Wednesday, July 30, 2014

How to Start a Savings Account

People feel powerless and helpless when they don’t have a savings or retirement account, live paycheck to paycheck or experience a financial crisis. You feel more confident, in control and powerful when you have a savings and/or retirement account - when you don’t have to worry about how you will pay for car repairs or a broken furnace.
People who do not save feel a temporary sense of power when they buy something that they believe shows they are powerful such as a “BMW”, “going on vacation to a Caribbean island or buying a designer item such as Luis Vuitton. However, these feelings erode quickly when the bill arrives – the credit card bill and they go back to feeling powerless. They also experience these feelings because they are treated differently by society. Someone living paycheck to paycheck may go to a liquor store or checking cashing place to cash their paycheck. However, if that same person when to a bank to deposit their paycheck they would have a different experience emotionally.
Nothing last forever and nothing stays the same forever. Life happens and things are constantly changing. Possessing a savings account will help you deal with changes in life much easier than applying for a payday loan because you don’t have a savings account. 
Some benefits of having a savings account are:  overdraft protection, no checking cashing fees, compound interest, cash back rewards for some debit cards, you have more payment options, money available for unexpected expenses.
Set a savings goal, reward yourself when you reach a milestone, and read your statement monthly. Here are 7 easy ways to start saving:

  1. Coins.  Save loose change in a jar. The money saved can be put in a high interest online savings account such as Emigrant Direct, ING Orange Account or HSBC.
  2. Use automatic deductions. Sometimes it is easier for people to save money if they can't touch it or see it. Setup paycheck deductions or setup automatic transfers to your savings account.
  3. Use programs. Use bank or community programs such as: Bank of America Keep the Change, Wells Fargo Way2Save, Individual Development Accounts (IDAs), etc.
  4. Online. Open an online savings account that has a higher interest rate than a traditional savings account.
  5. Location. Open an account at a bank location that is outside of your work area or local neighborhood to reduce temptation of accessing the account on a regular basis.
  6. Separate.  Create several separate savings accounts:  an account for unexpected emergencies, a vacation account, an account to use for home repairs if needed.
  7. Contribute regularly. Contributing regularly quickly builds up your account balance and helps you take advantage of compound interest.

Saturday, July 26, 2014

Use Crowdfunding To Get Back On Track with Your Finances

The 2012 Jumpstart Our Business Startups Act, or JOBS Act, loosened securities regulations to encourage funding of small businesses and required the SEC to propose crowdfunding rules. The JOBS Act limits annual individual investments in crowd funded startups to 5% of an individual’s income or net worth - or $2,000 if the individual’s income or net worth is under $100,000. Business startups can raise up to $1 million through crowdfunding each year, must report to the SEC at least annually and maintain audited financial statements if they raise more than $500,000 in a year.

Crowdfunding involves funding a project or venture by raising small amounts of money from people online around the world or when people network and pool their money together, via the Internet, in order to support efforts initiated by persons or organizations.

There are 4 types of crowdfunding:

1.      Reward-based crowdfunding – used for motion picture promotion, free software development, inventions development, scientific research, and civic projects

2.      Equity-based crowdfunding - support efforts initiated by individuals or organizations in exchange for equity in the company, a good example is the TV show “Shark Tank”

3.      Donation-based crowdfunding - raise money for any reason including personal matters, such as healthcare costs, or social causes.

4.      Credit-based crowdfunding - peer-to-peer lending or crowd-lending, a company or individual lends money and receives interest for the loan

The most common type used for personal needs is donation-based crowdfunding. Crowdfunding was originally designed to fund start-up businesses but many now use it to pay for personal expenses such as:  weddings, student loan debt, unemployment, financial crisis, buying a home, college tuition, paying medical bills or anything you can think of. It is also used by people who have bad credit and cannot get traditional loans or people who have loans and cannot pay them back.

The top ten crowd funding websites are:  Gofundme, Kickstarter, Indiegogo, Causes, Giveforward, Crowdrise,, Firstgiving, Fundly, and Fundrazr. Crowdfunding websites charge a fee usually a percentage of the money rose plus additional fees.  Crowdfunding fees for some of the most popular websites are:

1.      Kickstarter - 5% of funds raised, plus 3-5% transaction fees but you lose the funds if the goal isn’t met
2.      Indiegogo - on the all-or-nothing plan, 4% of the funds; flexible funding plan, 4% if you reach your goal, 9% if you do not reach your goal. Transaction fees are an additional 3%
3.      GoFundme – take 5% from each donation (the total donation) you receive. You can use either WePay or PayPal to process your payment - both charge fees ranging from 2.9+% to 3.5%.
4.      Fundrazr - 5% for completed or an incomplete campaign plus 2.2% +$.030 transaction fees

Here are 4 ways to use crowdfunding to pay a personal debt:

1.      Tell your story. Explain why you need the money, what you have already done on your own – what has worked and what didn’t work and how the money will be used.
2.      Set a Realistic Financial Goal. Set a practical fundraising goal that you can achieve in a reasonable time period.
3.      Develop an Elevator Pitch. Explain your cause in two to three sentences or within 60 seconds.
4.      Market. You will have to market your campaign to reach your fundraising goal. Tell everyone you know and invite them to visit your website. You will have to constantly update the campaign to give people a reason to keep visiting your website.
5.      Taxes. Money raised may be considered income and you may have to pay taxes on the amount raised. Treat the money as additional income or as you would business income and plan accordingly for taxes.
6.      Reward. Offer rewards or gifts for large donations to encourage greater participation.

Tuesday, July 22, 2014

You Can Still Rent - Here's How


According to the 2013 National Housing Pulse Survey eight in ten Americans no matter what age or education level believe that buying a home is a good financial decision and more than two-thirds or 68% believe now is a good time to buy a home. Fifty-one percent of renters say that owning a home is one of their highest personal goals. Many believe that housing prices in their neighborhood are more expensive than there were a year ago.

Several issues prevent Americans from becoming homeowners such as:   bad credit, little to no savings, student loan debt, other debt, low earnings, illness or experiencing a financial crisis. There are advantages to renting such as:  

  1. No costs associated with maintenance
  2. Easier to maintain
  3. Reduced financial responsibility
  4. Increases your credit score
  5. Proves that your are a responsible spender

There are disadvantages to renting such as:

  1. No tax benefits
  2. No equity
  3. No control over rental increases
  4. No control over who owns the building or property

If you are considering renting or moving to a new rental consider these 10 tips to help make the process easier.

  1. Review. Review your credit report and credit score before signing a lease. If you have bad credit you may have to put down a larger security deposit or other upfront fees.
  2. Energy Costs. Energy costs are higher when renting a home especially for older, concrete or brick homes where air escapes easier.
  3. Insure. You should obtain renter’s insurance to ensure all of your items are protected. Your premium may be a little higher if renting a home but you should be able to get a policy for less than $500 a year. Try to purchase a policy from the same company as your car insurance policy.
  4. Fees. You may have to pay additional fees if renting a home that is part of a homeowner’s association such as: parking spaces or storage, snow removal, garbage collection, and pets.
  5. Don’t assume. Don’t assume the landlord will pay for utilities or whenever something is broken. Ensure the details of who is responsible for what are identified in the lease.
  6. Ask. Ask the landlord to provide any verbal agreements in writing.
  7. Privacy. Ask about privacy rights.
  8. Safety. Use police department search tools to verify if the neighborhood is safe.
  9. Budget. Create a housing budget to cover additional expenses such as: security alarm, utility costs, possible repair costs, additional fees, etc.
  10. Furnish. Don’t go overboard or furnishings. Look for bargains to furnish your rental.