This Is How You Get Paid to Travel - Frugl

This Is How You Get Paid to Travel

Traveling the world is a dream for many of us. The problem is that it’s so expensive, it seems out of reach. But what if you could get paid to travel? Instead of spending thousands of dollars on an international vacation, you can find ways for companies and brands to pay you to travel the world. Doesn’t that sound fantastic?

It sounds like a dream, but there are actually quite a few ways to make money traveling. Some of these methods require a lot of up-front work, while others require commitment and personal sacrifice.

You can get paid to travel by choosing a certain career or pursuing side hustles to help pay for your travel.  Here are all the options to earn money traveling.

How Do I Get Paid to Travel?

There are a few career fields that will pay you to travel. The travel costs will all be on the company’s dime, so it’s free to you. However, remember that if you choose a job that pays you to travel, your main priority will be work, not exploring exotic locales.

Many folks choose a career that pays for travel only to learn that the only foreign lands they’ve experienced are airports and hotel rooms. Some of these jobs aren’t as glamorous as they seem, but if you are brave and adventurous, you can make it work.

The other option for getting paid to travel is starting a side hustle. A professional travel blogger can make a lot of money, but there are many different ways to make your travel dream come true with side hustles.

And of course, if you’re not getting paid to travel, then your only other option is to make sure that you’re doing what you can to save for a vacation, a family trip, or whatever is next to come. Ultimately, the latter comes down to discipline and good money habits.

Careers that Pay you to Travel

Military

Many people will balk at joining the military, especially as a means to travel. However, it’s one of the best career fields for getting paid to travel.

Not only are there training opportunities all over the United States, but there are also trainings abroad as well. Many Soldiers, Sailors, Airmen, and Marines get stationed overseas in Europe and Asia, so it’s like you are getting paid to live in a foreign country.

The great thing about the military is that you get to travel almost as soon as you sign up. There are Army bases that conduct basic training in most parts of the country. Still, if you join the Navy, you will most likely get sent to Great Lakes Naval Station and explore Chicago, or you will go to the Naval Station in San Diego and have the opportunity to explore California on the weekends.

Clearly, there are downsides. The United States has been at war for over twenty years, and you may end up traveling to war-torn countries. However, if you are adventurous and feel a calling to serve your county, this might be one of the only ways to see ancient sites in Mesopotamia, like the Ziggurat at Ur.

Remember, though, that with the military, there are no guarantees about where you will go. You go where you get sent. Sometimes it’s an epic experience, and sometimes it’s horrendous. You have to take the good with the bad if you go this route.

Diplomat

Another government career that pays you to live in foreign lands is with the State Department. As a diplomat, you will be stationed at a US embassy somewhere abroad. Newer diplomats tend to get less desirable locations, so if you’ve always wanted to live in underdeveloped countries, this might be a great fit for you. As you work your way up, you can get assignments in developed countries.

It’s not easy to become a diplomat. A rigorous selection process includes a written essay, a role-playing exam, and a written test. However, there are also support positions available in IT, medicine, and general administration. The selection process for these positions is rigorous, but it’s not quite as difficult as that for the actual diplomat.

Although it’s hard to get into it, it’s a great career choice if you want to serve your country without joining the military and see interesting parts of the world.

Flight Attendant or Pilot

If you want to literally get paid to travel, consider getting involved in the aviation industry. Pilots and flight attendants get paid to be in the air, ensuring that everything on a flight runs smoothly.

However, these jobs aren’t as glamorous as they seem. Pilots are highly respected, but it takes years of training to get behind the wheel of an airplane. You need a minimum of 1500 hours of flight experience to earn an airline transport pilot certificate, the minimum requirement for becoming a commercial pilot. Gaining this experience is not cheap. It can cost upwards of a hundred thousand dollars.

Becoming a flight attendant is much easier (and cheaper), but these workers are often underpaid. Some are only paid for the actual flight time, not any prep work, which is ridiculous!

Both of these careers often have quick turnaround times, so it’s unlikely that you will be able to see much of whichever city you landed in before you have to fly back. However, if you plan your work hours with your vacation days and off days correctly, you should be able to find time to explore!

Ship Crew Member

Another way to literally get paid to travel is to work on a cruise ship. The cruise industry always needs workers to help clean rooms, run the many restaurants and stores on board, and assist guests. The downside of working a cruise ship is that you will most likely be working when a ship is docked in cool places.

Another option is to become a deckhand on a cargo ship. It’s a bit harder to find work in this industry, especially since most ships don’t hire US workers, but it’s still possible. Many different jobs are available on cargo ships, from cooks and janitors to engineers to ship officers. Many crew members can take shore leave when the ship is docked in various locales.

Being a crew member on a ship is not easy. It’s dangerous work, and the majority of the world that you will see is covered in the ocean. However, for someone who loves the idea of being on the water and traveling by sea, this is a great option.

Journalism

Journalists can be sent on assignment all over the world. One of the best things about this field is that it covers a variety of niches. Fashion journalists can be sent to Paris to cover Fashion Week. Food journalists can be sent to cover the scoop on new restaurants or emerging food trends.

Writers can be sent to uncover stories of people living in desperation, the environmental impacts of developing new technologies, and political disruptions in war-ravaged countries. The work runs the gambit from fun entertainment pieces to dangerous journeys to uncover the truth.

Some journalists venture deep into rain forests to learn about the people or animals who call it home, while others stay safe in Hollywood interviewing up and coming stars. This industry is filled with people in thousands of different niches, all reporting on the things that they truly care about.

If you truly have a passion for traveling, you can become a travel writer. This niche of journalism is highly competitive, but those who make it can travel to exotic locations and write about their experiences.  Travel magazines such as Conde Nast often publish epic tales of amazing adventures. Unfortunately, it is harder to get a full-time job at these publications. Many of their content is written by freelancers, but becoming a regular contributor might be enough to make a living.

Teaching Abroad

A final way to get paid to travel is to get a job teaching English overseas. Native English speakers are in high demand in many different countries. You need a bachelor’s degree in any subject and a TEFL (Teaching English as a Foreign Language) certificate to teach English abroad. You can obtain a TEFL certification at a variety of online schools, generally for about $500.

Many people use teaching English to backpack through Europe or Asia while having a home base at the teaching location.  There are opportunities available all over the world. However, it will probably be difficult to find assignments in Western Europe or developed Asian countries as a newer teacher. If you dream of living in Europe, try an Eastern city like Prague or Budapest. If you are in love with Asia, look into teaching in Cambodia or Thailand. The competition isn’t as fierce in these countries, and there might be more opportunities available.

Find Companies that Pay You to Travel

Although the jobs listed above are the ones that traditionally have travel opportunities, they aren’t the only ones. With globalism, more and more companies are becoming multi-national. You may find work at a software company in Seattle that sends you to conferences in Germany or at a supply chain company in California that sends you to China to meet your shipping counterparts. You may be an engineer sent to South America to quality control the production of a certain product.

There are too many possibilities to list. If you want to find a career traveling the world, find skills that are in demand globally. Use job search boards like Indeed to determine which career fields require employees to travel and become essential in one of those fields.

Side Hustles that Pay You to Travel

Not everyone wants a career that forces them to travel. Sometimes, we want to get paid to travel on our own! It’s much better to work for yourself and choose your own assignments than to be tied to what a company wants you to do.

Here are a few side hustles you can start that might lead to paid travel opportunities. Remember that you need to put a lot of work in upfront to score these epic opportunities with side hustles.

Start a Travel Blog

Travel blogging is the first thing that pops into most people’s minds when they want to get paid to travel on their own terms. Those with successful travel blogs often get sponsored trips to interesting places, which they then review and write about for their audience.

Travel bloggers earn money by writing about their adventures. This side hustle is always at the top of any list on traveling the world and making money, and for a good reason. It works. It’s the dream.

But what many writers forget to mention is that it also takes a lot of time and effort. Making a travel blog is hard work, and it will take time to get established enough to earn those sponsored trips. It usually takes at least a year or two for bloggers to see any return on their investments. However, those who stick with it through the hard first few years will be able to monetize with ads and affiliates, and as they grow their blogs, they will start earning sponsorship deals and get paid to travel.

Be an Influencer

If you don’t want to go through the hassle of creating a blog, you can try becoming a social media influencer or content creator to get paid to travel.

Influencers are the new rockstars, and becoming one is not as easy as it seems. It takes a lot of content creation, curation, and understanding of the variety of social media platforms available to make it big on any of them.

However, if you are successful at it, you can earn a living by posting to social media. Companies will start paying you to post if you build a following on your travel Instagram of over 100K. You can get sponsorship deals with tour companies, hotels, and more. In addition, you could become a brand ambassador and get paid to promote a certain brand’s products. Some influencers work with travel gear companies, getting paid to show off the latest trends in luggage or travel jackets. There are plenty of ways that influencers can make money and get paid to travel.

Become a Photographer

Being a photographer ranks up there with journalism as a great way to get paid to travel, but with the advent of smartphones and easy access to editing tools, anyone can become a great photographer.

The difficult part is selling your photos and making a living off of your photography. There are a few ways you could go about this. You could become a freelance photographer for a travel magazine and get paid to take great shots for them. You could set up your own photography website and sell prints of your epic travel photos, and you can even post your photos to apps like Instagram and try to become an influencer.

Another way to make money with photography is by selling stock photos. Amazing photos of interesting places are in demand. Upload your best shots to sites like Shutterstock and make money whenever someone uses your photo. A final option is to upload your photos to a print-on-demand website, so people can use them to create t-shirts, mugs, or wall prints. ArtPal is designed specifically for printing works of art, but you may be able to sell your photos on sites like Tee Public as well.

House Sitting

House-sitting can be a great way to cut your travel costs, if not get paid fully for your trip. Rather than paying for lodging on your next trip, use an app like Home Exchange or Love Home Swap to find opportunities for house sitting and house swapping. You can also exchange services, such as pet sitting, for free lodging on apps like Trusted House Sitter. This app matches house sitters who love pets with people who need trusted pet sitters while they are away. They get the pet sitter while you get free lodging.

Many of these apps do have service fees or membership fees, but if you use them often, the cost will be much lower than the cost of lodging. That’s like getting free money to travel!

Become a Digital Nomad

Getting paid to travel is the dream, but they don’t always have to go hand in hand. Instead of getting paid to travel literally, you could find remote work. By working remotely, you can travel wherever you want and get paid for your normal work while doing it.

There are tons of ways to be a digital nomad. You could become a freelancer and write articles for a variety of outlets. You could land a few virtual assistant jobs and help others manage their social media accounts or blog schedules. These digital positions would allow you to work on your own schedule and travel whenever you want. You could also create your own businesses, like a blog or a YouTube channel. The difference between being a digital nomad blogger and a travel blogger is only in the niche. You can write about whatever you want while traveling.

Other digital nomads prefer to work full-time with a normal company, but their jobs are completely remote. Sit in on Zoom meetings from a beach in Belize. Finish that JavaScript program from a bar in Berlin. Work wherever you want, whenever you want with remote work opportunities. It’s not exactly getting paid to travel, but it’s pretty close.

Volunteer Work that Pays for Your Travel

Volunteer work is traditionally unpaid, of course. Still, many volunteer organizations will pay for your airfare, and some even provide a stipend while you are in a foreign country working for them. However, don’t expect to go to fancy cities like Paris and Rome if you go this route.

If you are doing volunteer work, you will likely be heading to countries that need the help. Expect harsh weather conditions and poverty conditions. Volunteer with organizations like the Peace Corps or Volunteer Service Overseas to do good in the world and get your travel paid for.

Getting Paid to Travel

Getting paid to travel is the ultimate dream. Start with the ideas on this list to turn that dream into a reality! This post originally appeared on Savoteur.

What happens if you file your taxes late - Frugl

What Happens if You File Taxes Late? Here is the Good News and Bad

Just do it already. Reset your view on taxes if you think not filing a return is the best course of action for you. Why do you ask? If you file your taxes late, what will happen?

Well, I’d love to keep it pithy and say, “You don’t want to know,” but you might care to learn what happens if you file your taxes late, regardless. Why else would you be here with this question in mind?

I should be more realistic as this is a question many people ask themselves—but should be afraid to find out.

The reality is, filing taxes late can have serious consequences, and what happens if you file taxes late largely depends on whether or not you owe the IRS money—or you’re even required to file (more on that later).

If you owe them money, then what will happen is that the IRS will send you a notice asking for payment and detail the penalties and interest you owe with an explanation of what those fees are.

However, if there’s no money due on your tax return, then it becomes less complicated.

The IRS has various options available to collect what they’re owed, such as levying wages or seizing property, and in some cases, interest rates can be up to 30%. You’ll want to avoid all this by filing your taxes on time (even early!). Unfortunately, that means all of your hard-earned money in your sinking fund might just have to be used to pay off what you owe! So much for good money habits, right?

Back to the question – What happens if you file your taxes late? A lot. Let’s dive in and find out.

What Happens if You File Taxes Late

What is a Tax Return?

A tax return is an annual federal financial report that assembles and reports tax payments, tax deductions, credits, and income received for money earned during the prior calendar year (or tax year).

Preparing your tax return can range from incredibly simple with a Form 1040 only listing your income, standard deduction, and pertinent personal information to extremely complicated with the need for hiring a tax professional.

This is especially the case if you have self-employment or freelance business income, make contributions to an IRA, or seek to add additional schedules for reporting more complex passive income investments or tax positions.

Once all information has been provided and any necessary supporting documentation (such as W-2s, 1099s, Schedules, and more), you may file your return.

A variety of options are available to you for proceeding with filing your tax return.  Your filing decision may be more complicated than just choosing which form(s) to use and can include considerations such as whether or not to wait before paying, what payment plans are available, if and how amending returns may affect the amount due, what extensions for payment are available, and which penalties may apply if you don’t pay.

The IRS offers various payment options for settling your tax debt, including the spread-out payment plan known as the Installment Agreement (IA).  Different methods may be seen as more advantageous depending on your particular financial status, but this is something you must evaluate yourself.

Do I Need to File a Return?

Despite the scare tactics employed above (what can I say, I’m a CPA who knows you don’t want to get on Uncle Sam’s bad side), you might not even need to file a tax return to begin with.

That’s right. The IRS may not require you to file an individual tax return (Form 1040), depending on three specific criteria you must meet (usually):

  • Your Age
  • Filing Status
  • Gross Income

Minors don’t need to file tax returns. However, their parents or guardians may if they qualify for the Kiddie Tax, meaning they owe taxes on investment income (meaning income from investment accounts for kids) or earned income (which they can contribute to custodial Roth IRAs for kids and reap decades of compounding returns).

If you’re 18 or older and not claimed as a dependent by parents or guardians, you may need to file. Exceptions exist, as we’ll discuss more below under gross income requirements by filing status.

For those, you’ll need to earn more than the applicable standard deduction by appropriate filing status for your situation:

  • If you file as a single taxpayer or a married person who is filing separately: $12,550 (unless you’re 65+, then it’s $14,200)
  • If you file jointly as a married couple: $25,100 (you and your spouse are 65+, then it’s $27,800. Otherwise, each 65+ person gets an additional $1,350 on top of the $25,100 standard deduction)
  • Head of household: $18,800 (65+ is $20,500)

When you earn income above these dollar thresholds stated above by filing status, you’ll need to file a federal income tax return (Form 1040). That doesn’t exclude the need to file one if you earn under these amounts, though.

As we learned with the stimulus checks of 2020 and 2021, the IRS needed to see a tax return for many individuals. That gummed up a lot of the payment processing and hampered seeing proof of your income. So, you might consider filing a return, even if you don’t exceed these limits above.

What Happens If You Don’t File Taxes?

We know when you need to file (mostly) based on the above discussion. Now, if you still aren’t convinced filing a return is the right move, I’ll really need to lean in and hammer home the fear because not filing a return will get costly and fast.

1. Penalties and Interest

First things first. You’re going to get hit with penalties and interest. If you didn’t expect that right off the bat, you don’t know the federal government. These disincentives usually are enough to entice most to file a return without a fight.

The reason they’d rather pay $50 – $100 to file their taxes with software (though you can get it for free through the Free File Alliance if you earn below certain annual thresholds) than face the long arm of Uncle Sam’s fee schedule.

Penalties are the worst. They’re not any better coming from the federal government. For failing to file a return (when you are technically required to do so), they slap you with a late-filing penalty worth 5% of the tax owed per month in most circumstances.

Yikes! Because there’s a 25% maximum the IRS will assess, you’ll pay this each month for five months you fail to file.

Let’s say you owe $10,000 in taxes and fail to file a return documenting your tax liability. That means you’ll pay 5% of that balance every month for five months, or $500 per month!

But, if you owe next-to-nothing and you file your return over 60 days late, the IRS still hits you with a minimum penalty of the smaller of $135 or 100% of the tax owed.

Did I mention this is just the penalty? There’s interest as well.

As for the mechanics of how much they’ll levy against you, the IRS charges interest worth 0.5% of the tax amount you owe per month that you’re late from the original due date.

As an example to consider, if you owe $1,000 to the IRS but don’t file for a month after the federal filing deadline (usually April 15 or the next following Monday if this falls on a weekend), that’ll be $5 owed in interest.

Not blisteringly scary—yet. If you owe $25,000, that’s $125! Also, this is per month. Don’t file for a year? $125 * 12 = $1,500.

But, you might not be so lucky only to pay the 0.5% per month your balance remains unpaid, and you fail to file a return. The IRS can double the rate to 1% per month if you don’t pay the amount owed after ten days of receiving the IRS’ notice of intent to levy.

That will continue to grow until you pay or bump up against the total 25% maximum penalty.

2. The IRS Files a Substitute Return for You

I can’t suggest avoiding this option any more than I already am: DON’T LET THIS HAPPEN. Those tax deductions and credits that you think you’re entitled to claim? It likely won’t go down the way you like.

The IRS will file a substitute return and won’t fully capture your tax situation because you didn’t give them the details to form one.

A substitute return won’t include all the details you’d like shown about your tax picture, costing you money for not claiming applicable deductions, credits, or other tax items which benefit your bottom line.

3. The IRS Will Begin the Collections Process

This one is a baddy. The IRS will come after you for money they think you owe them.

They’ve got a war chest of ways to extract what you owe: wage garnishment, levy money directly from your bank accounts, or even placing a federal lien against your property.

Just file your return and pay what you owe. And even if you can’t pay what you owe on tax day, you’ve got options!

Also, if you need to file an extension, this will give you more time to prepare your tax return (up to 180 days).

You will still need to pay the tax you think you will owe, or you will face penalties and interest for not paying your balance.

What Should I Do If I Can’t Pay My Tax Bill?

People who are in a position to pay their taxes should make payments as they go.

That means that you are showing people that you are acting in good faith to pay what you owe, and this will also lower the amount of money you would have to pay (that’s how paying bills works!).

If you can’t manage this, you still have some other options strongly worth considering.

Pay What You Can

If you can pay the full amount now, you can use an electronic funds transfer or even pay with a credit or debit card. Granted, don’t forget that you will also owe interest charges if you carry a balance on your credit card.

That could get just as ugly from a financial perspective. Therefore, you’ll want to be smart with how you manage paying one debt with another.

You can pay your taxes by sending a check. You can mail it or bring it to an IRS office near you.

Sign up for a Payment Plan

If you need more time to repay your unpaid tax balance, you can file a request for an extension and then apply for an extension. There are different costs tied to establishing an installment plan.

A formula exists that considers your particular circumstances (such as debt, the time frame needed to repay, etc.) and determines the cost.

This post originally appeared on Your Money Geek.

What is a sinking funds 101 - Frugl

Sinking Funds 101: Everything You Need to Know About Sinking Funds

From all-inclusive vacations and purchasing a new car to home renovations like that kitchen upgrade you’ve been dreaming of and even getting ready for family celebrations, there are so many different things that every single one of us plans for which usually comes with a price tag.

But how exactly can you and should you be saving for these types of planned purchases? 

The answer: sinking funds

Having a sinking fund, or even multiple sinking funds can play an extremely important role in your financial life. By using a sinking fund, you’re essentially making it easier for yourself to prepare for future expenses by tucking away a small amount of money on a recurring basis until you’ve saved enough to either cover the full cost or hit some relative “saving goal”. 

Sinking funds go above helping you save for small and large planned expenses, they can also help you improve the way you manage your overall finances by keeping you motivated, focused, and picking up new money habits along the way. 

Ready to learn more about sinking funds and how you can leverage them? Don’t stop reading here.. Keep going 🙂
 

“What the heck is a sinking fund and how do I start  one?”

By now, I’m sure you can tell that we’re big fans of sinking funds around here. There’s a good chance that you also likely have a general idea that sinking funds come with benefits. But… you’re still not sold, right? No sweat, that’s what we’re here for. 

Keeping it as simple as we possibly can, a sinking fund is a dedicated, usually separate, type of savings account or “fund” (hence the name!), that allows you to put money aside for purchases and expenses that you’re planning for in the future. future planned purchases. Your sinking fund(s) usually align with what your priority savings goals are—saving for a trip to Mexico? Create a sinking fund for that. Saving for your wedding dress? Create a sinking fund for that. Saving for a… you get the point!

Sinking funds “work” in a similar way to other types of saving funds or even investment accounts that you’re familiar with; usually by saving a small amount of money on a recurring basis, which usually ends up being monthly, for a specific amount of time until you’ve reached your goal. By the end of this ‘period of time,’ you should, fingers crossed,  have enough saved to either cover the full cost of the expense or at least enough to cover the amount you were hoping for. 

Here’s how to calculate how much you should be saving

The question then remains, “how much money do I need to be saving monthly?”. Just like everything else, it depends.

In this case, it depends on two numbers. 

  1. The total amount you plan on spending (or thus needing to save); and 
  2. The amount of time you have until you are considering making the purchase. 

Once you have those two numbers figured out, your math becomes really simple—take the total amount you plan on spending and divide it by the number of months, weeks, or even days you have left until you plan on making the purchase. 

The number you’re leftover is the amount you’ll need to save on a daily, weekly, or monthly basis to reach your goal. 

Mexico here we come…in 12 months

Let’s have some fun and use an example of saving for a trip to Mexico to illustrate some numbers. For the purpose of this example, let’s assume that you’re planning on booking an all-inclusive, $3,000 trip to Cancun, Mexico in exactly twelve months from now. 

Using that simple formula above, we would divide the total amount of the trip ($3,000) by the number of months you have left until you need to make the payment (12 months), which gives us a number of $250

Based on those numbers and that timeframe, it looks like you’d need to save $250 every month over the next 12 months to reach your savings goal of paying for your $3,000 trip to Mexico.

“Why do I need a sinking fund?”

There are several reasons why you need a sinking fund or why you would at least consider using one… But the number one reason is this; because life happens

It’s inevitable that there will be purchases you either want to make or need to make in the near future. Without a sinking fund, you might just find yourself being “forced” to pay for those expenses by resorting to other sources such as pulling money from your emergency fund, dipping into your retirement savings, or even busting out your nearly-maxed-out credit card. Resorting to those options doesn’t do you any good, in fact, it means you’re jeopardizing your financial situation and compromising your future financial health. 

That’s what makes sinking funds so amazing— they allow you to plan for large (or even small), expected purchases without compromising your finances while still remaining on track in other areas of your financial life, such as your retirement. Taking advantage of using sinking funds can help you stay out of debt while avoiding feeling even the slightest pinch on your monthly budget. 

By using a sinking fund you can:

  • Save for large upfront costs without feeling anxious or intimidated.
  • Plan and save for those dream items.
  • Importantly, save and spend your money without regret.

“Are there different types of sinking funds?”

There really are no rules when it comes to what your sinking fund(s) should or shouldn’t be used for, that’s entirely up to you and your goals. However, every sinking fund can be placed into one of two categories: 

  1. Large planned purchases. Most sinking funds will fall into this category as this is the most common use of a sinking fund. Saving for that trip to Mexico we talked about above, your dream wedding, and a down payment on a new house are all examples of large planned purchases.
  2. Small planned purchases. Next, are the smaller planned purchases that a sinking fund can benefit. This would include things such as family birthday celebrations, home decor, camps and weekend retreats, or even saving for back-to-school clothing for the kids. 

When you break out your funds into these categories, it makes saving for and planning for just about everything else so much easier to understand what you’re working towards.

“What’s the difference between my sinking fund and my emergency fund?”

We get this question asked ALL the time. So, are there any differences between your emergency fund and a sinking fund?

While there are similarities, there is also a very distinct difference. 

Your emergency fund is a reserve of money used for unplanned and unexpected expenses that come your way–in other words, for “emergency” occurrences. This can include things like the sudden loss of unemployment and income, your furnace or air conditioning unit breaking down, or getting a steep medical bill that you didn’t expect. 

Sinking funds on the other hand, are explicitly designed to help you pay for those planned, expected expenses you know you’ll either need to make or want to make in the future. Examples include saving for family birthdays and celebrations, saving for an engagement ring or wedding dress, or even saving for an annual family trip or vacation.  

So, the important takeaway is this: your sinking fund is for the known, while your emergency fund is for the unknown. 

“Where should I create and keep my sinking fund?”

NOW this is what really excites us.. for obvious, slightly biased reasons 🙂

With that being said, best practice will tell you that you should be keeping your sinking funds in liquid savings accounts where you are earning a small amount of interest while knowing that you can access and pull your money at any time. 

It’s totally up to you how you structure your savings and your sinking funds. You can use one account for everything you’re saving for as long as you track how much money you’re assigning to each planned purchase or savings goal. While that works, it can become a little messy pooling your money together.

We recommend creating separate sinking funds (savings accounts) for each different item or savings goal that you plan on saving for. So, if you’re saving for that trip to Mexico we talked about above, a small down payment on a car, and a nice anniversary gift for your partner, then we’d recommend using three distinct, separate accounts so that you can allocate different amounts to each account while being able to track your progress separately.

Moving forward with your sinking funds

Here at FRUGL, we make it easy to create new savings accounts based on your savings goals, categorize them, create your total saving goal amount, along with the time you plan on reaching those goals. Once your accounts are set up and making automated contributions, you’ll be able to easily track your progress to see just how much you have left to save for each goal. 

20 Cheap Travel Destinations Across America For Fun-Filled Vacations - Frugl

20 Cheap Travel Destinations Across America For Fun-Filled Vacations

91% of Americans are looking to practice better money habits. So when it comes time for a vacation, don’t drain all your savings, or even worse, go into credit card debt. With over 19,000 cities in America, there are many fantastic places for a vacation outside of expensive towns like Waikiki, San Diego, Washington D.C., or Chicago. Below are 20 Cheap Travel Destinations across American to inspire your next fun-filled and budget-friendly vacation.

Before we dive into the 20 destinations, it’s important to remember that if you’re planning on saving for a vacation, Frugl has your back. We make saving for your next vacation, whether it’s to one of the 20 destinations below or not, extremely easy by giving you the right tools you need to create your savings goal, automate your savings, make monthly contributions, and improve your savings routines using science-backed, habit-forming principles. 

1. Florida’s Jacksonville

As the locals call it, Jax is located in the northeastern part of the state, making it a road-trip option for those in the southeastern United States. Whether you’re an explorer, historian, beach, or salt-life lover, Jacksonville has 22 miles of beach (the most of any city in the state!), an extensive park system, fishing, museums, and even a craft beer scene.

There are accommodation options for various budgets with 18,000 hotel rooms across chain hotels, inns, and bed & breakfasts. Also, you don’t have to spend a lot to discover Jacksonville’s beauty, vibrant arts, and culinary scene.  Bike along the Baldwin Trail, a lush, shaded path, before making your way over to Jacksonville Beach, a popular seaside destination where swimming and sandcastles await on its white-sand beaches.

Stop by the Jacksonville Farmers Market, one of the oldest markets in Florida, where seafood, fresh produce, and local delights line the streets. Afterward, walk The Riverwalk, take a scenic stroll along the St. Johns River before dropping into the Riverside Arts Market, a weekly arts festival free to visitors that features live entertainment. Finally, make sure you check out the city’s many fish camps (casual, inexpensive waterside fish restaurants) and try Mayport shrimp, chowder, and other authentic Florida seafood.

2. Florida’s Ocala

If you’ve ever dreamt of sleeping under the stars, add Ocala in Marion County, Florida, to your bucket list! Full of picturesque campgrounds, R.V. parks, charming cabins, and other budget-friendly accommodations, it’s one of many cheap travel destinations that might not be on your radar.

Ocala has so many free things for visitors to do! Stroll through Tuscawilla Art Park in the historic Art District, and enjoy the sculptures throughout nature. Then take yourself on a historical tour of the area, walk around the Ocala Historic Downtown Square or explore the Fort King National Historic landmark. After working up a sweat, kids can cool down at Lily’s Splash Pad or Citizens Circle Splash Pad. Finally, wrap up your trip by attending one of the many local events hosted by the Ocala Recreation and Parks Service, such as monthly outdoor movie screenings and line dancing events at the community center.

3.Florida’s Orlando

While pricey amusement park tickets could bust most vacation budgets, it may be surprising that Orlando actually belongs on a list of cheap travel destinations. With almost 500 hotels in the city, there are many travel deals to be had and tons of free activities. That’s why USA Today ranked Orlando the #1 Most Affordable Vacation Destination Among Top U.S. Cities.

You can get your Disney, LEGO, or Universal Studios fix for free at Disney Springs, Disney Boardwalk, or Universal City Walk, all chock full of tourist attractions.  Nature lovers can explore The Nature Conservancy’s Disney Wilderness Preserve and downtown’s 43-acre Lake Eola Park with no admission fees. Or enjoy free admission to The Charles Hosmer Morse Museum of American Art, Cornell Fine Arts Museum, or CityArts.

4. Idaho’s Twin Falls

Known as The City of Waterfalls, Twin Falls has over 30 of them, including The Niagra Falls of the West, Shoshone Falls, which is even taller than its New York counterpart. While you could spend your entire trip swimming, hiking, boating, or relaxing in Shoshone Falls Park for less than $10 admission, this affordable destination has a long list of free hiking and outdoor sites. For thrill-seekers, activities are reasonably priced, such as renting Snake River kayaks for as little as $15.

According to Idaho Tourism, hotel rates on average are $120 a night, with options even under $100 a night. With lava fields, summer fairs, historical sites, and cowboy culture, there’s something for almost everyone in Twin Falls.

5. Iowa’s Council Bluffs

Perfect for those looking for cheap travel destinations for a family vacation, visitors call Council Bluffs a pleasant surprise. Located on the east bank of the Missouri River, across from the city of Omaha, Nebraska, it’s a great alternative in the region. With 25 hotel options in Council Bluffs alone, there are accommodation options for a range of budgets as well as free and inexpensive things to do.

If you’ve always wanted to stand in two places at once, take a stroll over the beloved Bob Kerrey Pedestrian bridge connecting Council Bluffs to Omaha. Train-lovers will enjoy the free-of-charge Union Pacific Railroad museum featuring 150 years of history and interactive exhibits. Or enjoy budget-friendly family vacation classics like disc golf, mini-golf, bowling, indoor go-karts, public art, and bike trails.

6.Iowa’s Mason City

Architectural lovers and fans of Frank Lloyd Wright will enjoy a getaway to Mason City, one of America’s relatively unknown cheap travel destinations.  Select nights are available for $150 at the Historic Park Inn Hotel, the last remaining hotel designed by Frank Lloyd Wright in the world.

Another Wright-designed property, the Stockman House, is also open for tours for only $10 a person. Or enjoy a self-guided walking tour through The Rock Crest & Rock Glen neighborhood, showcasing the largest group of Prairie School-designed homes on a unified site.

7.Massachusetts’s Berkshires

The Berkshires in western Massachusetts include part of Vermont’s Green Mountains and over 30 towns. Nature lovers, or those looking to escape the hustle or bustle of Boston, or New York City, will fall in love with all the region offers. See why it’s been named one of The 12 Last Great Places by The Nature Conservancy. While the region has luxury resorts and high-end hotels, it is also one of the Northeast’s cheap travel destinations with a wide range of accommodation options.

Besides a nature-lovers paradise, it’s also known as a mecca for the visual and performing arts. Between the MassMoca, Tanglewood Music Center (the Summer home of the Boston Symphony Orchestra), Barrington Stage Company, and the longest-running dance festival, Jacob’s Pillow, there’s so much to see!

You can save money for performance tickets by booking a condo resort stay on Tripbeat by Wyndham, starting at $210 for an entire week. Take your pick of resorts in South Lee, Lenox, Hancock, and Great Barrington. With a fully equipped kitchen, you can cook some of your vacation meals yourself to afford even more concert tickets.

8. Missouri’s Branson

Branson is not only the #1 best value in U.S. travel according to Trivago but is described as the Orlando of the Midwest for its Disney World meets Nashville vibe. Drawing vacationers for over a century to its stunning scenery, outdoor activities, warm people, and a wide range of things to do, it’s not a surprise that 9 million people a year visit Branson.

With 16,500 guest rooms across resorts, brand-name hotel chains, independent inns, cabins, condos, timeshares, and vacation homes, you can find accommodations for your budget. Like other cheap travel destinations on this list, cities with tons of hotel rooms often have great deals available.

While Branson does have over 100 live shows that could empty your wallet, it also offers tons of free things to do. Explore historic downtown Branson on the hop-on-hop-off trolley, check out Branson Landings’ hourly water spectacular show, take in Ozark Mountain views at scenic overlooks, or explore all that Table Rock Lake State Park and Lakeside Forest Wilderness Area have to offer.

9. Missouri’s St. Louis

Home to the iconic Gateway Arch, St. Louis boasts an abundance of free fun and reasonably priced accommodations perfect for those looking for cheap travel destinations in cities. With more than 40,000 hotel rooms ranging from $54 to $248, the average hotel room price in St. Louis is a wallet-friendly $93.

Explore the Gateway Arch National Park and its surrounding grounds or explore the recently renovated Museum at the Gateway Arch, a free hands-on experience. Then, spend the day at Forest Park, where visitors can stop by the St. Louis Zoo,  the St. Louis Art Museum, the Missouri History Museum, or the Saint Louis Science Center. Visitors can stroll through the Laumeier Sculpture Park, one of the country’s first and largest sculpture parks. Every single one of these St. Louis attractions is free, with no admission charge.

10. Nevada’s Las Vegas

With super affordable hotel accommodations, all-you-can-eat buffets, and local casual restaurants, plus a long list of free activities, Vegas is another one of the urban cheap travel destinations on this list.

With over 150,000 rooms in town, there are always travel deals available. With many large resort casinos not relying on room rentals to make money, you can find hotel rates at fantastic resorts for under $100 a night.

Fill your day in the Entertainment Capital of the World touring attractions without paying for admission. Whether it’s seeing Chihuly’s stunning blown glass sculptures, touring a botanical garden, or catching the infamous water fountain show, it’s all available free of charge at the Bellagio Hotel. At night head to historic Fremont Street to watch the pedestrian area studded with more than 14 million lights come alive and check out one of the city’s free concerts with acts like Three Doors Down and Plain White T’s.

11. New York’s Catskills

A go-to escape for centuries, there’s always been magic in a back-to-nature Catskills vacation. Less than 2 hours from New York City and about 3 hours from Boston, you’ll feel away, even if you’re close to home. See for yourself why it’s a Lonely Planet Top 10 region in America.

Long gone are the resorts depicted in Marvelous Mrs. Maisel,  as millennial entrepreneurs, hoteliers, and restaurateurs from New York and other cities help modernize the region once again.  From hotel chains, cabins, small inns, and hotels, there are many budget-friendly options in the region, such as Jesse’s Harvest House Restaurant and Lodge. Opened by former staff at the best restaurant in the country, Michelin-rated Blue Stone at Stone Barns, you can stay in a room for around $125 a night and enjoy a delicious, elevated meal for a fraction of the price.

From month-long free Octoberfest Festivals to hiking infamous Kaaterskill Falls to exploring small towns like Tannersville, NY, and their no-cost Mountain Top Arboretum, there’s so much to do. Art lovers can step into the infamous Hudson River School of Art by visiting the exact public locations of their paintings from 200 years ago. Three of the Art Trail locations are in North/South Lake, a 1,000-acre state park named “America’s First Wilderness” with so many activities you could spend a weekend there alone.

12. North Carolina’s Fayetteville

Known as America’s Hometown for decades, it’s not just one of the most accessible cities on the East Coast (located halfway between New York City and Miami), but its low cost of living translates into a great vacation on a budget.

In Fayetteville, there’s something for everyone. It’s home to two regional parks, more than 1,000 acres of recreation space, trails, lakes, and a new minor league ballpark with affordable tickets.  Chock full of historical sites like The Airborne & Special Operations Museum,  The Fayetteville Area Transportation and Local History Museum, and The African American Heritage Trail, all of which have free admission.

13. Oklahoma’s Chickasaw Country

Tucked into the rolling hills of south-central Oklahoma, Chickasaw Country is a low-budget destination that provides a high-quality outdoor experience. In addition to an abundance of picturesque campgrounds and R.V. parks, the area boasts a wide array of charming boutique accommodations for a serene, romantic getaway.

Couples can stay at Cedar & Stone, Pecan Valley Inn, or Acorn Vacation Homes, with hotel rates under $200 a night on average. The Arbuckle Mountain Range provides not only stunning vistas but plenty of free or low-cost outdoor adventures to keep visitors busy. Hike, bike, or run through the endless miles of trails found in the Chickasaw National Recreation Area to catch glimpses of nearby natural wonders, including the Lake of the Arbuckles, Turner Falls, and Veteran’s Lake.

14. Pennsylvania’s Lancaster County

Located in the heart of Pennsylvania Dutch Country, Lancaster County is a great value destination and within driving distance from Pittsburgh, New York, New Jersey, Washington D.C., and Virginia. There’s a wide range of lodging options with many motels, hotels, farm stays, country bed and breakfasts, and house rentals in the $100 to $150 a night range. Cheeky couples can stay in one of the many accommodations in the town Intercourse, PA.

There really are enough things to do in Lancaster to keep busy for months. For starters, learn about the Amish way of life at Kitchen Kettle Village or Lancaster Central Market, the nation’s oldest continuously operating farmers market. Bike ride along the 14-mile Northwest Lancaster County River Trail or explore Lancaster County Central Park. After you’ve worked up an appetite, go out to dinner at one of the many Pennsylvania Dutch all-you-can-eat reasonably priced smorgasbords like the family favorite Good ‘N Plenty.

15. Pennsylvania’s Pocono Mountains

For more than 50 years, the Poconos Mountains welcomed honeymooners to their famous heart-shaped tubs. But its proximity to major metro areas, endless natural beauty, year-round activities, and wide range of accommodations lands it on this list of cheap travel destinations for families or group trips as well.

The large region offers a range of budget-friendly accommodations from camping, glamping, inns, resorts, and vacation rental deals. You can rent a cabin at Promised Land State Park for about $40 a night or score condo resort rental deals for as low as $87 on Tripbeat.

Featuring many national, state, and local parks, bring a picnic lunch and explore Lehigh Gorge State Park, Prompton State Park, Promised Land State Park, or Tobyhanna State Park, to name a few!

16. South Dakota’s Hot Springs

Escape to this small town that offers so much! Located in the Southern Black Hills, take in all the landscape offers from the historical Mammoth Archaeological Site, Angostura Reservoir State Recreation Area, and Wind Cave National Park.

There are options for every budget with a wide range of chain hotels, R.V. sites, KOA cabins, small inns, and bed and breakfasts.  Couples will love to get away and relax in the mineral health spas and can enjoy adult-only budget-friendly accommodations like Bluebird Mesa Cabins that offers glamping, teepee, and cabin rentals at affordable prices.

17. South Dakota’s Yankton

Both outdoor enthusiasts and history buffs will enjoy the small town of Yankton. Located along the Missouri River, take your pick of water recreation activities, fishing, or exploring the Lewis and Clark Recreation Area, one of the state park system’s most popular parks. Located on the northern shore of the 31,400-acre Lewis and Clark Lake, it features over 20 budget-friendly activities.

The downtown is bursting with history, budget-friendly dining, and breweries and offers a range of accommodations giving South Dakota at least two cheap travel destinations for you to consider.

18. Tennesee’s Smoky Mountains

The Smoky Mountains ranks among the Top 10 Most Affordable Travel Spots by Lonely Planet, only one of two American cities to make the list. Home to not only the most visited National Park in America but the family favorite Gatlinburg and Pigeon Forge towns, it’s one of the most popular cheap travel destinations on this list.

Smoky Mountains National Park not only contains some of the tallest mountains in North America, including Clingmans Dome, Mount Guyot, and Mount LeConte, but all of its 500,000 acres can be explored free of charge!  The region is also home to the iconic amusement park Dollywood, a TripAdvisor Best Amusement Park in the World, and Budget Travel’s Best Value Theme Park. Meaning you can make thrilling family memories even on a budget.

19. Tennessee’s Chattanooga

One of the most popular cheap travel destinations for families in the Southeast, it’s been named by Lonely Planet as one of the Best Destinations in the U.S and a New York Times Top 45 Places to Go in the World. While outdoor enthusiasts have been coming here for decades, a recent urban revitalization has drawn a growing number of people to this city tucked between mountains along the stunning Tennessee River.

There are accommodations to meet a wide range of budgets from hip modern hostels, cabins, romantic bed and breakfasts, chain hotels, and even railroad sleeper cars. Explore the city on a bike, pedaling over the longest pedestrian bridge in the world to reach Coolidge Park, or hike the stunning mountains at  Point Park or Coker Creek Falls.

20. Virginia’s Shenandoah Valley

Even in high-cost of living areas, you don’t need to go far to find cheap travel destinations! If you’re one of the 6 million people who live in the Washington D.C. metropolitan area, you don’t need to spend an arm and a leg for a weekend getaway or fun-filled family vacation. About 75 miles from D.C., the Shenandoah Valley features a national park, caverns, history, water parks, music, art festivals, wineries, breweries, and distilleries.

Go on a day-long road trip along the 105-mile Skyline Drive to marvel at the Blue Ridge Mountains and its vistas. Next, explore the Shenandoah National Park’s 500 miles of hiking trails or 200,000 acres of protected lands for $30 a car. Then, retire back to a wide range of chain hotels, cabins, campsites, or resorts like Massanutten, the Mid-Atlantic’s Premier Four Season Resort Destination, where you can score condo rental travel deals from a timeshare owner for as low as $100 a night.

These 20 Cheap Travel Destinations will be waiting to welcome you on your next road trip, couples getaway, family vacation, or honeymoon!  You don’t need a lot of money to make memories. There’s no need to blow your hard-earned savings to explore our beautiful country. Instead, you can save money by visiting off the beaten path towns, booking resort deals, or filling your days with inexpensive and free activities!

This post originally appeared on Savoteur.

How to save for your first home - Frugl

How to Save for a House: 10 Ways To Make Your Biggest Purchase Ever!

Buying a home may be the biggest purchase a person can make. And, with home prices rising, it can also feel intimidating or even impossible, especially for a first-time home. However, there is no need to fret. If you’re wondering how to save for a house, you’re in the right place!

Before you start looking for a real estate agent, take some time to self-reflect on your current financial situation to develop a plan for success. Here are ten ways to help you save for a house and make your biggest purchase ever.

What Are the Costs When Buying a House

According to the National Association of REALTORS the median existing-home sales price for March 2021 was $329,100. Unless you have hundreds of thousands of dollars to spend, you most likely will work with a bank to finance your home purchase. Thus, the two main costs you need to save up for are down payment and the closing costs.

Down Payment

A down payment is an out-of-pocket expense a homebuyer will pay when financing a purchase. The amount is usually a percentage of the purchase price, which can vary depending on the type of loan.

For example, a 10% down payment for a purchase price of $200,000 is $20,000. Therefore, a homebuyer would need to bring $20,000 when signing closing documents while the bank will finance the remaining balance of $180,000.

Closing Costs

When financing a home purchase, there are several closing costs, such as an appraisal fee, termite inspection, and escrow fee. However, unlike a down payment, a homebuyer won’t know the exact dollar amount due until a few weeks or days before closing on the property.

Therefore, as a safe estimation, the closing cost is usually about 2% to 5% of the loan amount. For instance, homebuyers with a loan amount of $180,000 can estimate to pay about $3,600 to $9,000 in closing costs.

Moving Expenses

Although moving expenses are not as large as a down payment, it is still a cost that buyers should save up for. If you have a small family and only have small items, you can save a lot of money by transporting your family’s personal belongings in your car or a friend’s truck.

However, if you have larger and heavier items, you can rent a moving truck or hire a moving company. According to Moving.com, the average cost of a local move is $1,250 and $4,890 for a long-distance move.

How Much is Down Payment?

The down payment amount is usually a percentage of the purchase price. However, depending on the loan program, the percentage can vary. Determining which loans you qualify for is one of the first steps on how to save for a house. The requirements can change every year. So, be sure to check with a mortgage professional to get the latest details.

FHA Loan

The federal government insures a Federal House Authority (FHA) loan. However, the government doesn’t provide the loan to homebuyers. Instead, this program allows lenders to offer a low down payment requirement. The government will ensure the loan in case the borrower stops paying.

According to U.S. Bank, the minimum required down payment for an FHA loan is only 3.5% of the purchase price. Therefore, a 3.5% down payment for a $200,000 purchase is $7,000.

203k Loan

A 203k loan is a subset of an FHA loan based on section 203(k) of the National Housing Act. This program follows the same rules as an FHA loan and includes rehab expenses as part of the loan. Thus, homebuyers can buy a distressed property in need of significant improvements but at a meager purchase price.

VA Loan

The U.S. Department of Veteran Affairs created the VA loan, which is similar to the FHA loan. This loan’s critical difference is exclusively for U.S. service members, veterans, and eligible surviving spouses.

A VA loan doesn’t require any money down nor private mortgage insurance. Additionally, a VA loan allows a seller to pay 100% of the closing costs, unlike an FHA limiting a seller to 3%. Therefore, a homebuyer who qualifies for a VA loan doesn’t have to save up for a down payment.

USDA Loan

A USDA Loan is short for the “USDA Rural Development Single Family Housing Guaranteed Loan Program.” Like a VA loan, this program also allows a homebuyer to fully finance a home purchase, which means a down payment isn’t required.

The property must be a rural single-family home and low to moderate-income homebuyers based on the county’s median income to qualify for this program. Speak with a mortgage professional within your area to check your eligibility.

Conventional Loan

A conventional loan is a loan that is not part of a specific government program. The down payment ranges from 5% to 15%. Therefore, a 5% down payment for a purchase of $200,000 is $10,000.

Why Do People Want a 20% Down Payment?

Home borrowers that make a down payment of less than 20% are typically required to pay for private mortgage insurance (PMI). This insurance is not the same as home insurance. Instead, the purpose of a PMI is to protect a lender if a borrower defaults on their payment.

Thus, on top of the mortgage payment, property insurance, and property taxes, some homeowners will also have to pay for PMI. However, some homebuyers don’t mind paying the PMI because they prefer a lower down payment.

Some loan programs don’t allow you to remove the PMI. On the other hand, some programs will allow PMI removal when the balance is 80% of the original purchase. Homeowners can make extra payments towards the principal balance to accelerate the debt service payment. Alternatively, homeowners can refinance the property and take advantage of the house’s appreciation.

How Much Can You Afford?

Before you start looking at potential houses to buy, it’s essential to know how much you can afford. The general rule of thumb is that the mortgage payment should be no more than ⅓ of your monthly household net income. For example, a person with a monthly net income of $2,500 should aim to have a mortgage payment of no more than $833 a month.

Although this rule of thumb is a quick and easy way to calculate a rough estimate of how much you can afford. Any homebuyer needs to review their financial situation in detail thoroughly. Mortgage payments can easily vary due to property taxes and home insurance and can quickly increase your monthly expense.

Where to Save Your Money

It’s best to save money in a high-yield savings account, such as a money market account. Your account may not accrue a lot of interest. But, you avoid risking your savings by not putting it in an investment account, such as stocks or REITs.

10 Ways to Save For a Down Payment

1. Track Your Expenses

Before you can start putting away money for your down payment, you first need to identify and track all your expenses. Whether the cost is paying for utilities or entertainment, track it all.

 

With the help of online banking, you can see all your transactions in one place. Reviewing your expenses might even surprise you with some items you were unknowingly paying for. Knowing how much you spend on expenses will give you an accurate idea of how much you will have leftover from your paycheck.

2. Create a Budget

After you track all your expenses, it’s crucial to create a budget. A budget does not mean taking the fun out of your life. Instead, a budget is the best way to make sure you have enough money every month. For example, you budget $100 a month for dining out. If you already have exceeded that amount for the month, you will have to postpone any dining plans until next month.

3. Automate Savings

Creating a budget is a great way to be fiscally responsible. However, it can be tempting to spend your paycheck once it hits your checking account. To help overcome this temptation, you can set up automatic transfers to your savings account.

Talk to your payroll department to have them transfer a certain amount or percentage to your desired account. As another option, you can set up an automatic transfer with your bank. Automating your savings is a simple way to keep you honest with your savings.

4. Reduce Expenses

If you don’t have much money, an easy way to start saving is by reducing your expenses. For example, instead of buying lunch when you’re at the office, consider bringing your lunch.

Also, get rid of unnecessary expenses. That’s fantastic you signed up for a gym membership after the new year. But, if you’re not using it, you’re better off canceling it to keep more money in your pocket.

Consider living stingy and downsize, if possible. You’re not cheap. Instead, you are more intentional with your money. For example, you can trade in your car for a more affordable vehicle or change your cell phone plan. Or move into an apartment with more affordable rent while you work on building up your down payment.

5. Increase Your Income

Aside from reducing your expenses, another way to save for a house is to increase your income. One way to accomplish this task is by requesting a raise from your employer. However, be sure to back up your request with data to justify a promotion.

If you’re unable to get a substantial raise from your main hustle, consider a side hustle to create a second income stream. Depending on your current career, you can leverage that to your advantage to make money in your spare time.

Additionally, if you have an extra bedroom to spare, you could house hack your current residence and rent out the room for extra income. Be sure to consult with your landlord before advertising for a roommate.

6. Postpone Major Activities

You might call me a killjoy, but another option to save for a house is to postpone significant activities or events, such as a family vacation or concerts. Saving on travel alone can save you hundreds and even thousands of dollars.

Remember, I said “postpone” and not “cancel.” There will always be another opportunity to live that experience. At least once you have your house, you can hang those memories in your new home.

7. Get Rid of Debt

Getting rid of debt is another excellent way to help you buy a house. Not only does it reduce your monthly expense, but it can also make you favorable in the eyes of your lender.

According to Experian, two of the four significant factors mortgage lenders consider are payment history and credit utilization ratio. Lenders want to make sure potential borrowers have a good track record of paying on time.

Also, lenders use the credit utilization ratio to determine how much a borrower’s balance is compared to their credit limit. The lower the ratio, the more favorable a borrower, is to a lender. Therefore, it pays to pay down your student loans and credit card debt.

Additionally, lenders will also check a borrower’s debt-to-income ratio (DTI). This ratio compares how much a person owes to how much they earn a month. The better your DTI, credit utilization ratio, and other factors will help qualify you for a loan program to your advantage.

8. Save Your Windfall Income

There will be moments you’ll unexpectedly receive extra income, such as bonuses, gift money, tax refunds, and stimulus checks. Instead of splurging that surprise money on consumer products, save that extra cash in your separate savings account to help you get closer to your goal.

9. Sell Your Things

Another way to boost your savings is to sell items you no longer use. For example, if you’re no longer planning on having kids, you can sell that Spectra S2 to another mother in need. Not only can you make extra money, but you’ll also be reducing your belongings, which can have a positive effect on moving expenses.

A few options to sell your items are holding a garage sale or listing items for sale on Facebook or Craigslist. Aside from selling your TV or video game console, you can go as far as selling your barely used vehicle.

10. Pause or Reduce Retirement Contribution

It’s essential to make regular contributions to your retirement account, especially when you’re young and have time on your side. However, if you need a little more capital to save up for a down payment, you can temporarily pause or reduce your contribution to your 401k or IRA.

Keep in mind that you’ll lose the tax benefits of not contributing to these retirement accounts. Thus, it’s crucial to weigh the pros and cons of pausing or reducing your contributions. You may find more profitable avenues to save more money or may just need to extend your timeline when you can reach your savings goal.

Final Words

Owning a house is a great way to create generational wealth. So, as early as now, start reaching out to various mortgage professionals. A seasoned mortgage lender can help you navigate the financing process and help identify mortgage loan programs that work well for you. They can also let you know what credit score to work towards to get a better interest rate.

While you work on saving up for your down payment, also focus on building good money habits and practice budgeting for monthly payments. So, once you’re ready to make an offer and buy a home, you’ve already developed a habit.

This article originally appeared on Your Money Geek and has been republished with permission.

Residual Income - Frugl

What Is Residual Income? 10 Residual Income Ideas to Build Your Wealth

Most people believe that money is created through active income. They rarely think about passive income or even residual income as a source to generate wealth or financial freedom.

Wealth is thought of as being reserved for those that have the means to create and make money. These may be the rich and famous or even those that have inherited money. Why can’t we be part of those people that are wealthy? What rules restrict us from being able to make this wealth for ourselves and our families?

When exploring the means of creating wealth without using active income, we come across two types. There is passive income, and there is residual income. They both act very similarly, but as we talk about finance, it is better to think of the residual income.

What is Residual Income?

Residual income is an income that can be passive. The calculation determines how much profit or excess income is available after all expenses are paid off.

It is the leftover money we have after we have paid off any personal or business debt.

Most people trade time for money, but we create income streams without trading in more time with the residual income. These income streams are passive and allow us to keep our time without spending it to make more money.

Residual Income vs. Passive Income

Residual income and passive income seem to be used interchangeably within the internet world. You go to google to search, and some posts and articles come up with passive income ideas.

Let’s get these two things straight. The money that comes from all that work is passive income. Passive income comes from doing work like building a blog, writing posts, and using it to sell affiliates and ads if I were to buy rental properties that create massive amounts of cash flow, once all the work is done and the money comes in passively. You have now done all the work, and the income comes afterward.

We often think about active income. Work is done, and therefore, we get paid for the work. The work is done with the passive income, but the money keeps coming in. If you write one blog post and keep making money off it years later.

Residual income is the same, but you calculate how much profit you get from the passive income. With the blog you are writing, there are costs such as hosting, plugins, a theme, and even a mastermind group.

The rental property would have been bought with money and would have expenses like management fees, taxes, rehabbing the property, and maintenance.

In the end, you take the revenue you have created and subtract it from the involved costs. That is your residual income.

Different Types of Residual Income:

When talking about residual income, we come across two different types. There are personal and corporate.

Personal Residual Income:

In personal finance, residual income is the disposable income. You can calculate your residual income every month by taking what is left over after paying all debts. This debt-to-income ratio is critical when looking to get loans from banks and lending services.

Banks and lenders want to see how much you keep to see if it is worth loaning you money. The debt to income ratio is significant to these lenders.

Lenders generally do not want to see a debt to income ratio over 43%. It is not good for business. So the lower the ratio, the more likely a bank is willing to lend money to an individual.

Corporate Residual Income:

Corporate residual income is a bit different from personal. Corporations use residual income to assess their performance. That is the profit after paying all costs they have incurred to generate revenues. That is the net operating income.

They use residual income to evaluate the effectiveness of their investments, their teams, and their departments. It is a good measurement to see the health of a company.

10 Ways to Create Residual Income

Now we know residual income. It is time to make some. Here are 10 ways you can create residual income for yourself.

1. Invest in Real Estate

Owning real estate can be a great way to generate monthly income. You can purchase a single-family home, duplex, or even apartment building. The great thing about owning real estate is that there will be a good cash flow coming in every month.

There will be additional expenses, but the work is relatively minimal. The rental payments can help pay off the mortgage, taxes, and repairs while you save the rest.

You can manage the property yourself or even hire a property manager to help you with the property. With a property manager, you can put some of your time into other valuable items, but you can manage the property yourself to obtain more income.

2. Vacation Rentals or Short-term rentals

Airbnb has become huge over the last many years. If you have a free room in your house, you can rent that out. It is an excellent opportunity to make extra money without having much work to put in it.

My friends had a big house with plenty of rooms to rent out to people for weekends. It was an excellent way for them to create extra money without extra work to create active income.

You can also have a place in popular vacation spots like on the beach or the mountains to rent out short-term to use VRBO or other sites to make some good side income.

3. Invest in the Stock Market

Investing in the stock market is one of the simplest ways to create a passive income stream. Have you heard of index funds? They are one of the simplest ways to build wealth with your money in the stock market. You can continue to buy these index funds and allow compounding interest to really grow your money.

You can buy these funds with Vanguard or Fidelity. It can really make creating wealth simpler and easier for the average person.

It does take patience to allow your money to grow. If you can be patient and continue to invest, you will wake up in 10, 20, or 30 years with a massive portfolio. This is one of my favorite ways to create residual and passive income.

If investing in stocks is new territory to you, this guide about how stocks work is a great resource to get started!

4. Invest in REITs

If you want to invest in real estate without having the responsibility of being a landlord, you could invest in REITs.

REITs are real estate investment trusts. These are companies that will buy up real estate and use your money to help them do it. You will get dividends from the residual income that the company makes off of its property.

This is an easy way to create some residual income. You invest in some REITs and reap the profits at the end of each month.

5. Start a Blog

Starting a blog can be challenging work that takes time and money to make things happen. If you want to capitalize on something with a high ROI, creating a blog can be a way you can do it.

It takes little money to start. You need to have a good niche, persistence, and start to write. Once you get started, you can build a following, and soon enough, as the blog grows, your income can grow along with it.

Many people have started blogs and created great avenues of income through these blogs. It takes time and patience, but you can dominate the interweb with your content if you find a good niche.

6. Launch a Podcast

If you enjoy talking with people or sharing ideas, you can start a podcast. Many podcasts pop up all over the place, but it is a newer field compared to the blogging world and offers many opportunities.

With a niche, you can help educate the world with your skills and expertise. The great thing about running a podcast is once you record, edit, and publish, you can wait as people download the episode.

In making money with podcasts, many people will go to Patreon and set up an account. That is a way for subscribers to help sponsor their favorite content. As the content creator keeps creating, his audience will continue to grow, and other sponsors will jump on to help fund and make the podcast profitable.

7. Write a book

Writing a book is a great way to build something and allow the income to come in after all the work. It can be as easy as writing it and publishing it as an ebook through Gumroad or even using Amazon’s KDP program to create the book.

If you are knowledgeable about a particular subject, you need to put that pen on the paper and write something that will help bring value to someone’s life. Something helpful will be worth it to people that will buy it.

This book can be an asset that continues to pay you days, months, and years after you have written it. It is a perfect way to start some residual income.

8. Create a course

Creating a course is much like writing a book. There are many skills out there that people would be willing to learn if they had a good course that can teach them.

Right now, the internet is full of courses to help improve your life, create skills, and help you even manage your money. If you can teach someone, then building a course is a great way to generate some good residual income.

9. Make an App

If you have some technical skills, you can use those skills to be an app. That can be an app about anything that people will find value in. For instance, you can have a finance app, a recipe app, or even a fantastic travel app.

Once you build the app, you are ready to go to make some money. Not all of us can create apps.

You can visit sites like Upwork and hire some people to code and create an app for you. If you have an idea, you can make it work.

10. Sell Digital Products on Etsy

If you are good at creating, you can create notebooks and other digital products. You can sell these on Amazon, but you can also sell these on Etsy. Create a digital product, then add a download button, and you have it set.

You make the item once and can continue to sell many more of those specific items. That can be as easy as creating cards, wall prints, inspirational quotes, or even sell digital versions of your artwork.

Final Thoughts

Residual income is a way to create much wealth. As you can make most of this money through passive income sources, you can generate more income. This is a massive step towards achieving financial freedom. As you think about it, it is not just about making passive income but creating enough income not to need an active job.

Remember that residual income is the income and profit after all expenses are paid off. With these 10 ways, you have the tools to go out and make your residual income streams.

It’s also important to always keep in mind that you should always be practicing and building good money habits along the way to continue improving the relationship you have with your money which can afford you the many perils in life including saving up for your next vacation.

This post originally appeared on Savoteur.

Can I Work and Collect Social Security - Frugl

Can I Work and Collect Social Security in 2021

Around 64% of Americans have not saved enough for retirement, and about half of those individuals may have nothing set aside when they reach retirement age.

The pandemic worsened some grim statistics from a recent GoBankingRates survey. Many people lost their jobs and are months behind on bills.

With such a large percentage of Americans struggling to save for retirement, it’s clear that many of these individuals will need to work far past the full retirement age. And quite possibly in some capacity for the rest of their lives.

This harsh reality begs the question: Can I work and collect social security?

Like most things, the answer to that question is complex and varies depending on your situation. However, by the end of this article, you will be able to answer the question for yourself and your loved ones.

Can I work and collect social security? Let’s find out.

What is Social Security?

Signed into law in 1935 as part of the New Deal, the original purpose of Social Security was as a retirement plan for workers aged 65 or older. The program allowed individuals to have continuing income after retirement, and for many, to have a retirement.

Although Social Security started as purely a retirement plan for workers, provisions were added over the next 40 years to include survivor benefits, disability insurance, Medicare, and supplemental security income (SSI). These additions helped provide income for families of deceased workers, those with disabilities, and medical insurance for beneficiaries.

Today, roughly 63 million individuals in the United States receive Social Security benefits or approximately 1 in 5 Americans. Of those individuals, 1 in 3 are disabled, dependents, or survivors.

How Does Social Security Work?

Social Security is one of the more confusing areas of personal finance for people, and it can be challenging to determine how to handle the decision of claiming your benefits.

There are also concerns of solvency and the Social Security shortfall, or the fact that more benefits are get paid out than taxes taken in. However, we’ll save that discussion for another day.

It is essential to know is how Social Security works, which will help us answer whether you can work while collecting benefits.

At What Age Can You Take Social Security?

For most, Social Security benefits will come in the form of income for retirement. For those not on disability, you can begin drawing Social Security benefits at age 62 at the earliest (age 60 if a widow or widower). However, if you decide to start receiving benefits early, they will be reduced by a small percentage for each month before your full retirement age you take them.

Full retirement age, or the age at which you’ll receive full benefits for your situation, is age 66 and 2 months for those born in 1955, with a gradual rise to age 67 for those born in 1960 or later.

There is also an incentive for delaying your benefits until after your full retirement age. You can delay your benefits up until age 70, after which there is no further increase in benefits and thus no reason to delay receiving Social Security.

For example, those who reach full retirement age at 66 years and two months but delay until age 70 would receive 132% of what they would have received if they had begun drawing at full retirement age.

How are Benefits Calculated?

Social Security calculates benefits using two factors: 1) The amount you earned during your working career, and 2) The age you begin taking benefits.

In calculating your benefits, SSA uses the highest 35 earning years of your working career. This calculation yields your Average Indexed Monthly Earnings (AIME), which they use to calculate your benefits. However, take note that years in which you earned no income are also included in that count, which could severely impact your benefits if there were many years where you were not working.

The AIME is then divided into three “bend” points plugged into a formula that yields your monthly benefits at full retirement age or your Primary Insurance Amount (PIA).

Your PIA gets increased or decreased based on what age you start benefits.  Cost of living adjustments impact benefits as well.

Calculating your AIME and PIA is very confusing and complex, so those hoping to get an estimate of their monthly Social Security benefits can do so using online calculators offered at the Social Security Administration (SSA) website.

Can I Work and Collect Social Security?

Now that you know when you can begin taking Social Security, how your benefits get calculated, and possibly an estimate of how much you can expect to receive, we can start diving into the question posed at the beginning of this article.

Can I work and collect Social Security?

The simple answer is yes, but the complex answer is yes with a caveat. While it is possible to work and collect Social Security, the amount you can earn and the impact on your benefits depends on several factors.

How Much Can You Earn and Still Receive Benefits?

The moment you begin receiving Social Security retirement benefits, the Social Security Administration considers you retired. Whether or not earnings impact your Social Security benefits depends on your age.

If you have reached your full retirement age (between 66 + 2 months and 67 depending on the year you were born), then whatever you earn by working will not reduce your benefits. In other words, once you’ve reached full retirement age, you can work as much as you want without those earnings impacting your Social Security.

However, if you are under full retirement age, there is a cap on your earnings without facing a reduction in benefits. For 2021, the annual limit for those receiving Social Security retirement benefits is $18,960.

Thus, if you are under full retirement age and receiving Social Security, you can work and make up to $18,960 annually in addition to your benefits without losing any of those benefits.

However, for every $2 you earn above the annual limit, $1 will be deducted from your benefit payments.

For example, say you earned $19,960 this year, $1,000 above the annual limit. In this case, you would lose $500 in Social Security benefits for the year due to the additional earned income. Of course, you are gaining $500 in income in this scenario, but you’d have to decide for yourself if working to make that money is worth the loss of benefits.

To complicate things even more, there are special rules for those who choose to work while receiving benefits in the year they will reach full retirement. For those individuals, the earnings limit for 2021 is $50,520, with $1 in benefits being deducted for every $3 earned over this limit.

In addition, in the above scenario, the SSA only counts your earnings up to the month before you reach your full retirement age instead of your earnings for the entire year.

What Counts as Earned Income?

As you can see, the annual limit for the amount you can earn while still receiving full Social Security benefits is relatively low, and thus you may be wondering what the SSA counts as earned income.

Of course, income from working a job counts, along with bonuses, vacation pay, and commissions. However, if you are self-employed, the SSA only counts your net profit as earned income.

On the other hand, the SSA does not count pensions, investment income, interest, veterans or government retirements benefits, or annuities as earned income.

As you can see, the SSA only counts income earned from working a job or from self-employment when determining whether your benefits get reduced.

Can I work and collect Social Security? Yes, but be careful not to exceed the annual limit that applies to your situation, or you will lose out on some of your benefits.

Should You Work and Collect Social Security?

Now that you know that you can work and still collect Social Security, the question becomes, should you?

As with most things, it depends.

Remember that the annual earned income limits only affect your Social Security benefits under full retirement age. If you are over the full retirement age, you may work as much as you please without that income affecting your benefits.

If you are under full retirement age and receiving Social Security retirement benefits, consider the annual income limits and whether or not you anticipate making more than the limit.

If you are slightly over the limit, the impact on your benefits will be minimal. Still, if you are significantly over the limit, the extra income you’ll bring in likely won’t outweigh the reduction in benefits.

Suppose you want to keep working and earn significantly more than the annual earnings limits listed above. In that case, you should consider delaying taking your retirement benefits until you’ve reached full retirement age and the point where your earnings won’t impact your benefits.

You may still be unsure whether it makes sense for you to work and collect Social Security. If so, consider hiring a retirement advisor, a financial advisor specializing in helping people nearing retirement. You’ll find many retirement advisors have earned the Retirement Income Certified Professional designation, so they can help you determine the best time to claim Social Security based on your circumstances.

You can also visit the Social Security Administration site for a list of Social Security resources and help decide what is best for your situation.

Final Thoughts

Social Security is a complex but critical component of the long-term financial plan of every American.

While not meant as a complete retirement plan, Social Security remains a key piece of retirement and an earned benefit for those who have worked throughout their life. Social Security becomes even more critical for those with little retirement savings but may still not be enough to get by without additional earned income comfortably.

Luckily, you can work while collecting Social Security benefits up to a specific annual limit, after which SSA reduces your benefits based on how far over the cap you go. So if you’ve reached full retirement age, there is no impact to Social Security from additional earned income.

Can I work and collect Social Security?

Yes, you can, but only you can decide if you should.

This post originally appeared you Your Money Geek.

New York Pass Review - Frugl

The New York Pass Review: Is It Worth It in 2021?

New York City is a unique and wonderful place. As a born and raised New Yorker, I have been fortunate enough to experience and explore much of what New York City offers.

But even those not from New York know it is often crowded and expensive. So what is the best way to avoid the crowds, especially now as we continue to navigate this pandemic safely and stay on budget while enjoying all this great city offers? The New York pass is an option that provides perks and easy access to maximize your New York experience with less of the crowds and exorbitant prices.

So what is the New York Pass?

The New York Pass is an app with a planning guide, navigation, and digital passes for the entertainment you choose to book. The pass also offers discounts and fast passes that you can book in advance, up to 90 days, by planning your trip and booking your passes with the app.

Your passes will activate on the app when you go to your first attraction. You will then be able to use the pass for the remainder of your trip, and you can go to as many places as you want consecutively throughout the trip. It is an easy, safe, and budget-friendly way to approach your experience.

What attractions can you book with the New York Pass?

There are a variety of attractions you can book using the app. They are organized into categories to make your planning experience more enjoyable. The categories you can choose from include:

Must See

In this category, there is a mix of the most popular sites in the city for you to choose from, and there is no limit to how many attractions you choose to visit in any category. One popular option from this section is the Empire State Building Observatory. There you will have the chance to visit the historic building and see the spectacular view. Another option in this category that is often chosen is “The Ride,” an interactive, entertaining bus tour located in Midtown, Manhattan. Are you ready to explore, enjoy, and save? This list is loaded with options all over the five boroughs.

What’s New

This category offers discounts and freebies on food tours that take you around the city to taste the unique and delicious food you can get in various neighborhoods. You will be able to find Jazz events and more as well!

The next few categories are helpful if you know specifically what types of venues you are looking to see when you visit.

Museums

New York has a wide variety of museums for those of all tastes and interests. The New York Pass offers discounted or free access to museums all over the city, such as the Modern Museum of Art (MOMA.) You will see sculptures and works of art from artists such as Andy Warhol and Vincent Van Gogh. Another option with a different perspective on artistic representation is the Museum of Sex. There you will experience art that encourages interaction in conversation with a classically taboo subject for many based on the art they see there.

Take your pick of all the beautiful attractions that express the artists’ perspectives and expressions represented in New York at a discounted price or for free, and get the most out of your vacation without blowing your budget!

An added bonus for your budget!

All of the categories on the app offer various options free of charge when you purchase the pass, which is even better than a coupon! Check your app!

Traveling in the time of Covid

Thankfully, New York is no longer the hotspot for Covid that it once was, and things are beginning to open up again. Unfortunately, not everything is back to normal, so booking online, contacting the attractions ahead of time, and planning in advance is helpful. Hence, you are aware of any closures or restrictions around the city when you are there.

Due to the changes caused by the pandemic, New York Pass is offering full refunds on unused passes for up to 90 days after purchase. Thanks to this new option, you will not have to worry about losing money if you need to cancel for any reason. To be safe before traveling, also make sure you stay up to date on travel restrictions before going anywhere.

So is it worth it to get the New York Pass?

Discounts, freebies, the ability to organize your activities, and more. This is a great deal if it offers the things you want to experience while in New York. On average, you will need about $235 a day to enjoy the city and cover basic expenses. Having all of these discounts and free opportunities will allow you to do more on your trip without blowing your budget if you want to see the sites and experience the available options.

There are other ways to enjoy the city as well without only visiting the main tourist attractions. New York City has miles of beautiful beaches in Brooklyn and Queens. Pay your way onto the sand, but the boardwalks are free! You can also find both expensive and inexpensive food options to fit your needs.

You can also do walking tours of the neighborhoods you are interested in seeing, which is also free unless you decide to go shopping. Make sure you decide what kind of trip you want to have. If you are going for options like this, the pass may not be the best option.

So here are my good and bad perspectives on the New York Pass. It is a good idea to purchase the pass if:

1. You are coming to New York for the first time

There are many things to do in New York, and it can be overwhelming if you don’t know where to start. Having many of your options organized in one place will make it easier to decide what you want to start with from the major attractions, and then you can plan other things from there if you choose to.

2. You are planning to visit a bunch of the more expensive and popular options. You also want to skip the lines.

The discounts and free options are worth it if you are saving money by purchasing the pass and getting to see more attractions for less money.

No one likes lines and crowds, but now it is more important than ever to stay safe, plan ahead, skip the lines and large crowds.

3. You want to see as much as possible while you are in New York, and you don’t care how packed your schedule is.

When you purchase this pass, the more you see, the more you save, so get ready to explore!

You may not want to get the New York Pass if:

1.You are moving to New York, or you are staying for an extended period.

The pass has the best value when using it over a few days and packing your schedule with attractions. If you will be there for a while, you may want to space out your visits to the attractions.

2. You are more interested in seeing the free and low-cost attractions around the city.

This all depends on your travel style. You will only be able to decide if you crunch the numbers and make sure the pass is worth the same or more than you will be spending at the places you decide to go throughout your trip.

3. If you are a student and have a valid student ID from your school

Make sure the student discounts you get at many places will not save you more than the pass. You want to be sure you are getting the best deals!

In the end, it all comes down to what kind of traveler you are. The New York Pass is a great deal if you want to see the more expensive attractions such as the River Cruise or the Empire State Building, and you want to pack your schedule to see as many attractions as you can. If you are looking for a more laid-back trip or want to see more free and low-cost attractions, it may not be the best option for you.

Plan ahead and decide what you want to see when you visit New York and crunch the numbers to see how you can have the best trip and save the most money in the process. Either way, you will be visiting a fantastic city that I am happy to call home. Visit soon!

This post originally appeared on Savoteur.

Best ways to invest in 2021

Best Ways to Invest Money in 2021

Don’t fall into the trap of thinking that investing is reserved for the already rich.

Although having more money to play with makes investment simpler and less risky, anyone with a healthy savings account and enough income to set aside a few dollars each month can afford to invest. So don’t ask yourself whether you should get involved — try to figure out the best ways to use your money.

Unfortunately, there’s not a simple answer to that question. We all have drastically different financial goals and mindsets; one person’s foolproof plan is someone else’s recipe for disaster. In the advice that follows, I’ll outline the main factors to consider when starting on your investment journey, along with the best approaches for different situations.

What to Consider First

Most people want to jump straight into figuring out the hottest new investment opportunity, thinking that if they select the latest up-and-coming cryptocurrency or stock that they’ll be guaranteed tidy profits.

But this is the wrong approach — before you even think about what you want to invest in, you should turn your mind toward how you want to invest.

Lost? I’ll break things down into five questions you should be asking yourself:

  1. What are your financial goals?
  2. What’s your investment timeframe?
  3. How much risk are you prepared to take on?
  4. Do you want to select your investments yourself?
  5. What type of account is right for you?

Let’s look at each one in turn.

Financial Goals

We’d all like to have more money. But what exactly do you want it for, and how much are you going to need? Knowing the answers to these two questions is the foundation for building a solid financial strategy.

While investing your savings instead of leaving them sitting in a checking account will (almost) never be a bad idea, this method will be less effective if you don’t have a clear picture of what you’re heading toward.

Common financial goals include:

  • College tuition (or the college tuition of your children)
  • Retirement
  • Paying off a mortgage
  • Making a downpayment on a property

As you might have noticed, all the objectives above are longer-term goals that involve some serious saving over multiple years (if not multiple decades).

Although some people save for shorter-term milestones, like a wedding or vacation, investing is generally only recommended if you’re prepared to lock away your money for five years or more. I’ll be assuming most people reading this are in that category.

Next, you’ll need to figure out exactly how much you need to meet your goal(s).

For example, if you’re saving for retirement, start by working out how much annual income you’d need to live off. Many people in the financial independence movement recommend following the 4% rule (multiplying your annual income by 25).

Like mortgages and college tuition, other goals are easier to associate with a number for — but don’t forget to account for inflation. If college tuition costs $20,000 a year now, expect it to be a little more expensive in ten years.

Timeframe

Once you know your financial goals, it should be pretty straightforward to figure out the kind of timeframe you need to be investing over.

If you’re saving for your kids to go to college and the eldest is currently four years old, you’re looking at a time frame of 14 years. Or, if you’re 30 years old and saving for retirement, expect a horizon of roughly 35 years (assuming you want to retire at the “normal” age).

You get the gist.

Risk

The timeframe you decide on is one of the greatest determinants of how much risk you should take. For example, investing $100 in Bitcoin or Tesla shares is pretty risky if you know you’ll need to use that money in two weeks — maybe the market will just so happen to be experiencing a dip at that point, meaning you’ll lose money.

Take a look at the price chart of any stock, crypto, or currency pair, and you’ll know how volatile prices can be in the short term.

But if you know that you’re in it for the long haul and won’t need the money for a few decades, you can be reasonably confident that your investments rise in value by the time you withdraw them.

Naturally, there’s always a chance that a company could go under or lose value — that’s where diversification, research, and some thought about your risk tolerance come in.

If you invest all your money in a single company or asset, there’s far more risk involved than if you spread it across multiple companies or assets.

Then there are the investments that are inherently riskier than others. For example, pouring your money into a brand-new company or a new asset class like cryptocurrencies involves far more risk involved than putting your trust in a “safe pair of hands,” such as the Googles and Amazons of the world.

Anything with inherent value, like real estate in a desirable area, is also a decent option.

Still, risky investments aren’t necessarily a no-go — you need to make sure you’re going into them knowing and accepting their riskiness.

Investment Selection

You might be thinking, haven’t I already covered investment selection in the paragraph above? Not quite — investment selection here is all about deciding whether you want to handpick your investments or pass that responsibility onto someone else.

If you’re new to investing, you might find the idea of enlisting a professional to help you select your investments more appealing than having to do everything yourself. However, while this can be a good option, it comes with a fee — portfolio managers charge a management fee, which eats into your returns, especially if you’re only investing a modest amount.

But if you’ve never invested before, you probably don’t even know what you don’t know — how can you hope to pick the right platform, never mind the right assets and products?

Fortunately, there’s a third option: using a robo-advisor. Many platforms and apps have launched special software and applications that guide investors through selecting and managing their portfolios. The sophisticated algorithms bring suggestions that rival actual asset managers.

Some will take users through a quiz with questions about their risk tolerance, financial goals, and similar; others provide tools for automatic investing and rounding up spare change to make investing effortless.

Account type

Figuring out what you want to invest in is just the first step — you also need to know exactly how you’re going to do it. Or, in other words, which account type you’ll open and on which platform.

In the US, common investment accounts include:

  • 401(k): A tax-efficient retirement plan allowing employees to save part of their paycheck, often involving matched contributions from employers.
  • Traditional IRA: An account that lets you contribute after-tax money and withdraw it tax-free (along with the extra earnings) at retirement age.
  • Roth IRA: An account lets you contribute pre-tax money and pay tax when you withdraw it at retirement age.

Tax-effective investment accounts and pension plans exist in many other countries, but they’re likely to have different names and involve slightly different rules. For instance, the UK offers individual savings accounts (ISAs), which allow individuals to save up to a set threshold each year and later withdraw the funds they’ve accumulated tax-free.

You might also want to consider accounts for specific savings goals, such as an account for saving for college (known as a 529 account in the US) — these can offer special perks.

Best investments in 2021

Now you’ve given plenty of thought to the questions outlined above. It’s time to get on to the juicy part of the article — selecting suitable investments.

There’s not a single correct answer here since the right investments for you will depend on your answers to the questions outlined above — that’s why I’ve highlighted who each of the investment types below is most suitable for. Let’s go!

Stocks

Best for: Longer timeframes and higher risks for higher returns.

When you buy a stock, you essentially become a shareholder (or owner) of that business — so whenever the company increases in value, your investment will also rise in price.

You only have to look at how much some of the most successful stocks have grown over the last few decades to see how profitable this can be. For instance, if you’d invested in a Google stock back in July 2016, its value would have jumped from $719.85 to $2585.72 — an increase of around 259.2%.

That’s a whole lot better than stowing it away in your savings account and even better than investing in the S&P 500 (which achieved a return of around 100% over the same period).

Source: https://finance.yahoo.com/quote/GOOG/

Yet, although stocks can be a path to mouthwatering returns, they can also end in tears. If you purchase shares in a company that happens to go under, you’ll lose your entire investment. And even if a firm doesn’t go out of business entirely, it could lose a lot of its value, even over the long term — industry trends, technology, and customer opinion can suddenly render a profitable business less than desirable.

This isn’t likely with a business as dominant as Google, but there’s no way of knowing for sure what’s going to happen tomorrow.

Luckily, there’s a solution.

Mutual Funds

Best for: Longer timeframes and lower risk.

If you like the sound of the returns and liquidity that stocks can bring but not the high risk and the need to handpick your investments, I’ve got great news: you can opt for a fund instead. Funds let you invest in a mix of different company stocks, therefore offering increased diversification.

They don’t tend to achieve the same level of returns as the highest-performing stocks — but they’re far less risky.

While it’s reasonably likely that a single company could face tough times, it’s far less likely that thousands of companies will experience these same difficulties (other than during recessions, but these are a natural part of the economic cycle and nothing to be scared of).

There will be some high-performers and some low-performers (or non-performers) in any fund, but on average, you’ll still get good investment returns. As long as you’re willing to invest for long enough, that is.

The main types of funds available to investors are:

  • Mutual funds: Contain a selection of bonds, stocks, and other assets (e.g., real estate or commodities) picked by asset managers and pooled together with other investors’ money. Traded at the end of the day.
  • Index funds: Contain an index, like the S&P 500 or the FTSE 100, and are traded throughout the day (just like stocks).
  • ETFs: Contain an index but are traded at the end of the day, just like mutual funds.

The differences between these are subtle but worth noting.

Bonds

Best for: Shorter timeframes and lower risk.

Although I said I’ll focus on investment strategies for longer timeframes and goals, an article about the best investments wouldn’t be complete without giving an honorable mention to a top short-term investment option: bonds.

Bonds are essentially loans, with the borrowers usually being the government or large companies. Because of who you’re lending to, the risk associated with bonds is low, yet this also means that the returns are lower than other types of assets.

The exact returns you can expect depend on the type of bonds you opt for and who the borrowers are — some bonds are unable even to beat inflation, while others can earn up to 5%.

Bonds are often used in funds to hedge against risk since they’re less affected by the stock market swings.

However, if you want to invest over a larger time period, it’s generally agreed that the benefits of investing in bonds are minimal. If you know you’re not going to access your funds within the next few years, the cons of low returns will outweigh the benefits of increased security.

Real estate

Best for: Portfolio diversification and stable returns.

I want to address something right away. Although I just said that real estate offers stable returns, this isn’t true all of the time. Properties have inherent value — people will always need somewhere to live — so their prices will generally increase over time.

But real estate doesn’t always match the returns seen in assets like stocks, and if you choose the wrong property location, you could fail to achieve much of a return at all. However, as a big advocate myself, I wanted to explain why it can be such a great option.

For one, the gains can beat the stock market if you choose the right area. Just look at how much property prices in London have increased over the last few decades!

Source: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/january2021

If you purchase a property and then rent it out to others, it can also be a great way to generate income and make your money work for you — you can use your investment to finance even more investments by using rent payments toward the future down payment.

Still, money invested in real estate is less liquid than anything in the stock market. It carries some serious risk — you might have issues with tenants or face expensive maintenance operations, for instance.

Cryptocurrencies

Best for: High risk and high returns.

Last but least, we have cryptocurrencies. This certainly isn’t an option for the faint-hearted — it’s no secret that the crypto market is somewhat wild, and you need a clear strategy for the price swings. Just look at how much the value of Bitcoin has fluctuated in the last year alone.

Source: https://finance.yahoo.com/quote/BTC-USD/chart/

But if you’re prepared to take on some risk to earn higher returns — often even higher than anything you could achieve from investing in stocks — then the world of crypto is the way to go. For example, if you’d bought into Bitcoin five years ago, you’d have achieved a return of 5144.33% by now — and the coin is currently way below its all-time high.

Just be prepared to do some serious research before you start investing in this one. Following the crowd could lead you to buy into a bubble at the wrong time, whereas buying niche coins at random could involve you in a scam (the crypto world is unregulated for the most part).

Beware!

It’s Decision Time

As you should realize by now, choosing the best investment vehicle(s) for you is a personal decision. For example, some people are happy to accept significant risk by investing in specific stocks or cryptocurrencies. In contrast, others would prefer to sleep at night knowing their money is (relatively) safely locked away in index funds or property.

I’d recommend doing a mixture of all the above. It’s good personal finance practice to have a good amount of liquid cash at hand, and it’s safest to invest the rest of your funds across a range of assets or investment types. Why not invest the bulk of it in something safer like an index fund but allocate a smaller percentage to something riskier with higher potential returns, like crypto or individual stocks?

Whether that idea fills you with boredom, fear, or excitement will say a lot about your risk preferences and what your next step should be.

This post originally appeared on Your Money Geek.