Saving and investing — they’re both critical to achieving your financial goals. They both require you to put money aside, but for very different purposes.
Saving is ideal for short term goals (vacations or a rainy day fund). Investing is for long-term goals (down payment on a house or retirement).
But if you’re confused by the difference, you’re not alone. Most people in the U.S. don’t save enough, according to think tank Economic Policy Institute. And only half invest, according to a recent report from polling organization Gallup.
Take a look at this video. It will help you understand the difference between saving and investing.
Originally appeared on Learn.Stash.com and written by Jeremy Quittner, the Stash financial writer.
When most people think of investing they think of stocks, bonds and real estate. Very few people know about a very new asset class that is changing the face of investing and introducing investment possibilities to new investors. CryptoCurrencies have only been around since 2009. Designed as a way to make peer to peer payments over the web, cryptocurrencies have made countless millionaires and offer an investment platform for regular people.
The first cryptocurrency, Bitcoin, was created in 2009. It was designed to allow people to pay for things over the internet without middlemen, like PayPal. Since it’s inception, the value has grown over 4000%. People use Bitcoin as a store of value and to buy things over the web from places like Overstock.com. As more people have gotten into the market, the value has grown exponentially.
As an investment, cryptocurrencies are very attractive to new investors. They are particularly appealing because of the very low entry costs. It’s possible to start buying cryptocurrencies like Bitcoin for as little as $10. People enjoy investing in cryptocurrencies because they have huge medium and long range growth potential. Investing $100 in 2010 would have made you a multi-millionaire today. There are lots of reasons why people invest in cryptocurrencies. A little research will help you to find the best reason for you.
Where can I buy CryptoCurrency?
The only place I purchase my crypto-currency is Coinbase. A reputable exchange, Coinbase is one of the oldest exchanges for Bitcoin, Litecoin and Ethereum. It allows individuals to purchase all three of these currencies and store them in an online wallet. Through Coinbase, you can keep track of the value of your investments and also use it to make purchases. Our next blog will discuss digital wallets and where you can spend your new found wealth.
For more information, go to http://www.investnoir.com.
If you’re a business owner, you are used to wearing a lot of hats. Still, you can’t be an expert at everything, which is why it’s important to build a network of trusted professionals that you can turn to for help whenever the need arises.
No matter how successful you are, there are plenty of reasons to establish a professional network. In addition to exchanging contacts and referrals, there’s also the opportunity to share ideas and receive free advice from specialists in their field. And, much like getting a second opinion on a medical procedure, your network can act as a system of checks and balances by making sure you weigh all your options.
Ask yourself: Whom should you invite to be part of your network? While the members may vary depending on your strengths and weaknesses, your team should probably include some—or all—of the following professionals:
Attorney
Unless you have in-house council or a legal background yourself, an attorney—especially one with some experience in your industry—is almost a necessity. Among other things, an attorney can help defend you and your company from potential lawsuits, review contracts, and help with succession planning.
Accountant
While most people only use their accountant during tax season, business owners will find that an ongoing relationship can save them money in the long run. Not only can an accountant keep you from running afoul of the IRS, they can also show you how to structure your business and become a more tax-efficient operation.
Banker/Financier
As we all know, cash flow is the lifeblood of any business. And in today’s restrictive lending environment, having a banker in your corner can be a real boon. By providing easy access to credit, or letting you hear about the most favorable rates, a banker can be an invaluable addition to your team.
Insurance agent
A professional insurance agent can help you prepare for a number of critical business issues. Specifically, an insurance agent can help your business overcome the loss of a key employee, enhance your executive benefit package, fund a buy-sell agreement, and protect your family’s future by insuring your business interests.
As you can see, there are a host of advantages to creating a network of professionals with expertise in their field. Best of all, it’s a win-win for all parties, so setting one up may be easier than you think.
This educational, third-party article is provided as a courtesy by Tarra Jackson, Agent, New York Life Insurance Company. To learn more about the information or topics discussed, please contact Tarra Jackson at TRJackson@ft.newyorklife.com.
Three in four adults agree that they could benefit from guidance and answers to everyday financial questions from a professional, do you agree with them too?1
Since women control or influence the handling of the household finances, here are five things every woman should know about their finances, including a few tips from New York Life to get you started on the path to Financial Freedom.
#1 Maximize your tax credits 2:
Each year the deductible amount you can contribute to a retirement account is increased for inflation, and there are catch-up contributions for those 50 or over.
You can receive a $1000 tax credit for each of your qualifying children, in addition to each dependent’s personal exemption. Don’t forget to take this credit-it’s like receiving $1000 tax-free in your pocket, as long as your income doesn’t exceed the limitations.
The child and dependent care credit will cover up to $3,000 of qualifying expenses if you pay a babysitter or day care center so you can work or go to school.
#2 Become a S.M.A.R.T. spender:
Set S.M.A.R.T. financial goals (Specific, Measurable, Achievable, Realistic and Time bound) and create a spending plan in 4 steps3:
1. List your income
2. Compare your income and expenses
3. List your expenses
4. List your resources and set priorities
#3 Develop a savvy investment strategy:
Finding the right mix of investments depends on your available assets, your financial goals, your time horizon, and your tolerance for risk. It is important to ensure a balance between three things: liquidity, return, and risk. Start systematically investing as soon as you are able so that a reasonable amount is saved, even after just a few years. The compounding effect can help to speed up your savings4.
#4 Know your credit score:
Based on the factors below you are assigned a credit score between 300 (low) and 850 (outstanding). Here are the main areas in which you are graded and given credit scores, and the approximate weight that each area is given5:
Payment history: 35%
Outstanding debt: 30%
Credit history: 15%
New credit and types of credit: 20%
#5 You are your most important asset:
For most people, human capital is the missing piece of their portfolio. You insure your car, in the event you get into an accident. You insure your belongings, in case they’re lost or stolen. Your biggest asset is your ability to get up every day and provide for your family, whether by working or being the primary care giver. How do you insure your biggest asset? Through life insurance products.
A financial professional is trained to help you select and recommend vehicles that are suited to your protect your specific needs. You might find that working with a trained financial professional can help you to make well-informed decisions and stick with your financial plan — it is important that this is someone you are comfortable working with.
Click here to learn more about how New York Life can help you educate yourself on financial matters and set you on the path to a secure future.
Article by New York Life Insurance Company:
1 The 2014 Consumer Financial Literacy Survey, The National Foundation for Credit Counseling, http://www.nfcc.org/NewsRoom/FinancialLiteracy/files2013/NFCC_2014FinancialLiteracySurvey_datasheet_and_key_findings_031314%20FINAL.pdf
Remember the good old days of whistling while you work in regards to your 401k? Your company used to have a very nice match to your 401k. Your balance was at at all time high and retirement seemed like just over the horizon. Then 2008 came along and the whistling turned into more of a whimper. Don’t worry, I was whimpering, too. For those that are 59 1/2 and still working, I might have a reason for you to whistle again. The reason behind it is called the 401k in-service distribution.
I took a call from a client recently whose employer was getting ready to switch 401k providers again (3 times in the last 5 years) and was frustrated with the new investment options. He is over 59 1/2 and had heard that he might be able to rollover his 401k to an IRA and also continue to fund his 401k. I was excited to share with him that he in fact could do this and that the procedure was called an in-service distribution.
Rules on 401k In-Service Distribution
First things first, you HAVE to be 59 1/2. No matter how much you dislike your current plan and you want to withdrawal it all, it’s not an option until then.
This doesn’t just apply to 401k’s. Any types of retirement plans will work, too. This includes 403b’s, 457″s and pensions, too.
Be sure to rollover the money to an IRA if you don’t need it. By doing a 401k in-service withdrawal you will taxed.
Reasons to Do a 401k In-Service Distribution
An in service distribution allows you to rollover your vested balance from your profit sharing plan to an IRA. You will have to determine first if you are eligible. Some plans may restrict from doing so. Here are some reasons that you might want to:
Control— Who doesn’t like control? With an IRA, you are the account owner and have more control over your assets, free from the restrictions your employer-sponsored plan can impose.
Diversification — Many employer-sponsored plans offer limited investment options. In contrast, most IRAs typically provide a wider range of investment choices across virtually every asset class. This flexibility can help you better diversify your retirement assets to meet your individual investment goals.
Beneficiary options — Typically, IRAs allow non-spouse beneficiaries to “stretch” an inherited IRA over their lifetimes. This type of beneficiary distribution option is not available in most employer-sponsored plans, which may limit distribution choices for your beneficiaries.
Disadvantages of 401k In-Service Service Distributions
With every advantage there may be disadvantages. Please consider:
Age limitations — In qualified plans, the age 55 rule allows participants who stop working at age 55 or older to take distributions without the 10% IRS premature distribution penalty. In an IRA, you may not take distributions until age 59½. For this reason, if you plan to retire early, you may want to preserve penalty-free access to your retirement funds by not moving all of your 401(k) assets to an IRA before retirement.
NUA— Net Unrealized Appreciation (NUA) tax treatment is not an option for distributions from IRAs. Therefore, if you hold highly appreciated company stock in your employer-sponsored plan, the rolling of that stock to an IRA eliminates any ability you may have to take advantage of NUA tax treatment.
Creditor protection — While IRAs now have federal bankruptcy protection, other IRA creditor protection is still determined by state laws. Qualified plan assets continue to have broad federal creditor protection.
New contributions to your existing plan — Taking an in-service distribution may affect your ability to contribute to your employer-sponsored plan. Be sure to consult wit your plan administrator before implementing this.
Cost — Fees related to having your own IRA could be more costly than the investment options inside the 401k.
After-tax dollars — After-tax dollars are generally segregated in a qualified plan, and can often be distributed separately. However, after-tax dollars complicate things if rolled to an IRA. If you move after-tax money into an IRA, that money becomes part of the non-deductible “basis” of the IRA and will not be separately accessible. To avoid paying tax again on your IRA “basis” when you take an IRA distribution, you must maintain careful records of the “basis” in your IRAs. This can become more of an issue in regards to doing a Roth IRA Conversion.
*Restrictions, penalties and taxes may apply. Unless certain criteria are met, Roth IRA owners must be 59 1/2 or older and have held the IRA for 5 years before tax-free withdrawals are permitted.
Financial Freedom means different things to different people. For some financial freedom may be having a significant savings for emergencies or retirement, paying off debt and living debt free, or ownership of a home or business. Whatever Financial Freedom may mean to us, individually; there is a common fundamental financial foundation that must be established.
How do you eat this Fundamental Financial Foundation elephant? One bite at a time.
In response to hundreds of people across the country asking for financial help in an easy to understand and implement manner, Tarra Jackson, known as Madam Money, a seasoned financial executive and syndicated financial contributor, is introducing the 30 Days to Financial Freedom Challenge (#30D2FF).
Who Can Accept the Challenge and Participate
This challenge is a free, online financial program designed to help 1,000+ adult individuals and families who are ready to achieve their goals for Financial Freedom. Feel free to challenge your family and friends to access their Financial Freedom in 30 days.
How to Accept the Challenge
To accept and participate in the 30 Days to Financial Freedom Challenge, simply
Text 30D2FF to 313131 for Financial Freedom Simple Tasks Text Alerts.
When does the Challenge Start
The Challenge begins on Monday, May 4, 2015. Participants will receive a simple task to complete via email or text alert each week day for 6 weeks to help them work towards their financial freedom. The challenge also gives participants helpful lessons and resources to help them on their journey.
We look forward to connecting, sharing and reaching Financial Freedom with you.
Tarra “Madam Money” Jackson is a financial educator, international speaker, author, and wealth empowerment strategist helping you heal, build, and grow your wealth.
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