Make smarter decisions with your money today.
Thank yourself tomorrow.
Calculators and Tools
Do you currently have credit card debt? Use our calculator to figure out how much you should be paying each month, how long it will take to pay off and how much you'll end up losing to interest.
Your actual payment to the IRS can depend on thousands of factors, but this simple tool should give most people a pretty accurate estimate of how much of their money is straight to going to Uncle Sam.
Curious how much your savings can grow? Just tell us how much you have to invest and your time horizon and we'll show you what you can end up with.
The 3 most important factors that determine real estate prices: location, location and location. See how much housing costs where you live now, or where you'd like to live in the future.
Main Types of Investment Assets
One of the biggest reasons people don’t invest the money they have is the sheer number of different investment vehicles available and the complexities of each. It can be quite overwhelming, but the truth is most investors only need to know about a few of them. Let’s go over some of the most popular and easy to trade investments out there.
Stocks are the first thing that come to mind for most people when talking about investing. A stock is nothing more than a share of ownership of a company, hence the term ‘share‘ being synonymous with ‘stock’. A person that holds 1% of the shares of a company effectively owns 1% of that company and is entitled to 1% of that company’s profits, which is paid to shareholders in the form of dividends, usually on some regular schedule for consistently profitable companies. The real underlying value of ownership is that a shareholder has a claim to all future profits. It sounds obvious, but that’s a point many amateur investors overlook, so I’ll say it again, slightly differently. The underlying value of a stock is the present value of all future dividend payments. It’s easy to get caught up in a rising stock and to value it based only on the hunch that down the line someone will want to pay even more than you did to buy that stock from you, but don’t fall into that trap. Eventually markets will become rational and the market price of a stock will tend toward what analysts believe is the value of the company’s profit stream.
Bonds are nothing more than loans. When you buy a bond, you are making a loan to the writer of that bond. You are offered some predetermined interest rate for a specific amount of time on that loan, after which the loan must be repaid. While bonds are generally considered safer investments than stocks, they do carry a risk: there’s nothing stopping the company writing the bond from declaring bankruptcy and going out of business before it can pay the bondholders.
In fact, if you’ve ever heard the term ‘junk bond’, that’s exactly the case. Junk bonds are bonds issued by companies in very poor financial positions. They generally have to offer very high interest rates to get anyone to buy the bonds. If the company does end up succeeding, the bondholder gets a nice return on his or her investment from the high interest rate, but if the company fails it will likely never be able to repay the original value of the bond.
One last common type of corporate bond is a convertible bond. A convertible bond can be converted into common stock, generally at the bondholder’s discretion. This allows the issuing company to sell bonds with a lower interest rate by offering bondholders upside potential if the stock takes off and surpasses the face value of the bond.
It is worth noting that bondholders have a higher claim to the assets of a company than do regular shareholders. In the event a company is liquidated, all bondholders will be paid before any shareholders.
Municipal bonds can be issued by private or public sector organizations to raise funds for public projects. The primary advantage of municipal bonds is that many are federal and state income tax exempt. This is of particular value to high earning investors (i.e. investors in high tax brackets) and investors in states with high income tax rates. Investors in more tax-friendly states or in lower brackets may prefer to seek out higher interest rates from bonds that don’t get preferential tax treatment.
Treasury bonds are a lot like corporate bonds, except they’re issued by the United States Department of Treasury. Many consider this the closest thing to a risk-free asset. Even if the United States government finds itself in a dire financial situation, the treasury department has the ability to print money as a last resort to make good on its obligations. Because of this, don’t expect this financial instrument to do much more than help you keep pace with inflation.
Mutual Funds and Exchange Traded Funds (which are essentially the same things, except rather than giving your money directly to the fund, you buy shares of the fund on an exchange) are incredibly popular investment vehicles. They allow ordinary investors that don’t have millions of dollars to still have a well diversified portfolio by indirectly owning tiny fractions of hundreds or thousands of underlying securities. A simplistic view of how they work is a fund manager picks a bunch of securities, buys them, pools them together, and then sells claims to fractions of that entire basket of securities. If a few individual securities in that basket do poorly, they’re still only a fraction of the entire basket. Likewise, if a few securities really take off, they can only pull on the entire basket by so much. Overall, the basket, or fund, should be much more stable and predictable than individual securities within the basket. That’s known in mathematics as the law of large numbers. This allows investors to get the higher expected return of risky assets, while mitigating risk through diversification.
There are two important classes of these funds: actively managed and passively managed. Actively managed funds have (usually highly paid) managers that closely study the securities within the fund and make changes as they deem appropriate and generally charge a higher fee. Passively managed funds (index funds), on the other hand, just blindly buy across a large group of stocks, for example the entire S&P 500, a bunch of stocks with high earnings relative to the price of the stock (value stocks), etc. While the former may sound smarter, consider the theory behind passively managed funds. The stock market is an efficient market and the price of a stock reflects its true value as determined by all participants in the market. If a fund manager says a particular stock is undervalued and should be bought, he’s basically making the claim that he’s smarter or knows more than everyone else on Wall Street. After all, if others agreed with that manager, they would also buy that stock, thereby driving the price up, until it was no longer undervalued. The argument for passively managed funds is that the market has done the research for you, for free. Why pay analysts big bucks to do unnecessary research?
There are certainly complexities to modern financial markets, but you don’t have to have a degree in Finance to understand enough to start investing. Most people don’t need anything more complicated than mutual funds or bond funds in their portfolio. One of the most overlooked risks to investing is letting your risk aversion allow you to forego growth opportunities. Taken to an extreme, i.e. holding all your savings in cash, will just allow inflation to eat away most of what you have if given enough time.
Main Types of Investment Assets
8 Reasons Why Credit Cards are Better than Cash
The benefits of credit card use go far beyond convenience and emergency finance. Credit card companies make a lot of money from merchants when you use your card, and more and more card issuers are willing to give their customers a small piece of the action in one form or another for doing so. Shrewd card users can save money, protect their assets and even put extra cash in their pockets if they choose their plastic wisely. To help you get started, here’s a rundown of some commonly provided credit card extras.
Cash is king. Many cashback programs offer different amounts back for different categories. For example, they may offer 2% at gas stations and 1% at grocery stores. Some categories even go as high as 5 or 6% for some cards. Cards can also differ in how they give you the cash back. Some will give it to you as soon as you charge something to the card. Others wait until you’ve paid off your charges. Many card issuers require you to login to their site to manually redeem your cashback rewards. It’s also a common practice to only issue cash back rewards over a certain amount, such as $25 or $50, and often only in certain increments.
Before just about every credit card company was giving their customers cashback for purchases, they were giving away airline miles. Originally, airline miles could only be used on airfare, but today they can be often used on a wide variety of travel related expenses such as hotels, rental cars and the ever popular first-class upgrade. If you travel frequently, you may be able to get more value out of an airline miles card than a cashback card, but keep in mind you're locking yourself into a pretty narrow range of things you can buy and specific airlines.
Airlines and credit card issuers have been working together for some time now. In addition to cards offering airline miles, more and more airlines are offering perks such as priority boarding, a free drink or waived bag fees to cardholders.
Rental car insurance isn’t just limited to travel credit cards. In fact, it’s one of the most common perks. Usually the way it works is you pay for the car entirely with your credit card, decline the insurance that the rental car company will try really hard to convince you to buy, and you should be covered. Definitely read the fine print in your cardholder agreement before using this one though - it’s not one you want to get wrong. Carefully consider the insurance limits and what is and isn’t covered.
This one is arguably more a feature than a benefit, but we’ll include it here anyway. If you’re drowning in credit card debt on a high interest card, the credit card issuer is likely making some good money off the interest you’re stuck with. Not too surprisingly, other credit card issuers may want to get their hands on some of that interest. They may offer you a better rate and a balance transfer, so you can pay off your high interest credit card and roll your debt over to a lower interest one. Of course, you’ll still be paying quite a bit in interest. It’s not a substitute for just paying off your debt if you can. Do pay attention to both the introductory rate and the eventual rate that it’ll kick over to after the introductory period. You’d hate to be stuck in an even worse deal after 6 or 12 months.
This is yet another way credit card companies are paying customers to use their card. For people with good credit, it’s not uncommon to be offered a several hundred dollar sign up bonus. It usually comes with the contingency that you spend a certain amount on the card within some predetermined amount of time. The banks hope that the card makes its way into your wallet and daily life so that you continue use the card well after you’ve hit that limit. Usually cards with high sign-up bonuses don’t offer a ton of cash back, if any at all, and vice-versa.
Many credit cards also give you extended warranties or return policies on certain items purchased with the card. This is part of the agreement that merchants have to sign before they can accept a particular card. Sometimes it’s double the original warranty. Sometimes it’s a fixed amount of time. Usually there are limits too, so be sure to read your cardholder agreement when trying to decide which card to use for a major purchase.
If you have cash that’s lost or stolen, good luck getting any of it back. With credit cards, however, it’s a different story. Under federal law, your liability is limited to $50 if your card is stolen, provided you report the theft to the issuer within a reasonable amount of time after discovering it. If the card itself is not stolen, just the credit card number, and it’s used to make an unauthorized purchase, you cannot be held liable. For most credit card issuers, it’s more valuable to be able to advertise $0 liability than to very occasionally be able to collect $50. They generally waive the $50, remove all unauthorized charges and just replace the card for you.
It’s hard to believe there was a time when everybody carried cash for daily transactions. In today’s society, there’s really no reason to. Almost every business in the country that accepts payments directly from customers accepts some credit cards. It’s not just a matter of personal preference anymore. If you don’t use credit cards for your purchases, you’re losing out.
8 Reasons Why Credit Cards are Better than Cash
8 Individual Tax Breaks You Might Not Know About
A Tax Break is an advantage allowed by the government in which you are able to pay less in overall taxes. The goal of any taxpayer should be to reduce the total amount they pay in taxes so that they can invest that money back into their own lives the best way they see fit. Tax Breaks are not always obvious, so we have put together a list of the top 8 that you might not know about but could save you money.
Many people are now switching to more energy efficient appliances to try and help make a positive impact on the environment. The US government now offers tax credits to individuals who decide to clean up the environment by using energy efficient home appliances. You can get a tax credit of up to $500 by switching to more energy efficient stoves, heat pumps, central air conditioning, water boilers, fans, insulation, roofs, water heaters and many other household appliances. You can also get a tax credit, with no upper dollar limit, for geothermal heat pumps, small residential wind turbines and solar energy systems.
The federal government also rewards people who ditch fossil fuel vehicles for electric vehicles. You can now get a tax credit of up to $7,500 when you purchase an electric vehicle. Your taxable income must be at least $7,500 to receive the full tax credit. If you purchase a new electric vehicle and your taxable income only reaches $5,000, your tax credit will only be worth $5,000. Some states also have additional tax credits available on top of the federal tax credit. For example, Colorado offers an additional $6,000 tax credit for electric vehicle purchases. Imagine driving around in a brand new Tesla while saving thousands of dollars that you would have otherwise spent on a brand new gas powered car.
Higher education is a great way to invest in yourself and earn Tax Breaks at the same time. Higher education Tax Breaks can come in the form of tax credits, tax deductions and tax free savings plans. If you are pursuing a college degree, you may be eligible for the Lifetime Learning Credit of up to $2,000 per year if your income does not exceed $55,000 per year ($110,000 per year for married couples). If you do not meet the eligibility requirements for the Lifetime Learning Credit, you may be eligible to receive a tax credit of up to $2,500 per year through the American Opportunity Tax Credit if your income does not exceed $80,000 per year ($160,000 per year for married couples). You can also take advantage of tax deductions for things like tuition, books, room and board, and traveling expenses, which can reduce the amount of your taxable income by up to $4,000. Finally, you may qualify for an education savings plan where you can make tax free contributions to help you save for college related expenses.
Paying it forward is a great way to reduce your payments to the IRS. Donating to charity can give you huge Tax Breaks by reducing your taxable income by up to 50% in some cases. The IRS is very specific on the types of organizations you can donate to in order to receive these tax deductions. In most cases, it must be a United States organization. These organizations can be a community chest, corporation, trust, fund, foundation, church or other religious organization, war veterans' organization, nonprofit volunteer fire company, civil defense organization, domestic fraternal society or a nonprofit cemetery company. Deductions can also include things like the cost of ingredients for a dish you baked for a soup kitchen or traveling expenses related to charity work. Make sure to consider all expenses you incur while volunteering your time and services.
The job market is tough these days and job searches can go on for an extended period of time. If you are currently looking for work, you can rest a little easier knowing that you can also get tax deductions while you look. To deduct job hunting expenses, these expenses must be at least 2% of your gross annual income. These expenses include, but are not limited to, transportation expenses ($0.57 per mile driven plus parking fees and tolls), food and lodging expenses if your search takes you away from home, cab fares, employment agency fees, and the costs of printing resumes, business cards, and postage stamps.
Healthcare costs continue to rise at high rates and they can be very burdensome for individuals and families. Fortunately, there are numerous tax deductions you can take for medical related expenses. These deductions are especially useful for medical emergencies that are not covered by your insurance. The IRS allows you to deduct all medical expenses that exceed 10% of your gross annual income. You can deduct costs associated with preventive care, treatment, surgeries, vision care and dental care. You can also deduct costs associated with prescription medications and devices such as glasses, contacts, dentures and hearing aids. You are not allowed to deduct costs that will be reimbursed by your insurance or employer.
With interest rates near all-time lows, it has become increasingly difficult for low and average income people to put their money into a savings account and expect a decent return in the future. With the Saver’s Credit, it becomes much more profitable to save through the means of an IRA or 401(k). By saving through one of these accounts, you can earn a tax credit up to $1,000 per year. You can save for your future and get paid to do so. People who make $45,000 or less per year are eligible for this tax credit, which allows for a deductible of up to 50% for the first $2,000 you save through a retirement account. And, of course, 401(k)s and IRAs also have other tax advantages, most notably the ability to defer paying any tax until you withdraw from the account.
Owning a home can provide many Tax Breaks that you should be aware of. The biggest Tax Break for homeowners comes from deducting interest payments that you have made toward your mortgage. When you are in the early stages of home ownership, the bad news is that the majority of your mortgage payment will be in interest, not principal. The good news is that interest payments are 100% deductible up to $1 million. If you own multiple properties, you can deduct interest payments on those properties as well. Your second property does not have to be a house either. It can be a boat or an RV as long as it has cooking, sleeping and bathroom facilities. You should also be aware that you must spend at least 14 days at your second property, or more than 10% of the number of days you rent it out (whichever is longer) to be eligible for the deduction.
8 Individual Tax Breaks You Might Not Know About