of little treats in it but never making those big life steps that I wanted to make. It would have been a pleasant life, year in and year out, but it wasn’t the life I wanted. It was a life without any of the big dreams, a life that was always tinged with stress about money, a life where I feared the prospect of a job loss.

My other option, the one I took, was one where I said, “All right, I’m spending a lot of money on stuff that doesn’t really mean anything to me. It doesn’t build the life I want. It just makes today a little more pleasant in a forgettable way.”

I took that second option. My wife and I dove hard into frugality. We started cooking exclusively at our apartment. We started buying everything store brand. We started intentionally seeking out free activities and entertainment. We started using the library for movies and books. We cut out a lot of bills and negotiated a lot of other ones. I could go on and on here.

In the short term, our lives lost a lot of immediate pleasures. We simply didn’t have as many daily “treats” in our life, and many of the ones that stayed around changed a little.

I like to think of this as being almost exactly like “the process” of the 76ers. Those first few lean years during our financial turnaround was a lot like 2013 and 2014 and 2015 for the 76ers. We decided to focus entirely on the future and, for a little while, we chose a pretty mediocre life.

Not only did we still have the stress of living paycheck to paycheck and facing a lot of debt, we also didn’t have the treats that we were using to make life comfortable. It wasn’t very fun – or, more accurately, it was about as fun as going to a 2014 Philadelphia 76ers game.

The thing is, we trusted the process. We knew that as time went on, our daily stress about money would fade as we paid down debt. We knew that as time went on, we’d discover lots of fulfilling things that didn’t cost an arm and a leg. We knew that as time went on, we’d start having the financial assets in place to handle the big things we wanted, like three children and a family home, a goal we both desired.

We trusted the process.

Flash forward to today and we have a fully paid for family home, zero debt, strong retirement savings, a very healthy emergency fund, and money put aside to buy our next cycle of vehicles and for our children’s college educations, too. We have enough budget flexibility to do a lot of things that we enjoy doing without sacrificing an inch of that security or undoing any of that progress toward a fairly early and nicely secure retirement for us and college for our kids.

We are the 76ers right now. We have a ton of great pieces for the future. We don’t have to worry about each day, as we don’t have any debt and lots of good things in our life. We might not be championship caliber yet, but we’re heading for something like it via early retirement and a nice step forward into the future for our kids.

“The process” translates beautifully to personal finance, in other words.

All you have to do is stop for a moment, examine what you’re doing on a daily basis, and ask yourself what the payoff is for each of those moves.

Is it something that’s going to help you to have a great day today but have a cost further down the road? Then you should think very carefully about whether you should be doing it. If you’re spending money on a splurge, is it really, really worth it?

Or, is it something that’s not going to make today any better (or maybe even make it a bit tougher) but will really pay off down the road? In that case, you should strongly consider the idea that this is the best option. Are you contributing money to your retirement savings? Are you paying down debt?

Start looking at all of your actions that way. Is this something that makes today better at the cost of tomorrow? Or is this something that makes tomorrow better at the cost of today?

“The process” is about choosing that second option most of the time, far more than you’re probably doing right now.

The thing is, for a while under “the process,” your day-to-day life might not be incredibly fun. You were used to going to an average NBA game, but now you’re going to a 2014 Philadelphia 76ers game – a much less fun experience.

Sure, it’s an okay life, but it’s not up to the standards of the recent past. You’re still watching an NBA team, but now it’s a team capable of winning only 10 games rather than 35.

The thing is, your choices are based on the process, and you trust the process. You can go to bed each and every night trusting the process and knowing that your life is headed on a better trajectory than it would have been had you just kept doing the same old thing.

If you go to bed each night with that idea in your head and you get up each morning with that idea in your heart, you find that it’s actually pretty refreshing and inspiring. You’re driven to find value in things like preparing your own meals and learning how to cook. You start really looking in earnest into things like what’s available at the library.

I found myself excited to take on tasks like renegotiating bills because I knew that it was building to something.

The key thing, though, is that you have to give the process time to work. You can’t expect to commit to that kind of forward thinking and then assume that everything will be peachy tomorrow.

If you’re evaluating your choices through the lens of what’s going to be better three years or five years from now, you can’t be frustrated about the lack of results a month from now. You have to truly trust the process. You have to wait for the results.

The 76ers started going down this road in 2013, and it wasn’t until 2017 that you could really see dividends from it.

It took about two years for really clear benefits from our own process start to emerge. I started to feel less worried about money at the six month mark or so, and then at the two year mark it was clear that we were now basically debt free and bringing in far more than we earned.

However, it took about five years in total for it to really, really pay off. We paid off our house in full a little over five years after we started “the process” living in a tiny apartment. In that time, we went from tons of consumer debt, no home, and very little retirement savings to a very, very healthy financial foundation.

All along the way, we trusted the process, and that’s what you’ve got to do, too. A healthy financial foundation isn’t built in a month or two.

Furthermore, you need to seek out financial routines that cut a lot of spending, but they need to be sustainable. If you’re feeling miserable, then you’ve made a cut too far and you need to restore it, or else you’ll make a rash move and kill the process before it can ever pay off.

The process isn’t about tomorrow, or next week, or next month, or even next year. It’s about the rest of your life, and it starts today.

It starts with a willingness to understand that an average day isn’t filled with perks and treats. An average day is a very low cost day. Perks and treats should wait for special occasions, with a little bit of anticipation to heighten the pleasure.

It continues with an understanding that there is a lot of contentment, pleasure, and joy to be mined from those ordinary days. There are a lot of things in your life that you find yourself overlooking if you steadily commit to a nonstop flow of treats and perks. Eating nothing but takeout denies you the pleasure of a simple meal you made for yourself on your own time and your own terms. Having 500 channels and feeling like there’s nothing on denies you the pleasure of finding a single show on DVD at the library and watching it from beginning to end.

It also continues with understanding that a lot of moves just don’t pay off today. Time you invest in building your professional skills won’t pay off today or tomorrow, but in a year or two, they’ll pay off with a good chance at a better job and a higher salary. The same is true for time and effort invested in building a strong professional and personal network. It’s also present when you’re looking at paying off debt, or putting money aside in an emergency fund – those things aren’t likely to change your life today or tomorrow or next week, but there will come a day when they’re life changing.

That’s the process.

Inspiration is a funny thing. I’ve watched basketball for many years – it’s a sport I enjoy watching occasionally because it flows so well when it’s played at a high level – but I never really found inspiration in it for how to live my life.

Now, when I watch a 76ers game and I see Joel Embiid on the court waving his hands in the air and getting the crowd to chant “TRUST THE PROCESS,” I do feel inspired. I’ve seen The Process work with the 76ers, and I’ve seen a similar process work in my own life. I know very well it can work in your life, too.

All you have to do is trust the process.

The post Trust the Process appeared first on The Simple Dollar.

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Questions About HSAs, Withholdings, E-Books, Soup Containers, and More!

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. Funds for HSA and Roth
2. Going outdoors in unsafe areas
3. Money conversations failing badly
4. Auto insurance rate question
5. Benefit to filing taxes early?
6. Living in “food co-op land”
7. Impulse buying Kindle books
8. Estimating taxes for upcoming year
9. Evaluating community while moving
10. Choosing among retirement savings options
11. Storing soups in the freezer
12. Staying focused on personal finance?

I watched a portion of the Super Bowl last night and I couldn’t help but notice a giant theme running through the commercials. It seemed like every company was more interested in sharing some kind of socially positive theme rather than talk about their actual product. Budweiser. Dodge. T-Mobile. Lots and lots and lots of others.

You can see that as a good thing, I suppose, but what I actually saw was companies trying to associate a good feeling you might get from a positive social message to their product.

Just a gentle reminder: don’t buy a product or think more of a particular company because they had a socially conscious message last night. It’s just a marketing tactic, like any other marketing tactic. Buy products because they meet an actual need you have and, maybe, because the business has actual business practices that match something you care about. The ads mean next to nothing.

Q1: Funds for HSA and Roth

Midway last year I inquired about using my HSA as a retirement vehicle. Now that I’ve wiped away all my debt, I’m in the position to max out both a Roth IRA and HSA. Doing so leaves me with less “unrestricted” savings, but it boosts my future potential and reduces short-term risk for health costs. To the point – I’d like to keep $3-6K in my HSA in minimal risk funds and treat any amount over that as retirement (preferably $3-4K mid-risk and the rest med/high-risk). I decided to go with HealthEquity (thanks for your input) – considering the current market, what funds do you suggest I pick for short, mid, and long-term? My 401(k) Retirement funds are currently in a Target fund with Vanguard, so I’m swaying towards that for long-term.
– David

Assuming you’re healthy and have no major familial health factors, I would do as you’re doing and treat literally anything over $5K or so as essentially “retirement” savings in the HSA.

HealthChoice offers a number of Vanguard fund options as described in this leaflet. Unless you are really into managing the fund balancing yourself, I’d choose a Vanguard Target Retirement fund that’s about 5 years past your expected retirement date and just sit on it.

If you do like balancing yourself, it really depends on your risk tolerance. Mine is high, mostly because I honestly don’t look at retirement fund balances more than about once a year. Vanguard Total Stock Market is a good choice that I use.

Q2: Going outdoors in unsafe areas

You guys make a lot of posts about going out into nature as it is a free and fulfilling way to spend your time. But what advice do you guys have for women living in high crime areas, where going out for a jog is a risk, and people can get their shoes taken on a nature walk? I live in Southern Africa, Namibia specifically, and crime, especially violent crime is high. Doing the outdoor things I am used to doing in the states is a struggle.
– Agetha

I love going on outdoor walks when the weather cooperates. It provides a great sense of inner peace and a calming of the mind that helps me to think more clearly, plus it provides some good exercise. I’m fortunate to live in a place where everyone in my family can walk safely, however.

In your situation, here are a few things I would try.

One, look for someone you can go on a walk with. Who can you go with that would at least provide a group setting or could provide some safety? Do you have any trusted friends or relatives who could form a walking group with you? Groups are safer than individual people.

Two, look for high-traffic areas where lots of people go, such as a high traffic public park in a city, and stick at least somewhat near other people. Are there any places near you that get a lot of walking traffic? Stick to those places because it’s much harder to pull off a violent act in a crowd.

Three, walk in the daytime where it is harder to be approached without notice. Again, if you keep to places that are at least somewhat near other people, it vastly increases their ability to see you and that makes attacks more risky.

While those solutions aren’t perfect, they’re definitely a start.

Q3: Money conversations failing badly

I’m 28 and a software engineer. My wife is 27 and a dental hygienist. Over the last year I have realized that we spend more than we earn and our collective credit card debt is over $24K. We need to turn things around or we can never afford a child or a home. Whenever I bring this up my wife screams and says that I’m “trying to kill our fun years” and make her life “hell.” I’m not sure what to do.
– Kevin

Start with goals, not with dollars and cents.

Talk about where you each want to be in five years or ten years. Just ask her to sketch out where SHE wants the two of you to be, on her own, and make your own description of what you want for your life together in five or ten years. Do not talk about money in that picture. Then sit down and merge those pictures. Look for what they have in common, because those are five to ten year goals you agree on.

From there, talk about how to get to those goals. How do we get from here to there as painlessly as possible, starting right away? Putting off getting started means putting off that better life, and it probably also means that the life isn’t really desired. If it’s not desired, then what is desired?

Basically, nudge her down the path of thinking that comes to the realization that reckless spending stands in the way of bigger things in life. It will be painful, but that realization needs to occur, and it needs to occur inside of her. You can’t force it on her.

Q4: Auto insurance rate question

Can you please explain why car insurance raises rate to over $300 on a stop sign citation. The neighborhood was pretty quiet with no cars around and I just did not see the Stop sign at a pretty slow speed. It seems the insurance company need to rate speeders vs slow drivers differently. Are you able to explain how insurance company give different rate to individuals on cars or home based on location, record or incorrect record, etc?
– Meghan

Insurance companies use large pools of information to figure out how likely you are to be in an accident. They may have data that says, for example, someone who gets a stop sign citation is 58% more likely to be in an accident. That’s just one example – they may have data that says that a person is 23% more likely to get into an accident if they drive a red car, or 12% less likely if they’re driving a Honda compared to an average car. They have tons and tons of data like that about all kinds of groups. Because of that, they raise rates on you because you’re now in that “stop sign citation” group.

They really don’t care about the specifics of your situation, frankly, because they don’t have time to be. They can’t investigate the specifics of every ticket. Instead, they assume that the ticket was issued by an average cop in an average situation, like all of the other tickets in their big pool of information.

This is called actuarial science, a long established sub-field of mathematics, and it sets your insurance rates based on their model of how risky you are. By getting a stop sign citation, you raised your risk inside of their model and thus they’re charging more. It doesn’t matter whether or not you really are risky, but that your behavior that they can observe identifies you as being more risky than they used to think, thus the higher rates.

You can always shop around for better rates, but you’ll always be pushed through whatever models each company has.

Q5: Benefit to filing taxes early?

Is it better to file taxes when you have all of your papers or should you wait until you have everything in hand first?
– Derek

It’s better to prepare them now so that you can discover whether or not there are any missing documents or other issues sooner rather than later. There’s nothing worse than having April 15 roll around to discover that you’re missing a key document.

Actually filing makes little difference if you’re confident that your return is correct and complete. If you’re expecting a return, filing earlier will get you that return earlier.

The key thing is to make sure you’re submitting a complete and accurate return. Getting your papers together and actually going through that process sooner rather than later is a wise move. The actual date on which you file is less important, though I’d still give it a bit of breathing room in any case.

Q6: Living in “food co-op land”

My name is Jennifer, and I live in food co-op land.

A few months ago I got a great job and found a nice apartment about 4 miles from work that actually has a bus that goes back and forth between the two. Great! I bought a bus pass and everything’s good. I don’t need a car because I’m right in the middle of a bunch of services, too.

The only problem is that there are no cheap grocery stores near me. All of them are expensive. I am near two food co-ops and [a fairly high end grocery store]. All other grocers are at least two miles away and involve multiple bus switches to get there.

How do I make this work financially?
– Jennifer

Make it work financially by utilizing discount grocery stores when you can and buying tons of food there.

So, in your daily routine, use the food co-ops for fresh produce, especially for sales, and things you need in an urgent pinch.

Meanwhile, figure out multiple weeks of meal plans at once. Make a list of all of the nonperishables for all of them and all of the fresh produce for the next week.

Go grocery shopping with that list using the aid of a friend, and buy that friend lunch for the help. They can do their grocery shopping when you do, after lunch so neither one of you is hungry. Lunch costs you $20 or so but it’s also a social occasion, plus then you’re full at the grocery store and don’t buy impulsively.

That would be my approach to your situation. I’d just tap friends on occasion for big grocery trips at a cheaper store and buy them lunch for the help.

Q7: Impulse buying Kindle books

My biggest bugaboo when it comes to spending is that I impulse buy a lot of Kindle books. I am such an avid reader and being able to get a new book with a click is so tempting and easy that I do it all the time. I spent $280 last month on Kindle books! How can I stop?
– Aerie

Delete your credit card info from Amazon. Turn off one click ordering. That’s the start. Make it so that ordering a book from Amazon isn’t incredibly easy.

Then, read through what you have. I can’t imagine you’ve read through all of the Kindle books you have if you buy them at that rate. Just stop buying for a while. You theoretically have a ton of interesting books before you. Read them.

If you find you must read something new, get it from the library. Stop by and see if they have it and put in a request for it if they don’t.

You’ve got to break this cycle, and the biggest step you can take is just getting your credit card info out of there.

Q8: Estimating taxes for upcoming year

We almost have our 2017 tax filing done and I’m starting to look forward. I would like to calculate our estimated 2018 taxes to make sure our withholding is accurate. (My husband and I file jointly and will have 3 dependents in 2018. Our combined income of $175,000 makes the Form W-4 a little difficult to use. And the draft 2018 W-4 Form isn’t complete!) I haven’t been able to find a great resource on the internet that shows how to estimate our 2018 taxes. What is the best process to use to make sure our withholdings match our tax liability at the end of the year? Can you help?
– Nina

This isn’t a resource that is in wide availability yet. The best calculator I’ve found so far that incorporates the 2018 tax changes is this one which is somewhat bare bones.

In general, I don’t expect withholdings to change much for anyone, as although taxes are going down, the dollar value of withholdings is decreasing in parallel. There may be a few rare cases of people on the edge where there is a more “optimum” withholding, but the withholding rates are pretty straightforward.

Q9: Evaluating community while moving

My wife and I are about to move for career reasons. We’ve been evaluating houses and neighborhoods via Zillow and Google and other tools, but next week we’re going to actually be in the area looking at a bunch of houses.

We know what we want in a house itself, but what do we look for in a neighborhood? You mentioned in an earlier article that you chose your neighborhood because of the large number of families with young children. How did you identify that?
– Adam

The key, I think, is in knowing what kind of neighborhood you want to live in. My wife and I intentionally valued areas where there were many families nearby with younger children, so when we were looking at homes, we also glanced at yards up and down the block to see how many had play equipment back there, especially newer-looking play equipment. That’s a pretty sure sign of young children in the area.

You can find things like demographic splits and political stances pretty easily online. If you’re checking for religion, see what houses of worship are in the area. We wanted to live in a small town, but ideally one with more ethnic and religious diversity in town and in bordering towns than one might normally find in a small town in Iowa, so we used demographic tools to help us find that. (There’s a certain limit to how much diversity one might find in small town Iowa, but we found an area where there’s enough diversity that our children see different races, cultures, and religions as completely normal, which is what we wanted.)

What you should do is, on your way to the city where you intend to move, figure out what you both really want from a neighborhood. Then, use online tools to find out what you can (city/town/community sites, etc.), then keep your eyes open around the neighborhood when you visit, not just the house you’re looking at. Do you see play equipment in backyards? Do you see signs of sports fandom in front yards? Are there flyers anywhere for community events? Do you see lots of bumper stickers on cars? A house hunt isn’t just about the house itself.

Q10: Choosing among retirement savings options

My husband just started his new job as an assistant professor at a state university in Texas. In the next few weeks he has to choose whether to enroll in the Teacher Retirement System of Texas (TRS) or the Optional Retirement Program (ORP). The TRS is “a traditional defined benefit state retirement program in which investment risks are generally absorbed by the state,” aka a pension system. The ORP is “an individualized defined contribution plan in which each participant selects from a variety of investments offered by several companies (authorized by the employing institution) through annuity contracts or mutual fund investments” aka a 403B plan. The choice of one over the other is a “One-time Irrevocable Decision.” No pressure! Both plans offer similar employer matching (6.5%). These websites provide a summary of the two options: page one and page two.

Which would your recommend we choose? I am inclined towards the ORP. We established years ago when we were still graduate students that our savings plan is to invest in low-fee index funds. However my husband ran the calculations on predicted benefits and calculated that we would get more out of the TRS. He assumed the current statutory retirement formula would remain (years of service x average of highest five annual salaries x 2.3) and that we would get 5%-9.5% nominal returns in the stock market. The yearly retirement income assuming 4% withdrawal in ORP is lower than TRS in almost all cases, especially if my husband stays in his job for 10+ years, which is possible with a professor position. But what happens if the pension becomes insolvent? I personally have much more faith in the stock market than in a state government.

In case it matters, here are some stats on us: I’m 29, he’s 35. We don’t yet have kids but plan on having at least two. We’d like to pay for their college educations at the best university they get into. We are also putting money aside for our parents if they ever need it. We are no longer eligible for Roth IRAs because of our income. We plan on contributing at least enough into my 401K and his retirement plan to get our company match. We also have a steadily growing taxable investment account, own a condo with a 15 year mortgage that we bought 1 year ago, and may purchase a house in the next few years. I would like to retire in about 20 years. My husband would like for it to be an option.
– Denise

Assuming no insolvency, the ORP is a higher risk but higher reward proposition than the TRS. If you have a long time before retirement, it’s probably the better option because your contributions will grow more in there. That would probably change if you were close to retirement age and making that choice.

Insolvency is a tricky factor. I think if TRS goes insolvent, there are going to be bigger problems going on, ones that will probably adversely affect ORP returns, too. I don’t think fears of insolvency should sway this decision.

The younger a person is, the more I would lean toward ORP. If you contribute at a high rate, it should lead effectively toward an early retirement, but that’s a personal call for you.

Q11: Storing soups in the freezer

What is your recommended way of storing soups in the freezer? Ziploc freezer bags or containers?
– Drew

If you’re just dabbling, Ziploc quart freezer bags are fine. The only problem is that you can’t really microwave soup right in the bag. You have to thaw it a bit, then move the soup to another container, which can be messy. Plus, the bags have limited reuse – freezer bags only last a few times in my experience. I tend to rinse them, invert them, and run them through the dishwasher on the high rack. (Freezer Ziploc bags cost as much as $0.40 a pop – for the ten seconds it takes to turn them inside out, rinse them, and run them through the dishwasher, it’s worth it.)

If you do it a lot, get some containers that are both freezer and microwave safe that you can reuse many times. I really like these containers for that dual purpose.

The best way to label any kind of container in the freezer is with masking tape and a marker. Masking tape stays on the item in the freezer and easily peels off later without any permanent markings on the container, so you can label it again in the near future.

Q12: Staying focused on personal finance?

How do you stay so focused on personal finance? You’ve been writing like daily for 11 years?!
– Dana

There are a number of things that I do to keep up interest.

The big one is searching for new angles. I still find things regularly that surprise me. I like to try them out and share them if there’s value.

I’m also finding a lot of value in areas that are overlapping with personal finance, like personal development and growth in other areas of life. They overlap a lot, and many of the general principles apply really well.

I also recognize that new people are coming to the site all the time, so I sometimes dive back in and find a really good article I wrote several years ago and write a new version reflecting on what’s still true and what I’ve learned in the interim.

Reader mailbag questions and conversations with people keep me thinking as well. I get more questions in a week than I can use in a mailbag. Sometimes they wind up being full posts on their own. Other ones wind up being just food for thought.

In a given week, I usually have more ideas for posts than I actually end up using.

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 HSAs, Withholdings, E-Books, Soup Containers, and More! appeared first on The Simple Dollar.

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Reset: Historic 1,175 Point Market Sell-Off Could Be Just a 'Speed Bump'

Stock markets around the world were taking a beating today after Monday's dramatic 1,175 point sell-off on Wall Street, but experts are saying it's all just part of an ordinary "reset."

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Spread the Love With These 11 Low-Cost Valentine’s Day Gifts

Whether you think Valentine’s Day is the greatest day of the year or something dreamed up by greeting card companies, it’s a difficult holiday to ignore.

Heart-shaped balloons and little candies wrapped in red foil are everywhere, reminding you that the (perhaps manufactured) national day of romance is just around the corner.

If you’re looking for affordable gift ideas for your sweetheart, your kid or even your favorite pet, this guide can help. Just remember: No chocolate for the pooches.

Valentine Gifts for the Special People in Your Life

The best presents come from your heart not your wallet, so don’t feel like you have to take out a small loan to afford an expensive gift for your valentine.

Try these ideas instead.

• Buy a budget-friendly bottle of wine and some nice cheese or chocolate, then have a picnic on your living room floor or (weather permitting) a nearby park.

• Create a mixtape or hand-curated Spotify playlist to woo your honey with your favorite sentimental songs.

• Skip the pricy jewelry and use the money to pay your sweetie’s debt or build up their savings account.

• Check out the dollar store to pick up some scented candles, build a grooming kit or snag a magical coffee mug.

• Spell out a sweet or saucy message using confectionary hearts.

• Before buying a bouquet of flowers, check to see if you’re eligible for membership club discounts or cash back on rewards credit card.  

• Visit the local thrift store or consignment shop for fabulous gently-worn clothing finds.

• If you’re handy with a needle and thread, cross-stitch something sentimental or clever.

• See what you’ve got lying around the house that can be upcycled into something new.

• Give your besties paper fortune cookies with personalized fortunes or bite-sized s’more kits for Galentine’s Day.

• Spoil yourself on Valentine’s Day with a selection of DIY spa treatments you can do right at home.

Lisa McGreevy is a staff writer at The Penny Hoarder. Keep the balloons — give her the foil-wrapped chocolate.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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Credit Report vs. Credit File: What’s the Difference?

While it may sound like semantics, the terms credit report and credit file describe two very different things in the world of consumer credit.

You don’t necessarily need to understand the difference between the two to earn good credit — but, on the other hand, knowledge is power. The more you understand about your credit (what’s in your credit reports, how they are scored), the better equipped you’ll be to achieve and maintain great credit — which can pay you financial dividends for decades.

What’s a credit file? (Because it’s not a credit report.)

The term credit file describes the raw, unsorted data a credit bureau or credit reporting agency (CRA) collects regarding you and your credit management history. It contains the complete set of information that a CRA has collected about you.

The information found in credit files is collected from thousands of data furnishers (companies who report information to the CRAs) and a number of other sources as well.

All of the data collected by each CRA is kept in an electronic pool of sorts. These pools are referred to as credit file databases.

Credit file databases are massive and contain the information pertaining to you alongside the information of some 220+ million other consumers as well. The amount of information in any of the CRA’s credit file databases is truly mind boggling.

Credit files typically include personal information such as your name, aliases, past and present addresses, your Social Security number, your date of birth, your employer, and more. Credit files can also include information pertaining to your credit management history, including collection records, public records, your payment history on a variety of accounts, a list of credit inquiries, and so on.

What’s a credit report? (Because it’s not a credit file.)

If a credit file can be described as a pool, then you can think of your credit report as your information fished out of that pool with a net.

One of the ways the CRAs make money is by selling your information to lenders and other companies that are legally permitted to access the data. They sell your credit report, not your credit file.

So your credit report is a one-time extraction of the information contained in their credit file database, often delivered to lenders with a credit score.

You can also purchase or request a free copy of your credit report as well, but this type of report is formally referred to as a consumer disclosure.

Key Differences Between a Credit File and Credit Report

The data about you in a credit file is updated frequently. The information may change, for example, whenever a creditor updates your account management history each month. It can also change anytime you apply for or open a new account, or anytime a new collection account is reported to a credit reporting agency against you.

By contrast, the information in your credit report will only change whenever a new copy of the report is requested and delivered.

It’s also important to understand that your credit scores are not a part of the credit file. Instead, a credit score is generated whenever a lender requests a copy of your credit report and orders a score. You may also personally be able to purchase or access your credit score whenever you request a copy of your consumer disclosure.

However, any credit score is only an evaluation of the information on your credit report at that specific moment in time. Your score is not stored in any credit file and your score is likely to be different the next time it is requested.

Now, don’t get all twisted up about these different terms. Yes, you can still ask for your credit file and everyone will know what you’re actually asking for. But if you were talking to a room full of bankers, then you’d need to use the proper terminology.

Related Articles: 

• Listen to What Your Credit Score Is Trying to Tell You
• How to Raise Your Credit Score
• Hard Inquiries and Soft Pulls on Your Credit Report: What’s the Difference?

John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.

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Here’s How to Make Money off of 2018’s Unexpected Travel Trends

Even if you’re not into traveling and the whole #Wanderlust thing, understanding 2018’s travel predictions could help you bank extra money this new year.

How? If you keep your finger to the traveler’s pulse, you could cash out by listing your space — even your couch — on Airbnb.

The space-sharing platform recently released its 2018 Travel Trend Forecast, based on booking data for the first half of the new year.

Let’s take a look at what it found for the U.S. — then let’s cash out.

Airbnb’s 2018 Travel Trends Just Might Surprise You

Paris, London, Tokyo… Indianapolis?

No, the most popular cities on Airbnb likely won’t shock you. All the international staples made the list.

The three U.S. cities to make the top 10 include:

• New York City

• Orlando

• Miami

But some of Airbnb’s travel trends for 2018 are pretty unexpected. These are cities where 2018 bookings have already doubled or tripled compared to 2017.

Trending U.S. destinations that made the list include:

• Indianapolis, Indiana, with a 256% booking increase

• Columbus, Ohio, with a 254% increase

• Minneapolis, Minnesota, with a 193% increase

“In the United States, midwestern cities… are seeing some of the strongest growth,” Airbnb observes, “driven by booming downtown districts humming with new restaurants, nightlife and local arts.”

The platform also predicts towns that offer nature lodging or that are close to national parks (think: Whitefish, Montana) will also see a spike.

In fact, trending homes include nature lodges, ryokans (traditional Japanese inns), yurts and RV/camper vans.

If you’re interested to see how much your space — even couch — could make on Airbnb per month, check out the site’s estimator.

Enter your location, the number of guests and whether you’re listing an entire place or a shared room.

In some places, Airbnb income could pay rent!

Carson Kohler (@CarsonKohler) is a junior writer at The Penny Hoarder. She’s already booked Airbnbs in Chattanooga, Tennessee, and Austin, Texas, for her 2018 adventures.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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