How You Should Spend Your Stimulus Check

The U.S. Government passed legislation in response to the coronavirus pandemic emergency that provided funds to most low-income and middle-class individuals and families. Individuals could receive up to $1,200, while married couples who file jointly got $2,400. Having children provided another $500 per child.

That means a family of six could qualify for up to $4,400. This amount is in addition to an extra $600 per week of unemployment benefits.

When the money first hit bank accounts, Americans started spending their money from these one-time cash payments on legal marijuana products, groceries, and gasoline. 9% of people took the money out from the ATM, while 5% said they bought video games. 

If you want to spend your money in more effective ways, here are some ideas to consider.

Emergency Fund Accounts

Since COVID-19 creates an unpredictable economy, the best option for the stimulus check is to create an emergency fund. Putting the cash into a high-yield online savings account could give you enough money to cover utilities, rent, or a mortgage payment.

Debt Reduction

If you have an emergency fund in place, then take care of your debt next with the stimulus check. Credit card debt is a high-interest problem that can take several years to pay off if you only make the minimum payment. It gives you an immediate guaranteed return because then you still have room to make an emergency purchase if necessary. Pay down the account with the highest interest rate first.

Careful Investments

Investing in equities as a long-term investor makes sense since they are down over 30% from their all-time highs. Instead of putting all of your eggs in one basket, put small amounts in each week, carefully evaluating market conditions to reduce the risk of losing the stimulus check. 

Donate it to a Local Cause

If you are an essential worker or don’t have financial impacts from COVID-19, then it may be useful to donate your stimulus check to a local non-profit. Many families, especially those with hourly workers, saw their income disappear overnight. Rising demands at food banks and other essential services mean more money is going out. Contributing some or all of your check can help a lot of people.

The goal of each action is to create a long-term impact with positive implications. Whether you save, spend, or invest, do so in a way that puts you on secure financial ground.

How to Grow and Use a $1,000 Emergency Fund

If you qualified for a stimulus check as an American, then you may have received enough money to start a $1,000 emergency fund. A qualifying family with four children could receive up to $4,400 in funds to use, which is enough to establish savings of 3-6 months for most households to cover necessary expenses.

Your emergency fund needs to cover unexpected problems that arise outside of your regular income or handle your monthly bills if you lose your job.

It should be enough to manage a home repair, appliance replacement, or a significant automotive issue. If you can get $1,000 into this fund so that it can start growing, then you have will have some financial flexibility.

How to Start a Financial Buffer

You should keep about six months of expenses in your emergency fund. Since most families don’t have this financial buffer, the first $1,000 of savings becomes a critical amount to have ready.

Keep your emergency fund in a savings account you can access easily. Look for the highest interest rate possible. Then follow these steps to start getting enough money put away.

1. Calculate the total amount you want to save. Then split that figure into payments you put into savings from your monthly income. Take this money out first before paying any bills so that you stay committed to the process.

2. Keep the change whenever you have a cash-based transaction. When your jar fills up, then move all of those funds into your emergency fund. Some financial institutions will do this for you with your debit transactions.

3. Save your tax refund if you get one each year. It can be an easy way to boost the value of your emergency fund. You could also adjust your withholding to have less money withheld so that you put money away throughout the year instead of overpaying the government.

4. Limit your extraneous purchases for three months. That doesn’t mean you can’t have fun! Buy items like clothing only if you need them. You can also go shopping in your pantry to reduce the number of trips taken to the grocery store. 

5. Once you have the first $1,000 in your emergency fund, consider establishing another account for vacations, maintenance, and other regular costs. Most institutions let you label sub-accounts for specific goals.

An emergency can happen at any time. When you have funds stashed away to manage this situation, then it is much easier to manage the financial issues you might face.

Coronavirus Car Deals: Are the Incentives Good Enough?

With more people staying at home right now than arguably at any other time in human history, several industries find themselves in uncharted waters. People who aren’t traveling don’t need as many items to support their activities.

That means fewer cars, trucks, and SUVs get purchased since there isn’t a need to leave the house. Automakers are countering those conditions by providing some remarkable incentives.

You can find deals out there right now that provide long-term 0% APR, extended payment contracts to 84 months, discounted MSRPs, and the first 3-6 months of the loan taken care of for you.

Are the generous financing options and attractive prices a recipe for a great car deal? The answer to that question is surprisingly complex. 

Is 0% APR Worth the Investment?

Unless you were already in the market to purchase a new vehicle, it might still be time to wait. Having 0% APR for seven years can add up to significant savings, but it also means that your purchase will be underwater for significantly longer. That means you might get stuck with the vehicle until paying off that loan.

You must gauge your job security through an honest lens. If you’re working today, does that mean you still have a job tomorrow? Unless you have an emergency fund that can manage six months of your current expenses, it might be better to put a down payment toward uncertainty than a vehicle.

If you are an essential worker and were planning to get a vehicle soon, then now is a fantastic time to buy. If not, then it may still be time to wait.

How Will You Purchase the Vehicle?

The current patchwork set of stay-at-home orders across the United States makes buying a car an unpredictable experience. Some dealerships can only provide maintenance and repair services on vehicles while restrictions are in place. That means you might need to follow a direct-to-consumer process instead.

Companies like Carvana have contactless delivery options for you to use. Most automakers allow you to order directly during the COVID-19 pandemic, bypassing the dealership except for delivery. Every community is different, which makes it your responsibility to see what is available.

If you’re not comfortable with the current car-buying processes, then wait until things start getting back to normal once again.

A vehicle is the second-biggest purchase that most people make in their lifetime. A lot of deals are out there right now, but that doesn’t mean the right one is there for you. Proceed with caution.

Is It Ethical to Make Money by Investing in Lawsuits?

It was an idea that came about in 2016 when investors wanted new options for better returns. Mighty Group Inc. offered a unique proposition: Investing in a lawsuit could earn up to 30% interest on assets that have zero correlation to anything else in the portfolio.

Mighty Group Inc. lends money to plaintiffs who are in the middle of a personal injury lawsuit. Many of these individuals are unable to work or generate income while in the middle of litigation. Their bills pile up quickly, evictions can happen, and the insurance company keeps stalling for months or years before paying up.

By supplying a loan that gets paid when an award or settlement gets reached, you have an early-stage chance to invest in a different lending opportunity. Each case gets carefully examined to ensure the odds are in the investor’s favor.

Is this an ethical investing decision to make?

Insurance Companies Paid $140 Billion for Lawsuits in 2014

Over half of the injury lawsuits in the United States involve automobile accidents each year. With a figure approaching $200 billion in some years, the dream of investing in lending opportunities to plaintiffs isn’t far-fetched.

You’re not financing the lawsuit. You’re betting that the plaintiff wins the case, pays off the loan with what they receive, and has enough left to live a comfortable life.

Peer-to-peer lending websites are already taking advantage of this opportunity. Prosper and Lending Club make small, unsecured personal loans to individuals in ways that were classified as high-risk opportunities not that long ago.

You’re helping people to pay rent and buy food. Then you make money through the interest that you earn.

The ethics of that decision depend on the investor. The plaintiffs need these items anyway. If you charge a lower interest rate than a credit card provider, then you could be saving them some cash.

When your return is a percentage of the award or settlement, then that might be a different story.

Higher interest rates are part of the lending process for lawsuits in many markets. Mighty Group Inc. has had 100 transactions per month since its official launch. 

Most of their rates are above 30% because of the risk involved. As long as the deal gets structured as a loan, then this investment option gets around the rules that are in place to prevent claims being sold to others. 

How Do You Determine a Good Cash Return on Investments?

A cash-on-cash return is a rate that gets used in real estate investments most often. It calculates the cash income earned from the amount of money invested in the property. You’re receiving a figure that’s based on the annual return the investor makes in relation to the amount paid in monthly mortgage obligations.

It’s one of the most uncomplicated calculations to understand and serves as an essential real estate ROI consideration. This will be especially relevant to you if you are younger and looking to spend some of your free cash.

What Does This Information Tell You?

The cash-on-cash return is a metric for commercial real estate investment performance. It shows the cash yield on property investments, with the return rate providing an analysis of the business plan for it with potential distributions over the lifetime of the investment.

This option is often used for investment properties that require long-term borrowing. If debt gets included in the transaction, which is the case for most commercial properties, then the actual cash return differs from the standard ROI. That’s when these calculations make sense since it takes all profits and debt into account.

It only measures the return on the actual cash investment. That’s why it provides a more accurate analysis of the overall performance of the investment. 

Example of How to Use the Cash-on-Cash Calculation

Let’s say that the total purchase price for a property is $2 million. The investor pays $200,000 as a down payment, with the rest borrowed from a bank. Insurance premiums, maintenance costs, and closing fees reach $20,000, and this figure is what the investor pays out of pocket.

After one year, the investor has paid $50,000 in loan payments, of which 20% is principal repayment. Now the decision gets made to sell the property for $2.2 million after 12 months.

The investor’s cash-on-cash return for the property equals 51.9% after the deal closes. 

It is essential to remember that the cash-on-cash formula is not a promised return. It is a forecast that investors can use to take a look at future cash distributions, making it an estimate of what one can expect to receive over the life of the investment.

This principle applies to other investments that involve cash transactions. As long as you remove the initial payment to acquire items from the figures to focus on what you put into it only, then you’ll have a better idea of what to expect when it is time to implement your exit strategy.

How to Have Financial Success While in Your Twenties

When you reach your twenties, life seems to open up for you. Whether you choose to go to college or pursue a career right away, the freedom and opportunities that come with it can be exhilarating. But you need to know how to have financial success.

That’s why you need to take care of yourself physically during this time. You need to have the energy necessary to go on all of those adventures! The products from Irwin Naturals, Jarrow Labs, and Vital Nutrients can help you to redefine success in personal wellness.

This attitude must also apply to your finances.

Best Things You Can Do to Take Control of Your Finances

When you can make a financial plan for yourself early, then your future can be brighter. The habits that you build now will help you to achieve long-term success. 

1. Establish a Budget

Knowing how to slice up your income into manageable chunks can reduce impulse spending. It is essential to create definitions for your wants, needs, and dreams. Make sure that you have enough available to manage your daily and monthly recurring expenses.

2. Get Insurance

If something unexpected happens, it can be a devastating experience for your finances in your twenties. Having a policy, whether you rent or own, can help you recover quickly so that life can move on without as much difficulty.

3. Follow a Debt Repayment Plan

Student loans are a reality for many young people in their twenties. Make sure that you have a repayment plan in place that your finances can follow. Then avoid credit card debt whenever possible, even if that means you rein in your spending.

4. Create an Emergency Fund

Having insurance will cover most of your financial needs in an emergency. Having money stashed into a savings account that can supply a month’s worth of your basic needs is also essential to have. If you own a home, having your water heater go out can be a $1,500 expense. If you need a new furnace, that could be $5,000.

5. Save for Your Retirement

Retirement might seem like a long way away, but it will eventually catch up to you. Saving early for it allows you to compound interest, dividends, and earnings to amass enough cash so that you can retire comfortably. Follow these investment newsletters to learn more about investing the right way.

Keep all of your financial information secured in a safe place. Then be proactive about following these ideas so that you can have how to have financial success in your twenties.

How to Determine Your Home Buying Budget

How much house do you think your family can afford?

Houses are typically the most significant purchases that a family makes. Figuring out how much you can afford is one of the first steps toward a home buying budget.

If you follow these steps, then you can get an approximation of how much house you can afford right now.

Step #1: Know Your Monthly Income

Start your budget by determining how much you, your partner, or another co-buyer earns each month. Unless there are specific reasons why you shouldn’t include them, all revenue streams like investment profits and alimony should go into this figure.

Step #2: List Your Costs

Now you will want to make a list of your total housing costs. This figure should include property taxes, insurance policies, and the estimated mortgage interest rate that you will pay. Most families pursue a 30-year mortgage, but there are different lending products available. A shorter loan will result in a larger monthly payment, but smaller interest payments and better rates.

You’ll want to make sure that your total down payment gets figured into this rate.

Step #3: Tally Your Expenses

This part of your budget is the money that goes out to other creditors each month. You must be accurate about how much you’re spending because this will dictate the amount of house that you can reasonably afford.

Additional Steps to Take for Your Home Buying Budget

Maximizing your income to buy your dream house is the worst decision you can make. There must be enough room in your budget to manage unexpected expenses, emergencies, and still save something for your retirement.

That means most families should not be spending more than 28% of their gross monthly income on housing expenses. You should also not have more than 36% of your income already claimed by debt of some type. That means student loans and car payments can impact the amount of house you can afford.

Depending on where you live, your income levels might cover a mortgage or cause you to fall short. Even if a lender is willing to write a loan that takes up a significant portion of your wages, it may not be in your best interest to pursue a house. Work on raising your credit score, improve your debt-to-income ratio, and save up for a down payment of 20% if possible.

When you can follow these steps, then your home buying budget will be easier to implement.

6 Best Investment Newsletters to Follow in 2020

Investments are an essential component of modern financial planning. Interest rates for a savings account are well below 2% in most markets, which means your money loses its value if it stays in that account.

It can be scary to start using stocks, bonds, mutual funds, and other investment vehicles to grow your net worth. That’s why following these newsletters in 2020 can be so helpful. You’ll receive information and advice that can help you take your financial planning to the next level.

1. The Motley Fool

This newsletter provides accurate stock picks to help your finances grow. The 2018 version of their content saw 57% growth in their choices, and their ideas have outperformed the market by almost 40% by the end of 2019. If you’d followed this newsletter since its creation, your net worth would be up over 350%.

2. Tim Sykes Penny Stocks Alert

This newsletter watches the low-cost stocks found on the market while tracing day-trading activities. A small fee allows you to follow the same trades so that you can start growing your wealth in the same way. It’s a daily update that comes directly to your inbox.

3. Jim Cramer Action Alerts

This newsletter includes a daily round-up of potential opportunities, including recommendations to buy or sell for any stock. The high-level analysis contains detailed information about a company, the action being taken, and why the decisions were made in the way they were. Then a weekly review occurs where Cramer discusses his portfolio.

4. Zacks Investment Research

This free newsletter resource gives you a daily morning summary of the market. You’ll receive relevant information about what the data means and what you could do next to let your portfolio start growing. It contains numerous links to additional content that covers mutual fund picks, ETFs, and top stock options.

5. Kiplinger’s Personal Finance

This monthly magazine covers more than the stock market. You’ll receive tips on how to purchase a vehicle, save for retirement, or secure a mortgage. Topics include bond investing, credit cards, and more. Although it isn’t a free resource, it is just $1 per issue when you sign up for the entire year.

6. Stansberry Research

This newsletter offers research data for people who like to self-manage their portfolios. You’ll receive ideas that come from all over the world so that your wealth has real opportunities to start growing.

Money doesn’t grow on trees. It won’t multiply if you keep it sitting in a savings account. Take the time to follow the best investment newsletters this year so that you can create real opportunities for your net worth

How Building Business Credit Without a Personal Guarantee Works

Small business owners find themselves forced into a situation where they must provide a personal guarantee to receive financing. Lenders want to have this promise because it reduces their risk, but that action causes companies to pay more for the credit they need.

If the business fails, then the lender can come after the person who made the guarantee to recoup the losses.

Since many small businesses operate as sole proprietorships, a personal guarantee is already part of the credit application. Owners in this situation already have their individual and corporate assets intertwined.

If business credit is desired without a personal guarantee, then three specific steps must occur for building business credit without a personal guarantee to be viable.

How to Get Business Credit Without Individual Guarantees

Lenders are already hesitant to extend credit to new businesses. Finding an option with zero ties to personal assets will take some time and planning to accomplish.

That journey begins by implementing these steps as soon as possible. Then you can work to improve the financial reputation of the business in question.

1. Incorporate The Business

A business must be kept separate from individual assets to generate an offer without a personal guarantee. That means it must go through the incorporation process or become an LLC. Partnerships and sole proprietorships see the issuance of a business credit card like a personal loan. By filing for this structure, the company will become more like its own individual.

2. Build The Company’s Credit Score

Do you remember what it was like to try to get credit when you were young? Businesses go through this same process. The company must establish a record of repaying its obligations. That means the owners must apply for credit cards, third-party guaranteed lending, SBA loans, or store-based lines-of-credit to create evidence of responsibility.

3. Pay Bills on Time, Every Time

Creditors want to see that a business has the reputation of paying its bills before they will move away from the idea of a personal guarantee. That means the company might pay a higher interest rate on the loans or credit it receives for the first 12-36 months of existence to establish this record. This will be especially important if the economy makes a downturn into a recession and you see existing and new business slow.

Building business credit without a personal guarantee gets easier over time. If you focus on improving your Dun and Bradstreet score now, then the higher credibility levels you’ll need in the future will develop so that your company can secure an excellent lending product with a fantastic rate.

How to Establish Realistic Business Aspirations

Business aspirations are something that leadership teams around the world must leverage as a way to inspire themselves and others. This action involves setting goals that push the mission and vision of the company to become better than they are in the present.

The idea of pursuing business aspirations is that you’re going to start reaching for the stars. What gets in the way is the foundation from where the leadership team begins.

If the C-Suite wants to decentralize their role in making decisions, then a structure where these executives must make every final choice will never turn intentions into reality. That’s why a realistic approach to these goals must take place.

How to Set Reasonable Corporate Goals

Companies pursue their business aspirations every day. The firms that know how to set reasonable corporate goals are going to be the ones that see the most success.

It isn’t a secret that successful companies follow best practices that help to set the stage fir where anything becomes possible.

1. Make Each Goal as Specific as Possible

Business goals cannot be vague if you want growth. You must define an end goal, and then create a map of how to reach that eventual outcome. Create specific items to accomplish at each checkpoint.

2. Commit to the Goal-Setting Process.

Business aspirations fail when they only receive lip service. The entire company must commit to the process, staying motivated through each checkpoint until reaching the final destination. There must be a way to restrict procrastination and second-guessing choices to prevent delays from happening.

3. Go Public With Each Goal

It is easier to reach goals when there is a measure of accountability built into the aspirational structure. Invite individuals, teams, or other organizations to participate or audit the existing plans to determine if new best practices are possible. Then take the outside feedback received seriously to improve the quality of the work performed.

4. Set Firm Deadlines

When companies refuse to set deadlines, then the goals they attempt to reach almost always fail. Unless a specific date is in place that draws a line in the sand, the indication is that the business isn’t 100% committed to the stated outcome. This step puts the aspirations into their correct context.

When a company reaches a checkpoint successfully, then it should reward everyone in some way. This final step will help keep people engaged so that it is easier to keep pushing forward to the overall business aspirations.