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الثلاثاء، 10 ديسمبر 2019

Distinguishing Between Needs and Wants Using the 80/20 Rule

The other day, I was talking with a friend about how people often have way more than they need for modern life. I pulled out the example of transportation and borrowed an idea from Jacob Lund Fisker. I simply rattled off a list of possible ways to get to the places you might want to go, starting with “basically free” and working up to “really expensive” (and many of these rankings are arguable and depend on where you live, but you’ll get the idea):

1. Walk
2. Bum rides from friends
3. Ride a scooter
4. Ride a skateboard
5. Use rollerblades
6. Ride a bike
7. Use a motorized pay-as-you-go scooter
8. Use public transportation
9. Drive a junker car
10. Use Uber/Lyft
11. Drive a later model, used, low-end car
12. Drive a used mid-level car
13. Lease a car
14. Drive a new low-end car
15. Take an economy plane trip
16. Rent a car
17. Drive a new mid-level car
18. Take a business class plane trip
19. Drive a used luxury car
20. Take a first-class plane trip
21. Drive a new luxury car
22. Take a private jet

You can definitely fill in even more than that, and you can move around some of the items depending on your situation and where you live and what your specific needs are, but you get the idea.

Then, I asked him to name the ten things he does the most with transportation. What are the ten most vital and frequent things he does when he leaves his property? He goes to work. He gets groceries. He takes his kid to school. He goes to the library. He visits a couple of friends. He goes to events around town. I don’t remember the rest, but most of them – and all of the frequent ones – were within five to ten miles of his house.

So, I asked him which of those he could do on foot? Which ones could he do on a bike? Which ones could he take the bus for? This quickly whittled his list down to things he could do once every couple of weeks. Then I said, “Couldn’t you just use Lyft for some of those? And rent a car for the remaining ones?”

This is actually the 80/20 rule (also known as the Pareto principle) at work. The Pareto principle states that for many events, roughly 80% of the effects come from 20% of the causes. In this example, walking and bicycling takes care of 80% (or more) of the things he currently does in his car. Of the remaining 20%, adding public transportation takes care of at least 80% of those remaining tasks. Almost everything my friend might want to do is actually handled by using his feet, a bike, or the bus, and what few things remain are handled by Lyft maybe once or twice a month and renting a car once every few months.

Here’s the thing, though: he drives a luxury car around, and a pretty new one at that.

Now, the point of all of this wasn’t to accuse him of wasting all of his money on this luxury car when there was a much cheaper way to live. Rather, the point was to demonstrate how big the gap was between addressing his actual needs and addressing his wants.

His needs would be addressed with a good pair of shoes, a decent bike, a bus pass, a Lyft once a month, and a car rental every few months for a few days. That would get him virtually everywhere he might want to go. If you add up the cost of those, it is a fraction of the money he’s putting into the car he drives, when you count the cost of the car, the fuel, the maintenance, the registration, and the insurance.

There’s a small amount he’s spending that covers what he needs from transportation, and then a large amount that’s covering what he wants. He wants a luxury car. He wants to not have to think about a bus schedule. He wants to not have to walk or bike roughly half a mile to the grocery store.

Again, this isn’t to criticize my friend at all. Rather, the point of this is to illustrate how wide the gap actually is between the money spent on what he actually needs and what he’s actually spending — the difference is what he’s spending on his wants.

Think about it yourself. Make a list of the ten things you do most often when you leave your property. Do you go to work? Do you go to the post office? The grocery store? How many of those things could you do relatively easily on foot with a backpack? How about on a bike with saddlebags? How about using the bus or the subway while carrying a backpack?

(I find that listing the ten things I most value out of a major item or out of a collection covers the 80/20 rule quite well. It identifies the small portion of that thing that I actually need or very highly value, and the 80% that is just a want.)

If you can do almost all of them without a luxury car, you don’t need a luxury car. If you can do almost all of them without a car, you don’t need a car. You might want a car because of various reasons, but if you can meet your needs without a car, you don’t need a car.

You can do this same exact kind of thinking with virtually everything you own.

What about your house? What are the things you actually need from the place where you live? What are the ten things you do most commonly at your home? What’s the most minimal home in which you could do those things? Could you do them in a one-bedroom apartment? How about an efficiency or studio apartment? Could you do them in a tent or a camper? Again, you’re simply trying to distinguish what it is that you need and what it is that you want.

If you walk through every area of your life like this — your clothes, your various collections, and so on — you begin to see that a lot of the things you own and the subscriptions you have are just wants, not needs. 20% of the things you own make up 80% of what’s important that you get out of them, and thus 80% of your spending on the things in your life gives you only 20% of the value. That first 20% covers your core needs — everything else is your wants.

So what can you do about this?

Recognize that this is a spectrum.

The first thing that people will point out — my friend did — is that when you make a list like the one above, you have a handful that address needs that are really inexpensive, then the higher levels address gradually less important wants until you get to the level you’re sitting at.

Let’s look at that transportation list again:

Each step on that list gives you some more options for transportation and, in some cases, more comfort at a higher price. While there’s clearly a point on there that indicates what you must have to cover your needs, the ones right after that cover a lot of deep wants. In this case, they usually help free up time — if you jump from “public transportation” to “junk car,” you’re saving some time, for example, at a jump in cost.

As you keep going down, each switch usually adds convenience or time or luxury at a gradually higher expense until you reach a point that you chose.

This isn’t black and white. It’s a spectrum. Each step means you spend a little more to have some more wants covered, and as you go up the spectrum, those wants often become a little more frivolous. Wanting to be able to just drive to the store is a more vital want to most people than having a leather seat with a built-in seat warmer.

However, your life is made up of tons of these kinds of spectrums.

Almost everything you do in life is made up of these kinds of spectrums. You are not looking at this spectrum in a bubble.

You have a spectrum that covers where you live. You have a spectrum of job options. You have a spectrum of entertainment options, where there are free options on one end and very expensive options on the other. You have a spectrum for clothing. You have a spectrum for, well, laundry detergent.

On all of those spectra, there’s a low level that covers what you need and a higher level that summarizes what you actually do and use. The difference between those two are wants.

In my experience, most of our expenses in life are spent on wants rather than needs. We spend a lot of money not on what our basic needs are, but on convenience and luxury, and that phenomenon repeats itself over and over.

Take laundry detergent, for example. You have a number of options there.

1. Wash without any kind of soap or detergent.
2. Wash with homemade laundry soap.
3. Wash with store brand laundry soap or detergent.
4. Wash with name brand laundry soap or detergent. (A lot of people are here, which is 4x to 5x more expensive than homemade soap and probably 2x more expensive than store brand.)
5. Hire a laundry service.

There are definitely more levels in there, but you get the idea.

Level 2 probably covers the “need” for most people. Homemade laundry soap consists of equal amounts of soap flakes, borax, and washing soda, and you only need a tablespoon of that mix to wash a load of laundry. It does a good job and costs four or five cents a load.

However, a lot of people jump in at level 4. They buy Tide, which is fine, but it costs four or five times as much as homemade laundry soap (level 2) and probably twice as much as store brand soap or detergent (level 3). 20% of your expense covers the need (the cost of homemade soap) and 80% of your expense covers the want (the cost gap between homemade soap and Tide).

This exact phenomenon repeats itself over and over again. It’s not always a perfect 80/20 split, but you’ll find again and again that the level of expense that covers your “need” is often just a fraction of what you’re actually spending, and the gap there is your “want.”

This is a very useful way to start looking at all of your expenses. What 20% of that expense is taking care of 80% of what I want out of it? You don’t have to immediately switch to that 20%, but it is incredibly valuable to think about it in those terms.

The secret is that over time, we convince ourselves that many “wants” are actually “needs.”

Here’s the real trick that’s going on in this picture. Over time, when you settle into a particular level on a spectrum, it becomes a normal routine. Some level on that spectrum actually is a “need” in your life (or a very core “want”), but you’re at a point on that spectrum that’s way down on the “frivolous want” end of it. However, you inherently know that there’s a need somewhere on that spectrum, so you count the spot you chose on that spectrum as a need.

Think of it with that laundry detergent example above. You need something to wash your clothes so that they don’t smell and look horrendous and have some semblance of a lifespan. Great. However, if you get in a routine of always buying Tide with Febreze, you begin to see Tide with Febreze as fulfilling a “need” because, well, you do need some kind of laundry soap. In truth, Tide with Febreze is about 80% want, as noted above, but because there is some “need” on that spectrum, we define it as a “need.”

I need laundry soap. Tide with Febreze fills that need. So I define Tide with Febreze as a need, even though 80% of that expense is actually fulfilling a want.

This is why thinking about the idea of each thing you buy being on a spectrum is so important for frugality. Just because you are buying something that addresses a need in your life does not mean that a large portion of that expense is not actually a want. It is so easy to just file that expense away as wholly need-based when that’s frequently not the whole story.

A lot of things that we view as needs actually do have a need at their core, but in truth, they’re more about fulfilling a want.

Once you see how much of your spending is really addressing “wants” rather than “needs,” you can start making a lot of meaningful cuts.

Personally, I came to this perspective gradually and didn’t see it in exactly this way at first. Rather, I just saw that there were things I was spending money on that weren’t really necessary to maintain the life I wanted to live.

Take that laundry detergent spectrum above. I used to be a Tide buyer. Now, most of the time, I use homemade detergent, sometimes coupled with store brand detergent if it’s got some sort of special promotion going on. Why? I realized that laundry detergent was something in my life that really only had to fulfill a need. The extra “want” — the nice aromas, lower static cling, mild fabric softening and reliable name brand that Tide offers — wasn’t something that really provided much value in my life. I want clean clothes, period. Anything else provides almost no value to me, so why spend money on it?

Basically, look at that gap between “need” and “want” on each spending spectrum that you notice and ask yourself what those “wants” are really adding to your life. On that laundry detergent spectrum, what are you actually getting out of each level above “need?” Are those extra levels really worth it for you? What value are they adding to your life?

I don’t break things down to a long listed spectrum for each thing in my life, and you shouldn’t either. Rather, once the idea is natural for you, you can apply this kind of thinking quickly to almost every expense in life. It boils down to instinctively figuring out what you actually need from that particular item and how valuable the various levels of “want” on top of that need actually are. These judgments come pretty quickly.

Those cuts are about cutting away at the lesser wants so that you have room for things that you deeply want, that come much closer to needs.

This is really where the magic is in this story. When you see a situation where there isn’t much justification to spend above your “need” level or to spend at the high level of “want” that you’re currently spending and you make a cutback, that doesn’t mean a reduction in your quality of life. Rather, it means an improvement in your quality of life.

Why? That money you’re saving from making a low impact move on one spectrum means that you can make a much higher impact move on another spectrum. Because you cut back on a really minor want in one area means you have the money to cover a need or a really important want in another area.

Because I cut back on laundry detergent and 50 other things that don’t really matter to me, cutting all of them back to basically just covering the level of “need” from that item, I had the money to build an emergency fund and start chopping down debt. When debts disappeared, I had even more money each month because monthly debt bills were vanishing. I had the money to spend on things that I deeply wanted because I wasn’t spending money on things that I didn’t really want.

So, what can we do?

Get into the routine of “spectrum thinking” about all of the things that you spend money on. When you grab laundry detergent at the store, think about that choice on a spectrum for a moment. You don’t have to bury your entire shopping trip in that kind of thinking, but give that kind of thought to a few items each time you go shopping. What do I need out of this item? What here can fulfill just that need? How much of this expense is a want? Is that desire really an important desire in my life?

When you realize that you’re spending extra on a want but that want seems pretty unimportant compared to other things in your life, you’ve probably found a great place to cut back a little in your life. Is the difference between the name brand item and the store brand item really important to your life? If not, buy the store brand item. Is the difference between a new car and a used, late model covering a very important want in your life? If not, buy the late model. Is having a car at all fulfilling a major want in your life if there’s a bus stop right near your door? If not, sell off that car.

To help with those choices, consider areas of your life where you’re struggling to cover needs and important wants. Do you have an emergency fund? Are you putting money aside for major bills that you know are coming up? Are you saving a little for retirement? Is not having those things introducing worry and mild stress into your life?

Dialing things back on the various expenses in your life where the “want” portion of the expense is fairly frivolous can help you easily cover this other area of life where you’re barely meeting or not even meeting an actual “need” or the “want” is really important. If you can’t hold down an emergency fund because the mortgage is too high, maybe it’s time to look at a smaller home, or if your rent is crushing you, maybe you can look for somewhere else to live for now. If you can’t make any progress on your mountain of debt because of the car payments, maybe it’s time to look at the gap between “wants” and “needs” in your transportation. If your entire budget is just too tight, look at the “wants” and “needs” for many of your smaller purchases.

Over time, you can find a balance where you’re taking care of the needs and most important wants in all areas of your life, while even having a bit of extra room for some of your favorite frivolous wants, too.

Good luck.

The post Distinguishing Between Needs and Wants Using the 80/20 Rule appeared first on The Simple Dollar.

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My money lessons: Raising piglets and reinvesting the sausage profits

Tamara Hawkesford is a 43-year-old analyst from Peterborough. She talks to Moneywise about her hobby raising pigs, making sausages and investing the profits into a Stocks & Shares Isa

Tamara Hawkesford Tue, 12/10/2019 - 12:50

My full-time job is working for Anglian Water. I’ve been with them for 15 years. Prior to moving up to Peterborough and starting this job I travelled a lot. After working for a seismic surveying company and travelling around the world doing all sorts of interesting jobs in interesting countries, I decided to settle down.

One of the big reasons for moving away from London and settling down was the better lifestyle. That’s what led me into what we have been doing over the past couple of years – breeding and raising pigs.

I know lots of people who do that now, they have moved out of London, got a few chickens and that sort of thing.

It started off with a friend of mine who has some Tamworth pigs in the village. He had to go for a knee operation and needed help looking after his animals. Another couple and I said that we’d help out. He couldn’t really afford to pay us, but in the end he gave us a pig each to say thank you. We were hooked!

I’m not actually rearing any of the pigs myself at the moment because my job has taken off and I’m just really busy. But I’m still involved in the sausages.

Basically, I’ve still got a few “in the piggy bank” with my friend, the ones that were piglets when we were doing the rearing. Every two months or so I take two pigs to slaughter and we make them into sausages. We mostly sell them to friends and family, but every time I work in a new Anglian Water office, I get new customers too!

I decided that although I’m not making a huge profit on this, I don’t want the money just to go into the bank to pay a bill, or go on a Friday evening in the pub. I want to see a little bit of benefit from the project. So I decided to invest 25p a pack of sausages into a Stocks & Shares Isa.

The reason I do the sausages is that I like to know exactly where my meat is coming from. I like to know that these animals are high welfare. I want to know what they’re eating themselves, and I also want to know that when they go to slaughter that it’s as humane as it can be.

Anglian Water call it “source to tap” – but I like to know “field to fork” where my food is coming from.

I knew that I wanted the same thing from my investments, that I didn’t want to just go to my bank and put 25p aside because that means nothing, it’s then just a small savings account. I wanted to find something that I could be a little bit more involved with.

I’d looked at things like BrewDog and Serious Pig, thinking that sounds good, these are food outlets that I’m interested in. But most of them require quite big investments. And then I stumbled across an investment app called Wombat, where you only need to invest £10 to get started.

The truth is I’m not the biggest investor in the world, but I’m slowly building it up. What I like about Wombat is I can click on my phone and

I can go and see how my investments are doing - good or bad. And I can channel my money into ‘themes’ I’m interested in.

I’ve invested in a couple of the safer themes, like gold. I’ve also invested in social media, which is coming along quite nicely. The one I’m a bit gutted about is the foodie one, which has dropped off since I started. But it’s a long-term thing.

Two of my friends have signed up too, as a result. It’s become something we talk about, whereas I wouldn’t really discuss how well my bank account was doing! I work in analytics so I find the app interesting because it has charts and analytical tools. I like to see how things are performing.

Anglian Water used to be listed on the stock market and I would follow the share price in the papers and check how it was doing but really those are just numbers on a page.

What is nice about investing through an app with visual graphics and information is that it’s much more engaging and easier to understand.

As told to Edmund Greaves

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20 years of investing in the 21st century

I’m not sure where the past 20 years have gone. But here we are, nearing the end of the second decade of the millennium. And in the investment world it’s certainly been eventful.

Darius McDermott Tue, 12/10/2019 - 12:04

It started with the tech bubble bursting and the euro coming into circulation. We have had two bear markets, two bull markets and the global financial crisis. Bitcoin became all the rage; China became a major market; and the UK voted for Brexit. The list goes on.

I thought it might be interesting to take a look at what the best – and worst – performing investments have been over the period. Some may surprise you.

Best performing funds and trusts

Over the past 20 years, the best funds have been those investing in Chinese equities. The average fund in this sector is up 504%. Next are those investing in European smaller companies (up 352%), followed by our own UK smaller companies (330%).

The best performing open-ended fund over all is Marlborough Special Situations (up 1059%), which has been managed by Giles Hargreaves for the entire period. He has turned £1,000 into £11,591.

Rather scarily, the average Japanese equity fund has returned 2% less than the average cash fund. It just goes to show that a prolonged deflationary environment can really stifle investment.

The best investment trusts in contrast have been those investing in Asian smaller companies(up 1482%). Trusts investing in property securities were second (1467%) and those investing in biotech and healthcare third (931%). At the other end of the scale, the average venture capital trust (VCT) has lost 60%.

The top performing investment trust has been TR Property Investment Trust (up 1670%). Run by Marcus Phayre-Mudge since 2004, it has turned £1,000 into £17,745.

Each decade in more detail

Looking in more detail at each of the two decades also makes for interesting reading. The first was dominated by technology stocks tanking (the average fund fell 57%), commodities booming (gold rose 274% and oil was up 219%), and emerging markets heading off to the races (the average emerging markets fund rose 240%).

In contrast, the UK stock market was up a mere 19%, while the US stock market fell 12%. And if you ever needed proof that bonds have enjoyed a prolonged bull market, look no further: the best performing bond sector was UK index-linked gilts (boring, safe government bonds), where the average fund returned 62%.

The second decade saw a reversal of fortunes. The commodities super-cycle came to an abrupt end and emerging markets funds have lagged returning 65%. The UK stock market is up 94%, while the US market is up 292%. Technology funds are up 288% on average – but it did take them until 2016 to recover their losses. The exception has been those index-linked gilt funds. They rose a further 120% over the past 10 years.

What will the next 10 to 20 years hold?

The only thing I can say with real conviction is that bonds will not do as well. The high returns have been made because yields have fallen from around 5% to 0.7%. I cannot see them falling much lower.

I am pretty sure that emerging market funds – Asian equity funds, in particular, – will have their day in the sun once again. Fidelity Asian Opportunities is worth a look, as is Invesco Asian. I am also pretty sure Japanese equities will do better. Comgest Growth Japan is a fund I have come across recently that looks interesting, as is Baillie Gifford Japan.

However, the one enduring theme I think we will experience over the next two decades is the move towards more responsible investing. It is now or never really in terms of our environment, so if I am thinking about a better future for my children, a fund such as Pictet Global Environmental Opportunities could fit the bill perfectly.

Note: Performance figures are from 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. Darius’s views and those of the investment professionals quoted are their own and do not constitute financial advice.

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6 Home Businesses You Can Start With No Money

Recently, I received an email from an individual who was looking for an online business opportunity. This person had just moved to a rural area and was unable to make the long commute to their prior job. Another obstacle this person faced was the issue of needing money ASAP to pay for bills and daily […]

The post 6 Home Businesses You Can Start With No Money appeared first on The Work at Home Woman | Legit Work From Home Jobs.

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Open Banking technology is already revolutionising pensions - but this is just the start

Just five years ago it would have been almost impossible to imagine a scenario where we, as consumers, could have full control over our money and financial data in the way that we do today.

Romi Savova Tue, 12/10/2019 - 10:10

Despite the term “fintech” dating back as far as 1971, widespread innovation in financial services has been painfully slow, and it wasn’t until the arrival of Open Banking in 2018 that the status quo well and truly started to change.

Open Banking has blown the financial services industry wide open, increasing competition and forcing disruption in sectors that haven’t adapted to meet consumer demand. For the first time, consumers get to choose who can use their financial data, and in what way, forcing companies that are focussed primarily on themselves to shift their attention to their customers, simplifying financial products and creating much-needed solutions.

The arrival of apps to help us unlock spending data and make our money work harder, while empowering us to make smarter financial choices, has been revolutionary.

We’ve only reached the tip of the iceberg when it comes to Open Banking technology and will continue pushing the boundaries of what’s possible for pensions, giving even more control back to consumers and achieving our ambition of making pensions truly simple.

PensionBee was the first pension provider to apply Open Banking technologies to pensions – helping our customers see their complete financial position, with their live pension balance displayed alongside their live current account balance in some of the UK’s most popular money management apps, including Yolt, Moneyhub, Emma and Starling bank.

We’re pleased to see that PensionBee isn’t the only one innovating in this space. Several of the more traditional financial services companies are getting in on the action; Lloyds Bank customers with a Scottish Widows pension can see the value of their pot when they log into their bank account online and Moneyhub, a personal finance application that PensionBee has integrated with, can also show the balances of other major pension providers such as Aviva and Aegon.

More recently, pension administrators like Mercer have started white-labelling personal finance management applications like Moneyhub to offer dashboard-like services to those who are auto-enrolled.

When it arrives in a few years’ time, the government’s Pensions Dashboard will enable consumers to see all of their pension information online, in one place. This increased transparency and control will ensure consumers don’t lose track of their hard-earned savings and can better plan ahead to ensure a comfortable retirement in later life.

In September I was appointed to the Pensions Dashboards Industry Delivery Steering Group, alongside nine others, with a mandate to help deliver pensions dashboards to millions of consumers effectively and safely.

I believe that complete dashboards, which include data on all pensions, are unlikely to be available before 2025. In the meantime, there are lots of pension calculators and useful retirement forecasting tools that can help better prepare savers for retirement.

A pension calculator can help consumers work out how much they need to save to fund the retirement they want. All they need to do is input a few details such as how much they have already saved, the amount they are planning to contribute and the age at which they would like to retire.

Most calculators will provide the option of including the state pension in the calculation, so savers can see a realistic estimate of what their income is likely to be. It is advisable to try a few different calculators and most major pension providers, including PensionBee, offer a free tool for consumers.

New tools such as this are revolutionising how we interact with our pensions, allowing consumers to build the financial futures they deserve.

Romi Savova is chief executive of online pension provider, PensionBee

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الاثنين، 9 ديسمبر 2019

This Man Told Us How He Turned Christmas Lights Into a Lucrative Business

Editor’s note: This post was originally published in 2018 and has been updated for the 2019 holiday season.

When you have a name like Josh Trees and you run a Christmas light installation business, you have to be prepared for the inevitable question: Is that actually your name?

Trees — yes, that’s his real name — started his business, We Hang Christmas Lights, in 1997, decorating homes, businesses and assorted branched greenery in Temecula, California.

But Trees definitely gets the last (jolly) laugh.

“When we first started doing this, people were like, ‘Oh, that’s a cute little business,’” Trees says. “We were like, ‘Yeah, cute,’ — you don’t realize people are paying us $3,500 to put lights up on their houses.

“By my third year, I was hitting a net profit of right around $138,000.”

Now Trees crisscrosses the country with strands of lights and a tiny house to teach others how they can build their own businesses hanging twinkling bulbs.

On the First Day of Christmas Lighting

Ah, the fond memories of hauling out last year’s box of lights to add some holiday cheer to the humble abode. Haphazardly arrange the lights around the front stoop, throw a wreath on the door and voilá!

But if you’re starting a business hanging lights, that simplified recollection can lead to costly errors, according to Trees. And he should know, because he had the same idea.

“We were making mistakes on everything — we were just a bunch of guys thinking, ‘Hey, this is going to be easy,’” Trees says. “We were hanging other people’s lights — that’s a huge no-no.… The second stage was hanging the crummy lights from retailers.

“I’m surprised I made it through the first couple years.”

By the third year, Trees had moved onto purchasing lights from wholesale vendors, which offered discounts for bulk purchases. He was also buying commercial-grade strands so that when one bulb went out, they didn’t all go out.

But Trees says his biggest mistake had nothing to do with lights — it was underbidding jobs.

“I got into it in the first year… and I didn’t make any money — probably lost money,” Trees says. “I was charging $150 for jobs that should have been $850.

“I bid a job for $3,500 that should have literally been $35,000. It was horrible.”

Enlightening Business Strategies

Trees’ students echo his refrain, noting that learning from other professionals early on can help transform a business idea into a profitable enterprise — and with a lot fewer mistakes along the way.

One of Trees’ early students was Jeff Krall, owner of American Holiday Lights in Illinois. In 2008, Krall attended an individual training session, which Trees conducted before he started traveling the country to teach classes.

“Josh helped me get it started,” says Krall. “Everything from how to hang the lights on the rooflines… making our own extension cords, how to wrap the trees.

“It would take someone… two or three years to learn how to do it correctly, whereas Josh, in two or three days, he tells them how to do everything.”

In his first season of business, Krall estimates he had 30 clients. Now he manages 25 to 35 employees who light 35 to 40 houses a day during the season, at an average price of $1,400 to $1,500 per house.

However, those visions of sugarplums and dollar signs dancing in your head might not be in your immediate future — or at least not the first season.

In 2017, Lucas Pulvermacher decided to add a light-hanging business to his busy lawn care enterprise near Oshkosh, Wisconsin.

“My first year was tricky because I had to have an inventory of the lights. That’s a fairly large cost — and also the ladder, equipment, safety stuff like that,” says Pulvermacher. “I’d say we came out about even.”

Pulvermacher says his Lucas Lights lit three houses and two businesses after launching in mid-November last year — “It was hard because we started so late.”

After taking Trees’ class to learn marketing and sales strategies, Pulvermacher invested in professionally designed materials, including a logo.

Beyond Christmas Lights

One of the cool things about those twinkling lights is that they still work after Jan. 1. That means there’s more business after the wintry holiday season.

“A lot of the guys we work with, they do wedding lights, event lights, party lights and backyard lighting, that sort of thing, and a lot also do landscape lighting,” says Trees, who estimates that light installations for weddings bring in $1,800 on average but can go as high as $7,000.

Krall, who also owns a roofing business, hangs lights all year round for backyard weddings, Diwali festival of lights celebrations and Halloween parties — “but the majority of what we do is Christmas,” he notes.

Holiday Gigs

So let’s say you’re not ready to start your own business but being outside hanging lights sounds like a better gig than working a seasonal retail job.

You might be in luck.

Krall notes that the toughest part of his business is finding good, reliable help.

“We got creative this year, so we align ourselves with other companies out there that are seasonal, like landscapers or pool companies,” Krall says. “When they’re laying off, we’re actively developing relationships.”

Trees recommends that installers offer tiered bonus pay, adding an extra $1 per hour each week to incentivize continued attendance as the season winds down — particularly in January when companies have to take down the lights.

“Helpers can typically make anywhere from between… $13 at the low end to about $20 at the high end — and that’s before bonuses,” Trees says. “When you find somebody that’s good, it’s key that you keep those people, because it’s temporary, and they know it’s temporary.”

For people interested in finding holiday lighting jobs in their area, Trees suggests checking places like Craigslist, Indeed and the We Hang Christmas Lights site, which includes a directory of light installers that’s searchable by zip code — just mention your interest in a job when you fill out the online form.

Trees has found that these holiday gigs are best suited for people who work warm-weather jobs in roofing, tree trimming and window washing. All of which have at least one trait in common — no fear of heights.

And yes, the money is nice, but Krall and Pulvermacher agree that the best part of hanging bulbs is the way their customers’ faces light up when they see the finished product.

“Everybody’s in a really good mood around Christmas time,” says Krall.

Pulvermacher adds: “It’s just kind of a cozy feeling when you see a house all lit up.”

Tiffany Wendeln Connors is a writer/editor 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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Mailbag: Questions About Mass Layoffs, Financial Autopilot, Cast Iron 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. Authorized signer on checking account
2. Mass layoffs at work
3. Financial autopilot is very boring
4. Cast iron is gross!
5. Stock market not realistic
6. Free tools for podcasting
7. “Stolen” reusable containers
8. Inexpensive family games for holidays
9. Different credit scores?
10. Cheap but durable backpack
11. Tips for razor blade life
12. 2020 reading list

Something I like to do each December is make a batch of homemade egg nog. I use this basic recipe from Serious Eats, mixing it together in a cocktail mixer, and I keep it in the fridge in a container.

My belief in the past had been that you should drink it fairly quickly after making it, but a friend of mine has persuaded me to let it age for a couple of weeks in the fridge, so I have some egg nog in the fridge in a few jars aging for a couple of weeks.

I’m sure many of you will want to know the cost calculations on this. It’s definitely cheaper to make it yourself unless you’re buying organic dairy products from a local farm versus buying the dirt cheap eggnog at the store (and even then, it’s fairly close). It’s pretty easy to do — you just put the ingredients in a cocktail shaker and shake it for a while, then strain it so that any thicker parts of the eggs are strained out. I think it’s pretty tasty, too.

(Just make sure the eggs you’re using are pasteurized.)

On with the questions!

Q1: Authorized signer on checking account

I recently found out I’m an authorized user on my dad’s checking account, leftover from long ago. I called the credit union and they said we both have to come to their office in person (which isn’t easy for my elderly father) and he would need to close the entire checking account and open a new one just to have me removed as an authorized user. I’ve explained the situation and complained plenty. I don’t buy what they’re saying one bit as I bank almost exclusively online, but they’re not budging. My question is are there any negative implications to just staying as an authorized user on his account? I know it doesn’t affect my credit report. But could it have a negative impact on my ChexSystems report if, let’s say, he overdrafts? And should he pass away with debt or other financial issues, would I have any obligation to pay that if our names are connected on his checking account? I’m trying to gauge if I should put the effort to fight this or just let it go.
– Bianca

I did some research into this, including contacting a local bank and having a long conversation with the manager. In most situations, an authorized signer is not liable for anything regarding the account — that’s standard policy for banks today. However, banking practices haven’t always been as standardized as they are today, so the bank manager strongly encouraged me to tell you to check with the bank in question and ask them directly. Just simply state that you are an authorized signer on an account and what your concerns are.

Again, in normal banking practices, if you are an authorized signer and he passes away, your ability to sign related to that account also ends immediately. It is he who is authorizing you, and that authorization terminates at his death. This makes sense, as the account is now part of his estate.

Here’s another way to think of it: all of the risk is with him because he’s the account owner. You are not an owner, merely someone he gave permission to sign documents related to the account. It’s not your actual responsibility.

My recommendation would be to call the bank and ask these questions very specifically. You’ll likely be handed off to a branch manager who can answer those questions. Unless their policies are outside of what I understand to be the norm, you will be fine remaining an authorized signer on the account.

Q2: Mass layoffs at work

This morning a third of my department was let go. They were given two weeks severance, walked one by one to their desks to clear them out, and escorted out the door. I’m scared and everyone’s scared. I have spent today trying to figure out what I should be doing right now. I have $65K in student loan debt and $11K in credit card debt and no money in the bank other than some in my 401(k). My wife works but makes maybe half of what I do. Please help with specific advice on what to do.
– Jim

Obviously, you shouldn’t bet on your employer employing you for a lot longer. It’s very likely you’re going to be hit with a flood of work as you take up the slack from the terminated people, plus they’ve shown you how expendable you actually are. If I were you, I’d be looking elsewhere for work as soon as possible.

First, you have to cut back on your spending immediately. A lot of the more frivolous things you spend money on have to go for a while. Buy everything store brand. Eat most of your meals at home. Don’t go out nearly as much and have a lot of “date nights” at home. Enjoy hobby stuff you already have instead of buying new stuff. You need to channel that saved money into a savings account and build yourself a nice emergency fund so that you can survive for a few months without work. I strongly recommend setting up an automatic transfer from your checking to your savings account each week for a healthy amount — $50, perhaps — and never turning it off. In the short term, supplement it with even more so you can build it up quickly. That way, if you need to use it in the future, there’s always cash in there for emergencies like a sudden job loss.

Also, polish up that resume and start talking quietly to anyone you know in the field outside of your employer. Ask them if there are any openings at their organization that you might be right for. Beyond that, start getting involved in any local groups that are related to your field (if you’re not already) and stay involved, because it’s situations like this where the relationships you have with people in those groups can really prove useful. Look online and offline for these groups.

Those are the two most important things for you to do right now. You’ve got to get your finances in better shape while looking for a new job. Some of these changes — like a better grip on your spending and more involvement in your local professional community — should be permanent ones, lasting after you find a new job.

Q3: Financial autopilot is very boring

I think I’m where you’re at with having all of your finances on autopilot and it’s really boring. I have some money in my checking account that I can spend on whatever I want and everything else is automatically paid. I have every single one of my bills on auto-pay. I automatically put money into an emergency fund and a bunch into retirement all automatically. I just buy food and household supplies and fun things out of checking and I just wait. If I lose my job or something, I’d just go in and turn off a bunch of automatic transfers and move some money over from my emergency fund for a while. I used to stress so much about finances and now I don’t even think about it for weeks at a time. It’s actually pretty boring because there’s nothing really to think about, so I have time to think about other things in life and that’s actually kind of the problem because thinking about other things sometimes tempts me to spend that money and change things. It’s like putting together a LEGO kit — fun when you are building it but boring when it’s done.
– Ambrose

I’m very much in that same boat. Almost everything in our financial life is on autopilot. The only issue that ever comes up is when something automatic breaks. We have a healthy enough emergency fund that unexpected events don’t really derail anything.

It becomes a waiting game at that point and it’s easy to focus on other things. I’ve been trying to stretch the self-improvement principles I learned from all of this into other areas of my life, reading a lot of philosophy, delving into hobbies and trying frugal projects because it’s enjoyable for me to figure out optimal ways of doing things (in terms of both time and money).

I think the important thing is to find things to focus on that aren’t going to damage the financial system you have in place while also making you feel fulfilled. I have a number of things in my life that do this for me. I think it’s also helpful to really focus on gratitude and be grateful for having that kind of financial stability and the peace and lack of stress it brings because it’s fairly rare today.

Q4: Cast iron is gross!

So you’re telling me the shiny nonstick layer in a cast-iron skillet is just cooked-in oil and food bits and stuff? That is seriously gross!
– Amy

It’s not what you would think of as food, really. The shiny nonstick layer on a cast iron skillet is called the patina, and it’s basically fats and oils that have been heated above their melting and boiling points and cooled down many times. In that process, they undergo a number of chemical transformations that, in the end, cause them to oxidize and form tight bonds with the other fat molecules on there.

A good mental model is to think about what happens to wood when you burn it. It doesn’t stay wood — it turns to ash. Ash has very different properties and very different uses than wood — for one, you can actually use hardwood ash to make soap. It’s undergone significant physical and chemical changes — it’s not the same thing anymore.

The same exact thing is true with the patina on your skillet. It was originally fats and oils, but it’s been heated and cooled so many times that it’s not the same thing anymore. Like how wood transforms into ash, fats and oils transform into a hard, dry, shiny, nonstick layer that protects the pan from rusting.

Q5: Stock market not realistic

I would like to see an article explaining how believing that you’ll get 20%+ returns a year in the stock market forever isn’t realistic. The stock market has grown really nicely for a decade now but it’s cyclical and there will eventually be a downturn.
– Derek

I completely agree. The only problem is that no one knows when the downturn will hit. Will it be in a year? Five years? Ten? No one knows for sure.

I do know this: I stick to my long term stock market return prediction as being around 7% a year on average. The last decade has beaten that significantly, but long-term history has not. However, the last decade started at a very low point historically — 2009 was clearly a bottoming out of the stock market.

I strongly encourage readers to not believe that the stock market will return more than about 7% to 8% a year over the very long term. Individual years — or even runs of years — will beat that significantly, but then there will also be years like 2008 where the bottom falls out.

Q6: Free tools for podcasting

Want to start a podcast with a friend but all of the intro guides seem to list hundreds of dollars worth of stuff and services. I need free tools to get started and then upgrade from there as needed.
– Max

The first thing you’ll need is a host. For free, I’d suggest Podbean, which has a free tier that will be perfect for your first few episodes so you can see if this is something you want to stick with. You can record episodes for free right within the Podbean app on your phone if you wish, though the sound will be of the same level of quality that a smartphone mic picks up.

If you want to record on a computer, you will need an inexpensive mic of some kind. I’d probably get a very low-end Logitech USB headphone-mic combo. It won’t sound amazing, but it’ll be certainly good enough to get started and should cost you under $20. You can use the built-in mic in a computer if you really want, but it’ll sound extremely echo-y at best and there’s no software in the world that can fix it.

For a really good free basic sound editor on a computer, get Audacity. It’ll do a great job for you. If you want to talk to guests remotely, use Skype and have them record their audio using Audacity and then send you their file so you can sync them up.

That’s enough to get you started for free. As you do it and learn, you can decide for yourself what things you want to add to it.

Q7: “Stolen” reusable containers

After our big Thanksgiving family dinner I packed up leftovers in really nice Rubbermaid containers for some guests and they took them home. I assumed the containers would be returned but no one returned them and I’m out several containers. Sad that family members and friends would steal. How should I ask for them to be returned?
– Andie

I think it’s a giant stretch to think of these containers as “stolen.” Likely, they took them home, used them, ran them through the dishwasher, and stuck it somewhere, figuring they could just give it back to you the next time they saw you.

If you want it back urgently, give them a call. A much nicer approach would be to just ask them to bring it the next time you get together with them normally.

An aside: if it’s a really nice Rubbermaid container (some of them are pretty nice, especially when new), I understand wanting them returned, but if it’s an older container or a cheap one, like Gladware, it’s really not even worth mentioning.

Q8: Inexpensive family games for holidays

Do you have any suggestions for inexpensive ($20 or less) games that would be fun for a large family group? Want something to take to the holidays. A cousin brought Codenames for Thanksgiving and I want to “pay it forward” and add to the fun because everyone liked that. Looked at Target and there were infinite options.
– Viola

I’ll name a few good low-cost games that might click well with a large mixed family.

Monikers is a word game in which two teams of people take turns going through a small deck of cards several times. The cards each depict some noun on it — usually a person or a place — and a point value. Each person gets a minute to try to get their teammates to name what’s on the card without saying that exact word. Your team keeps the ones they get right. Ones you get wrong or pass on get shuffled back into the deck, then the other team gets a shot, and teams go back and forth until the deck is empty (with clue-givers rotating around). When the deck is empty, teams count up scores, then they play again with the same exact deck, except that now you can only use one single word as a clue. Once that’s done and you score again, you play through it a third time, using only gestures. It works because everyone’s already seen all the cards multiple times. It’s a great game, comes with a lot of cards for replayability, and costs around $20. Note that if you’re playing with kids, you may want to filter out a few cards, so go through the cards first.

Dixit is a game with big, beautifully drawn art cards. Each player has a hand of cards and one person is a clue-giver each round. The clue-giver chooses one of the cards in their hand and gives a clue about it — not too specific and not too vague. All of the other players give a card to the clue giver that best matches the clue, then the clue giver turns over all the cards and all of the other players guess which one was the clue giver’s card. If some — not all, but just some — of the players picked the right card, the clue giver gets 3 points and all correct guessers get a point; otherwise, the clue giver gets a -2 point penalty. Also, anyone who wasn’t the clue giver but had someone else guess their card gets a point. You play until someone hits 30, but it’s mostly hilarious to see the clues people come up with and to appreciate the art.

Skull is a simple game that takes the bluffing of poker and distills it down to the very basics. You have a stack of four beautiful cardboard tiles, identical on one side and on the other side, one has a skull and the other three have roses. At the start of a round, everyone puts a tile of their choice face down in front of them, then players go around the table either adding a tile to their stack or starting a bid. You start a bit by saying a number, then other players can overbid you until everyone passes. You resolve a bid by flipping over that many tiles, starting with your own, then flipping over those of other players from the top of their stacks. If you see only roses, you get a point, and the game is won by the first player to two points. If you hit a skull, you lose one of your four tiles at random, and you’re out of the game when you have no tiles. It’s a very simple and beautiful bluffing game.

Hopefully one of those three will match what your extended family might like! I personally vouch for all three of these being quite fun in a mixed group with people of all ages.

Q9: Different credit scores?

I saw part of a news report last night discussing how credit bureaus are now using a number of different credit scores for people. It was confusing because I missed the last half of the story. Do you know what they’re talking about?
– Jeremy

Sure do. The credit bureaus, which are the companies that collect your credit information and share it with other businesses so they can decide whether to lend money or extend credit to you, don’t actually maintain one single credit score for you. They actually maintain a bunch of different ones. Here’s why.

There are different kinds of requests that a business can make from a credit bureau when they want to know about you. They can get a copy of your credit report, or they can just get a credit score — a number that kind of summarizes your report. Up until fairly recently, there was one score that everyone used — the FICO score. That’s what most people think of when they think of “credit score.”

However, some businesses wanted a different score that was calculated a bit different. They might want a score that grades you with a much higher focus on not having defaulted on loans and a much lower emphasis on being 30 days late. Another business might want a score that really emphasizes timely payment, and another business might want a score that emphasizes the length of credit history. It depends on the business and what they care most about when lending to customers.

To facilitate that, the credit bureaus have gradually rolled out more credit scores for various purposes, emphasizing different things. You might have a really good credit score by one of those formulas, an OK one by another formula and a bad one by yet another.

So what can you do about this? Rather than worrying about a credit score at all, worry about what makes up a good credit score and get those things in good shape. Don’t be late on your bills. Always make your minimum payments. Avoid defaulting on any loans. Don’t max out your credit cards. Keep a long credit history by at least keeping your oldest credit card around, even if you don’t use it. If you do those things, you’ll have a pretty good score with any formula, at least with regards to the things you can control.

Q10: Cheap but durable backpack

I need a cheap but durable backpack. I just moved about a mile from a subway stop and I’m going to try using just subway and buses in 2020 and selling my car if it works out. I pulled out my old college backpack but the thing is falling apart and I can’t believe it didn’t rip out my last semester. Don’t need anything amazing, just something cheap and durable to carry a laptop and a book and some snacks and headphones.
– Barry

The first thing I’d do if I were you is check some secondhand shops in the area. Don’t just hit Goodwill or Salvation Army, but also check out some consignment shops and pawn shops. You might also want to check out any buy/sell/trade community Facebook groups and throw out a request. If you can get a $70 backpack for $20 with only a bit of use (most of the time, used backpacks for sale are ones people used a dozen times and stopped using for whatever reason, usually unrelated to the bag), that’s a good deal.

Honestly, in terms of a cheap new backpack, I’d get this Amazon Basics one for $29.99. I got a good look at one of these recently and I was amazed at the quality for $30. It’s not as good as my own, but it’s a lot less expensive and most of the quality. It had good, roomy pockets and the seams looked pretty well stitched for the price.

The Jansport Big Student backpack is pretty good, too. It’s a bit more expensive than the Amazon Basics one, but it’s roomier. You can often find this bag or a similar one at department stores like Target and Walmart, particularly during back to school periods. For example, the Trans By JanSport 17″ SuperMax at Target is very similar and is available at a number of Targets near me, if you want to go look at one. It’s usually the best backpack they sell for the price, in my opinion. I had a similar one when I was younger.

Those are all options that will get you a pretty sturdy and roomy backpack for under $40. Good luck with your 2020 resolution!

Q11: Tips for razor blade life

Here are some tips for keeping shaving cheap if you want to stick with a cartridge razor. First, clean it and keep it dry after every shave. Run water between the blades and get all the hair and any soap out then make sure it’s well dried with a towel after flicking water out of it several times. You can dip the head in alcohol too if you don’t think it’s dry. Run it backwards every two or three shaves on something like a pair of jeans, opposite of the direction it would cut, as that cheaply hones the blades and extends their life. I do these things and shave every day and sometimes twice a day with Harry’s and a single cartridge will last a month or so. Used to leave the razor in the shower and never rub it on anything and it would be dangerous within a week. Huge money saver.
– Tom

Great tips, Tom. In my experience, you can hone the blades a bit by just running them backwards on your forearm. I do it after each shower.

I usually shave in the shower like you seem to. I grab the razor out of the closet and take it in the shower with me. I shave using shower soap. Then when I’m done with it, I rinse it thoroughly in the shower water and set it up next to the soap. When the shower’s done, I dry off, then grab the razor, flick it dry a few times, and rub it on the towel. Then I run it backwards on my arm a time or two and stick it in the closet. I used to do it on my jeans after getting dressed, but I’d forget to do it half the time and it’s way quicker and gets similar results to just do it on my forearm.

I get similar results to you — a cartridge can last 30 or so shaves if I do this diligently. It’s the routine I’ve fallen into after a bunch of trial and error.

Q12: 2020 reading list

I hope to see an update soon to your reading lists and reading goals!
– Sandra

Sure!

As I’ve mentioned before, my theme in 2020 is “black belt,” and while that obviously relates to my goal of achieving a black belt in taekwondo by the end of the year, it has a deeper meaning, too. It means that I want to “lean in” to some things in my life and approach them with systematic care and deliberate practice.

One big thing is that I want to spend more time doing focused reading of books, not just blowing through them for fun and rushing to the next one, but really extracting meaning and lasting value from them. I’m trying to build a daily system around this … a topic I’m going to address in a later post, probably this week or next.

Anyway, the point is that I’m intentionally digging into some material in 2020 that I consider challenging, not in the sense that it’s hard to read (though that might be true), but that it challenges ideas I’ve held and makes me think about new ones. I plan to try to develop a daily routine of reading for an hour or two in a very deliberate way so that I’m really absorbing the ideas and thinking about them, which probably means slower reading than I’ve done before.

I can name four that are definitely on my reading list at the start of the year: Aristotle’s Way by Edith Hall, Psychopolitics by Byung-Chul Han (recommended by a reader), and The World Beyond Your Head by Matthew Crawford (a reread).

Most of the books I pick to read come from a long list of books that I want to read. When I have maybe two or three left on my bedside table, I’ll go through that long list, pick one or two that seem interesting, and request them from the library. Sometimes, there’s a brief waiting list for the book and at other times the book has to be requested. That list is very long and full of books I tossed on there on a whim and most are likely never going to be read. I will sometimes just purge everything after roughly one hundred on the list, because I never make it down that far when looking for the next book I want to read.

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 Mailbag: Questions About Mass Layoffs, Financial Autopilot, Cast Iron and More appeared first on The Simple Dollar.

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Considering a Joint Bank Account? Read This Before You Open One

Forget making it Facebook official. Opening a joint bank account is the true way to show you’re committed.

OK, so not really. But for many married couples, long-term domestic partners, families and even roommates, joint bank accounts make budgeting and sharing bills easier to manage.

What Is a Joint Bank Account?

A joint bank account is much like any other bank account you open with your bank or credit union. You can use it to save money and earn interest, write checks and swipe a debit card to make payments, and even set it up for direct deposit and automatic bill pay.

So what’s different? You aren’t the only account holder. Joint bank accounts let multiple people (typically two, though some banks allow up to four) act as account holders. That means they have equal rights to deposit — and withdraw — funds and will be held just as responsible as you for overdraft fees.

Why a Joint Bank Account Might Be Right for You

The main reason people open a joint bank account is because they are married or domestic partners with shared expenses and shared savings goals. Sharing a bank account might make you a little more disciplined with your own spending and can help you form a team mentality toward saving for specific goals.

But romantic partners aren’t the only ones who open joint bank accounts. Sometimes parents will add children, like college students or young teens just learning the ropes of money management, to their accounts. Those with aging parents might be added to their parents’ accounts to make it easier to take care of medical expenses or trips to the grocery. If you trust your roommates enough to open an account just for rent and utilities contributions, it’s an easy way to take care of shared household expenses.

A huge pro of joint bank accounts is the financial power of combined money. Often, certain accounts will pay higher interest rates when you have more money in them. Reaching that total is easier with more than one contributor.

Potential Pitfalls of Joint Bank Accounts

Bankers beware: Joint bank accounts have a lot of downsides, so be sure you trust your co-account owner on a personal level and a financial level before opening.

For starters, if a relationship or friendship ends poorly, the other co-account owner can drain the account before you are able to freeze the funds (or withdraw them yourself). If your relationship is on rocky ground, a joint bank account is not a good idea.

Some partners who do not see eye to eye on spending and saving should consider separate accounts to avoid fighting.

Pro Tip

Instead of combining all your savings into one account, create an account for monthly contributions toward shared bills and keep the rest of your finances separate.

Another major con of joint bank accounts is what can happen if your co-account owner mismanages the funds. They may be solely responsible for the act of overspending, but the bank will hold both of you responsible for the resulting overdraft fees — and you’ll also be out all that spent money.

Joint bank accounts can also have a negative effect on your credit score. If the other account holder has bad credit, you will likely experience a drop in your own score.

Further, any funds in a joint bank account count toward both of your assets. That means, if one of the account holders files for bankruptcy, the money in the joint bank account is fair game for their creditors, even if you actually contributed most of that money.

Just as frustrating, shared funds with your child in college could count against them in terms of financial aid while an account held jointly with someone on Medicaid could disqualify them from receiving benefits.

Finally, joint bank accounts can get messy when one of the owners passes away. Because of “right of survivorship,” all that money goes to the other co-owner, even if you had intended for some of it to be distributed to other family, friends or organizations via your will.

And even if your intention is to pass on the money to the co-owner after death, the co-owner will still potentially have to deal with inheritance taxes, depending on the amount in the bank account.

How to Open a Joint Bank Account

If a joint bank account makes sense for you and your partner, parent, child or roommate, apply online or visit a branch of your chosen bank in person to open the account. The process is typically easy. Just be sure to bring:

Proof of identity, like your driver’s license or passport
Proof of address, like a utility bill
Your initial deposit (this can also be electronically procured from an existing account at another institution, if necessary)

You will need to fill out an application, and voila! You now co-own a joint bank account. You should receive a debit card, a checkbook and information regarding how the account works.

But before signing on the dotted line, ask a few important questions:

What happens if the relationship with the co-account holder ends? How do you freeze funds?
Can one person take out all the funds at once? Is it possible to limit withdrawals unless both/all parties are present?
Who is responsible for paying overdraft fees?

Considering an online bank for your new joint bank account? Check out our favorite online savings and online checking accounts for 2019.

Timothy Moore leads a team of editors and graphic designers at a market research company as his full-time gig. As a freelance writer, he writes about personal finance, careers, education, pet care, travel and the automotive industry. His work has been featured on Debt.com, The Ladders, Glassdoor and The News Wheel.

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New peer-to-peer lending rules come into force - new investor deposits curtailed

New and inexperienced investors will have the amount they can deposit in peer-to-peer platforms capped at 10% unless they take financial advice first

Stephen Little Mon, 12/09/2019 - 11:14

New investors will not be able to place more than 10% of their assets in peer-to-peer (P2P) investments unless they have received financial advice, under new rules from the City watchdog, the Financial Conduct Authority (FCA), that come into force today.

This is to ensure that investors have clear, accurate information about what they are investing in and so that they do not over-expose themselves to risk.

The changes mean P2P platforms will have to provide extra information, helping investors to make better-informed decisions.

Platforms are also required to assess investors’ knowledge and experience of P2P investments.

The regulator is also introducing new advertising rules, requiring providers to clearly spell out the potential risks involved.

Rhydian Lewis, chief executive of P2P lender RateSetter, says the new regulations are a “watershed moment” for the industry.

He says: “For first-time P2P investors, 10% is a sensible place to start and once you are experienced you can invest more.

"This is exactly what we have seen over the last ten years, with people dipping their toe in and then growing as they see the value. The limit will become a target, encouraging every investor to think about diversifying some of their money into P2P.

“Stronger regulation with harmonised standards means that people can invest in P2P with greater confidence than ever."

However, other large P2P platforms, such as Landbay, have announced their exit from the retail investor market altogether.

What is P2P lending?

P2P platforms bring borrowers in need of loans together with investors who want to earn more than in savings accounts at banks.

By using a P2P platform as the middleman, you can lend money to individuals or businesses. As banks are being cut out of the deal, P2P is good for borrowers and lenders. However, not without extra added risks.

The person borrowing money gets a lower interest rate than they would from a traditional lender and the person lending the money is offered a higher interest rate than they would receive from a traditional savings account.

Some of the best-known P2P platforms include Funding Circle, LendingCrowd, Lending Works, RateSetter and Zopa.

You can expect to get returns of between 3% and 7% a year, depending on which account you choose.

Is P2P lending safe?

This year has seen the high-profile collapse of P2P lenders FundingSecure and Lendy, raising questions about the safety of P2P lenders.

While P2P offers savers the potential for better returns, you must remember that the risks are higher. It is not the same as putting your money in a bank and is more like investing.

It is also important to note that P2P platforms are not covered by the Financial Services Compensation Scheme, which protects your money up to £85,000.

This means that if the P2P platform goes bust you will not get your money back.

There is also the chance that some companies or individuals you have lent your money to decide to default.

Some companies do have measures in place to protect you regarding this. Zopa splits your investment into small chunks across multiple loans to help spread the risk, while Ratesetter has a provision fund, so even if the borrower defaults you get paid.

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الأحد، 8 ديسمبر 2019

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