What to Know About Bitcoin as It Approaches $70,000

What to Know About Bitcoin as It Approaches $70,000

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

Bitcoin is trading near all-time highs: The cryptocurrency crossed a record $68,000 this week before dropping slightly lower. It was the latest record high in what can now be considered a tear — the currency also crossed the $60,000 threshold in October, a figure it also hit in spring 2021.

Money is pouring into bitcoin as of late, according to data released Monday by digital asset manager CoinShares. Inflows into bitcoin hit a record $6.4 billion so far for 2021, CoinShares data shows, and $2.8 billion has flowed into bitcoin during the cryptocurrency’s latest eight-week bull run.

It’s not entirely clear what’s driving this latest rally, although volatile price swings are relatively common among bitcoin and other cryptocurrencies. Bitcoin is up about 130% year-to-date.

Investing in cryptocurrencies is somewhat controversial among big-name investors and business leaders. For example, JPMorgan Chase chairman and CEO Jamie Dimon is not a fan. “I personally think that bitcoin is worthless,” he said during an Institute of International Finance event in October.

Conversely, Tim Cook, Apple chief executive, said during the New York Times DealBook Online Summit on Tuesday that he has bought cryptocurrencies. “I think it’s reasonable to own it as part of a diversified portfolio.”

What is bitcoin, and should you invest now?

Bitcoin is a decentralized form of payment intended to eliminate the need for intermediaries like banks and governments. Unlike fiat money (like the U.S. dollars in your bank account) that is government-backed and regulated, bitcoin is powered by a combination of peer-to-peer technology and software-driven cryptography to create a currency backed by code.

Bitcoin is just one of many cryptocurrencies, though it’s by far the largest. Other prominent cryptocurrencies include ethereum and solana. There are also dog-themed cryptocurrencies, including dogecoin and shiba inu, the latter of which saw a massive surge in October 2021, which many attributed to tweets from Tesla CEO Elon Musk. Shiba inu coin is up about 72,000,000% in value over the past year as of press time.

Cryptocurrencies can be purchased from online crypto exchanges, such as Coinbase and Gemini, or through select online brokers, like SoFi and Robinhood. In addition, some cash and payment apps, including Venmo and CashApp, also offer access to a limited selection of cryptocurrencies.

Whether you should invest in bitcoin and other cryptocurrencies depends on your financial situation. One rule of thumb when it comes to alternative investments like this is to ensure they comprise only a small percentage of your overall portfolio, with the bulk of your investments diversified through more traditional assets, like mutual funds.

The author owned bitcoin at the time of publication. NerdWallet is not recommending or advising readers to buy or sell bitcoin or any other cryptocurrency.

Sally French writes for NerdWallet. Email: sfrench@nerdwallet.com. Twitter: @SAFmedia.

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The 5 Worst Investment Tips on TikTok

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

Do-it-yourself is fine when the stakes are low; everything you need to know about patching drywall is on TikTok. But what about when the stakes are high? Would you rewire your home after watching a few TikTok videos? Probably not, and the same logic goes for financial advice.

Pouring your savings into an investment — or any product — being hawked on social media is generally a bad idea. But how will you know which bits of advice are legitimate, and which are bunk? Below, experts weigh in on the worst investment advice they’ve seen recently on TikTok and other social media.

1. The FIRE movement is for everyone

FIRE stands for “financial independence, retire early,” and given how the movement has spread on social media, the acronym is apt. Chris Woods, a certified financial planner and founder of LifePoint Financial Group in Alexandria, Virginia, says that many of the core tenets of the FIRE movement are great: They focus on lowering your expenses, saving heavily, putting money into diversified index funds and generating multiple streams of income to help you retire early, which may all be sound financial decisions.

The problem is, everyone’s financial situation is different. Financial planners spend a lot of time upfront learning as much as they can about someone’s unique financial standing before making any recommendations. And for some, he says, the FIRE movement may be an appropriate goal. But it’s not for everyone, and sound bites from social media influencers can’t take your personal situation into consideration.

“So many people will do what these influencers are saying, even if it’s not the appropriate thing for them,” Woods says. “That’s one of my big overarching disappointments or gripes with the influencers out there. Because a lot of times, they’re talking about this stuff without context.”

The next time you see someone living their best #vanlife and boasting how they retired at 30, remember you’re seeing a highlight reel, Woods says. Their financial situation may have been completely different from yours, and there’s no guarantee what worked for them is right for you.

2. Forget about 401(k)s and IRAs

There’s a thought out there that boring, long-established wealth-building strategies, such as funding retirement accounts like 401(k)s and IRAs, are outdated.

“This is all so faulty and so bad I don’t know where to start,” says Tiffany Kent, a CFP and portfolio manager at Wealth Engagement LLC in Atlanta.

Kent says that to stand out on social media, someone can’t just talk about typical retirement accounts over and over again, no matter how proven they are. Boring doesn’t inspire viewers to smash that “like” button.

Instead, they talk up new, complicated — and at times confusing — products, simply to stand out from the crowd. Sometimes the ideas are a bit contrarian, other times they’re outright outlandish. But this approach, Kent says, is absolutely the wrong way to get financial advice.

“If it’s boring, it’s good,” Kent says.

3. Precious metals are the best long-term play

Gene McManus, a CFP, certified public accountant and managing partner at AP Wealth Management in Augusta, Georgia, said by email that he’s seen claims that precious metals IRAs (which invest in gold and silver instead of stocks and bonds) are a better choice than typical IRAs.

He said acolytes of the strategy argue that precious metals IRAs better protect your money from things like inflation, global supply shortages or a collapse of the financial markets.

But McManus disagrees.

“The long-term history and performance of gold and silver do not indicate that they are a rewarding asset class,” he said. “There are short-term periods that they might outperform the S&P 500, but over the long term, they don’t make sense to own, especially exclusively or overweight in a portfolio.”

4. Hundreds of thousands of people can’t be wrong

It’s true that there’s power in numbers. However, it’s equally fair to say that mob mentality, echo chambers and hype can get in the way of rational decision making. Anthony Trias, a CFP and principal at Stonebridge Financial Group in San Rafael, California, says he’s worked with clients who are investing in stocks they’ve heard mentioned on social media — no matter how staggering the claims of future potential — because of how many people were talking them up.

“There are going to be 300,000 people on social media saying one thing,” Trias says. “But prudent investors block out the noise, do their due diligence and look at who they’re actually listening to.”

Trias also echoes Woods’ concerns. Validating investment ideas based on social media hype is problematic, he says, because investment decisions should be highly tailored to you and your needs — and that’s just not possible on social media.

5. Your cryptocurrency will absolutely go to the moon

All the rocket emoji in the world couldn’t give a valueless cryptocurrency long-term staying power, no matter who’s pumping it.

Clayton Moore, founder and CEO at crypto-payment system NetCents Technology, said by email that while engaging platforms like TikTok have been instrumental in spreading the word about cryptocurrencies, they’ve also become breeding grounds for fraud.

“You’ve got to watch out for the crypto influencer who’s just in it for a quick buck,” he said. “The classic pump and dump.”

Moore said it’s common for crypto influencers to accept payment in exchange for making wild claims about a coin, only to abandon their support for it once the check clears.

“If it is too good to be true, 99% of the time, it is,” Moore said.

Chris Davis writes for NerdWallet. Email: cdavis@nerdwallet.com.

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If Doing Less Means Saving More, Try These 5 Money Moves

The coronavirus has upended countless jobs, schools and bank accounts. But while undoubtedly more people are struggling than not, those who are still working may have seen their expenses actually drop, due to canceled travel, limited dining options and more time at home.

If you’ve managed to end up with extra money during the pandemic, here’s how to take advantage of those savings.

1. Start or fill out an emergency fund

2020 has served as a stark reminder that unexpected things can happen, and when they do, it’s a good idea to be prepared.

“We say if you have a steady job, your contingency fund should be three to six months of expenses,” says Tara Unverzagt, certified financial planner and founder of South Bay Financial Partners in Torrance, California. “I would bulk it up even more because of uncertainty. I’ve never known anyone to be upset because they had too much cash, but have known lots of people who were upset they didn’t have enough.”

That level of savings is a stretch goal for many people; an extended period of reduced expenses may provide you with the opportunity to finally reach it. Establishing an emergency fund is one of the best things you can do for your future self, and if you put it in a high-yield online savings account, it will benefit from a higher interest rate than a regular savings account.

You don’t want to invest your emergency fund because your primary goal for that money is accessibility, not growth. The stock market goes up and down, and there’s a real risk that it could go down just when you need the money. At best, that could mean having to sell your investments at a loss to pull cash out. At worst, it could mean your money won’t be there when you need it most.

2. Invest for retirement

If you haven’t ventured into the world of investing yet, it may feel like a scary time to start given all the volatility in the market lately. The good news is that volatility doesn’t cause much harm when you’re investing for a long-term goal like retirement: The peaks and valleys due to the coronavirus will likely appear much smaller over time.

If you haven’t started investing, there are two easy jumping-off points: your employer’s 401(k) if it offers one and an IRA. Both are accounts that can help you invest for retirement with some tax benefits. Roth IRAs, for instance, allow your money to grow and be taken out in retirement tax-free.

Even if you’re already contributing to a 401(k) or an IRA, you may want to consider upping that contribution. Every extra bit you can put toward retirement goes a long way. Let’s say your reduced expenses mean you can save an extra $500 a month over the next year. If you have 30 years until retirement and you earn a 6% return, that $6,000 you invest could add over $34,000 to your retirement balance — a significant boost.

And because you can always change how much you’re contributing, you can decrease the amount you’re putting toward retirement if and when your spending habits return to normal.

3. Save for nonretirement goals

Retirement is a common goal, but it likely isn’t the only one you have. If you’re on track for retirement, consider putting extra funds toward other things: college for your kids, a new car or a dream vacation (which you’ll have plenty of time to save for, since most people aren’t traveling right now).

Investing can help you achieve those goals faster than just saving, but keep in mind that you generally don’t want to invest money you’ll need within five years. (Like an emergency fund, savings for near-term goals should go into safer options, like a high-yield savings account). On the other hand, if you’re starting a college fund for a newborn, that money will have approximately 18 years to take advantage of the market’s returns.

If you’ve found yourself in a position of privilege during this global pandemic and have been able to save some extra money, you may also want to consider increasing your charitable contributions. Keep in mind, you may be able to deduct your charitable donations when tax time rolls around.

4. Explore real estate investments

If you’re interested in investing in real estate, you don’t have to start renovating an old barn or putting up shiplap. One of the easiest ways to invest in real estate is to invest in real estate investment trusts. REITs are companies that own (and sometimes operate) real estate that generates income, such as apartment buildings. Publicly traded REITs are bought and sold on exchanges, just like stocks, and have similar liquidity, meaning you can sell them with relative ease.

5. Get some help

When you suddenly find yourself with extra money, it can be difficult to figure out the best way to put it to use. Financial advice is widely available these days, and it’s often inexpensive. Online financial advisors and robo-advisors have brought the cost of investment management and financial planning down significantly, and both are good options for when you’re feeling lost.

These advisors can also help you stay hands-off with your portfolio during turbulent times in the market by ensuring that your investments are aligned with your risk tolerance. Robo-advisors offer investment management and typically charge between 0.25% and 0.50% of your assets per year. If you need assistance developing a more comprehensive financial plan in addition to investment management, it may be a good idea to enlist the help of a financial advisor.

Alana Benson is a writer at NerdWallet. Email: abenson@nerdwallet.com.

The article If Doing Less Means Saving More, Try These 5 Money Moves originally appeared on NerdWallet.

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How to Pay Rent When You Can’t Afford It

After Megan Pearson’s job as a restaurant server was put on hold because of COVID-19-related stay-at-home orders, the single mom had to figure out how to come up with the rent for her apartment in Brooklyn, New York.

“I posted my frustration on Facebook with trying to get through to unemployment the first week,” Pearson says. “I probably made 200 phone calls before I got it all settled.”

Uncertain whether assistance would arrive on time or at all, Pearson took action, reluctantly creating a crowdfunding account at the encouragement of a friend who’d seen her social media post. This move bought Pearson some time and ultimately allowed her to stay in her apartment without having to take on expensive debt.

If you, too, are dealing with an emergency and scrambling to make rent, consider some of the following steps first before resorting to high-interest loans.

Explore free options first

Some states have issued eviction moratoriums during the COVID-19 crisis, but you’re still responsible for paying rent. So the first step is to reevaluate your budget and “find” money where you can.

Cut back on nonessential expenses, lower 401(k) contributions, reach out to creditors for assistance and seek low-income programs for food and utilities, suggests Jeffrey Arevalo, a financial wellness expert with GreenPath, a nonprofit credit counseling agency.

Here are some options that cost nothing or close to it:

  • Take the help you can get. Applying for unemployment or other assistance programs may take time, but it can certainly be worth it. Pearson expects she’ll cover future rent payments with unemployment and coronavirus stimulus money.
  • Talk to your landlord. Explain your situation and ask for more time until a check arrives. You could also request an installment plan or waived late fees. Your landlord might be willing to help, especially if you have a history of paying on time. “It’s worth a shot,” says Arevalo, who notes he’s worked with clients who’ve had success with this step. Whatever terms are negotiated, get them in writing.
  • Call 211. Local nonprofits and religious organizations may offer rental assistance. United Way helps access those services upon calling 211. Note, however, that resources may be limited during national emergencies.
  • Apply for grants in your industry. Associations are raising money for people displaced from jobs in their industries due to COVID-19. Pearson applied for a grant from the Restaurant Strong Fund, which helps restaurant workers affected by COVID-19 closures, though she has not yet heard back.
  • Ask for help from family or friends. Loved ones — and strangers with steady income, for that matter — might be willing to help. Pearson raised $3,995 toward rent and essential expenses via the GoFundMe crowdfunding platform. “If you don’t ask, no one knows you need it,” Pearson says. If you’re not comfortable with crowdfunding, you could also ask family members for a loan.
  • Modify living arrangements. If your lease permits, consider subletting your apartment or a room. Or move in with a loved one and help each other by divvying up rent costs. Of course, moving may come with its own expenses, and if you’re under contract, you’ll have to weigh the cost of breaking your lease. Again, talk to your landlord to see what’s negotiable.
  • Seek professional advice. A credit counselor can review your finances for potential savings toward rent. Currently, GreenPath Financial Wellness is offering free phone-based financial counseling during the pandemic.

Lean on investments

Typically, it isn’t advisable to dip into money that’s meant for your future, but these aren’t typical times. When an emergency threatens to evict you — here and now, in the present — the normal “rules” don’t always apply.

If you have a taxable brokerage account, you could consider selling stocks. Otherwise, the next potential option might be a withdrawal from a 401(k) or individual retirement account, says Andrew Rosen, financial advisor and partner at Diversified, a financial planning firm. Again, raiding your retirement funds is not ideal, but in a crisis it may be necessary — and you may be able to mitigate the financial repercussions.

Under the Coronavirus Aid, Relief and Economic Security Act, for example, those under age 59½ years impacted physically or financially by COVID-19 can withdraw up to $100,000 from an eligible 401(k) or IRA through Dec. 31, 2020, without the usual 10% early withdrawal penalty. The tax bill is spread over the next three years, and you can claim a tax refund if you pay it back before that time. If you’ve lost your job, roll over your 401(k) to an IRA and then make a withdrawal, Rosen suggests.

The CARES Act also lets qualifying 401(k) plan participants borrow 100% of their vested balance up to $100,000 as a loan. And in emergencies unrelated to COVID-19, a loan on a 401(k) — if available through your employer — avoids penalties, taxes and a credit check.

Still, think hard before going this route. If you are truly drowning in debt and rent is just one of many financial obligations you’re unable to meet, you may want to consider other options.

“Most people don’t realize that generally speaking, your retirement accounts are protected in a bankruptcy,” Rosen says.

Choose the least expensive high-interest debt

You could look to finance some of your expenses to help cover rent by, say, opening up a low-interest credit card. But without sufficient income or good credit (typically a FICO score of at least 690), you may be left with only high-interest financing options. Consider the following, in order from least to most expensive:

  • Borrow against your existing credit card’s limit. Targeted offers like the Citi Flex Loan and My Chase Loan let you borrow against your card’s credit limit with a fixed interest rate and term. The money is deposited into a bank account without the need for a credit check or origination fee.
  • Pay rent with your credit card. Some services facilitate rent payments with a credit card, for a price. Plastiq, for instance, will let you charge your rent to your card and will then cut your landlord a check on your behalf, in exchange for a 2.5% processing fee. Weigh the costs of that fee before going this route, and be aware that if you can’t pay it back in full within a billing cycle, you’ll incur interest on the rent payment at whatever APR your card charges.
  • Among your last resorts, consider a cash advance. A cash advance can offer quick cash up to the amount of your available limit, but you’ll pay dearly for it in the form of a steep fee and an interest rate that starts accruing the moment you pull the cash from your bank or ATM. Cash advances could also negatively impact your credit by increasing your credit utilization, a key factor in credit scores. Still, it’s a possibility if you need it, and it’s likely cheaper than turning to a payday loan, which may not be an option anyway if you are no longer collecting a paycheck.

The article How to Pay Rent When You Can’t Afford It originally appeared on NerdWallet.

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How to Keep Your Spirits Up in the Long Game of Saving

Dreaming of a savings goal is almost always fun — a sunny vacation, the perfect home, a dazzling holiday gift. But think about how long it can take to get there, and all that fun might fade away.

Even if you’re doing the right things, such as cutting your expenses or taking a part-time job for extra income, it can be discouraging when the finish line is far away. Here’s how to stay motivated until you reach it.

Automate your savings

If you plan to save a little bit each month for the next year or so, you can simplify the process by setting up automatic transfers from your checking account to your savings. You’ll be making deposits without extra effort.

This tactic helped Marissa Ryan, co-founder of a Chicago-based digital marketing agency, when she wanted to save $25,000 for her wedding within 18 months. Using direct deposit, she split her paycheck between two different accounts, one for her wedding fund and the other for daily expenses.

She says automation helped, because there were months she didn’t feel like making the effort. “Setting up automatic deposits took ‘me’ of the equation, so I didn’t have to worry about skipping a month,” Ryan says.

To boost your savings even more with minimal effort, put your money into a high-yield savings account or certificate of deposit, which can earn 20 times more than a traditional savings account.

Celebrate small wins

Say you want to save $5,000, and you’ve set aside $500. That’s a reason to celebrate, says Joseph Polakovic, owner of Castle West Financial LLC, a financial advisory firm in San Diego.

He explains that when you have a large financial goal, it helps to see it as a series of smaller targets that are easier to meet. When you reach these milestones, celebrating them  — with an inexpensive treat, for example — can help you stay motivated.

“You don’t get just one reward at the end. You give yourself several rewards along the way,” he says.

Look at the big picture. Literally.

While you don’t want to be overwhelmed by how far away a goal seems, reminders of the goal itself can be helpful. Once Ryan picked her perfect wedding venue, she downloaded a picture of it and used it as the background image on her phone’s home screen. “It made me feel good just to anticipate the place, and that kept me going,” she says.

Polakovic agrees that this is a good strategy. You could print a photo that represents your goal and place it where you see it every day, such as on the refrigerator or bathroom mirror, he says.

Take setbacks in stride

There will probably be stumbling blocks along the way. For Ryan, it was an unexpected $3,000 car repair bill. She says she used some of her wedding fund to pay it, but was determined to rebuild the balance as quickly as possible.

If you do have a savings shortfall, there are options for getting back on track, including increasing your income. Ryan says she took on extra freelance work in order to replenish her fund.

Be accountable

Find a friend or family member who you can update on your progress. Scott Perry of Raleigh, North Carolina, says he and his wife held each other accountable when they decided to pay off $60,000 in student loans early. They made a plan to live below their means and earn extra income with side hustles. When surprise money came their way, say from a gift or job bonus, they’d use some of it to pay down loan principal, in addition to building up an emergency fund.

“There were times we would have rather gone out to eat on weekends instead of cooking at home to save money,” he says, but together, they resisted these urges. With a little time and patience, Perry says, they were able to cut their loan repayment period nearly in half, writing the last check a little more than five years after they started making payments.

Your savings goal can sometimes seem like a faraway dream. But keep plugging away, and it can eventually become a reality.

Margarette Burnette is a writer at NerdWallet. Email: mburnette@nerdwallet.com. Twitter: @Margarette.

The article How to Keep Your Spirits Up in the Long Game of Saving originally appeared on NerdWallet.

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Beware of These Overhyped Financial Strategies

A good rule of thumb when you’re trying to eat healthy is to beware of any food you see advertised. The most beneficial fare — whole grains, fruits, vegetables — tends not to have a marketing budget.

Similarly, investments that are enthusiastically pushed by commission-earning salespeople may not be the best for your financial health. Before you buy any of the following, you’d be smart to investigate lower-cost alternatives and to consult an objective, knowledgeable third party, such as a fee-only financial planner.

Equity-indexed annuities

Equity-indexed annuities are insurance products that base their returns on stock market benchmarks. They’re often promoted as a way to benefit from stock market gains while being protected from losses.

But the contracts typically limit how much investors get when the stock market rises, says certified financial planner Anthony Jones of Groveport, Ohio. Two clients, who had purchased equity-indexed annuities before joining his firm, received only a fraction of last year’s 30% increase (as measured by the Standard & Poor’s 500 benchmark).

“They expected bigger returns in 2019 and were very disappointed,” Jones says. “They each had less than a 3% return.”

Equity-indexed annuities typically come with high commissions and surrender charges that can make it expensive to get your money out, says CFP Scott A. Bishop of Houston. The contracts can be extremely complex, and many buyers don’t understand what they’re getting, he says.

“They are not necessarily bad products, but they are really more like bond alternatives than stock alternatives,” Bishop says.

Reverse mortgages

Reverse mortgages allow homeowners 62 and older to convert some of their home equity into a lump sum, a series of monthly checks or a line of credit. Borrowers don’t have to make payments on the loan, which doesn’t have to be paid back until they die, sell or move.

But borrowers don’t always realize that their debt is accruing monthly interest. The amount they owe may grow so high they no longer have any equity in their homes, says Barbara Jones, an attorney with the AARP Foundation.

Reverse mortgages typically aren’t a good fit for people who may need to rely on their equity for future expenses, such as medical bills or nursing home care. Reverse mortgages could be a way to avoid foreclosure if a homeowner can’t afford to make payments on a regular mortgage, Jones says. There may be no equity left for their heirs, “but at least the person gets to age in place,” Jones says.

Non-traded real estate investment trusts

Real estate investment trusts allow people to invest in commercial real estate without having to buy and manage the properties themselves. Most REITs are publicly traded, so it’s easy to buy and sell them.

Non-traded REITs also invest in real estate but are designed to reduce or eliminate taxes. The trade-off is that your money could be locked up for years. Also, non-traded REITS tend to have high upfront fees that reduce the return on your investment.

“Non-traded REITs make my heart sink when I see them in a new client’s portfolio,” says CFP Jonathan P. Bednar of Knoxville, Tennessee. “These are very complex products, with high fees, and oftentimes not the greatest-quality underlying holding.”

Bednar prefers that clients own investments they can easily sell if needed, such as an exchange-traded fund that invests in real estate.

Cash-value life insurance

Cash-value life insurance combines a death benefit with an investment component. (Whole life, universal life and variable life policies are all types of cash-value life insurance.) Sometimes the policies are promoted as a tax-efficient way to invest for high earners who have maxed out their other retirement savings options, says CFP Alex Caswell of San Francisco.

But the premiums aren’t deductible, and the policies tend to have high costs, Caswell says. Many investors have better alternatives, such as using a tax-efficient investment strategy in a regular brokerage account, he says.

Also, premiums for cash-value policies tend to be much higher than premiums for the same amount of term insurance, which has a death benefit but no investment component. The higher premiums can lead buyers to skimp on coverage or to drop the policy because it’s too expensive. And sometimes policies are sold to people who don’t need life insurance at all, such as single people with no financial dependents, says CFP Tess Zigo of Lisle, Illinois.

Zigo says the higher commissions paid by cash-value policies can lead insurance agents to recommend them even when there are better alternatives.

“If all you have is a hammer, everything looks like a nail,” Zigo says.

This article was written by NerdWallet and was originally published by the Associated Press.

Liz Weston is a writer at NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

The article Beware of These Overhyped Financial Strategies originally appeared on NerdWallet.

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Be Your Financial Valentine

Valentine’s Day: a day to celebrate your partner or a day to celebrate yourself. And while it may not sound romantic, this time of year is also an opportunity to show your finances some love.

Whether you’re single or in a relationship, build toward your future by defining your goals, budgeting for splurges and getting started with investing.

Know your goals

Setting a goal is the first step in any kind of money decision. After all, money is just the means to live the life you want.

If you’re single: This is the fun part: Grab a glass of something you like and write down goals, whether it’s going on a dream vacation, buying a new car or maybe pursuing the business idea you’ve been chewing on forever. Don’t second-guess your ideas — having them all in front of you will help you prioritize the goals you truly value.

If you’re paired up: Turn this into a date night and work on shared goals together, says Angela Moore, a certified financial planner at Modern Money Advisor in Miami.

Moore suggests asking each other basic money questions over dinner. To prevent a fight, stay open to hearing your partner’s way of doing things, she says.

She recommends open-ended questions like:

  • “What do you feel you’re really good at with money?”
  • “What do you think you can work on?”
  • “What are your dreams for the future?”

Once you have a list of goals, estimate how much it will cost to achieve them and how long each will take. Print out the list and pin it up to track your progress.

Make a budget

Prioritizing your goals in the first step allows you to create a budget that matches your spending to your values. “Focus on the things that bring you great joy,” Moore says.

The 50/30/20 budget is a good way to divvy up your money: 50% goes to needs like housing and utilities, 30% goes to wants like your coffee habit or eating out, and 20% goes to savings and debt repayment.

If you’re single: Knowing what you value means you can cut spending in other areas. At the same time, the “wants” category lets you stick to a realistic budget so you don’t feel like you have to give up on splurges.

If you’re paired up: You’re probably aware of whether you and your partner have different spending and saving styles. Use your strengths and weaknesses to hold each other accountable to the budget, Moore says. Spenders and savers can draw inspiration from each other, for example.

Whether you have separate or combined accounts, you can agree to each have some money to spend as you wish (like on a Valentine’s Day treat for your partner). The key is to have an open dialogue about it, Moore says.

Invest in your goals

Once you know your goals and what it will take to achieve them, figure out your “investment strategy.” This just means how quickly you want your money to grow for your goals.

A quick heads-up: Investing for goals isn’t the same as saving for retirement. Make sure you have retirement savings in place first; check whether your workplace offers a retirement account and company match. “The most important thing is to just get started. Time is one of the most important factors when it comes to compounding your initial contributions into significant wealth,” says Eric Roberge, a certified financial planner at Beyond Your Hammock in Boston.

If you’re single: Investing doesn’t have to be scary or mysterious. Robo-advisors have made it easy to get started even with small amounts of money. You can answer a few questions to set your risk tolerance and invest your money accordingly.

“When you’re just getting started, keep it simple. Stick to things you can understand and are relatively safe and reliable rather than trying to shoot for the moon,” Roberge says.

Low-cost index funds and exchange-traded funds are two good options for millennials in particular, Moore says.

If you’re paired up: How you manage investments depends on your equation as a couple and both your incomes. You could invest together equally or in proportion to your income. One of you might also be more inclined to organize money matters.

“Even if one person takes the lead, the other should check in along the way to see how the money’s grown,” says Rebecca Provder, a matrimonial attorney and partner at Moses & Singer in New York City.

This article was written by NerdWallet and was originally published by The Associated Press. 

Amrita Jayakumar is a writer at NerdWallet. Email: ajayakumar@nerdwallet.com. Twitter: @ajbombay.

The article Be Your Financial Valentine originally appeared on NerdWallet.

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Let a Playlist Help You Make Good Money Moves

Next time you’re looking for financial advice, ignore your opinionated uncle and turn on Spotify.

Over the decades, many pop stars, and rock, country and rap artists have offered catchy advice that can remind you to stick to your personal finance goals. Below, we rank some of the best:

1. ‘Diversify your bonds’ —Wu-Tang Clan

Made famous by the “Wu-Tang Financial” sketch on “Chappelle’s Show,” this line gives some sage advice: Diversification is one of the most important aspects of investing.

If you invest all your money into a single stock or bond and that investment loses its value, you’ll be out some serious cash. When you diversify, you spread your money across not just different types of investments — like stocks and bonds — but also across investments from various industries and geographic locations. Diversifying is one of the best ways to safeguard your investment portfolio against risk.

If you’re not sure how to diversify your assets or would like some help, think about using a robo-advisor. Robo-advisors are automated investing services that help you choose investments and manage your portfolio. They’re cheaper than human financial advisors, and you don’t have to worry about managing your investments yourself.

2. ‘Floss a lil’, invest up in a mutual fund’ —Busta Rhymes

One way to diversify your portfolio is through mutual funds. Unlike stocks, which are investments in a single company, mutual funds are portfolios of investments — one mutual fund might hold hundreds of different stocks or bonds. Mutual funds can help investors quickly and easily diversify their portfolio and avoid having to pick individual stocks themselves.

You will pay an annual fee to invest in a mutual fund, but there are ways to cut costs. One is choosing an inexpensive type of mutual fund called an index fund, which invests in an entire stock market index — for example, the S&P 500.

3. ‘If they can’t raise my interest then I have to let them be’ —Madonna

Preach, Madonna. If your precious cash is sitting in a traditional brick-and-mortar savings account, it’s time to change it up: Think about opening a high-yield savings account. Many offer rates even a Material Girl would approve of: Currently, 1.60% or more, which is significantly higher than the national average savings account rate of 0.09%. Cash management accounts, which are offered by investment firms like online brokers and robo-advisors, are similar to savings accounts and also offer high interest rates.

4. ‘Grab that cash with both hands and make a stash’ —Pink Floyd

This may be obvious (and easier to do when you’re ultra-famous), but Pink Floyd has a point. Making money and putting it away is the basis of any saving or investment advice. From cutting your cable bill to making a budget to refinancing a loan, there are lots of ways to “grab that cash,” even when things feel tight.

Then you have to put that cash away. If you keep the money you save in your checking account, it may not stay saved for long. Having a dedicated savings or investment account can help you safeguard your money and keep yourself from spending it. Some employers even let you split your direct deposit between different accounts. If you can, arrange to have a portion of each paycheck go directly to savings.

5. ‘Lousy pay, there ain’t no 401(k), I know this may come as a shock, but this here’s a full-time job’ —Gretchen Wilson

Gretchen Wilson’s country ode to the trials of being a mother points out the obvious about unpaid work (often) performed by women: There’s no paycheck, and there are no benefits. Stay-at-home parents should treat the work they do like any other full-time job and think about saving for retirement. There may be no 401(k), but you can open a spousal IRA.

An IRA is a retirement account you open on your own. Because of the tax advantages, IRAs typically require contributors to have earned income; however, spousal IRAs allow you to contribute based on your spouse’s income, as long as you file taxes jointly and your spouse makes enough to cover your contribution. (Here’s more about spousal IRAs and how they work.) Single parents can contribute to IRAs as well, as long as they have earned income.

6. ‘Whoever said money can’t solve your problems must not have had enough money to solve ’em’ —Ariana Grande

Grande’s theory is partly true: Buying stuff you don’t need may not make you any happier, but having enough money for your needs (and at least some of your wants) alleviates stress and can help you achieve a better quality of life.

The key is to recognize what “enough” means to you so you’re not constantly striving for more. For most people, “enough” doesn’t mean a bigger house or a fancy car. It means having an emergency fund to fall back on, or not having to stress about retirement. That kind of financial security is a surefire way to buy yourself some happiness.

Alana Benson is a writer at NerdWallet. Email: abenson@nerdwallet.com.

The article Let a Playlist Help You Make Good Money Moves originally appeared on NerdWallet.

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5 Money Hacks Hiding in Your Wallet

Your wallet has a secret. Buried in your billfold, bound in a money clip, or stuffed in a pocket on your phone case are untapped benefits on credit and debit cards that could save you hundreds of dollars a year. Here are five money hacks hiding in plain sight.

1. Use a savings app

Build savings even as you spend money by linking your credit and debit cards to an app like Acorns or Digit. Acorns automatically rounds up your purchases to the nearest dollar and then adds the difference to your savings. Digit analyzes your spending and income and sets aside a little of your extra money for savings.  It’s like a tip jar by the register or a spare-change dish, but the money goes to your future.

2. Maximize your card benefits

Credit cards often come with valuable but easy-to-overlook benefits. According to a 2019 J.D. Power study, only 36% of cardholders understand the supplementary benefits on their cards.

“Consumers generally are probably not very knowledgeable about all of the features of their credit cards,” says John Cabell, director of wealth and lending management at J.D. Power and a lead researcher on the study. Money-saving card benefits “may not be clearly communicated or communicated proactively by the issuers.”

Among such benefits:

  • Travel perks. Cabell points to airline cards that offer free checked bags and airport lounge access, as well as cards that charge no foreign transaction fees. Several cards reimburse the application fee for TSA Precheck and Global Entry.
  • Cell phone insurance. Wells Fargo, U.S. Bank, Mastercard and other credit card companies offer cell phone coverage with certain cards when you pay your bill with the card.
  • Automatic credits. Some cards automatically reimburse you for things like travel expenses, rideshares, meal delivery or purchases at select merchants, up to a monthly or annual limit.

Read your credit card’s benefits guide to see what’s included. You might be surprised by how much you can save. A checked-bag benefit, for example, could save you $120 on a single round-trip with a companion. Getting cell phone coverage from your card could shave $9 to $15 a month off your wireless bill if you were previously paying for it through your carrier.

3. Use your rewards cards for everything

Some people have a habit of using credit cards only for “big” or “important” purchases while paying for smaller or everyday purchases with cash or debit. But every purchase that isn’t on a rewards card is money left on the table.

“I think if you pay your balance in full every month, it’s kind of silly not to have a rewards card because you’re getting something for nothing,” says Holly Johnson, who with her husband, Greg, runs the money-saving tips blog ClubThrifty.com.

Rewards cards essentially give you a discount on all your spending. Depending on the card, how its rewards are structured and where you use it, you’ll typically earn rewards equal to 1% to 6% of the purchase price. Even earning a paltry 1% on everything, a modest $100 in spending a week turns into more than $50 in rewards in a year.

4. Stack savings with a cash-back portal

Websites such as Rakuten (formerly Ebates) and BeFrugal pay you a percentage back on every qualified purchase from participating retailers. A Rakuten spokesperson, for example, says the average member earns 4% to 6% in cash back on purchases made through the site, which can add up to hundreds of dollars a year.

The trick is to get into the habit of checking the sites before you shop and to use them only for purchases you were going to make regardless.

“I am a big online shopper, and once I learned about Ebates a couple of years ago, I thought ‘Why would anyone not use a program like this?’ You’re ordering from the store anyway, so why not get cash back?” says Stacey Wallenstein, a parenting blogger at The Mint Chip Mama and mother of three from Plainview, New York. Wallenstein says she has saved more than $175 in 2019 just through Rakuten.

Use a rewards credit card on a cash-back site, and you’re multiplying your savings with zero extra effort.

5. Know your price protections

Here’s another good reason to keep your receipts: You might be able to get money back if something you bought goes on sale for less somewhere else. If your credit card has price protection, you can claim a refund of the difference if you submit proof of the lower price on an eligible item within a particular time period after your purchase. Don’t have price protection on your card? Several major retailers offer their own version if certain competitors offer the same item for less. Participating stores include Bed Bath & Beyond, Best Buy and Home Depot.

An earlier version of this article misstated how the Digit app works. It has been corrected.

The article 5 Money Hacks Hiding in Your Wallet originally appeared on NerdWallet.

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5 Financial Tasks You Should Tackle by Year-End

A task without a deadline is just wishful thinking.

Sometimes, you can get away with procrastinating. If you never get around to alphabetizing your spices, no one’s life will change. But putting off some tasks could have a huge impact on loved ones.

The close of the year is a good time to set some firm deadlines to make sure you won’t leave a financial mess for people you love if you unexpectedly die or become incapacitated. Consider putting these items on your to-do list with a Dec. 31 due date:

1. Check your beneficiaries

If you need convincing that updating beneficiaries is important, consider the case of David Egelhoff, a Washington state man who died two months after his divorce was final in 1994. Because he had not changed his beneficiaries, his life insurance proceeds and pension plan were paid to his ex-wife rather than his children from a previous marriage. The children sued, and the case went all the way to the U.S. Supreme Court, which ruled in 2001 that the beneficiary designations had to be honored.

You’re typically prompted to name beneficiaries when you sign up for a 401(k) or other retirement account. Beneficiaries also are usually required when you buy annuities or life insurance. You often can check and change beneficiaries online, or you may need to call the company to request the appropriate form.

2. Review pay-on-death resignations

You may not have been required to name beneficiaries when you opened your checking account or a non-retirement investment account. Instead, financial institutions may offer a “pay on death” option. This allows you to name a beneficiary who can receive the money directly. Otherwise, the account typically has to go through probate, the legal procedure to distribute your property after you die.

Some states also have “transfer on death” options for vehicles and even real estate. Like pay-on-death accounts, these options allow you to pass property directly to heirs without the potential delays and costs of probate.

Beneficiaries can be added to vehicle registrations in Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Illinois, Indiana, Kansas, Maryland, Missouri, Nebraska, Nevada, Ohio, Oklahoma, Texas, Vermont and Virginia, according to self-help legal site Nolo. To add or change a beneficiary, you apply for a certificate of car ownership with the beneficiary form.

Transfer-on-death deeds for real estate are available in Alaska, Arizona, Arkansas, California, Colorado, District of Columbia, Hawaii, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Virginia, Washington, West Virginia, Wisconsin and Wyoming, according to legal site RocketLawyer. To add or change a beneficiary, the deed must be submitted to the appropriate county recorder.

3. Update insurers — and your heirs

Insurers usually don’t pay out life insurance proceeds until someone files a claim. But far too often, heirs are unaware that the money exists. A Consumer Reports investigation in 2013 found about $1 billion in life insurance proceeds waiting to be claimed.

Updating your contact information with your insurer also may help prevent policies from lapsing. I just heard from a reader who lost her long-term care coverage because she’d moved, forgotten to tell her insurer and failed to notice she hadn’t been billed. Many insurers will allow you to name someone who can be notified if a payment is overdue or they can’t find you. You’ll want to keep the contact information for those back-up people updated with the company, as well.

4. Visit your safe deposit box

If you forget to pay your annual fee and your bank can’t find you, after a few years your safe deposit box will be drilled and the contents turned over to the state. Photos and documents could be destroyed and family heirlooms sold at auction. Visit your box once a year to make sure your payments and contact details are current. Leave clear instructions with your executor or your heirs about where to find the box and its keys.

5. Create or revise powers of attorney

Powers of attorney allow others to make financial and health care decisions for you if you become incapacitated. If you don’t have these documents, or the designated people have died or are otherwise unavailable, your loved ones may have to go to court to take over. The expense and delay can add trauma at an already difficult time. Spare everyone that pain by naming a backup person or two and reviewing the documents every year to make sure the people named can still serve.

This article was written by NerdWallet and was originally published by The Associated Press.

The article 5 Financial Tasks You Should Tackle by Year-End originally appeared on NerdWallet.

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