There are many more different types of financial institutions like online banks, state banks, community banks, but I want to talk about credit unions and banks. I think they best illustrate the different mentalities financial have, and how profit motive can change the way that they do their business.
Without wasting time
Let Start With Banks
I just want to say this, despite any of my biases, I don't think banks are bad or evil, they just have a corporate obligation to amass as much money as they can.
Let me expand on that
Big banks the ones that you all know the names of, they are publicly traded on the stock market. People invest in that company, they're called shareholders, so banks have an obligation to make those shareholders as much money as possible.
- In order to increase the value of their company they need to make money as much as they possibly can, that means the more fees they charge, their company value goes up, the more interest they make on their loans their, the value goes up
- Every one of the people that are using their debit card or credit card, their value goes up, so when their value goes up, their share price goes up, the investors make their money, they're doing their jobs.
It's not bad, it's not evil that's just what they're there to do.
Let's remember this they are obligated to make as much money as they can for the investors who invest in their company, that's it. And that doesn't mean that the products or services that they offer are bad it just shows you that ultimately they need to make as much money as they can and the profit motive is their driving force.
If I asked one of you to go find a big bank around your city you would have no problems trying locating one, I mean they are every were.
Let Talk About Credit Unions
Unlike major banks, credit unions are not-for-profit organizations and they have a board of directors that listen to their members to help steer the credit unions path
Notice that I said not-for-profit
That's not a nonprofit organization, it just means that their sole purpose is not to make as much money as they can, they probably do, but what they want to do with the money that they make is put that back into the community, give it back to the members
That's why credit union fees and interest rates are normally much more favorable than the banks, they want to give that back to the members, it's not to say that credit unions don't charge fees and that everyone that works there is an angle
But it normally that their goal is to benefit their community and their members which is something that's great.
The Downside OF Credit Unions
The downside is that they are small, like really really small compared to major banks. They're not as technologically advanced they don't have locations on every street corner, I doubt you know a tenth of all the credit union that is in your state.
They don't have all the bells and whistles the big banks have.
If you're just everyday person, you work a job, you need somewhere to put your money and want that financial institution to do right by you, a credit union is a great place to go and they can absolutely help you out.
This is a very small portion of the difference between banks and credit unions, but in my opinion, it's the biggest and most significant difference that they have. I truly believe that both serve their purpose and there are certain people that should be using big banks and there are other places that should be using smaller banks or credit unions.
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Most of the time when people tell you not to use a credit card, many time the reason is actually valid, they 're just trying to help you out, but it's also true, maybe they are telling you this because they got themselves into trouble and they didn't use it the right way.
A lot of time when it comes to the bad side of credit cards it's because people don't use them responsibly and the error lies with the user, I don't mean to come across that way, but it's true,
You know, when it comes to money and personal finance sometimes people just don't really think about what they're doing and if they use something the wrong way and they can't really see consequences that are going to come because of that, well, then is going to be a surprise when things go bad.
- A credit card can make you drown in the sea of debt. They can have a crazy interest rate that's just making you throw away money, that's only if you don't educate yourself on how they work, but that's not going to be a problem because we're learning about it today. They can ruin your credit, but that's if you want to use the credit card that way.
Understanding How Credit Card Works
When you go to a stop or you buy something online with your credit card, the money doesn't come out of your bank account, it goes onto your credit card balance and you have to pay that balance off at a later date.
You use your credit card, you spend a certain amount of money you will get a bill from a credit card company that says this is how much you spent, this is your
- Balance Owed
- Minimum Payment
- Due Date
What you do when you make that payment is going to determine whether you pay interest or not, so this is very very important.
If you pay off the full amount that you spent, you will not pay interest ever.
For example
- If I use my credit card and I spend $500 a month and I go to make my payment and I pay $500, I will not pay a penny in interest. You can use your credit card for more than 10 years without paying interest.
- If you decide not to pay off everything then guess what, you will pay interest. If my minimum payment is only $30 and I spend $500, let's say I pay the $30, I'm going to pay interest on that remaining $470.
That's not good, that's not what you want to do, your biggest rule when it comes to using a credit card is to pay Pay Off Your Full Balance! Every single month.
As long as you do that, it won't matter what your credit card interest rate is, seriously my card company could call me up tomorrow and say hey Michael we're going to go ahead and raise your rate up to about a million percent interest, but I really wouldn't care too much
Because think about it, you pay interest on whatever is left over after you make your payment, so because I always pay off everything in full whatever left over is $0, so what's a million percent interest on $0, is Zero.
That is the main reason why I love them because I pay it all off and I don't pay interest.
Now you understand how a credit card works, just make sure you always pay off your entire balance every month. If you like our article feel free to like our page.
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What is passive income, it's just the opposite of active income, well, that doesn't really help explain what it is, when people think of earning money, they think I go to work for 8 hours and I get a paycheck in exchange for my work. But That's not the only way you can earn money.
Passive income is where you put work into something like this might be a business or some research or just something, you put work into this thing and then you get paid for this work that you did for years into the future.
The reason most people get turned off when they hear the words passive income is because they assume it means I do nothing today and then I'm going to get paid a whole bunch of money every single month for the nothing that I did today.
Read: 9 Ways to Create Passive Income Streams Without Investing Money
It doesn't really make sense to me either and the more you try to find these secrets to making money the more you are going to be disappointed, if you are willing to put in the work in the front end, Here are 5 strategies you can use to generate $700/month or more in passive income.
1. Sell On Amazon
I know some people have made selling on Amazon into some sort of get-rich-quick strategy, but there is a way to make it work. You can think of Amazon kind of like this big huge digital database of people looking to buy things
Read:
You can be one of the people that sell these things, that's what my friend did, he found a wholesale supplier in China that sold cellphone cases and he started buying them to sell on Amazon
- As soon as he listed the products for sale, it was like he got hit by a tidal wave, the order started rushing in and he as making killing money.
- Just kidding, nobody bought his product. That's when the real work started.
He started doing shots of his products, that way he had good products images, he started learning about SEO which is search engine optimization, and he learns about how to get his products to rank on the first pages of Amazon
Read: The Secret Methods to Launch a Product to Rank on Amazon
Slowly he got his first sale and then the sale started to come more consistently day and night. If you sell a product with a profit margin of $30, if you sell one product today that's $30 profit a day, if you sell two a day that is $60
He was doing great and then he had to shut his business down because it turns out that his supplier was selling him counterfeit products that he didn't know
But if you don't sell brand-name products you don't have to worry about that problem. Amazon is doing the work to bring buyers on their website, so if you want to make a ton of passive income you have to put in the work to get your product to rank on the first page of Amazon.
2. Invest In Dividend Paying Stocks
I started investing in the stock market when I was in high school and like most high school kids I don't have a whole lot of money to invest so I started by making small trades. But then things change, I found the secret.
- I started hearing about those penny stock millionaires and it hit me, if I could find the right penny stock, I could turn $1,000 into a $100,000 overnight, and this secret strategy turn my $1000 into Zero.
Sometimes you have to touch the fire to realize it's hot which is right now I love investing for passive income which is why I like real estate so much, but on the stock market you can also invest for dividends with the regular cash payment that companies pay you every 3 months just for owning them
Read: How Stock Market Investing Works
If you took a couple $100 and you invested it in the McDonald stock, for example, I'm not telling that's what you should do just an example,
But you bought one share the McDonald stock, now every 3 months or so the MacDonald company will be sending you paychecks for owning their stock and you don't have to do any of the work
- Is this dividend going to make you rich with a $200 investment? No, absolutely not, this is going to be a few bucks, but some passive income is better than no passive income, you have to start somewhere.
3. Be An Affiliate
If you build an audience on social media or Youtube, podcast or your blog, you can start generating a recurring income by selling other people's products as an affiliate.
Let's say you're into fitness so you start a fitness blog and you really like Joe's Vitamins so you start talking about Joe's vitamins as an affiliate on your blog, a percentage of people that read your articles will buy Joe's vitamins and you will get a percentage of every sale that you bring
Read Affiliate Marketing For Beginners! Step by Step In Plain ENGLISH!
Now kind of like how we talked about with Amazon on point, if you can get your article or your blog to rank on the first page of Google that means recurring income for you.
4. Let Other People Sell Your Products
This one is kind of like the opposite of what I just said if you have a product like let's say cell phone cases you can find other influencers to sell your product for you on commission.
You can get these influencers to work as an affiliate like I just talked about, your work here is twofold, you have to find the right affiliate with consistent traffic and you have to show them that your product is amazing.
As somebody who gets tons of products promotion messages a day I can tell you from personal experience that if you just start emailing influencers telling them hey sell my product I'll give you 10% of sales, you are going to end up in the trash folder,
Show them your unique value, and show them how your product is great for their audience, then once you do that the affiliate jobs is to sell your product day after day because if they don't sell your product you don't get paid.
If you like reading our article don't forget to like our page and also leave a comment below
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If somebody asked you what's the best way to plan for your future? What would you say? Easy, get a good job and then invest in a 401k. You've probably heard money management advice like max out your 401k contribution if you want to live a healthy retirement.
Have you ever ask yourself is the 401k right for you, and well, it's not a very simple answer it depends on what your financial goals are and the only way you can know if the 401k is a good investment for you or not is if you understand the truth about your 401k
In this article, I want to go over 5 things you need to understand what a 401k
1. Why Does Your 401k Even Exist
Back in our grandparents' generation people were handed retirement throughs company paid pensions if you worked hard at your job for long enough your company would reward you by paying you to retire and then they would pay you every single month while you're in retirement until you died.
This was great for employees because you were guaranteed to get paid assuming your company didn't go bankrupt, but this was bad news for your boss, your employer was on the hook for your employment and that cost was a huge question mark on their financial books.
Your company couldn't predict what the economy was going to look like when it was time for you to retire, your company didn't know what their expenses were going to be like or what their company was going to look like in 10 or 20 year, and they don't know how long you were going to live
They don't know how long they have to keep paying for you to retire with a pension, so there was a lot of uncertainty and nobody likes uncertainty especially when it comes to your money
Corporations naturally wanted an alternative so employer met with the government and wall street to come up with a solution to help you retire. And they decided the best thing to do was to teach people how to fish and become self-reliant by teaching people money management and investing so you can create your own retirement. Just Kidding, out came your 401k.
2. The Benefits Of The 401k
The best thing about your 401k is, you get a company match, if you invested $500 into your 401k, your boss might give you another $250 or another $500 to invest. Investing in your 401k is easy, your money is automatically deducted from your paycheck and you have experts managing your money, plus your 401k is risk-free and you get huge tax breaks, you'll see what I mean just keep reading.
3. The Cost Of Your 401k
- NerdWallet did a study and they found that 92% of Americans don't have a clue of what their 401k fees are.
But wait a minute, does your 401k cost you money?
Let me put it this way, in 2015 Wall Street money managers made 17 billion dollars in 401k hidden fees, 17 billion dollars figure, it doesn't include the open fees.
To put it in perspective the average American earning a median salary, not a high-income salary, but a median salary can expect to pay around a $138,336 in 401k fees over the lifetime.
The way it works with most funds is every single year your money managers will take a percentage of your total assets every single year as their fee whether or not you make money. they can afford to charge these high fees every single year because they know that when you invest your money in your 401k is going to be invested for a long time
- If you realize this and you were like what, I don't want to keep paying these fees, and you try to pull your money out of your 401k, that's when the government will come in and they will slap you with a huge penalty.
4. The Risk Of Investing In Your 401k
For many americans, the 401k is their only investment and their only retirement hope, and that's very risky because you have no real diversification. If you think you have money invested in different funds, thinking you're good, let me go over what real diversification is
Investing your money in a Growth Fund, Dividend stocks and a blue chip pond, isn't real diversification because all of your money is in paper assets, it's only one asset class, so if you ended up retiring when the stock market is down because nothing can go forever, then you might be in trouble, I mean, people that tried to retire during the 2008 crash found that their life investments were worth a fraction of what they invested.
Real diversification is where you invest your money in different asset classes. like one might be paper assets that I've been talking about, one might be physical real estate, and one might be physical gold
This way if the stock market comes down you can go and use your money in a different asset during that time.
5. The Tax Benefits
I've spent a lot of time studying that tax code and one thing that is very obvious is that you get huge breaks for being an investor, but most of those investment tax breaks don't carry over to your 401k.
You're told that when you make a contribution into your 401k you don't have to pay taxes on that money that you contribute, that's your tax break
If you make $50,000 from a job and you contribute $1,000 to your 401k, you don't have to pay taxes under $1,000 and you only have to pay taxes on $49,000. even though that's only partially true because you still have to pay FICA taxes on your $1,000 contribution
But what you need to remember is you don't get to avoid paying taxes on that $1,000, you just defer it until you're old enough to retire
Let me get it clear
When you're old enough to retire and you pull your money out from the 401k account, that's where you get taxed. That is very bad financial planning because why in the world would you plan to have no income when you're old enough to retire.
- Every investor's goal is to create more income the next year, so this way by the time you're old you should be planning to have a whole bunch of income when it's time for you to retire,
But for the sake of this article, let keep going along with your example.
If I had $10,000 and I learn how to invest and I took this money and I invested it in the stock market, I didn't use a 401k I did this invest with myself and after 10 years these $10,000 investments grew to a million dollar and I wanted to pull this million dollars out, I'm going to have to pay taxes on the million dollars
But because I invested this money myself I get investment tax breaks and I would be paying somewhere between 0% and 20% of that money in taxes. And by the way, this example is using today's tax rates.
Tax Rates Will Greatly Affect Your 401k
With the 401k it's kind of different if we had the same scenario where I took $10,000 and I invested it in my 401k and after 10 years I was old enough to retire and my 401k was worth a million dollars and I pull a million dollars out of my 401k
I don't get that same tax rate, I don't get to pay 0 to 20 percent of that money in taxes, I would have to pay way more than that in taxes because this is classified as ordinary income and I would be paying a lot more in taxes on my profits. Again that's using today's tax rate.
As you can see there's a lot more to the 401k, but that's why I'm writing this article, this way you can be aware and take charges of your finances and do what's best for you financially.
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It's no surprise that everyone hates student loan except banks. I mean there's such a strong dislike for student loans that even the people that don't have student loans hate student loans but it might not be for the reason that you think. In this article, I want to go over why student loans suck for everyone and why you need to know.
First, let's talk about the people who have student loans. These people don't like student loans because they have to pay the student loans back.
Let me dive a little bit deeper, you are a 17-year-old high school senior and everybody around you is talking how you have to go to college so you can get a good job and become successful
But what people don't tell you is the cost of getting that degree. You're told to go to the best school you can get into even if it's super expensive because it's an investment it'll pay off in the long run but what people don't tell you is depending on where you go
It might take you a lifetime or more to pay off your investment.
Read: How To Budget And Get Out Of Debt! The Simple Way
1. The Issue With Student Loans & Cost of Living
The cost of getting an education has been skyrocketing because school have been increasing the price of tuition like crazy
Then the cost of giving a student loan has been going up because the interest rate has gone up a lot in the last couple year, so the price of your loan is becoming more and more expensive
The cost of living, the cost of your house, your car, your food, your healthcare has been going up
Your wages that you get after going to all the school haven't been able to keep up with the rising costs
I'm no fortune-teller but you don't have to be a rocket scientist to know that this isn't a good combination, I mean this is why people hate this student loan so much because your education didn't come with a disclaimer of what you're getting yourself into
You are a 17-year-old who might be signing yourself up for a lifetime of payments unless you had some sort of financial education in your life which is why I stress financial education so much on our blog
2. People Who Don't Have Student Loans Hate Student To.
90% of money problems have nothing to do with how much money you make. It's what you do with the money you make and if you're never taught how to use your money you don't know what to do with it which is why the majority of people are living paycheck to paycheck
If you can't pay off your loans that's bad news for you
Read: How To Pay Off Debt on a Low Income
But there's something that you need to know about student loans,
3. Why Student Loans Are Special & You Can’t Declare Bankruptcy on Them
If let's say you need the money and you went to your friend Nancy, and then you borrow $10,000 and then you took all over the $10,000 and gambled it on the roulette table and lost it, your friends Nancy isn't going to be very happy
Nancy can take you to court and try to force you to pay but if you really don't have the money you can declare bankruptcy and Nancy will lose that money that she lent you
- That's how almost every loan works except for student loans. If you go to an expensive school and you get a worthless degree and you get a low-paying job and you can't pay back student loans, well, you can't declare bankruptcy on your student loans
- You want to know why it's because the government says so and now if you're wondering why can you declare bankruptcy on all of these private loans but you can't declare bankruptcy on student loans, It's because the government is the one that's giving these student loans and so they make special rules
4. Who Pays The Price When Someone Defaults on Their Student Loans
- If you can't make your student loan payments someone have to pick up the tab. Over 1 million people default on their student loans every single year and 40% of students are expected to be in default by 2023, so who has to pick up the tab, it's not the banks, it's You.
When somebody defaults on their student loans all taxpayers have to pay the price even if you don't any student loans because the government doesn't have any money to issue student loans, they get this money through taxes with tax dollars or they have to borrow the money from somewhere else and then you have to pay that back with taxes plus interest.
- That's why the student loans game is a game that you're designed to lose, the schools are guaranteed to be paid and the banks are not allowed to lose.
5. Pay Your Student Loans Off As Fast As Possible
If you have student loans pay them off as fast as possible, studen loans are expensive the fastest you pay them off the less interest you have to pay and the faster you will be able to live your life much easier withour student loans
Read: How to Pay Off Your Student Loans FASTER
6. Teach Others About The Cost Of Student Loans
If you are going to college or if you have kids or friends that are about to start college, teach them. We all have our own opinions on college, you have your own, I have mine, but we need to all understand is that you want to minimize the amount of students loans you take out to go to college
You need to understand the cost of your education before you go and drown yourself in debt
I hope you learn something from this article, now you know how student loans work
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When the majority of people go shopping they become broker because when you go out and spend $200 on the newest Nike Gear, your $200 disappears and if you try to sell your Nike Gear, later on, you're not going to get anywhere close to the $200 you spend to buy that gear. In other words, you just lost money
Now, what if I told you there was a way you could get paid to go shopping and this is one of the ways wealthy people love to spend their money
When you invest in the stock market, you are using your money to buy companies instead of buying the products that these companies sell.
That way when these companies make money so do you.
Consider this when the majority of people go shopping they buy things called consumer expenses, going back to our Nike Gear example.
But the things about consumer expenses is that as soon as you buy them your money's gone, Nike isn't going to pay you to wear their shoes, well, unless you're LeBron but for most of us we're paying Nike
That's why it's called a consumer expense these are things that you're buying and they lose value but they don't pay you
Now here at Roadtosuccesse.com, we take a different approach to shopping, instead of buying things that lose value we buy things that pay us, we called these things investment seeds
- With investment seeds, you're using your money as a tool that's going to work for you instead of just spending your money on consumer expenses that just eat away your cash
- So instead of having the consumer mindset of just buying Nike Gear you want to have the investor mindset where you're going to profit when other people buy that Nike Gear
When you are buying a company stock what you're doing is purchasing a small piece of that company called a share, buying that share makes you an owner in the company, so if you buy one share of Nike you just became an owner of Nike
Being an owner that entitles you to a portion Nikes profit, when they make money you do too, and yeah knowing this information is going to skew how you watch sports a little bit because whether you love or hate LeBron you're going to want him to win because when he wins your Nike lays pocket win too
A stock market is just a place where investors go to buy and sell shares and big companies just like Nike
But How do you actually make that money well that money comes in two ways Through
- Appreciation
- Dividends
Appreciation is just when the value of the share you bought goes up, going back to our Nike example which hopefully you're not sick of this Nike example but then again how could you be because no one gets sick of Nike I mean that's what makes it such a great company
Let say you buy Nike at $100 a share and Nike starts doing really well because LeBron keeps winning so more investors come to the market and they start trying to buy those same shares, well, what's going to happen to your shares, they're going to keep rising in value, they're going to get more and more expensive.
Dividends
The second way you can make money in the stock market is through dividends, Dividend is just money that a company will pay you to be invested in their stock which is pretty awesome because it almost is like you're LeBron being sponsored to invest in Nike
They're going to pay you dividends 4 times a year because you are technically an owner of the company, you have the shares, you get paid, that's how dividends work
Now to be really successful in the stock market the first thing you got to do is to shift from the consumer mindset which the majority of people have, to the investor mindset which the minority of people have
Like I said before a consumer, someone who just buys products the money they spend just goes into the pockets of the businesses
But an investor is someone who buys investment seeds they make their money work for them by investing in those businesses
I mean really, which side would you rather be on
The one paying these companies or the one getting paid by these companies
Now a lot of people think you need a ton of money to start investing in a stock market, but that's not true, you can start investing with as little as $100. But are you going to become a millionaire investing a $100 over 2 month? No.
Of course not, but everyone has to start somewhere and the sooner you start the sooner you're going to get the results you're looking for.
That's how stock market work, hopefully, you learn something from this article
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In this article, I want to talk about wholesaling real estate. If you're not familiar with this term i will explain it to you, when wholesaling transaction what you're doing is you're not actually buying the property, you're tying property up, giving you the right to close on it but you're not going to close on it you're going to transfer that contract to another investor who will come in and take your place.
If I spend a lot of time looking for deals that I can tie up in this manner then I want to be compensated I'm just not going to give the right to close to another party I'm going to charge for it
It's Complicated? Let me explain.
In the typical wholesaling transaction what these investors are doing and you may be one of them, you're going to be like this
- You're going to find a house
- There's some investor that would like to close on this property because you've tied it up under contract
- You transfer the contract over to the investor and in exchange, the investor will give you some money.
That is what will call a wholesaler
Read: 6 Ways To Make Money In Real Estate
You are not buying the property, what you're doing is you're tying the property up under contract in order to give someone else the right to close and you hope to get paid on this deal.
Read: How To Earn Passive Income With Real Estate Investing
The Problem With Wholesaling
- Are you aware that when you wholesale property you can be held personally liable and someone could sue you? So you have to be careful about how you structure so that you don't bring back any personal liability
- Are you aware that when you enter into a contract with someone they may prohibit you from assigning it, so then you cannot set up any transaction and the deal falls through and you lose your earnest money because the seller refused the assignment?
These are problems that are rampant when it comes to wholesaling because individuals just don't know about it until they get involved in a transaction that goes south on them when they experience it and then that cost them a lot of money to get that type of education.
What I want to do now is to show you a way where you can put a wholesale deal together, you can protect yourself so the seller can't come back against you and sue you individually and you can transfer the deal to someone else without anyone else standing in the way of that transaction and stopping it
How To Protect Yourself As a Real Estate Wholesaler
1. Never put an agreement together in your own name, you always want to have an entiry that stands between you and the seller of the property, so what you should do is create a c-corporation. You enter into an agreement between your C-corporation and the seller, so if it goes bad the only person this seller can sue is your corporation
They can sue the corporation but they can't sue you personally so the first thing you've done now is limited your liability
2. How you do set it up if you're going to wholesale property in order to assign the contract to someone else.
What you'll find in many situations is that when enter into an agreement and you're going to assign the agreement over to someone else and your corporation is going to get paid, you could run into a problem
Increase In Value
Sellers like this don't want to honor the assignment, maybe they put language in their agreement that states that the contract Is Not Assignable, so if you don't close on it they get to keep your earnest money and they can go out and sell to somebody else mabye at a higher price, so they make more profit.
This is the problem you face
One way or another I hope this article shows you more about wholesaling real estate
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