The Savvy Worker

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The Top 30 Best Personal Finance Books for 2021

Introduction

If you ever want to improve your personal finance abilities and financial net worth then you need to cultivate a positive habit of reading. To become an empowered individual who understands the basics of finance, including how to create passive income, the importance of budgeting, how to build wealth and retain it then you need to create a good habit of reading. This does not mean that you should rush to your nearest library or purchase the latest edition of the Bridgerton books but rather create a selective playlist suited to your personal finance needs. The books included in this list are specially curated as the best personal finance books to read in 2021 and cover a range of topics and themes. Some of these books are centered on the five foundations of personal finance while others on wealth creation and retainment. To become more empowered you can combine some of these books with personal finance podcasts. A simple search will reveal a list of the best personal finance podcasts in 2021. Some of the results include the best millionaire mindset books while others include a compilation of the best-selling books on wealth creation. Regardless of the way you choose to determine which books suit your preferences, it is evident that personal finance reading is an integral process in the pursuit for financial well being.

That being said, here is an exhaustive list of the best personal finance books to read in 2021. Most of them are available on Amazon and can also be purchased as audiobooks on audible. 

‘I Will Teach You To Be Rich,’ by Ramit Sethi

In this book, Ramit Sethi explores how an individual can earn and save more to live a rich life. The fundamental teachings in this book include that you did not have to be an expert to become financially stable, you need to become financially empowered at an early age, you should spend extravagantly and the things that you love and cut expenditure on those that you don’t, you should use your finances to design your ultimate rich life, and there’s always a limit to how much you can cut on your expenses that there’s no limit on how much you can earn. This book is suited for beginners looking to improve their financial situations.

Raising Your Money-Savvy Family for Next Generation Financial Independence

This book is available as both a paperback and an audiobook and is written by Doug Norman and his daughter Carol Pittner. The book contains ways through which an individual can motivate the kids to better manage their money, how parents can begin empowering the kids at a young age by allowing them to make mistakes which are considered cheaper during this period than when they’re in the workforce and provides a way through which parents and children can validate their feelings regarding money and the mistakes that they have made. This is a family-centric book that seeks to teach both parents and children how to manage money by understanding the significance of making mistakes at a younger age and exposing children to financial Management information at an early age.

‘The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich,’ by David Bach

If you’re looking for a book that provides a step-by-step action plan on personal finance management then this is the book for you. David Batch provides an actionable step-by-step plan through which individuals can build wealth without being disciplined and by solely relying on fixed percentages, small payments, and automated transactions. some of the key lessons in this book include saving small amounts every day as it can go a long way in improving your financial status, ensuring that you pay yourself first before you get out other bills and expenses which will eventually help you take care of your financial future, and understanding the significance and importance of automatic payments as they allow individuals to invest in a disciplined manner without being disciplined themselves. This book is more suited for a beginner investor or individual who struggles with budgets released from paycheck to paycheck and is trying to find a way through which we can improve his financial well-being.

The Paper Solution

This book comes with a unique perspective on personal finance and management. The author examines how organization and clutter can mean the difference between success and failure. A proven step-by-step actionable plan is provided for readers to determine papers that should be shredded, those that should be saved, and how to sort what is left behind. This book on organization provides a method through which you will be able to learn the documents that you must hold onto and their implied meaning, those that you should dispose of immediately, and how to overcome bulky filing cabinets and disorganization by creating a system where your vital documents are accessible and portable. This organization plan is based on something that is referred to as the Sunday basket which is a box that will contain the final papers that are organized according to the proposed system. You might ask yourself how is organization relevant to personal finance? Well, it has been proven that a more organized individual is more likely to make astute personal finance and other decisions. This book is more suited for a beginner or novice looking for a way to improve their organization system as a way of enhancing their personal finance journey.

Rich Dad Poor Dad

This book is regarded as the poster child for personal finance and wealth management. The author of this book Robert Kiyosaki is a self-made millionaire who shares his secrets on wealth acquisition that he learned from his father and his friend’s father. In this context, his friend’s father was the rich Dad while his father was the poor dad. The book contains an array of personal finance information ranging from simple to complex terms. Some of these themes include definitions of assets and liabilities, how to get rich without making a lot of money, and an in-depth explanation for parents on why education systems are not based on personal finance empowerment of children. This is one of the oldest books in this category and has existed for more than two decades. However, each new edition contains updates that Kiyosaki deems important according to the current financial situation.

This book is suitable for individuals who want to learn about wealth acquisition and also want to empower the children on how to become more financially stable in the future.

The Fearless Money Mindset

If you’re a beginner investor then you probably come across some of the fears that are mentioned in this book. Most people are often afraid of losing their money when it comes to money management or investment which often impedes their growth. This book provides its readers with seven principles and tools through which one can eliminate any fears regarding money management. These principles and tools are suited for different kinds of individuals regardless of their current income. You might be struggling from paycheck to paycheck or have a 7-figure salary yet you still have fear when it comes to dealing with your money. The viable solutions offered in this book will help you achieve financial success by eliminating fear and having a fearless money mindset.

Why Didn’t They Teach Me This in School: 99 Personal Money Management Principles to Live By By Arian Simone

This book offers similar teachings to that of Robert Kiyosaki’s Rich Dad and poor dad as it is based on the notion that most schools do not teach their students how to manage money and other personal money management principles that people should live by. It is often argued that the fallacy of weakness that comes with the education system is partly attributed to capitalism that requires a highly skilled workforce that supports the empowered individuals who have a more intimate idea on how to manage money. The book also provides an inside view of the author’s life experiences, business wins and failures, and adventures that have affected and impacted both her personal and professional journey. If you’re looking for a book that offers relatable situations then this is the one for you and is available on Amazon.

Secrets of Six-Figure Women: Surprising Strategies of the Successful High Earners by Barbara Stanny

Have you ever wondered how some high earners consistently succeed at Business ventures yet when you try implementing the same formula you always fail or come up with the relatively negligible success outcome? If so then this is the book for you as it offers 7 key strategies that successful female high earners employ in their daily lives. These strategies include profit motive, audacity, resilience, encouragement, self-awareness, non-attachment, and financial know-how. It is important to note that most of these strategies underpin personal finance and can be found across most of the books included in this list. This book is both available as an audiobook and in paperback format.

The Behavioral Investor by Daniel Crosby

Dr. Daniel Crosby the author of this book creates a premise that to be able to be successful at investment and personal finance one must understand human nature because markets are made up of people who are often driven to create profit. Crosby argues that human beings are sociologically unable to not be good at investing, neurologically wired to be impatient and hungry, and physiologically created to be subject to failure. If you are looking for a book that will help you modify your behavior to fit a positive one that can help you improve your financial well-being then this is the book for you. This book contains ways through which you can do a personal audit and determine which characteristics of features make you more susceptible to failure and which ones can be enhanced to become most successful.

How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won’t Get from Your Financial Advisor by Ernie Zelinski

Retirement security is an issue that is becoming more significant in the modern world. This is because most people do not consider the possibility of retirement as they are stuck in a vicious cycle of working to be able to supplement their current bills. Studies have consistently shown that more and more people are reaching retirement age without any retirement nest egg. Most people who are employed and have been contributing to retirement funds often become subject to financial deficits making them deep into the retirement funds. This book provides a guide through which you can understand the significance of saving for retirement, how you can gain the courage to retire at an early age by investing your money in the right channels, how you can generate purpose in your retirement life through pursuing creative channels, and how you can follow your dreams instead of contributing to building someone else’s dreams. This is an important read for everyone as retirement is a topic that is increasingly becoming significant as we often ignore it in pursuit for financial well-being

The Total Money Makeover Classic Edition: A Proven Plan for Financial Fitness by Dave Ramsey

If you are familiar with personal finance management then you probably come across Dave Ramsey. Ramsey is a renowned expert in personal finance and debt management and has authored several books that are quite important in one’s journey to financial well-being. Ramsey posits that financial well-being cannot be achieved if you do not take into consideration of your debts. As such, this book offers an actionable plan through which you can get out of debt and improve your overall financial well-being. The book also debunks some common myths associated with money and examines some of the illusions and fallacies associated with the American dream that often makes people acquire more debt. This is a must-read for anyone interested in becoming more financially stable and having an actionable and clear plan on debt management and acquisition. It is available on Amazon as a hardcover and paperback.

Die with Zero by Bill Perkins

The author of this book, Bill Perkins, is a hedge fund manager and entrepreneur who examines their idea of optimum retirement strategies. The fundamental idea behind this book is that individuals who have saved enough money to fund their retirement and can give back to their families and charities should begin focusing on generating more memorable life experiences. This idea is based on nine rules or philosophies including the need to maximize positive life experiences, investing in experiences at an early, aiming to die with zero, using all available tools to plan your future, always giving money to your kids or charity at an early stage, not living life on routine or autopilot, planning one’s life in terms of seasons, knowing when to, and taking big risks at an early stage of your life. If you’re looking to live a more meaningful life while simultaneously taking care of your financial well-being, this is the book for you.

Money: The True Story of a Made-Up Thing by Jacob Goldstein

In this book, Goldstein examines the fundamental ideologies of money including the fact that it often seems cold and mathematical and exists outside the realm of human relationships and social interactions. However, in actuality money is a made-up thing or a shared fiction and is unalterably socially. The examination of the fundamental identities that surround the exchange and creation of money is made with the sole purpose of creating a more relatable experience to associate it with. There are several case studies included in the book including that of Kublai Khan who was the leader of the Mongol Empire during the late 1200 and is regarded as an early example of innovation as he created one of the formal paper money systems. The main idea behind this book is why money matters and its future in the digital realm. 

You Are a Badass: How to Stop Doubting Your Greatness and Start Living an Awesome Life by Jen Sincero

This book explores some fundamental mindsets that are integral in achieving financial well-being. This mindset include that you are perfect and to think anything less of yourself is pointless, you are responsible for your actions and not responsible for the reactions of others, you are unconditionally loved, you should not base your self-worth on whatever and thinks about you because by doing so you hand over the power to other people and become dependent on their validation, you should not apologize for who you are as an individual, nobody ever accomplished anything worthwhile by being in their comfort zone, the only outcome that can be considered a failure is that of quitting, you should always consider that you have been blessed with all opportunities and ideas around you, when you are in a state of gratitude and aware of all the great things that surround you then it is much easier for you to believe that there is greatness that is yet to be manifested and available to you, and when we are able to share our sole purpose in life then we are in alignment with the best and powerful versions of ourselves. 

When She Makes More by Farnoosh Torabi

We live in a patriarchal society where it is often expected for men to make more money than women. However, over the past decades, women’s empowerment through education and other channels has created an appreciated system where women are now able to earn equal to their male counterparts or even more in some situations. This book considers the situation where a woman makes more and provides 10 rules for breadwinning women. This book is considered an ultimate guide for women who earn more than their male counterparts as they are often subjected to higher risks for burnout, infidelity, and divorce. This is a must-read for women seeking to create the perfect balance between their personal and professional lives and for men who want to support their spouses and their journey to financial greatness.

Women with Money: The Judgment-Free Guide to Creating the Joyful, Less Stressed, Purposeful (and, Yes, Rich) Life You Deserve by Jean Chatzky

This book provides an actionable way through which women can chart a pathway to a joyful and purposeful life by exploring the relationship with, taking control of their finances, and using their money to create the life that they want. The author of this book provides readers with a way to reach they can implement tactical solutions in their workplace to get paid what they deserve, how they can be inspired to begin businesses, invest for their future life, retain and enhance their finance portfolios, raise independent and confident children, and Foster secure relationships.

Don’t Retire… Graduate by Eric Brotman

Don’t retire graduate is a book that provides you with a degree to financial freedom. This book provides information regarding the three main strategies that can help you balance your debt while still paying yourself, explains the significance of undertaking a course in risk management and insurance in helping you save for your future financial casting, and selects the people who will live in it, contains a 12 relationship matrix that will help you determine if you should continue engaging with your financial advisor or drop them, provide a crash course in retirement accounts and IRAs that will help you maximize your peak earning years, and explains how the 21 extra credit assignment in risk Management, financial independence, debt and cash management, and other subjects will help you become the top of your class. This book takes a unique approach to personal finance management by providing access to a full syllabus of courses that will help you enhance your skills in money management

The 7 Habits of Highly Effective People by Stephen Covey

Our list will not be completed without mentioning the seven habits of highly effective people by Stephen Covey. This book is regarded as an important book for any person looking to enhance their management and finance skills. So what are the seven habits of highly effective people? These habits include the ability to be proactive, being able to begin things with an end in mind, the ability to Prioritize and achieve the most important goal, the skill collaborating more effectively through building high trust relationships, the habit of influencing others through developing a deep understanding of their needs, the habit of synergizing and increasing one’s motivation, energy, and work/life balance.

Other notable mentions include:

  1. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy
  2. The Intelligent Investor: The Definitive Book on Value Investing.
  3. The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life
  4. Think and Grow Rich
  5. The Maxwell Daily Reader
  6. Retire Before Mom and Dad
  7. Why Smart People Make Big Money Mistakes and How to Correct Them
  8. Spend Well, Live Rich: How to Get What You Want with the Money You Have

Conclusion

To become financially stable and savvy at managing personal finance, you need to have basic knowledge of personal finance and wealth acquisition. These books provide a way through which you can learn this information by detailing and summarizing personal finance tips at an affordable cost. Some of these books also provide personal finance advice that is crucial in becoming more stable. Additionally, some of these books also provide frameworks that will show you how to get rid of bad habits that are responsible for poor financial outcomes. Create a reading schedule, pick a book that best suits your learning needs and engage in one of the best ways of becoming empowered. Most of these books are available on Amazon in hardcover and paperback formats and on Audible in audiobook format. 

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15 Investments You Should Avoid in 2021

Introduction

Investments have always been touted as key implements of gaining financial stability. The media hype surrounding age and investment often compels people to rush into the sector without having any idea about the drawbacks and repercussions of bad investments. The idea about toxic investments was demonstrated during the 2008 financial crisis where some highly revered investments were rendered worthless. For instance, chip stocks like AIG were rendered worthless during this crisis. This compelled the Federal government to intervene and buy the stocks before they affected the companies financial status and ultimately the country’s economic well being.

There have been a number of financial crises that have demonstrated the severe impact of toxic investments on personal liquidity and financial well-being. Most of these crises have been preceded by globally-altering events like the Great depression which was preceded by the stock market crash of 1929.

Learning from such events and trends makes us better investors and prepares us for any eventualities. It can be argued that the current pandemic is a global-altering event that may have a significant impact on the investing sector. Some experts have argued that this pandemic may cause a subsequent financial crisis that may take years to recover from. It is because of such ideas that we should prepare for a possible financial crisis and consider the toxic investments, in our portfolio or ones that we intend to buy, to avoid the risk of financial insolvency.

Avoiding bad investments does not only make us shrewd investors but also helps us safeguard our future in troubled times. That being said, some of the investments listed in this article may already be in some of your financial portfolios. Do not take this as a sign of failure but as an incentive to research into how these investments have been predicted to work out in the upcoming future.

It is also important to note that most of these listed investments are touted as toxic investments based on a number of factors including how they have performed in the previous financial crisis. This should not be taken as a conclusive indicator that they will underperform in the upcoming fiscal year but as a reminder that we should pay close attention to our financial portfolio to weed out toxic investments and avoid the risk of acquiring toxic ones. 

That being said, here is a list of investments that you should avoid or pay close attention to in the upcoming fiscal year.

Subprime Mortgages

Subprime mortgages are the kind of mortgages taken out by individuals with low credit scores, usually 640 or less- and more often than not below 600. These mortgages are taken out as a substitute for conventional mortgages because of the lack of credit worthiness. These mortgages come with higher interest rates than conventional ones because of the lack of guarantee of payment from the borrower. These mortgages come with a lot of risk for the lender because of the fact that subprime mortgage borrowers are more likely to default on the loan payments. Additionally, the current pandemic implies an underlying financial constraint for most families which doubles the risk associated with such mortgages.

Why are Subprime Mortgages Bad Investments in 2021?

The current pandemic has forced various commercial and financial institutions to make concessions in regards to financial implements. These concessions triple the risk associated with some of these investments. In this case, interest rate concessions can be made for subprime mortgages which enhances the risk of lower return while compounding the risk of default by the borrower. Let’s say for instance, a subprime mortgager took out this kind of loan and decided to rent out the house. However, during this pandemic, some states have outlawed eviction of non-paying tenants. As such, this mortgager is forced to default on the loan which already came with a higher risk of default. Such scenarios make this form of investment a toxic one that can challenge your financial well-being. 

Variable life insurance policies

Variable life insurance is a type of premium life insurance coverage that comes with a range of separate accounts and a number of investment funds. These kinds of insurance policies come with three main components that include the death benefit, cash value, and premiums. Variable life insurance policies are regarded as securities contracts because of the underlying risk of each separate entity. Most investors consider getting these forms of insurance because of the tax deferrals on accumulated earnings, ability of the policyholder to access the cash value through tax free loans as long as the policy is still enforced, and the flexibility of the premium remittance and cash value accumulation. 

Why are Variable life insurance policies Bad Investments in 2021?

Variable life insurance policies are considered toxic because of some of their major drawbacks including the high fees associated with maintaining the policy including mortality and expense risk charges, sales and administrative fees because these policies are considered SEC regulated investments, investment management fees, and surrender fees amongst others.  These kinds of policies also do not have a guaranteed rate of return. Additionally, during declining market conditions, like the one experienced in 2020, the cash value of such policies can dwindle thereby rendering your investment toxic because of the lack of cash value. Lastly, the greatest risk that contributes to this investment being considered a toxic one is that the policyholder assumes the full risk of investment. The insurance companies do not guarantee any rate of return and also offer no form of protection against losses. 

Penny Stocks

crop faceless ethnic woman working on computer
Photo by Kamaji Ogino on Pexels.com

Penny stocks denote the stocks of companies that trade for less than $5 per share. This may seem like a good investment for a beginner but they come with some risks, particularly in a year where the threat of financial recession is increased with the global pandemic. Penny stocks are commonly associated with small companies that trade infrequently. This implies that these companies lack liquidity or willing buyers in the stock market which is a sign of a toxic investment. Investors often find it hard to offload these kinds of stocks because of the lack of willing buyers. Additionally, owners of penny stocks often find it hard to price the stocks with a value that accurately reflects the market conditions. 

Why are Penny Stocks Bad Investments in 2021?

Penny stocks trade at cheaper prices which may be an indication of a failing company that may end up filing for bankruptcy. Additionally, these stocks are regarded as highly speculative because of their lack of liquidity, wide bid-ask spreads or price quotes, are subject to market manipulation by barkers looking to offload them, and small company sizes. In 2021, many of these small companies have been adversely affected by the pandemic. While some have managed to access financial implements to help them weather the crisis caused by the pandemic, others have failed to transition from a physical to an online marketplace. This makes these stocks bad investments because the risk associated with company failure have been compounded with the pandemic. 

Non-Traded Real Estate Investment Trusts (REITs)

Non-traded REITs refer to real estate investments that are not listed on public exchanges and are designed to reduce or eliminate tax while providing returns for the investor. The most common source of income from these kinds of investments is through rent. Since these kinds of REITs do not trade on the securities exchange, they often chrome illiquid for longer periods. Furthermore, the investor often does not have an idea on the kind of properties that the REIT invests on. This is because most of the properties procured through non-traded REITs are done from a blind pool which compounds the risk associated with them. 

Why are Non-Traded Real Estate Investment Trusts Bad Investments in 2021?

The fact that the main form of income or return is gained from rent makes this a toxic investment in 2021. This is because the current pandemic has heightened the risk associated with rent defaulters. Additionally, if an investor wants to redeem their returns earlier than planned, they have to contend with high fees which reduces the overall returns associated with the investment. The fact that these types of investments can remain illiquid for a longer period also implies that distribution of returns is not guaranteed. As such, at the beginning, most of the distributions amongst shareholders comes from the capital invested which also affects the return on investment. 

High Yield Bonds

High yield bonds also referred to as junk bonds denote bonds that come with higher interest rates because they are often issued by organizations that have poor or low credit worth. Most investors often include these types of bonds in their portfolios because of the possibility of higher returns on investment. However, junk bonds are more likely to  default and display a higher price volatility than other types of bonds. Furthermore, these bonds come with shorter maturities meaning that the company or issue of the bond  can take advantage of lower funding rates and recall the bonds if their credit rating improves. 

Why are High Yield Bonds Bad Investments in 2021?

Companies with low credit rating are comparable to individuals with lower credit ratings. As such, they are highly likely to default on their loan payments and in some cases file for bankruptcy. In such a scenario, you will lose all your investment. This makes these forms of bonds toxic investments in 2021 because of the decline in economic activity in some sectors. Additionally, the fact that the company can use their increasing credit worthiness to shortchange investors means that you will bear the full risk of the investment. Additionally, the high price volatility may work against you in a declining market. 

Hedge funds

The investor-worthiness of hedge funds is two sided. These funds are offered as alternative investment implements that use pooled funds to gain returns for the investors. Hedge funds are complex names to investment partnerships where the hedge fund company or manager invests aggressively in a range of financial products. The management of these pools is based on the combined implementation of a number of different strategies to provide higher returns for investors. Most hedge funds prefer trading in relatively liquid assets that may either work for or against the investor. The most common strategies used include long-short equity, market neutral, volatility arbitrage, and merger arbitrage and are often only accessible to accredited investors.

Why are Hedge funds Bad Investments in 2021?

“Hedge funds, private equity, and venture capital funds played an important role in providing liquidity to our financial system and improving the efficiency of capital markets. But as the roles have grown, so are the risks they pose.”

Jack reed

Hedge funds are considered bad investments in 2021 because the potential losses can be significant due to the aggressiveness of the trading. This risk has been exacerbated with the threat of a financial crisis that has seen the market decline in the past financial quarters in 2020. These funds also come with less liquidity than standard mutual funds and investors are often required to lock the funds for a period of years. With the assumption of an imminent financial crisis, it means that during the years when your funds are locked up you could end up making significant losses that can permanently damage your financial stability. 

Private Placements

Private placements denote the trading of securities (sale of stocks or bonds) that are often not sold on public offering but through private ones. To be able to gain access into these private offerings, one must be an accredited investor which comes with a high personal asset value. The SEC defines accredited investors as those who have an income that exceeds $200,000 or combined income of $300,000 with a spouse in the last two years with exce[tion of the current year one intends to invest. The main advantage of this form of investment is lower regulatory requirements that may see an investor begin trading faster than in other financial securities.

Why are Private Placements Bad Investments in 2021?

The duality of this form of investment makes it hard to concretely label it as atoxic investment. This is because there are certain situations where they are better options for investors looking to expand their portfolio and those that have personal assets to fall back on. However, for a regular investor who just attained the financial requirement needed to be listed as an accredited investor, these can be toxic investments. This is because these types of investors do not have access to information regarding the traded stocks and assets. Additionally, these placements are liable to manipulation by brokers who are looking to offset stock that may be declining in performance. The selling of private placements is also complicated  as it requires an investor who has access to the private offering. 

Commodities trading

Commodities trading refers to the exchange or trade of assets based on the price of an underlying physical commodity. Theoretically, commodities offer investors an opportunity of diversifying their investment portfolio and minimizing risk. The most common commodities traded are classified into four categories including metal, energy, livestock and meat, and agricultural. While these commodities often come with a higher predicted rate of return, they also have underlying issues that compound their risks. Commodities have higher price volatility because their prices are influenced by market supply and demand that is often influenced by a number of unexpected or unpredicted events like natural calamities. 

Why are Commodities trading Bad Investments in 2021?

Commodities trident are toxic investments in 2021. As mentioned earlier, these investment options are largely influenced by uncertain events like the current global pandemic. For instance, in 2020, a barrel of oil once traded for less than a dollar. While this has increased, the risk associated with trading such commodities still exists. Furthermore, the current pandemic forced most countries to lock their borders. This cessation of goods and services into various countries meant that these countries had to find alternatives to some commodities. This may drastically affect the cost of such goods which renders such investments toxic. 

Regular Savings Accounts 

Savings accounts are often viewed as sources of regular passive income that comes from the consistent interest rates provided by banks. These savings accounts come with a range of features that each provide different interesting interest and insurance coverage packages. In most cases, the interest rates provided by these banks are varied or standardized across the country and often regulated by a national standard. While this type of investment can be viewed as the text-book case for a regular and secure source of passive income, it can also be considered a bad investment in 2021 because of some underlying drawbacks. 

Why are Regular Savings Accounts Bad Investments in 2021?

While  savings accounts are not as toxic as some of the other investment options listed in this article, they come with some significant drawbacks that may affect your financial stability. The first drawback is their low interest rate. Savings accounts provide consistent returns but at significantly lower interest rates sthan other fiscal implements. This means that you may invest your money to gain low returns that you could have otherwise doubled or tripled with other investments. This drawback contributes to the second issue with these accounts which is the time constraint applied on all savings. In most savings accounts, you are only paid returns if the money is saved for a specified period of time. Lastly, when you factor in issues like declining economic situations and inflation, the money you have saved does not work to your benefit. 

Options and futures trading

Options and futures are considered comparable investment options that provide an investor with the chance to make money and hedge current investments. Options provide the investor with the right but not the obligation to buy or sell an asset at a specific time during the progression of the contract. On the other hand, futures give investors the obligation to purchase specific assets which can be delivered at a specific future date unless the holder’s position is closed prior to expiration. Futures, combined with options, are often considered low-risk ways of assessing and approaching future markets. For instance, let’s say as an investor you expect the price of gold futures to move high over a certain future period, say 3 or 4 months. You then purchase an option that is based on the presumption of an increase in price. 

Why are Options and futures trading Bad Investments in 2021?

The profitability of futures and option contracts is based on the prediction of future prices. However, the current stock market is uncertain because of the uncertainty of the pandemic. As many countries begin 2021 with lockdowns and curfews, it is not determined whether the situation will be alleviated or will worsen. As such, investing in such options purely based on the speculation of an increase in price of an asset is a toxic investment that can tamper with your financial stability. While your prediction may turn out to be right, there are a number of uncertainties that may influence the outcome. 

The Investment Someone you know Just Doubled His Money On

This is a common mistake that most beginner investors make. You may have come across articles describing how someone made a fortune selling a stock which he bought on low or be influenced by a relative or friend who made an investment that just doubled. In other cases, you get introduced to pyramid schemes with the hope that you will be able to make money as your relative or friend did. For instance, there have been a few pyramid schemes in the cosmetics industry where stay-at-home moms were influenced by people in their circle to join with the hopes of doubling their income. These moms were then made to pay “a franchise” fee and ended up with subpar products that could not be sold. These are examples of bad investments that should not be tolerated in 2021.

Why are “Investment Someone you know Just Doubled His Money On” Bad Investments in 2021?

Regardless of whether or not your neighbor or relative managed to double his money on stock options or MLM schemes, buying into the same scheme is often a bad idea. For instance, let’s assume your neighbor comes and tells you that he bought bitcoin when it was low and sold it at its highest prices. You are tempted to buy and end up purchasing it at its high price. A few weeks later the cryptocurrency crashes and you end up losing money that could have otherwise been appropriated into safer investment options. Buying into a stock because it doubled is toxic investment because it, more often than not, has reached its optimum price and may decline in a few days or months. This does not mean that you should abstain from investing in assets that show promise of increase. However, you should limit your investment choice to information regarding the particular asset and not family or friend influence. 

Derivatives

 Derivatives denote securities that generate their values from underlying assets. These types of investments are often used to guarantee the balanced exchange rates of goods traded across borders, hedge positions, speculate on the directional movement of the underlying asset, or give leverage to holdings. As such, their value is derived from the price fluctuation of the underlying asset. Some common derivatives include aforementioned futures and options, forwards, and swaps. In this instance, we shall discuss investing in forwards and swaps. These derivatives have increased risks and possibility for higher returns on investments which often sways the investor in purchasing them. 

Why are derivatives Bad Investments in 2021?

Derivatives are bad investments in 2021 because of some major drawbacks that have been amplified with the current pandemic. The first drawback is the difficulty in valuing the implement because of its dependency on a number of uncertain factors. The second drawback is that derivatives are subject to counterparty default when purchased over the counter. This can result in the loss of initial investment amount. Lastly, derivatives are significantly reliant on supply and demand which makes them subject to the declining economic conditions caused by the global pandemic. Buying into these investment options comes with a higher risk of low or no returns. 

Promised Returns with higher than average returns

This is similar to the aforementioned family-influenced investment options. You have probably come across advertisements or ads that promise to double your initial capital or provide a higher than average rate of return on your investment. Such investments come with scardce details regarding the assets that will be traded on or often provide vague details regarding the opportunity. Due to the expansivity of the internet, some of the promoters of these dubious opportunities may convince you that they are backed by the government or accredited by federal organizations. This can be enticing to someone looking to expand their portfolio or looking for a new way of earning passive income. However, more often than note, they turn out to be scams.

Why are Promised Returns with higher than average returns Bad Investments in 2021?

Such investments are poster child for toxic and bad investments. Firstly, there are no legal or accredited investment options or financial organizations that can guarantee these levels of returns. While some of these organizations may be insured and some accredited, none can guarantee double digit returns or provide consistent higher than average returns on interest. To conceptualize how toxic these investments are, think about it this way: if investing $100 or $2000 could guarantee $200 or $4000 consistent returns would it not be easier for anyone to become rich? You might argue that most people do not know about these options but they are, in most cases, scams run in overseas locations. 

PIPES (Private Investments in Public Equity)

Private investment in public equity (PIPE) denotes the procurement of shares of publicly traded stocks at prices and values that are beneath the current market value. This kind of stock buying strategy is common amongst investment firms, mutual funds, and other large, accredited investors. Conventional PIPES are ones where common or preferred stocks are issued at prices set by the investor. On the other hand, structured PIPES occur when common or preferred stocks are issued as shares of convertible debts. These forms of investment are considered lucrative because they are obtained at discounted prices. However, they come with some underlying drawbacks for a beginner investor.

Why are PIPES (Private Investments in Public Equity) Bad Investments in 2021?

The largest drawback of this form of investment is the fact that they dilute the share value for current shareholders. This discounted share price means less money for the company. PIPES are also only accessible to investors who are accredited. This means that you need to have a certain level of personal fiscal assets to be able to purchase these assets. 

The Nigerian Prince

While this may sound cliché, people still fall for the Nigerian prince scam. The scam often targets innocent people who get emails from Nigerian princes who have millions of dollars locked in overseas countries. They often need help in getting this money and may require you to send them some money to access their “inheritance.” In return, this prince offers a piece of the dubious inheritance. This is one of the most common scenarios for the same with others targeting lonely people online. The scammers often come with compelling  stories and in some cases use threats and intimidation. Similar scams include Indian call center scams where people are duped into providing their personal financial information. 

Why are Nigerian Prince Scams Bad Investments in 2021?

While the Nigerian prince was one of the most popular internet email scams, there have been several variations of this scam. Most of these investment-related scams promise greater returns which are often lies. Never invest in an idea or option that you do not have information on. Additionally, always be wary of unsolicited investment options because, in most cases, they are scams which have targeted you based on your online presence. Lastly, providing your personal financial information like bank details to individuals who you do not know is always a bad idea. Safeguard your assets just as you expect legitimate financial institutions to safeguard your investments. 

Conclusion

Investing is a good option for safeguarding your financial stability and wellbeing. However, not all investments should be considered as viable ways of making consistent and passive returns. while some of the aforementioned investment implements come with a dual side of good returns, they should be thoroughly investigated before you decide to put your money into their structures.

Disclaimer: The opinions expressed in the Savvy Worker Blog are intended for general informational purposes only and are not to provide specific advice or recommendations for any individual or on any specific security or investment product.  It is only intended to provide education about the financial industry.  The views reflected in the commentary are subject to change at any time without notice.

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How To Invest Your Money In Your 20s

Introduction

If you are in your early or mid-twenties then you have probably come across financial advice on investing during this age. This is because this is the age where you are getting your footing in the real world as an adult. In your late 20s, you already have an inkling of what investment is and how you can save for the future. This description is not typed in stone. As such, if you are in your twenties and have never encountered or delved into financial education on investing then do not worry. Most people are advised to invest in their twenties because you have more time before retirement which equates to more time for your investment to grow. Additionally, during this age you have higher flexibility in testing which investment options work for you and which do not. This is the age when you can explore higher risk investment because it’s a common assumption you can still regain the time and money lost or invested in higher risk investment options. 

The options listed in this article are some of the best ways to invest money in your 20s. This is because the selected options are based on the consideration of your employable years coupled with common retirement needs. This is an installment in your investment by age series. You can check out our article on Assets to buy in your 30s that provides an ultimate guide into investing in your thirties. In this article, we will discuss how to invest money in your 20s in a range of risk options that will help you safeguard your future financial stability.  These are some of the best investments for 2021. The options listed below also take into account the possibility of an inflation or economic crisis as such they are also cited as the best investments during inflation.

S&P 500 Index Funds

Young investors are often advised to build their investment portfolio on growth-oriented assets. This is because of the aforementioned assumption of longer working time where you can take advantage of compounding of higher rates of return on growth investments. The S&P 500 index are growth assets that come with an approximated annual returns of 10%. You might be afraid of investing in the stock market because of the current pandemic that has increased uncertainty in investing in stocks. However, you can view this as an advantage and buy into these stocks whilst they are being sold at low prices. It is evident that the world may not return to normal after this pandemic. Nevertheless, you should bank on the continuity of commerce and its affiliated elements. Additionally, in your twenties you still have time to work towards your financial goals. It is important to note that this type of stocks are often categorized as moderate-to-high risk stocks.

Open a Retirement Plan

Most people in their twenties often do not think of popening retirement funds. Why should you think of your old age when you are still so young? However, investing for your retirement at an early age comes with a number of advantages including an early start at growing a more lucrative retirement benefit saving and tax deferrals. Additionally, beginning to save at this young age will afford you the opportunity of retiring early. Depending on which retirement investment plan you choose, you will have access to a range of tax deferral plans that can help you have higher disposable income. We have a detailed guide on the most common retirement plans and the tax benefits that come with each. The guide, titled Traditional 401(k) vs Roth 401(k) will provide you with an overview of the tax benefits that come with the most common retirement saving plans. 

Real Estate Investment Trusts (REITs)

Real estate investments are growth assets that can prove vital in improving and enlarging your financial portfolio. One way to venture into real estate is through Real Estate Investment Trusts (REITs) that are an alternative for directly buying real estate. REITS offer investors opportunities to buy stocks in real estate. One of the advantages of REITS is the ability to buy from a diversified portfolio of real estate assets which helps spread the risk. REITs are often considered some of the most profitable investment options because of moderate risk and because the real estate market often moves independently from the stock market. 

Skills

Skills improvement is always a viable investment option. Most people do not consider skill improvement as a viable investment option. However, personal development, particularly new skill acquisition, will help you advance your career and get more opportunities. For instance, choosing to gain a new skill in programming which can be gained online can help you get lucrative job offers as a software programmer. This job position comes with less restrictions and a high paycheck with some programmers working from the comfort of their homes. Other skill investments include financial literacy that can help you make better investment and money management choices. In this new digital era, you can access a range of skill and personal improvement courses online on sites like Udemy and eDX. 

Invest Using a Robo Advisors

Robo Investors are a good way of investment management and financial advisory. These automated solutions offer a low-cost solution to investors by providing digital advice on investment opportunities based on mathematics and other financial algorithms. Additionally, Robo advisors can manage your online investment portfolio by making investment choices based on your financial status and preference. Additionally, you can use Robo accounts for either a taxable investment account or a retirement account. The only requirement is to register with the account, fund it, and monitor your investment portfolio. 

Buy Fractional Shares of a Stock or ETF

Fractional shares have made it possible for people to buy portions of shares. For instance, let’s say you want to purchase tesla stock or apple stock. However, you do not have enough money to buy a complete share as these stocks can be quite pricey. In the above instance, a tesla stock goes for approximately $705.67 and apple stocks go for $132.69 at the moment of publishing this article. In this instance, you can use services like Motif Investing that allows you to purchase a fraction of these shares to improve and diversify your portfolio. ETFs or exchange-traded funds also allow for the building of investment portfolios at low amounts. This is quite useful for beginner investors as it enables you to progressively save towards your future. 

Buy a Home

Owning a home is one of the optional investment options that can be procured at later dates. This is because the viability of this investment option largely depends on a number of factors including the state where you reside in and any other financial burdens or bills that you have to pay. For instance, buying a home in a state with high property taxes in your twenties will create more tax burdens that may end up messing up your future financial stability. On the other hand, properties in such high tax states often come with higher appreciation values which means that your property will increase in value over a number of years. Owning private property can help improve your asset portfolio.  

Treasury Bills

Treasury bills are short-term financial obligations backed by governments. These bills are regarded as low-risk because they often mature in one year and have relatively low returns on investment. These bills are often sold in denominations of $1000 and can reach $5 million. The returns on these bills are largely dependent on the maturity date. The longer the maturity date of the bill, the higher the returns. One of the advantages of investing in these bills is tax exemption. This is because the interest gained from such bills is exempt from state and local income taxes. 

Debentures and Bonds

Debentures and bonds are good investment options for young investors because of high returns. Debentures are considered high risk because they are unsecured notes that come with fixed interest rates and repayment amounts. This means that you do not have any guarantee of payment. When choosing the best debentures to invest in it is important to note that those that come from companies or organizations with higher rates of returns often come with higher risks. This means that the company or organization does not have a good debt repayment history. Some of the risks associated with debentures include interest rate risk where the fixed rates exclude the investors from better rates, credit default risk where the borrower may default on the payment, and liquidity risk where investors do not have access to their investment fund in case they need an early exit. In all sense, all debentures are bonds, but not all bonds are debentures. Bonds are fixed income instruments that take the form of loans made from investors to the borrower and issued by companies and securitized as tradable assets. Bonds come with fixed income securities and are publicly traded. If you hold the bond to maturity you are able to get all your principal back.  

Conclusion

In conclusion, investing during your 20s is a good way of safeguarding your future. Time is your greatest asset at this age, use it wisely. The above mentioned assets are just some of the viable options that can help you improve and diversify your financial portfolio.

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Traditional 401(k) vs Roth 401(k)

You have probably come across a Roth 401(k) and may even be considering investing in it. However, you are stuck between the traditional 401(k) and the Roth 401(k). This is the good kind of dilemma to be stuck in as you are looking to invest your money and safeguard it for retirement. In the past, the traditional 401(k) was more preferred by employers and this was demonstrated in how common it was offered in workplaces. However, in the past decade more and more employers are increasingly offering the Roth 401(k), it might be wise to take a step back and consider your options and the potential benefits and drawbacks of each retirement benefit account. While the two account options are intrinsically related, each comes with a set of benefits that may apply to your age bracket and some drawbacks that may apply to your income bracket. With the end goal of making the most returns from your retirement savings, you need to analyze each of these differences and comprehend their implication in your life. 

What is a Traditional 401(k)?

A traditional 401(k)is an employer-sponsored plan where employees get access to an extensive range of investment choices for their retirement savings. This account works in a simple format where employees make regular contributions to a retirement savings account set up by the employer. Your contributions and any earnings from this account are often tax-deferred meaning that you will not pay any taxes when making the contributions but you will have to pay tax when you withdraw the savings and returns.  The tax rate is usually determined by the current tax and occasionally State rates. In some cases or with certain exceptions  you may incur a 10% penalty when you withdraw from your account if you’re under 59½. There are different types of Traditional 401(k) plans with the most lucrative being the employer-matched one where your employer will match all your contributions essentially doubling your savings over a selected period. The income taxes on these matched contributions are also deferred until you withdraw your savings where they are treated as ordinary income.

What is a Roth 401(k)?

Roth 401(k) plans are also employee-sponsored retirement plans that are quite similar to the traditional 401 (k) plans with one exception: all contributions are made after taxes are paid. This savings retirement plan was designed and introduced in 2006 as a combination of the traditional 401(k) and the Roth IRA. Just as the traditional 401 (k), you are allowed to take employer match contributions. This form of retirement savings is often considered more efficient because it is funded with money that is already taxed. As such you are not burdened with any taxes when you withdraw your savings and Returns. 

What Are the Similarities Between a Traditional 401(k) and a Roth 401(k)?

There are several similarities between a Traditional 401(k) and a Roth 401(k), and they include:

  • Both of these options come with a workplace retirement savings option which comes with the convenience of having your savings deducted directly from your paycheck. This is quite efficient as it will help you conform to the scheduled deduction plan.
  • Both the Roth 401 (k) and the Traditional 401(k) allow for your employer to match your contributions. This is very important as it will help you achieve your retirement savings goals faster than anticipated. An employee match contribution means that your employee will contribute the same amount of money you pay to your retirement plans thereby doubling your contribution. 
  • Both the Roth 401 (k) and the Traditional 401(k) have a comparable contribution limit. This means you can have the same amount on either plan depending on your income tax bracket. 
  • Both the Roth 401 (k) and the Traditional 401(k) allow for your investments to grow tax free. This means you will only pay income tax when you contribute or withdraw and not the annual capital gains taxes that are required for investment returns.
  • Both the Roth 401 (k) and the Traditional 401(k) have limited contribution limits. The 2021 401 (k) contribution and Roth 401 (k) limits allow you to contribute up to $19,500 to your 401(k) a year, or up to $26,000 if you’re 50 or older.
  • Both of the savings plans are flexible. This means that you are allowed to switch between your 401(k) Roth and the traditional 401(k). 
  • On both plans you have Penalty-free withdrawals start at age 59 ½ or with a qualifying event. In this context, qualifying events include disabilities, deaths, or hardships. 

What is the difference between the Roth 401k vs traditional 401k?

There are a number of differences between the Roth 401k vs traditional 401k and they stem from the inherent problems that each plan sets out to accomplish. These differences include:

  • The main difference between Roth 401k vs traditional 401k is tax contributions. In the Roth 401 (k), you have to pay tax on your contributions before they are remitted to the retirement account. This is often referred to as a post-tax plan. In a traditional 401(k) or a pre-tax savings account, you will pay income tax when you withdraw your savings and returns. This means that your contribution amount goes into the savings account before it is taxed. 
  • Roth 401 (k) withdrawals are not taxed while traditional 401(k) withdrawals are taxed. Think about it this way, let’s say you are employed with an organization that matches your contributions. You manage to save and earn $1.5 million dollars during your employment period. During your withdrawal, if you saved under the Roth 401 (k) the entire $1.5 million is yours. However, if you saved under the Traditional 401(k), then you will have to pay income tax which may amount to approximately $330,000 if you fall under the 22% tax bracket. 
  • If you save with a Roth 401 (k) you will only be allowed to withdraw your money after you have held the account for five years or longer. However, if you save with the traditional 401(k) you can start receiving your distributions immediately you attain the retirement age of 59½. This means that if you decide to switch to a Roth 401 (k) in your mid-fifties then you will have to wait until five years have elapsed before you can access the savings even after you have attained the retirement age of 59½.

Paying Taxes now Versus Later

The most important and fundamental difference between the Roth 401 (k) and the Traditional 401(k) is the tax contributions. Most people often choose the traditional 401 (k) because of the freedom from paying tax. Think of it like postponing your IRS issues until you reach retirement age. However, this is not often a good choice because every dollar that you will withdraw from your traditional 401 (k) will be reduced by at least 20 to 30 percent depending on your tax bracket. This means that you have to work 20 or 3o times harder to save up for the impending taxes depending on how you want to spend your retirement savings. Additionally withdrawals from your traditional 401 (k) may increase your income tax bracket thereby subjecting you to more debts and lower disposable income. 

This doesn’t necessarily mean that the Roth 401 (k) is better. However, you need to have a complete overview of how your decision will impact your future income tax bracket and savings. 

Here’s when it may make sense to use a Roth 401(k):

  • When you are in a lower marginal income tax bracket for instance if you are between 10% and 12% in the federal tax bracket.
  • If you expect to have multiple taxable retirement incomes like social security and annuities.
  • If the contributions do not affect how much you take home. Roth 401 (k) contributions come with a tax burden that will reduce how much you are able to take home. If you cannot maintain the same dollar-for-dollar retirement savings then this plan is not for you.
  • If your current financial situation, i.e. your income and assets are more suited for tax-deferred assets.
  • If you are able to max out your tax-advantaged contributions and still retain surplus income for retirement in a fully-taxed account.
  • If you have the expectation that you may need some of your retirement savings before you reach 65 years old. 
  • If you qualify for tax deductions/credits that you will not be able to qualify for in retirement. 
  • If you work in a state with low income rates but expect to retire in a state with higher income rates.
  • If addition of your Roth contributions to your taxable income do not come with significant implications such as pushing you into a higher marginal tax bracket

Here’s when it may make sense to use a traditional 401(k)

  • If you are in one of the highest marginal tax brackets
  • If your contributions won’t make any meaningful difference in your tax bracket plan particularly if you plan on making significant changes like applying for a new job. 
  • If you do not have or expect multiple retirement incomes apart from qualified distributions from retirement accounts. 
  • If your current income excludes you from tax breaks like child tax credits.
  • If you work in a state with high income tax rates and expect to retire in a state with lower income tax rates.
  • If you expect periods where you will have little disposable income such as when you are sending your child to university or paying for a new investment. 
  • If you do not expect to withdraw from your retirement savings before you attain the retirement age.

Can I contribute to a Roth 401k and a Traditional 401k?

A more flexible option is the combined contribution to both the Roth 401k vs traditional 401k. To be able to make a contribution to both of these plans, you have to enquire on whether your employer offers the combined option. If your employer plan allows it, then you are in a much better financial position to contribute to both particularly if your employer also matches your contributions. If you decide on contributing to both, the annual contribution limit is $19,500 in 2020 and 2021, if you’re under age 50. $26,000 if you’re age 50+.

Which is a better option Roth or Traditional 401k?

Regardless of the option you choose, if you have a consistent plan for your monthly investment then you are on the right track. However, when choosing between the Roth 401k vs traditional 401k in the current economic situation then the Roth 401k is the better option. The significant reasons that position the Roth 401k over the traditional 401k include:

  • Tax benefit: while it may be tempting to delay your tax payments, you still have to pay them. Additionally, the current economic situation that has been worsened by the pandemic is a sign that income tax and other related taxes may be affected in the future. It is better to take care of your tax payments instead of deferring them and having to contend with these bills when you retire, pay them when making your contributions and forget about them.
  • Better Retirement Flexibility: you may reach retirement and decide on running a home-based business or operating a BnB on the coast. However, this can be hindered when using traditional 401 (k) because of the tax payments that will put considerable strain on your finances. You will be in a much better position of opening and running your business successfully or spending on your retirement plans under Roth than the traditional one. 

If you have decided on contributing to a Roth 401 (k) then there are a few factors that you need to consider including

  • Eligibility: You become eligible for the 401 (k) Roth if it is offered by your employer regardless of your income tax bracket.
  • Contribution Limits: According to the IRS (2020), “Aggregate* employee elective contributions are limited to $19,500 in 2021 and in 2020 and $19,000 in 2019 (plus an additional $6,500 in 2021 and in 2020 and $6,000 in 2019 for employees age 50 or over).”
  • Monthly Contribution Plan: Everyone has different savings and retirement goals. However, Chris Hogan at Dave Ramsey recommends saving at least 15% of your income.
  • Mutual funds that you should choose: all investments come with risks and the key to maintaining healthy risk levels is diversifying your portfolio. It is commonly argued and believed that higher risks come with higher returns and lower risks come with lower returns. However, this is not applicable for all investment opportunities. It is recommended that you balance your retirement fund across four main mutual funds that include growth and income, growth, aggressive growth, and international funds. You can also consult an investment expert on the best mutual funds to invest in.

Conclusion

Investing in either a Roth or Traditional 401 (k) is a great start towards saving for your retirement. However, it is more important to make an informed decision on which option best suits your  needs and financial status. These saving plans come with a flexible option of rolling over. If you decide that the Roth is better than the traditional 401 (k) or vice versa you can easily switch between the two. Always remember that your retirement savings plan is safeguarding you during your old age. As such, do not tap into this fund unless you have a medical emergency or can no longer make ends meet. 

Disclaimer: The opinions expressed in the Savvy Worker Blog are intended for general informational purposes only and are not to provide specific advice or recommendations for any individual or on any specific security or investment product.  It is only intended to provide education about the financial industry.  The views reflected in the commentary are subject to change at any time without notice.

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Assets To Buy In Your 30s: A Guide on How to Invest In Your 30s

Introduction

If you are in your thirties then you have probably come across opinions that you should have invested early in your 20s. However, you’re not alone as a recent study conducted by Gallup showed that approximately 28% of Americans don’t start investing until they’re 30 years old. Creating an investment plan during this age is important as it will help you have better bearings and plans for your future. Whether you’re interested in getting a head start on retirement or you just want to increase personal wealth then investing during your thirties is a great financial decision. 

Most people in this age gap are more established in their careers and have sufficient salaries with surpluses that can be redirected towards investing. However, you should not be discouraged if you are not yet settled in your career as you have a long way to go and many opportunities to still invest. The most important thing to consider is that you should never beat yourself for investing late. It is better to start at this age than to never have a plan for your future. 

The Big Picture

Before you begin investing, you need to have a clear understanding of what you desire and how you will achieve it. Let’s assume you have a high-level vision of a successful investment plan where you want to be able to retire in 30 years and have enough investments to leave off. You might think that investing in high returns is the best option since you assume that you do not have enough time. However, you are more likely to end up with lower returns or burn your principal investment when you choose such get-rich schemes. The investment options provided in this article take into consideration all income ranges and some investment profiles that you might be interested in. 

How did we get Here?

How did we get here? This is a question that we all ask ourselves at one point in life. Many people are often discouraged that they did not begin investing during the early stages of life. However, having such a mindset will most definitely contribute to your failure rather than success. It is important to note that we each have different paths in life and we also have different aspirations and access to information. Basic educational curriculum does not teach financial literacy and this may contribute to us not having enough knowledge to know what options we have regarding our incomes and financial positions. 

For most people investing in your 30s may have been because of a combination of events including:

  • Not having timely access to financial education
  • Not having an idea about what you wanted to do after high school
  • Unexpected life events that may have complicated your career and financial growth
  • Positive life events such as marriage or children that may have hindered your ability to save.

Regardless of the reasons that may have hindered you from saving in your 20s you should know that you still have the opportunity and chance to create a viable and sturdy financial plan that will help you retire without any constraints. 

How to begin Investing

The most difficult part about investing in your 30s is that you have to balance life events to make sure that you have sufficient funds to invest. Most people are often married or engaged in their thirties with big expenses including wedding costs, having children, and taking care of a family. Such events are all positive and may complicated decisions to begin investing. However, you can overcome these constraints by creating a good plan and sticking to it. You need to create a financial balance that takes into consideration all your expenses and your future savings plan. These balances may come with some compromises as you have to balance income against expenses and adjust your vision from near-term goals to longer ones. 

This means that if you have a family your investment goals may largely be founded on creating an education plan or saving towards your children’s future. However, if you do not have children you can customize your investment plan to include both your retirement options and future family plans. This should not restrict you as with discipline and commitment, you can create an investment plan whether you have children or not. Not everyone has access to financial advisors as they can come with a pretty high cost. As such, these options provide viable ways based on tested and proven techniques that will help you create a more viable investment plan.

Growth stocks & dividend stocks

Growth stocks are shares in businesses that have shown above average earnings and have a potential to grow faster than the economy. These kinds of stocks are considered volatile because they generally increase in price faster than other stocks. Some of the characteristics of growth stocks that make them viable investment options in your thirties include their high price to earnings ratio and high-earning growth records. However, it is important to consider that they are considered more volatile than the broader market which makes them a riskier investment. So how do you make money from growth stocks? These kinds of stocks do not pay dividends. As such investors rely on the possibility of increase in the value of stock which will provide you the opportunity of selling them at a higher price than you initially purchased them.

Dividend stocks are shares from well-established companies that have a track record of paying dividend earnings to the shareholders. This kind of stocks provide regular dividends which are often used to either add value to your portfolio or provide you with periodic and sustainable income. There are different kinds of dividend stocks depending on the frequency at which the dividends are paid. For instance, there are some companies that pay monthly dividends and the others that pay quarterly dividends. If you choose this type of stock then it is advisable to always reinvest your dividends and increase the value of your stock so that you can get higher returns in the future.

 If you are creating a financial investment portfolio then growth stocks and dividend stocks are important assets that can help you create a viable investment plan. It is advised that your portfolio should have at least 70% of this type of stocks as you will be able to maximize your investment and generate interest. This high recommended percentage takes into account that you still have the opportunity to afford some risk that comes with such investment.

Buying a house

Buying a house is often considered a mandatory rite of passage in capitalistic societies. However, it is important to note that this investment is not always right for everyone as it depends on a number of factors. Let’s say you live in a higher-living standard city where utilities and bills are quite expensive. Buying a house in such cities is not a wise financial option as it will only add up to your expenses. On the other hand, if you are living in an average-standard of living city then you might find the cost of maintaining a house more affordable thus making it the right investment plan for you. 

When deciding if this is the right choice for you, you should always consider the market and prices because it is financially advantageous to buy a house rather than rent when market prices are reasonable. Houses are often considered incremental assets as their price characteristically increases with years. However, some events in your neighborhood such as increasing crime rates or deteriorating living standards may reduce the value of your house making it a burden rather than an investment. When choosing to buy a house always select a neighborhood that has a high growth potential which will help you maximize the appreciation value of your home. This will also contribute to your ability to obtain fixed-rate mortgages that come with substantial down payments thereby avoiding other high and expensive payment plans. 

How do you know if an area is considered a high growth potential neighborhood? Take this assumption, let’s say you’re looking to buy a house and come across a relatively average costing settlement with an upcoming university or hospital. It is logical to assume that these new establishments may increase demand for housing which will contribute to the increase in the value of your house. Always ask your realtor about the growth potential of the neighborhood before investing in it. 

Purchase a Rental Property

Rental income has always been acknowledged as a viable form of investment because it provides regular and passive income. The key to becoming more financially-independent and being able to sustain a relatively peaceful home is to have passive income. Think of it this way, if you are in employment you always have to work because of the regular payments that you receive either weekly, bi-weekly or monthly. This is passive income that is geared towards sustaining your lifestyle. While this sounds like an easy way to secure your future you need to understand the risks associated with rental income. Most countries and cities have laws that protect landlords and tenants. Sometimes these laws may act in your favor or in that of your tenant. 

For instance, let’s say you decide to evict a tenant who hasn’t been paying rent or has become belligerent towards you and your family members. During the eviction the tenant destroys your house making it inhabitable. You might decide to sue this tenant to partially recover the costs associated with renovating your rental. However, the associated costs of such cases coupled with the probability that the judgment may not be in your favor will leave you in more debt than you initially had. This can further complicate your career and make it more difficult for you and your family. As such it is important to consider all the risks associated with buying rental houses before you decide on this investment venture. The key to being financially independent is to always know the risks associated with investment and to understand that you can never gain without having risk.

Tax-Advantaged Accounts

Tax-advantaged accounts are those that are designed to help you invest in your retirement by making periodic contributions that are exempt from taxes. You might have heard of the 401 (k) which will help you create a retirement fund. If you are employed then it is important to know if your company offers any structures for such retirement plans since there are companies that may match your contributions which doubles your investment. Other tax-advantaged accounts include Roth IRA that will protect you from paying taxes when you decide to cash in the earnings from your savings account. This type of investment is suitable for an individual looking to invest in their retirement. 

Personal Development

Personal development is often an overlooked investment opportunity that can help you become more established in your career and personal life. In the past few decades there has been an explosion in the number of sites offering online courses that can help you improve but your career and personal life. For instance, nowadays you can access programming courses offered by ivy league universities such as Harvard or MIT on platforms like edx. Before you invest in personal development you need to decide whether you want to improve your personal or career life. For instance let’s say you have been working in an average job with average earnings and you want to make more during your free hours. You can choose to invest in an Amazon web services certification that is provided online and is considered one of the highest paying groups of jobs in IT. 

You can also choose to invest in your personal life by considering courses such as mindfulness and meditation that are aimed at making you a more peaceful and empowered individual. Other courses that can help you in your personal life include financial literacy that will help you improve your knowledge on investment and savings and help you create a more stable future. . The key to choosing the right course is deciding what you want to improve on and focussing on it.

Cryptocurrencies

Cryptocurrencies are considered the new buzz as they provide a new mode of paying for things. This kind of investment is considered extremely volatile as evidenced by how the cost of popular cryptocurrencies like bitcoin can rise or fall. This can be a valuable addition to your portfolio if you select one that is relatively stable and has potential. One principle that can guide you in selecting the best cryptocurrency to invest in is to always go for those that solve the problem. 

For instance, the cryptocurrency Ripple (XRP) was created as a currency that helps solve the problems affiliated with updated SWIFT systems. These problems often result in inefficient payment delays, inflations, and outrageous transaction fees that are solved by allowing users to send money anywhere in the WORLD within seconds. This kind of cryptocurrency has potential as it provides a solution for a problem that has existed in the financial industry for decades. 

Bonds

We cannot consider investments for your thirties without talking about bonds. These are units of corporate debt that are often issued by companies and governments and securitized as tradable assets. Bonds often have lower risk than stocks which also means that they have a lower rate of return. However, this should not discourage you as the lower risk means that you have a degree of control or guarantee that you will always get a return on your investment. It is important to look at government bonds when considering this option because most of them have higher than average rate of returns and are tax exempt. 

Paying Off Debt

First step to financial independence is being able to pay off debts. Think about debts like an anchor holding your ship from sailing to financial independence. No matter how much investment you have or how much you earn you will always have to pay these debts that will put you anchored in the same position for a long period. You should also know that these debts ultimately affect how you are able to access other financial implements that may help you become more financially independent as they contribute to your credit score. If you decide that you want to become financially stable in the future then you need to come up with a tally of all your debts and decide on a plan to pay them off before they become an anchor to your financial independence. You can check out our list of FREE budgeting and money-saving charts that will help you overcome your debts and create a more stable future for you and your loved ones.

Create an Emergency Fund

Emergency funds are important financial implements that can help you plan for your future. Always having an account that you can fall back on when things get tough is important particularly because incidence is like the current pandemic has shown how uncertain the world can be. Creating an emergency fund should be based on a few factors including your monthly expenditure, your medical expenditure, and a nest egg for your dependents. Realistically, if you are employed you should have an emergency fund that is sufficient enough to help you give at least six months if you become unemployed. This means that you can have enough time to look for a job without having to worry about paying rent or feeding yourself and your family when you have such an account. This is also an important way of protecting your assets. This is because most people often think of disposing of their assets when they hit hard times. While this might provide you with money to sustain you for a period it may contribute to your financial destruction.

Think of it this way, let’s say you have a rental house and then you suddenly become unemployed. The rental income is not enough for you and your family to live on. As such, you might think it is a good idea to sell the house and get enough money to sustain you while you look for another job. This is a wrong move as you may take longer to get a job or have more challenges in accessing a job that pays as much as your previous one. If you are in such a position having an emergency fund will prevent you from selling your house as you come up with ways through which you will be able to get more income. One way you can survive this is by downgrading and fitting your lifestyle to your new reality. Always remember that assets are there to protect your financial independence and not destroy it. As such, all of your moves should be geared towards protecting them.

 Investing in Insurance

Insurance coverages were created to protect you from the unexpected. As such, it is important to view them as investments that can guarantee a more stable future. Always make sure that you have fundamental insurance coverages including healthcare which has been identified as one of the costs that contribute to financial destruction. If you live in an area where you cannot access free health care from hospital having insurance will ensure that you do not have to pay out-of-pocket costs when you or your dependent become sick. Unexpected healthcare challenges such as cancer may put a significant dent in your financial independence as you will have to struggle to pay for regular pharmacotherapy sessions. Having good medical insurance would ensure that you are able to access your healthcare needs while simultaneously protecting you and your loved ones from incurring the cost associated with your care. You should also research other insurance covers that protect you from unexpected costs.

Conclusion

Financial independence is a goal that everyone aspires to achieve regardless of age. While some may have been lucky to have begun investing at a younger age it is important to note that you can still get financial independence regardless of how late you begin investing. You should not allow myths about investment and age stop you from achieving financial independence since you are still very capable of generating passive and viable income regardless of your age. The investments included in this list take into account the risk and returns that you might be looking for when you start investing in your 30s. This, do not buy any means, represent the entirety of available investment opportunities as there are a plethora of opportunities that are available for you. Always make sure that you do your research before you decide on the financial implements that you will include in your portfolio. It is also important to remember that diversity in a portfolio is equated to better and stable returns as you are able to spread the risk across different opportunities.

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10 Best Ways To Invest $100 And Make Money In 2021

The best-kept secret to financial independence is investing! However, most people often assume that you need thousands of dollars to invest and make significant returns. This is a myth that will only stop you from becoming financially independent in 2021. In this article I will show you ten different ways of investing $100. While you will not be able to make a sizable income to live from, this will help you learn how to invest. It will also teach you the habit of investing and spreading the risk of your income. 

The investment options detailed below are drawn from different fiscal sectors to provide you with an extensive portfolio. While this is a start towards attaining your fiscal goals, always remember that investments are like plants. They need to be attended to daily to grow. Just as plants need water and manure to grow, so do investments need money and attention to grow. $100 is a starting point that needs to be improved on a periodic basis. One tip that will help you attain your financial goals easily is to always reinvest your earnings from these investments. For instance, if you invest in dividend paying stocks, always reinvest the dividends into attaining more shares either from the same portfolio or from a different one. This will help your portfolio increase and help you retire on your own terms. How can you invest $100 and become more financially independent? This article details the assets you can acquire and investment schemes you can join to become more independent.

So which assets can you invest $100 and make returns from? This article details how to invest $100 in a range of risk options.

Micro-Savings/Micro-Investment Apps

While this article is focused on ways of investing $100 and making returns, it also provides ways through which you can invest less than $100 and build an impressive investment portfolio. A few decades ago it was practically impossible to invest if you did not have a substantial initial investment. However, tech innovations in the 21 st century have opened up this sector to even those who do not have these initial capitals. One of these innovations include the Micro-Savings/Micro-Investment Apps. These apps are designed to help you invest and also accumulate or save the money needed to make these investments. One of the most popular apps in this sector is Acorns. This app is based on a simple mission: simplify investing for millennials. This app works on the idea that most times we often forget how important loose change is towards our financial independence. Accounting for every penny is the principle way of achieving financial independence. As such, this app utilizes a process called round up that helps you save and account for each penny which is then invested. 

Let’s say you purchase a starbuck coffee for $2.25. Acorns will round off the purchase to $3 where $2.25 will be paid to the merchant and $0.75 saved by Acorn towards your investment fund. Once these funds reach $5, they will be transferred to an Acorns investment account where it is managed by the Acorns robo-advisor. This type of investment schemes are utilized with a number of Micro-Savings or Micro-Investment Apps that are suitable if you are looking to invest anything below $100.

10 ways to invest $100

Peer-to-peer lending

As the name suggests, peer-to-peer lending refers to business platforms where people borrow money for personal loans. These types of loans are often unsecured and can be as high as $10,000. The provider of the P2P lending platform often determines the interest rates and payment period of these loans which may vary based on the credit rating of the borrower. This platform offers a good way to invest $100 as it allows investors to purchase “notes” which refer to funds made accessible as personal loans to the users. Different platforms have different requirements. 

Some platforms allow notes to be purchased in small units. For instance, one platform can allow these notes to be purchased in units of $25 which allows the investor to decide if they spread the loan across four borrowers or two. It is often advisable to spread the risk in investment thereby most of these sites would ask the investor to spread the risk across different profiles. One of the most popular P2P platforms is Lending Club which allows investors to invest funds as little as $25. They also advertise high returns ranging between 4% and 7% that comes with risk as the borrower may default on the loan. However, these rates indicate the default rate and returns that are higher than you will be given by banking and other financial institutions. As such, this is a great way of investing without having to worry about initial capital. You will be surprised at how much you can save if you constantly round up your purchases.

Invest in Personal Development

Personal growth and development is integral in becoming financially independent. Think of investment as a Chess game where intellect dictates the outcome. Most affluent people often state how important reading is. If you want to be wise with your investments and personal finance management then you need to learn about money. Not everyone has an accounting or finance degree. Various platforms like Edx, Udemy, and Coursera have made it quite easy to enroll in personal development courses. Some of these courses are offered for free while others come with affordable certificate courses starting from $49. 

Personal development and growth is not only limited to financial education. There are a plethora of courses that will help you learn new skills which can improve both your personal and career life. For instance, let’s say you are a stay at home mum with three kids and you only get time to yourself when your kids are asleep or when they are in school. You can enroll for an Amazon AWS course which is often delivered online that comes with lucrative jobs. Amazon AWS offers four training and certification paths which include Cloud Practitioner, Developer, Architect, and Operations. In 2019, the average salary of an AWS-certified IT professional was $129,868 ranking as one of the highest paying jobs in North America. The best part about this job is that you can work remotely, meaning that you wouldn’t have to sacrifice on spending time with your kids! Imagine how you could upgrade your career and financial independence by investing towards your personal growth?

Invest in Dividend Stocks

Dividend stocks refer to companies which pay shareholders regular dividends. Most companies that pay dividends are usually well-established and have a record of their dividend payouts. American dividend paying companies often distribute a fixed amount of their earnings on different schedules. For instance, there are monthly paying dividend stocks where you get dividend checks at the end of each month or quarterly-paying dividend stocks where you are paid after every three months or yearly-paying stocks where you are paid annually. Regardless of the company scheme you choose to invest in you will always get a check depending on how a company performs. There are two main ways through which you can invest in dividend stocks and they are mutual funds and individual dividend stocks.

You can choose to either purchase the stock by investing in mutual funds such as index-funds or exchange-traded funds that have dividend paying stocks or buy these stocks independently. The difference between these two is that investing through mutual funds will give you access to an extensive portfolio of companies helping you spread the risk of your investment while purchasing individual stock will increase your risk. For instance, let’s say you choose to invest through mutual funds and choose three companies that offer different dividend stocks. Let’s assume that all these companies pay the stocks quarterly. If one company underperforms and the other two surpass their targets then you are still sure of receiving a check. However, if you invest in individual funds and the company underperforms then you will also have to partake in the company’s losses. 

Invest in Your 401(k)

This is a tax-advantaged retirement account where employees contribute to build their individual portfolios. This plan is available in the US as the 401 (k) and in other countries as retirement/pension schemes and funds. It is cited as one of the easiest ways of investing $100 as you can contribute this amount either monthly, biweekly or periodically according to your income. The only limit to this form of investment is that you can invest up to an annual limit. Additionally you are only allowed these tax advantages if you withdraw your 401 (K) after you attain the age of 59½. If you withdraw it earlier, you will be liable to some tax penalties. 

This investment option is a definitive way of investing for your retirement. Some of the advantages include matching contributions provided by some employers. Some employers often “match” their employees annual contribution by contributing an amount based on your annual contribution towards your retirement fund. The money contributed is often invested in your choice of variety of mutual funds that have returns which help you grow your retirement fund. Who does not like the idea of securing their financial independence during old age? Checkout this option to ensure that you take care of yourself after you retire from normal jobs.

Build an Investment Portfolio with Robo-Advisors

Robo-Advisors are safe ways of investing as they offer digital platforms which provide automated solutions to financial planning. These platforms often have little-to no supervision and are algorithmic driven which speak to their accuracy in mapping out financial mathematics. There are numerous robo-advisors online with a number that do not require any upfront investment. If you choose to invest $100 in this option, you will get a fully-managed, well-diversified portfolio of stocks and bonds with impressive returns. These platforms often use a subscription fee model where the robo advisors customizes a portfolio based on your preferences and manages it for a minimal fee. 

Some of the most popular robo advisors include Fidelity Go, Betterment, Ellevest, and M1 Finance. All these companies do not have a minimum opening balance meaning that you can invest whatever amount you have. Additionally, Fidelity Go charges up to 0.35% to manage your portfolio, Betterment charges 0.25% management fee, Ellevest charges between S1 to $9 per month to manage your portfolio, while M1 Finance does not charge an investment fee bur rather charges for supplementary charges such as account maintenance, request for paper copies, direct account transfers, miscellaneous charges, and bank fees. Some of these platforms also offer lending facilities to their clients. For instance, if you register with M1 finance you can access your portfolio line of credit once you reach $10,000 at only 3.5% interest rates. 

10 ways to invest $100

Index-Based Exchange Traded Funds (ETFs)

You can buy a portfolio with Index-Based Exchange Traded Funds (ETFs) which allows you to buy into an entire market of stocks. This option is quite suitable for people looking to spread their investment risk with diversified portfolios. EFT often contains a variety of investment options including stocks, commodities, bonds, or a combined investment option. This is a secure way of investing because EFT funds have marketable security meaning that they come with associated prices which allows them to be easily bought or sold. 

Open a Traditional or Roth IRA

Individual Retirement Accounts (IRA’s) are investment schemes that offer valuable tax benefits for people interested in saving for their retirement. These are commonly referred to as tax-free or tax-deferred ways of opening a savings account that safeguards your retirement. There are three main types of IRAs and they include Traditional, Roth, and Rollover IRAs. In this article we will focus on Traditional and Roth IRAs. Traditional IRA’s refer to saving investments where the taxes are deferred for the investments while the contributions might be tax deductible. On the other hand, Roth IRAs the investments are tax-free and the final withdrawal is also tax-free. Opening and contributing to one of these schemes will help you create a retirement fund that will ensure you have a financial cushion to fall back on when you decide to retire. Most financial advisers often advise on opening Roth IRAs because of the tax advantages. However, both IRAs have some advantages that could help you become more financially independent by saving for your future.  Both of these IRAs have no minimum requirements, so you could open an account with $100. 

Payoff Debt

Debt is like an anchor that will keep you in dire straits. Some debts often snowball and make it harder and difficult to access other credit options or become liberated from the paycheck-to-paycheck routine. Paying off your debt is  one of the most integral steps in becoming financial steps. How can you pay off your debt if you are living paycheck-to paycheck? Do not worry, there are a number of tested and proven ways through which you can organize and pay off your debts even if you do not have enough funds left over from your paycheck. Check out our list of 50 FREE Budget Templates that will help you manage your debt through various budgeting techniques including Dave Ramey’s infamous Zero-based Budget. 

Buy individual stocks

Individual stocks have always been considered profitable ways of investing. In the past, you would often be compelled to buy full shares which could be expensive and out of reach for most individuals. However, the introduction of fractional shares has made it easier for people to buy a fraction of shares and still make money from them. For instance, if you are interested in buying Amazon shares but do not have the $3,311.37 needed to purchase a full share, you can begin by investing $100 and work your way up. You can buy these stocks under $100 through distant brokerages like Robinhood and Stash who allow users to invest in stocks starting from $1. Investing $100 in stocks will definitely help you become more financially-savvy as you will become more empowered in the world of finance and investing. 

Conclusion

Investing should not be considered an expensive or out of reach venture. Whether you are a stay-at-home mom or a student or an employee living paycheck to paycheck, you can invest in a variety of schemes that will help you become financially independent. Remember that patience is key to investing. Do not invest your money today and expect it to grow overnight. Realistically speaking, most investments often generate income after one to three years depending on the option chosen. If you are determined to become more financially independent in 2021 and stop living paycheck to paycheck then download one of our budgeting templates, choose an investment medium, and begin contributing periodically. Also to be successful at investing you need to be highly disciplined. Imagine how much you could save and invest if you stopped unnecessary bills and spending and invested in any of the above mentioned schemes; or if you stuck to a stringent contribution schedule, you will be financially independent much sooner than you expected!