Tamila McDonald, Author at The Free Financial Advisor

Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.

This Is What You Should Do If You’re Laid Off

December 19, 2022 by Tamila McDonald 3 Comments

With a potential recession on the horizon, many professionals are worried that layoffs will occur during the upcoming year. Layoffs are common when companies experience significant financial hardships, particularly when they’re coupled with declining customer demand. While a layoff is challenging for all impacted employees, there are steps professionals can take to mitigate any damage to their well-being. Here’s what you should do if you’re laid off.

Understand Your Rights

First and foremost, you want to ensure that any layoff notice you receive aligns with your rights. Review local laws governing laying off employees, as those rules may vary by location. Additionally, check any employment contracts – including union contracts, if applicable – to learn about layoff requirements that apply to your situation.

The goal is to find out what your rights are and to ensure your employer is acting in accordance with them. There may be rules regarding the minimum amount of notice required, severance packages, unused leave payouts, benefits extensions, and more. As a result, you want to make sure you’re receiving what you’re due before too much time passes.

Get the Layoff Terms in Writing

Typically, a layoff notice is presented in writing. However, if you aren’t offered an official document that outlines the terms of the layoff, including any severance and benefits extensions, request it in writing. By doing so, you have a formal document that outlines the conditions of the layoff. Along with giving you information about what to expect, you can make sure that it’s accurate and aligns with applicable laws or contracts.

Know What a Layoff Means

Losing your job for any reason is difficult to navigate. However, it’s critical to remember what a layoff is and how it differs from a firing.

When you’re laid off, it’s not because your performance was poor. You didn’t do anything wrong. Instead, the situation is merely a reflection of a company experiencing a financial hardship that it’s struggling to manage.

While it also creates a financial hardship for you, don’t connect the experience to your capabilities, competence, likability, or worth. Typically, known of those factors played into the company’s decision, so adjust your mindset by remembering that you have valuable skills and that finding a new job is possible.

Additionally, it’s critical to realize that when you look for a new position, hiring managers typically won’t hold a layoff against you. When you’re asked why you left the job or why your exit resulted in a gap in your work history, be honest that it’s due to being laid off. Hiring managers know that even highly skilled professionals can lose their jobs during a layoff, so they won’t make negative (and inaccurate) assumptions based on that being your reason for leaving.

Request Letters of Recommendation

When you receive a layoff notice, ask your manager if they’re willing to write a letter of recommendation. With one of these letters, they can formally vouch for your capabilities, character, and value in the workplace. Then, you can present the letter when you’re applying for a new job. Plus, you can review it any time you find yourself questioning your capabilities, allowing you to refresh your memory about why you’re a fantastic candidate and employee.

Alternatively (or additionally), ask your manager and coworkers if they’d serve as professional references during your upcoming job search. Since most hiring processes involve contacting references, requesting trusted colleagues who can accurately discuss your capabilities if they’d be willing to fill this critical role is wise. If they say yes, get updated phone numbers and email addresses for them, allowing you to create a quick list of contacts for future reference requests.

File for Unemployment Benefits

After a layoff, you’re typically eligible for unemployment benefits. Make sure you file immediately after your last day on the job. Often, there’s a short waiting or processing period before you’ll start receiving the benefits, so filing sooner rather than later is always your best choice.

Additionally, filing quickly creates more opportunities for financial planning. You’ll know how much you’ll likely receive, and that makes updating your budget as soon as possible easier. In many cases, you can file online, over the phone, or in person, so choose the most efficient approach available and get the ball rolling.

Explore Your Health Insurance and Retirement Account Options

When you experience a layoff, your employer typically won’t continue contributing to your health insurance benefits unless doing so is part of a formal severance package. Since that’s the case, you’ll want to explore your available options.

Along with reviewing your COBRA coverage options, see if your state offers a health insurance exchange that could help you find an alternative. That way, you can compare costs and coverage levels to find a plan that meets your needs that doesn’t bust your budget.

You also want to consider what to do with any retirement account you had with your employer. If the value is high enough, you can potentially leave a 401(k) where it is even if you no longer work there. However, it’s wise to discuss alternatives – such as rolling your 401(k) over into an IRA – with a financial advisor. That way, you can make the financial move that’s best for you over the long term.

Refresh Your Resume and LinkedIn Profile

When you’re informed that a layoff is occurring, take some time to update your resume and LinkedIn profile. Make sure your current position is accurately captured on the document, and add bullet points in the entry that outlines every noteworthy achievement.

With your resume, don’t worry about keeping the size limited when you’re adding accomplishments. Instead, record as much as you can remember and save the document as your master resume. Then, you can tailor the content to reduce the length when you find suitable opportunities.

With that approach, your odds of forgetting an achievement go down dramatically. Plus, preparing your resume for submission could be simpler, involving little more than reordering the accomplishments and deleting those that aren’t as relevant to that specific opening.

Take a Moment to Process What’s Happened

For many people, a layoff is a very traumatic experience, resulting in a wide array of emotions. Since that’s the case, taking a moment to process what’s happened is a smart move. It allows you to work through what you’re feeling before you make any major decisions or begin searching for new opportunities. Essentially, you’re giving yourself a chance to get your mindset right prior to moving forward.

Just make sure that you don’t allow yourself to wallow. After spending a little time reflecting and sorting through your emotions, transition to a forward-thinking perspective. Additionally, spend some time engaging in self-care, ensuring you have the right attitude and enough energy to walk the road that lies ahead.

Spend Time Reflecting on Your Career Path

Taking some time to reflect on your career path after a layoff is also an intelligent move. It allows you to gauge your level of satisfaction, as well as consider whether the industry is stable or likely to recover once economic conditions improve.

Consider whether you find your field satisfying and whether you generally enjoy the responsibilities that come with it. That may help you determine if staying the course or changing careers is your best choice, allowing you to move in the right direction.

Additionally, examine your skillset and other credentials. That way, you can see if there’s anything you’re missing that you might want to acquire once you are laid off. In some cases, the layoff turns into an opportunity to boost your capabilities, so keep that in mind as you plan for what comes next.

Update Your Budget

When you’re laid off, the amount of income you’re receiving typically declines dramatically. As a result, you’ll need to examine your complete financial picture and adjust your budget.

Even if you have money in savings you can use, reducing your expenses ensures that the cushion lasts as long as possible. Cut back as much as you can to see if you can cover what’s left solely on your new income level. If not, see how much of your savings you need to dedicate to handle the gap, allowing you to estimate how long your savings will last.

Launch Your Job Search

Launching a job search as soon as possible allows you to shorten the amount of time you’ll end up relying on a reduced income. Begin by identifying what you need to find in a new role. Consider the skills you want to use, as well as any duties you’d prefer to avoid. Think about the culture you’re after and what type of compensation you’ll need to meet your needs.

After that, use several avenues to explore opportunities. Head to job boards and design searches that you can turn into job alerts. Reach out to your network to let them know you’re looking for a new job. Partner with staffing firms to access even more opportunities.

You can also consider freelancing opportunities, temporary jobs, or contract work. Each of those has unique benefits and drawbacks, but they’re worth keeping on the table if you’re concerned that your post-layoff income level is unsustainable.

It’s also wise to create a formal schedule for your job search activities. By allocating specific times to seek out new opportunities, follow up on applications, network with your connections, and take similar steps, you’re establishing a new routine. Plus, it ensures you’re dedicating enough time to make progress while still maintaining a sense of balance, preventing you from overdoing it and, ultimately, burning out.

When you find an opportunity, take a moment to target your resume before applying. Adjust the content to speak to that specific employer’s needs. Make sure you incorporate keywords from the job description into your resume to position yourself as the strongest possible match.

Prepare for Job Interviews

As you search for a new job, it’s wise to put some job interview preparation time into your schedule. Part of job search success is coming across as competent and confident when meeting with hiring managers. By regularly practicing answers to common interview questions, you’re giving yourself a chance to get comfortable with discussing your relevant achievements and sharing your expertise. As a result, when you land an interview, the upcoming experience feels less daunting, which makes a difference.

Do you have any other tips that can help someone if they’re laid off? Were you laid off recently and want to tell others how you’re navigating this challenging situation? Share your thoughts in the comments below.

Tamila McDonald

Why Did I Buy That House? Home Buyer’s Remorse

December 12, 2022 by Tamila McDonald 1 Comment

Purchasing a home is typically exciting, regardless of whether you’re a first-time buyer, upsizing, or downsizing for retirement. The problem is that once the purchase goes through and you start living in the property, you may begin to wonder if you made a mistake. Owning the home can reveal problems you didn’t initially notice, and you might worry that buying was the wrong decision. If you’re asking yourself, “Why did I buy that house?” here’s what you need to know about home buyer’s remorse.

What Is Home Buyer’s Remorse?

Home buyer’s remorse is a sense of disappointment and regret that can follow a home purchase. Essentially, you think you made a mistake by purchasing the property, and the feelings of guilt, frustration, uncertainty, fear, or sadness because of it weigh you down.

In some cases, home buyer’s remorse happens due to your own views on the purchase. At times, it’s a result of opinions others express to you about your property, creating doubts that weren’t there previously.

Why Home Buyer’s Remorse Happens

Home buyer’s remorse isn’t uncommon, and it can occur for a wide array of reasons. Here’s an overview of some of the most common causes of buyer’s remorse among new homebuyers.

Your Mortgage Is Hard to Handle

While dealing with your mortgage payment is something you know is part of the equation, after paying it for a few months, you might realize it’s harder to handle than you expected. If paying becomes stressful, you may start regretting your purchase.

If this happens, go over your budget and review your spending. Figure out where your money is going and where you can scale back. Also, consider starting a side hustle to boost your income until you can reach a more comfortable place. You could also look for a higher-paying job or a raise at work.

Unexpected Issues with the Location

While you may have gotten some basic insights about the neighborhood when you viewed the home, living in it might reveal new issues. Perhaps a neighbor is unexpectedly difficult to deal with or dogs barking in nearby yards is noisier than you expected. Maybe you didn’t realize that your road was a path for ambulances, and there are sirens wailing at all hours of the night.

Regardless of the reason, not liking the location is frustrating and can lead to home buyer’s remorse. Consider looking for ways to minimize the issues. For example, landscaping and fencing can potentially shield you from some noise and give you privacy.

Surprise Maintenance or Repairs

When you buy a home, you usually don’t expect to need expensive maintenance or repairs right away. Since that’s the case, when the unexpected happens, and you suddenly have to sell out hundreds or thousands of dollars, home buyer’s remorse can occur.

Fortunately, doing the repairs or maintenance means you now know when similar actions might need addressing in the future, allowing you to plan. Additionally, you’ll start forging a relationship with local repair and maintenance professionals, and that can make handling subsequent needs easier in some cases.

Surprisingly Challenging Commute

In some cases, a commute from a new home seems manageable until you start driving it. You might realize that you’re suddenly spending far more time on the road or that traffic conditions are significantly more stressful to navigate than you expected.

With this issue, there are potential solutions. You can explore telecommuting options with your current employer or look for a new job that’s either closer to home or lets you work remotely. Joining a carpool means you aren’t as responsible for as much of the driving, which can also make the commute feel more manageable.

Negative Opinions from Family or Friends

When you buy a house, showing it off to family and friends typically happens. While this is potentially reassuring if they focus on the positives, if they start sharing negative opinions, it can lead to buyer’s remorse.

Whether your loved ones are questioning how much you spent, express dislike for the home’s features, or say anything else along those lines, you might worry that you’ve made a mistake. However, what’s important to remember is that you’re the one living there. If the house makes you happy, don’t let their opinions drag you down.

How to Deal with Remorse

Above all else, it’s critical to know that buyer’s remorse about purchasing a house is normal. It’s a major investment that comes with a highly stressful buying experience. Plus, unless you built a house, no available home would likely have everything on your wish list, which can lead to some regret in nearly anyone.

Dealing with the feelings that come with home buyer’s remorse isn’t easy, but there is a way to move forward. Begin by reminding yourself why you purchase the home in the first place. Spend time appreciating the features that drew you to the property. In some cases, that alone helps you see that the house is an excellent fit for your needs, which can reduce negative feelings about the purchase.

It’s also wise to unsubscribe from any email or text alerts relating to real estate in your area. Seeing sale prices or attractive marketing photos may bring about new doubts. Since those comparisons won’t benefit you in any way, unsubscribing can save you unnecessary pain.

Finally, keep in mind that this home doesn’t have to be your last house. In many cases, first-time homebuyers have to make sacrifices due to limited budgets or other constraints. However, your house can put you on the path toward your dream home. By caring for it and improving it appropriately, you’ll build equity that can potentially make your perfect house more affordable down the line.

How to Avoid Home Buyer’s Remorse

If you’re considering purchasing a house and want to avoid home buyer’s remorse, begin by setting a realistic budget. Factor in the property’s price, closing costs, appraisal fees, inspection fees, down payment requirements, property taxes, homeowner’s insurance, potentially increased utility costs, an emergency fund for maintenance, and any other expense that could come with the purchase. By doing so, you can avoid regrets related to the financial side of the equation, as you’ll know what to expect.

Additionally, create a list of your genuine needs for a new home. Use that to guide the properties you consider, keeping your wants largely out of the equation until you begin narrowing down your options. That may give you a more realistic idea of what you can reasonably get, which could prevent later disappointment. Alternatively, it may show you that now isn’t the right time to buy, which is also helpful.

If you find a house with potential and place an offer, get the right inspections. Along with a general home inspection, consider paying for specialty roof, plumbing, electrical, HVAC, and pest inspections. While going that route means more upfront costs, it could reveal expensive repair needs that you can then negotiate for as you navigate the purchase. If nothing is found, it may give you peace of mind.

Finally, spend time exploring what living in the house is potentially like. Visit the neighborhood multiple times during the day and night, allowing you to gauge the noise and see traffic patterns. Also, consider heading to the area and doing your commute at the typical times on a few occasions. While that means going out of your way, it lets you know if the drive is an issue.

Were you happy with your home purchase, or did you experience buyer remorse for your house? If you did regret the decision, do you have any tips that can help aspiring homebuyers avoid mistakes? Share your thoughts in the comments below.

Tamila McDonald

How To Retrieve Your Vehicle After Repossession

December 5, 2022 by Tamila McDonald Leave a Comment

Having a vehicle repossessed puts you in a difficult spot, particularly if you need the car to get to work, school, stores, or anywhere else. Fortunately, it’s possible to get your vehicle back after a car repossession. If you’re vehicle’s been repossessed and you’d like to get it back, or you’re at risk of a car repossession and want to prepare, here’s what you need to know.

Why a Car Repossession Happens

Generally speaking, a car repossession only occurs if you violate the terms of your auto loan. In most cases, that means failing to make your required payments, as that causes you to default on the loan. However, in some states, not having sufficient vehicle insurance may also trigger repossessions, even if you’ve made all of your payments on time.

How to Prevent a Car Repossession

If you’re at risk of a vehicle repossession, but one hasn’t occurred yet, preventing it from happening is potentially an option. Contact your lender immediately to discuss the issue. If missed payments are the reason for the car repossession, you might be able to negotiate better terms or qualify for a program that gives you more time to make up any missed payments.

For vehicle repossessions relating to insufficient insurance, you’ll need to find a car insurance provider and get a policy that meets the terms of the loan. Speak with your lender to determine precisely what coverage is required. Then, shop around for insurance that offers a compatible policy. Finally, once you have the policy, contact the lender again to provide them with your new coverage details.

How to Retrieve Your Vehicle After Repossession

Contact Your Lender

If your car has already been repossessed, the first step you’ll need to take is to contact your lender. Find out why the vehicle repossession occurred, as well as whether retrieval is an option.

After a repossession, lenders may prepare to auction the car. However, some states have mandated reinstatement or redemption periods, limiting how quickly a lender can move forward with an auction. As a result, you may have time to get your vehicle back without having to deal with the auction process, depending on how long you wait before reaching out and whether you can pursue alternative solutions.

In other cases, a lender may resell the car instead of auctioning it. Again, there is commonly a minimum waiting period before the lender can move forward with reselling, so ask about the timeline during the call.

Do Some Research

What options are available for getting your car back may vary by state. As a result, after speaking with your lender, it’s wise to research local laws regarding repossessed vehicles. That way, you’ll know whether what the lender stated aligns with any relevant legislation in your area.

In most cases, you can perform a simple online search to get an overview of applicable state laws. Simply search for “vehicle repossession [your state]” as a starting point. Alternatively, you may be able to reach out to your state’s attorney general’s office or a local consumer advocacy group for information.

Reinstate the Auto Loan

In specific states, reinstating the loan is a potential option. With this approach, you’d need to pay the entire past due amount along with any repossession-related fees, such as storage and towing costs, within a specific time period.

If reinstatement is available in your state, the lender will outline a timeline for providing them with the required funds and the dollar amount needed. In most cases, the timeframe is relatively short, usually coming with a deadline that’s 10 to 20 days after the date of repossession.

Whether a reinstatement is worth pursuing depends on your financial situation. Acquiring the needed cash is potentially challenging, particularly if you were already struggling to make the monthly payments. However, it’s worth considering if gathering up the money is an option.

Redeem the Auto Loan

Redeeming the auto loan involves paying off any missed payments and the remaining balance in full, as well as covering any repossession-related fees. In many cases, this requires significantly more funds than a reinstatement, as you’ll need to cover the entire balance due. However, if you pay in cash, it also means the vehicle is formally yours in the end, which is beneficial.

If you want to pursue this option after a car repossession, ask the lender for the pay-off amount, including any repossession-related fees. Additionally, find out the timeline for the redemption, letting you know when you’d need to provide the lender with the funds to get your car back this way.

Buy Your Car at Auction

If the lender decides to auction off your vehicle, you can attempt to buy it back then. Buying a car at an auction is relatively simple, but there are some costs involved.

First, you’ll need to register for the auction, and that usually comes with a fee. When you register, you also need to show that you have enough money to potentially participate. That could include providing a credit card number and a letter of guarantee from your bank or bringing cash to the event, depending on what the auction accepts.

Once you register and arrive on-site, you’ll get a numbered paddle. The auctioneer will present a vehicle – discussing its features and the starting price – and open it up to bidding. The auctioneer will then state new prices, and those who are willing to pay the indicated amount raise their paddle to make their bid. That process continues until no further bids come in, making the last bid the purchase price for the associated bidder.

Raise Your Paddle

When your car comes up, you’ll raise your paddle to correspond with the amounts you’re willing to pay. Just keep in mind that you’ll need to cover the entire cost at the end of the auction, as well as a buyer’s premium – which is typically about 10 percent of the bid price – so don’t place a bid that you can’t support financially.

The process is similar for online auctions; you just don’t have to deal with a paddle. Instead, when the auction goes live on the designated, it will show an initial price. Bidders can then submit offers over a specific time period.

Some online auctions show the updated price based on the submitted bids, giving others a chance to outbid the current leader. Others use a sealed-bid process, where the bid amounts aren’t displayed, essentially encouraging all participants to submit their best offer from the beginning.

Regardless, immediate payment is typically required for online auctions, too. As a result, you need to ensure you can cover the purchase price and any buyer fees.

Will You Owe Money After an Auction If You Don’t Buy the Car Back?

It’s important to note that having the vehicle go to auction doesn’t mean you’re immediately clear of the original loan. Whether the loan is complete after the sale primarily depends on the auction price.

If the amount the car sold for at auction meets or exceeds what’s left on your loan, then you won’t typically owe any money to the lender. However, if the auction sale price is less than the remaining balance of your loan, you are typically responsible for the difference.

For example, let’s say that the remaining loan balance and any required fees is $5,000 in total. If the vehicle sells for $5,000 or more at auction, the amount is covered, so you won’t owe any more money. However, if the car sells for $4,000 at auction, you’d still owe $1,000.

If you owe money, you’ll need to pay it like any other debt. Failing to do so can cause the account to go to collections or may make it possible for the lender to sue you for the amount due.

Owe Money After an Auction If You Don’t Buy the Car Back

Should You Retrieve a Vehicle After Repossession?

Even if you can retrieve your vehicle after repossession, that doesn’t always mean that you should. Look at your broader financial situation. Determine whether you’d be able to cover the costs of car ownership after a reinstatement, redemption, or auction purchase.

If so, then getting your vehicle back after a car repossession isn’t necessarily a bad idea if you need it for transportation. If not, then you may want to let it go and explore alternative forms of transportation, such as public transit or a cheaper vehicle you can buy with cash.

Additionally, regardless of whether you retrieve the vehicle after repossession, the action may still show on your credit report. As a result, you’ll want to focus on rebuilding your credit. Make on-time payments on any other debts, pay off your debts as soon as possible, and avoid opening new accounts as much as possible. That way, you can regain your footing.

Have you ever had to retrieve a vehicle after repossession and want to tell others about the experience? Did you go through a car repossession, decided not to get the vehicle back, and want to let others know what that was like? Share your thoughts in the comments below.

Tamila McDonald

Is It Too Late To Start Christmas Shopping?

November 28, 2022 by Tamila McDonald Leave a Comment

Many people start their Christmas shopping at some point in November, allowing them to take advantage of sales that are ramping up and events like Black Friday. However, if you aren’t able to dedicate cash to Christmas shopping before Black Friday passes, you may start wondering, “Is it too late to start Christmas shopping?” If you’re trying to answer that question, here’s what you need to know.

Is It Too Late?

Technically, it’s never too late to start Christmas shopping. While events like Black Friday and Cyber Monday are usually when people think they’ll find the best bargains, holiday sales continue all through December. As a result, you can still get amazing prices on fantastic gifts all the way through Christmas Eve, so you have plenty of time to score some deals.

In fact, some sale prices may even beat Black Friday and Cyber Monday discounts. Retailers know that many people tackle a lot of Christmas shopping during those events, so they might not worry about getting customers’ attention. However, competition for any remaining shopping dollars gets fiercer as the holiday gets closer, so you may find even better prices on items like toys, electronics, and more.

What’s Late For Your Christmas Shopping?

Generally, you can Christmas shop as late as Christmas Eve at many stores if you’re shopping in person. While the product selection could be limited in some cases, last-minute shopping isn’t unusual, so you’ll likely find some excellent gifts up until the stores close.

The situation is a bit different if you are planning to shop online. With this, the selection isn’t the primary concern. Instead, it’s the time required for shipping.

Every major shipper – including USPS, FedEx, and UPS – as well as direct shipping services through Amazon, won’t guarantee Christmas delivery after a particular date. For example, the cutoff date for Priority Mail at USPS is December 19, 2022. For FedEx Ground, it’s December 14, 2022.

Amazon cutoffs for guaranteed Christmas delivery can vary depending on your location. For items with same-day service, you could potentially shop on December 24, 2022, and get your purchase on time. If one-day shipping is available, then December 23, 2022, is usually the last day, while two-day shipping means wrapping up by December 22, 2022. Thankfully, Amazon shows delivery date estimates before you check out, allowing you to adjust what you buy if an item would miss the deadline.

Sooner Rather Than Later

Depending on the shipping service involved, you may need to wrap up your Christmas shopping sooner rather than later. Check out the websites for the retailers you’re considering using as a starting point. In some cases, the retailer will list purchase deadlines for online orders, allowing them to factor in processing time to ensure delivery before the holiday. If not, see what shipper they use and review the order processing times to see when you need to make a purchase to ensure it gets to you before Christmas.

When do you usually start your Christmas shopping? Do you wish you could start earlier, or do you think your timing works? Do you have any tips for those who are just starting their Christmas shopping now? Share your thoughts in the comments below.

Tamila McDonald

What Are The Best Stocks To Buy Now?

November 21, 2022 by Tamila McDonald Leave a Comment

As an investor, one of the trickiest things to figure out is which stocks to buy and when. The holiday season and post-midterm climate alter the landscape a bit. Additionally, many companies are examining their year-end figures, with some exceeding recent expectations and others falling notably short. As a result, it’s hard to choose the right investments. If you’re trying to figure it out, here are some of the best stocks to buy now.

Best Stocks to Buy Now

Energy Stocks

Energy stocks are a potentially good choice as 2022 begins to come to a close. Oil profits are on the rise, and the midterms – which resulted in a split Congress – means new energy regulations are unlikely, which can help the broader energy industry succeed in the coming years.

Look at stocks in the oil, gas, and electricity markets. By doing some research, you can determine which options make sense based on your investment preferences.

Pharmaceutical Stocks

While many pharmaceutical stocks for companies that produced COVID-19 vaccines have slipped recently, they have ample potential for ongoing growth. As a result, looking at investments in this category could let you buy the dip.

Bank and Financial Stocks

Banks and financial companies are undoubtedly impacted by the current economic conditions, including rising interest rates and a potential recession. However, many major institutions are likely to weather the storm. As a result, you may have a chance to buy them for less, putting you in a good position if you’re looking to hold these investments and let them grow as economic conditions normalize at some point in the future.

How to Choose the Right Stocks for Your Portfolio

Ultimately, the stock categories above are only recommendations, and nothing is guaranteed. As a result, you should research any companies you’re considering and make sure they align with your investment strategy.

For example, short-term investors may need to approach things differently than long-term investors, as their goals are different. Similarly, risk-averse investors may have preferences that don’t make sense for those who are more growth-oriented.

In the end, you should never purchase any stocks based on a recommendation – regardless of the source – if they don’t make sense for you. Instead, let your strategy be your guide, ensuring your portfolio aligns with your needs and preferences.

Are there any other investments that you think should be on our “best stocks to buy now” list? Are you wary of purchasing stocks due to fluctuating economic conditions? Is a possible recession or ongoing inflation altering your investment strategy? Share your thoughts in the comments below.

Tamila McDonald

Here Are The Requirements For A Hard Money Loan

November 14, 2022 by Tamila McDonald Leave a Comment

requirements for a hard money loan

Hard money loans are one of the more popular options for buying fixer-upper homes to renovate and resell for a profit. While there are alternatives available – such as using a traditional or renovation mortgage – hard money loans usually fund far faster and are less restrictive. If you’re considering a hard money loan for an investment property purchase, here’s a look at what hard money loans are and the typical requirements for a hard money loan.

What Is a Hard Money Loan?

Hard money loans are non-conforming financing options that are typically used to purchase commercial or investment properties. These loans aren’t available through traditional lenders like banks and credit unions. Instead, private companies or individuals may fund the loan.

As with a mortgage, a hard money loan is connected to the property, allowing the property to serve as collateral. However, they fund much faster – often closing within just a few days – and have less stringent requirements in many cases.

The interest rate associated with a hard money loan is commonly much higher than traditional lending alternatives. Additionally, the repayment term is far shorter. While mortgages usually have 15 or 30-year repayment periods, hard money loans may only allow a few years.

Since house flippers typically aim to renovate and resell an investment property quickly, the shorter repayment term isn’t inherently problematic. As long as the investment property sells within the repayment period, proceeds from the sale cover the cost of the hard money loan and any associated interest, and the investor keeps any remaining profits.

Hard money loans may also work for rental or commercial properties where anticipated income generation makes paying off the loan on time plausible. In this scenario, investors may aim to complete any required builds or renovations to ensure the property meets the livability or value requirements set forth by traditional lenders, giving them an opportunity to refinance the hard money loan into a typical mortgage upon completion.

Requirements for a Hard Money Loan

As with all lending products, the requirements for a hard money loan may vary depending on the issuing party. However, there are some more standard requirements that most borrowers will need to meet. Here’s an overview of the typical requirements for a hard money loan.

Sizeable Down Payment

Since hard money loans are usually riskier for lenders, the down payment requirements are commonly higher. For example, while mortgages may only require up to 20 percent, a hard money loan may have a minimum down payment requirement of 30 percent.

However, precisely how much the lender needs as a down payment does vary, including based on the borrower. If the borrower has a substantial history of repaying hard money loans on time through their investment projects, the lender may require a smaller down payment in comparison to what they’d expect from a less experienced investor.

The state of the property being purchased is another factor that may influence down payment requirements. Additionally, the buyer’s plans for the property could also play a role. For home flipping, local market conditions may cause down payments to rise or fall, for example.

Cash to Cover Fees and Insurance

Along with a down payment, buyers need additional funds to cover any associated fees or insurance needs in cash. This includes handling underwriting expenses, closing costs, and property insurance, at a minimum. Other fees may also be part of the equation, so investors should look at what the hard money lender specifically requires to ensure they have enough money to address these expenses.

Liquid Cash Reserves

Most hard money loans are used to purchase properties that require renovations or land for building a new structure. Since that’s the case, buyers need liquid cash reserves to successfully handle the project and meet any payment requirements for the hard money loan.

Generally, liquid cash reserves include money in savings or held in accounts where making withdrawals is simple and quick. As a result, the value of investment portfolios typically doesn’t qualify. Stocks, bonds, and similar securities aren’t inherently liquid, so their value isn’t factored into the equation. Similarly, the value of other held real estate doesn’t count since selling takes time.

Proof of Income

Along with a liquid cash reserve, many hard money loan lenders require proof of income. The goal is to ensure that the borrower has a reasonable amount of cash coming in from a source other than the investment property they’re considering. That way, the buyer has a way to cover the hard money loan payments should the project head in an unexpectedly negative direction.

Beyond proof of income, the personal finances-related requirements are minimal, if not non-existent. While a hard money loan lender may run a borrower’s credit, there typically aren’t credit score minimums. As a result, any credit checks typically focus on factors other than credit score, such as a history of defaulting on similar loans.

However, some hard money loan lenders forgo traditional credit checks entirely. Instead, they concentrate on income levels, current property values, and after-repair values. The property is acting as collateral, so as long as it has enough value to cover the loan with room to spare, that may be enough in some cases.

Suitable After-Repair Value

When considering a hard money loan application, lenders compare the current value of the property to its potential after-repair value. The after-repair value is based on the project the buyer presents, allowing the lender to estimate how much the property will be worth based on the improvements, location, age, local market conditions, type of property, and similar factors.

Generally, the bigger the difference between the current value and after-repair value, the more attractive the loan is to the lender. Larger differences provide a sort of cushion, as project overages or standard shifts in the market likely won’t eliminate all profit potential.

In most cases, it’s the after-repair value that determines the maximum amount a lender is willing to offer. Additionally, as a result, it also influences the required down payment.

A Clear Project Plan

Assessing the after-repair value isn’t possible unless there’s a well-outlined plan in place for the project. Often, aspiring buyers need to thoroughly outline the bulk of the project, including building or renovation schematics, material and labor cost estimates, anticipated timelines, and similar details.

The more comprehensive the plan, the easier it to for the hard money loan lender to understand the buyer’s vision and goals. Plus, a formalized plan shows focus and dedication, which can play in a borrower’s favor.

Solid Investment History

While having prior property investment experience isn’t required by all hard money loan lenders, it’s a must for some. However, even if it isn’t an explicit requirement for a hard money loan through that individual or company, having a solid investment history works in a borrower’s favor.

For example, a borrower who’s about to undertake their first flip is viewed as riskier than one that has a dozen successful flips under their belt. As a result, the latter may qualify for lower down payments or more favorable terms. Additionally, their odds of approval are generally higher.

For those with previous experience, providing an outline of past projects is wise. This is particularly true if the borrower can demonstrate a clear history of finishing on time and under budget, as well as securing post-update sales at or above the anticipated after-repair value.

However, even if a borrower has no investment property experience, that doesn’t mean they won’t get approved. Instead, they may simply need to do more due diligence to demonstrate they have a solid plan and enough cash reserves to handle everything that’s involved. That strategy gives the lender more peace of mind, which may make them open to a higher degree of risk.

A Reputable Hard Money Loan Lender

Technically, finding a reputable lender isn’t a requirement for securing a hard money loan. However, it’s essential for borrowers who want to avoid predatory lenders.

Predatory lending takes many forms, but it all typically involves unfair loan terms designed to rob borrowers of equity or make seizing properties easier. Some consider all hard money loans inherently predatory, as they usually involve higher interest rates and challenging fee structures. However, that likely isn’t universally true.

Borrowers should perform some due diligence when considering lenders. Compare interest rates and fee structures. Examine the lender’s reputation. Speak with others who used the company for hard money loans. Also, make sure to read the entire loan agreement and have it reviewed by an attorney.

A Big Dose of Reality

While being realistic also isn’t an inherent requirement for getting a hard money loan, it’s nonetheless critical. The borrower needs to be honest with themselves about their financial situation and the viability of the project. It’s easy to underestimate repair costs, particularly since some issues aren’t always visible until work is underway. Having a sizeable financial cushion that can address overages created by unseen problems is, therefore, essential.

Additionally, getting accurate data about material and labor costs is a must. Being realistic about the timeline and potential shifts in the local market is similarly critical. Otherwise, even experienced property investors may end up over their heads.

Ultimately, it’s best to consider a big dose of reality to be one of the requirements for a hard money loan. That way, borrowers don’t move forward based on an overly optimistic perspective only to find themselves in trouble once the project is underway.

Do you think the requirements for a hard money loan make sense? Have you used a hard money loan previously and want to tell others about your experience? Do you think that hard money loans are too expensive to be wise options? Share your thoughts in the comments below.

Tamila McDonald

What Is The Cost Of A Gut Renovation?

November 7, 2022 by Tamila McDonald Leave a Comment

When you own a home and want to remodel, the idea of tackling a gut renovation is often appealing. Getting down to the studs allows you to update every aspect of the home. You can easily replace plumbing, electrical, and HVAC components. At times, you can even move walls, vault ceilings, and otherwise, adjust the layout. Plus, you can redesign the entire space to meet your needs and match your stylistic preferences. However, gut renovations are expensive. Here’s a look at the cost of a gut renovation.

What Is the Cost of a Gut Renovation?

Technically, the cost of a gut renovation can vary depending on several factors. The size of the home, the number of stories involved, the required systems updates, and the nature of any repairs are factors. Whether hazardous materials – like asbestos or lead paint – are present impacts pricing, as well as changes like moving walls and vaulting ceilings.

The finishes you choose for the new design also matter. Higher-end flooring, cabinets, hardware, and other finishing items come with bigger price tags, boosting the total cost.

Additionally, your location plays a role in the cost. The prevailing wage for contractors and construction workers varies from state to state and city to city, and the same is true of materials. As a result, you may pay more or less than others with similar properties if you’re in a higher or lower-cost area.

With that in mind, the average cost of a gut renovation usually falls in the $100,000 to $200,000 range. Just bare in mind that your property could cost more or less, depending on the factors listed above and other details.

How to Estimate the Cost of a Gut Renovation

In most cases, estimating the cost of a gut renovation is challenging, typically because certain issues aren’t revealed until the entire structure, and underlying systems are exposed. Additionally, unless you’re in the construction industry, you might not know material costs in your area, how much specific structural changes usually run, or all of the required steps to make your vision a reality.

As a result, it’s often best to map out your gut renovation. Outline every room that’s involved, the features or finishes you want, and any structural adjustments. Additionally, for structural changes, get a formal building plan in advance, preferably one that’s created by an engineer or similarly licensed professional.

After that, present your project to several capable, licensed, and insured contractors in your area. Meet with them to discuss your vision and answer any questions they may have about the project or plans. Additionally, learn more about their capabilities. Then, request official quotes.

By getting several quotes, you can gain insights into prevailing rates in your area. Just make sure every estimate includes details about contingency funds, as that money helps deal with the unexpected. It’s also wise to follow up and see what sorts of situations may make the quote inaccurate, such as the impact of shifting material prices during the renovation period.

Compare the quotes line by line, as some contractors may include steps, features, or services that others don’t. Additionally, don’t default to the lowest bid, particularly if it’s far below the others, as that could indicate the contractor overlooked a critical part of the project or lacks the necessary experience to offer an accurate estimate.

Factoring in the Hidden Costs of a Gut Renovation

While contractors can often provide reasonably accurate bids for your project, the cost of the renovation itself isn’t all you’ll contend with during the project. With a gut renovation, living in your home while work is underway may not be an option. Along with being uncomfortable, there are potentially laws that make it illegal. As a result, you may need to find a place to stay for several months.

Living in another location can come with a range of expenses. It may alter your commute times to work, require you to drive more so that you can visit your home, pay utilities on two properties, have insurance for two properties, and more.

Plus, a gut renovation usually means you need to store all of your belongings. This could make adding and securing sheds in your backyard a must, or you might need to rent a suitable storage unit or temporary options like containers from a company. Depending on how much you own and how long the renovation takes, this adds up quickly.

Even if you’re able to live in the house, you could see expenses increase. For instance, when your kitchen is torn out, cooking may not be an option. As a result, you may rely more on dining out or food delivery, which is typically more expensive.

Plumbing Updates

If your plumbing is getting updates, you might not have access to clean water at home. With this, turning to bottled water might be your only option, and that’s far more expensive than what comes from your tap.

Consider how the gut renovation will impact every aspect of your life. That way, you can identify and factor in potential hidden costs that increase the price tag of the total project.

Are you surprised by the cost of a gut renovation? Have you tackled a gut renovation and want to tell others about your experience, including unexpected expenses you encountered that threw off your budget? Share your thoughts in the comments below.

Tamila McDonald

5 Common Investing Mistakes

October 24, 2022 by Tamila McDonald Leave a Comment

Many people wonder, “What are common mistakes people make when investing?” Regretfully, missteps happen often, and some of them are incredibly costly. Fortunately, by knowing what they are, it’s easier to avoid them. Let’s look at the answer to the question,”What are common mistakes people make when investing?” By answering this question, we ensure you don’t make them.

5 Common Investing Mistakes

1. Failing to Diversify

Putting all of your eggs in one basket is incredibly risky when you’re investing. If you focus solely on a single company – or even a single sector – you may see the value of your portfolio tumble when specific market conditions occur.

Often, a lack of diversification is more likely to be an issue with new investors who are just getting some footing with their portfolios. If you don’t have a lot of money to commit, you may be limited to just a few investments initially. As a result, diversification is inherently harder to capture, especially if you’re buying individual company stocks.

If you want to boost your level of diversification quickly, consider mutual funds and exchange-traded funds (ETFs) instead. Unlike individual stocks or bonds, mutual funds and ETFs actually represent a range of investments that are associated with the fund. As a result, there’s an inherent degree of diversification built into the investment.

When you explore mutual funds and ETFs, you’ll find a wide variety of options. Index funds aim to include assets that represent the broader associated market, so they can be excellent places to start. However, you’ll also find mutual funds and ETFs that target specific sectors or groups of investments that align with a single concept, which may or may not be industry-limited.

Consider starting with a few different mutual funds or ETFs to get the ball rolling. Then, you can examine other investment options, like investing in the HALO IPO, after your diversified portfolio is a bit established.

2. Being Glued to Market News

Generally, it’s wise to remain informed about the market when you’re investing. Similarly, you’ll want to research any potential investment before moving forward, allowing you to determine if it aligns with your strategy and risk tolerance.

However, constantly monitoring the markets isn’t typically a good idea for the majority of investors. It’s easy to get swept up in the fervor, which may prompt you to make decisions you normally wouldn’t in regard to your investments.

Plus, not all market news is entirely unbiased. For example, some media personalities operating in this space may have an incentive to push an investment if they’re heavily involved with a particular stock. Even if they aren’t aiming for personal gain, that attachment may skew their view.

Instead, look to limit your consumption of market news, going with enough viewing or reading to stay informed but not so much as to track the market in real time. Additionally, if you learn about an investment with potential or are wondering if conditions make shifting away from an investment wise, do some additional research. Focus on unbiased sources that use a neutral approach to news delivery, as those are less likely to impact you emotionally, allowing you to make smarter decisions.

Similarly, resist the urge to constantly check the value of your portfolio. Market fluctuations are common, so the value is going to rise and fall regularly. What matters is sustained growth. In most cases, investing is a marathon, not a sprint, so keep an extended time horizon in mind and focus on the bigger picture.

3. Relying on Social Media for Investment Advice

While social media platforms can carry news from legitimate sources, it’s critical to be wary of investment advice coming from accounts not associated with unbiased information. First, social media accounts don’t know about your financial situation, so any recommendations aren’t targeted to your circumstances. That alone should give you pause.

Second, social media influencers may be compensated by companies to promote specific investments, either by directly recommending an asset or indirectly by increasing the visibility of an asset or company. While social media influencers are supposed to disclose when they’re compensated, it doesn’t always happen. Even if it does, you have to notice the disclosure, and it may get buried within the post depending on how it’s presented.

As with all investment advice, you shouldn’t move forward without digging into the asset or company yourself. Assess its viability and decide if it aligns with your investment strategy. Also, analyze the amount of risk, as an endorsement doesn’t mean it’s a safe bet.

4. Focusing on Trends When Choosing Investments

In some cases, unique conditions occur that bring a particular investment to everyone’s attention. The GameStop stock rise in January 2022 is a prime example, and there are several cryptocurrencies that have seen meteoric rises over the short term. However, these upticks may not last, particularly since the buying activity can shift to a sell-off relatively quickly.

What’s important to remember is that a trend isn’t necessarily an indication that an investment has long-term merit. The GameStop stock rise wasn’t about the value of GameStop; it was a movement designed to show the power of small investors, allowing them to impact massive institutions. Essentially, it was about making a statement.

With cryptocurrency, trends can occur for a variety of reasons. While some may be based on the increasing validity of a particular coin, others may be scams. For example, pumping and dumping isn’t exceedingly rare within the altcoin landscape, and if the news travels through the right channels, investors of all kinds can get caught in the wave.

Often, trends create a fear of missing out, essentially invoking an emotional response in investors who worry they’ll fail to capitalize on these rapid upticks. As a result, it’s crucial to take a breath and do some research. Determine if the trend genuinely represents long-term potential or if it’s spurred by something else. Additionally, assess whether the investment fits with your overall strategy and risk tolerance. Ultimately, if you have doubts, it’s usually best to focus your investing on other assets.

5. Trying to Time the Market

Generally speaking, timing the market doesn’t work for long-term investors. First, getting the timing exactly right is almost impossible. No one knows precisely what an individual stock or broader market is going to do from one day to the next, so you can’t predict the precise moments prices will hit their lowest point.

Second, trying to time the market can lead to inaction. You’re essentially holding money outside of the market, waiting for the perfect moment. Even if it’s in a high-yield savings account, you’re potentially missing out on much better returns.

Bonus Tip: Invest What You Can When You Can

In many cases, your best bet is to invest what you can when you can. Whether that means committing a lump sum all at once – such as turning your tax return into a source of funds for investing right when you receive it – or using a dollar-cost averaging approach where you invest using a specific amount from every paycheck, you’re creating opportunities for long-term growth.

Plus, moving forward ensures that you don’t wait so long that you never invest. Even if some of your investments are made when the market is high, it’s important to remember that the markets generally trend upward when you look at the activity over years and decades instead of weeks or months. As a result, occasionally buying at a high point today doesn’t mean you don’t have growth potential, so keep that in mind.

Can you think of any other common investing mistakes people make? Did you make any of the missteps above and want to tell others about the experience? Do you have any advice for new investors? Share your thoughts in the comments below.

Tamila McDonald

What Is The Cost of Living In Key West?

October 17, 2022 by Tamila McDonald Leave a Comment

For many people, moving to Key West would be a dream come true. However, if you don’t live nearby, you may worry about whether the area is affordable. After all, living in a beach town typically comes with a price tag. If you’re trying to figure out if Key West is affordable for you, here’s a look at the cost of living in Key West.

The Cost of Living in Key West

Generally speaking, the cost of living in Key West is high. It’s a small beach community and a highly desirable area. Plus, as an island and based on its location off the southern tip of Florida, transporting goods into the region can be expensive, leading to higher prices when shopping.

As a result, prices for nearly everything are above the national average. Here’s a closer look at the cost of living in Key West broken down into categories.

Housing

When it comes to housing, you typically have to choose between buying and renting. Purchasing a home in Key West is quite costly. As of October 2022, the median sale price of a property came in at $917,500, which could make buying a budget-buster for many.

If you’re interested in renting, that also comes with a big price tag. A one-bedroom apartment typically runs $2,413 per month, while a two-bedroom can cost $4,400 per month.

When it comes to homeowner’s or renter’s insurance, you may see higher rates. This is particularly true since adding hurricane coverage is often viewed as a necessity.

Food

When it comes to food, the overall cost in Key West is approximately 5 percent above the national average. That puts it in line with cities like Miami, though it may not be high enough to completely derail your budget.

Transportation

Transportation costs about 10.7 percent more in Key West. In some cases, this is because it’s a smaller island, so there’s limited access to options, which can reduce competition. Additionally, bringing new vehicles to the area potentially costs more due to the location, and those expenses can be passed on to the buyer.

Gas prices are also higher in Key West than in many other parts of Florida. Due to the island’s location, you may also see higher auto insurance rates, depending on where you’re coming from, and you might need to add specialized coverage for hurricanes and similar natural events.

Healthcare

In Key West, the cost of healthcare is about 13.2 percent above the national average. Again, this is partially based on limited access, as fewer medical facilities can lead to higher costs.

Taxes

In Florida, there is a base statewide sales tax set at 6 percent. However, cities and counties can add to that, pushing this cost up. For Key West, that leads to a sales tax of 7.5 percent on most purchases.

For property taxes, a recently passed increase would set the tax rate at $2.14 per $1,000 of assessed home value. However, that may not take into account certain deductions or exclusions, so keep that in mind.

Utilities

While the utility rates themselves aren’t necessarily bad, your utility spending may go up if you move to Key West. The area frequently experiences high temperatures, and the costs of cooling can add up quickly. While the difference is less dramatic if your home is well-insulated and has a modern, efficient HVAC system, it can still be quite spendy when compared to other regions.

Does the cost of living in Key West surprise you, or do you think it makes sense based on the location? Do you consider the cost of living when choosing where to live or retire, or is it not a major concern? Share your thoughts in the comments below.

Tamila McDonald

My Company Offers A Standard 401(K)-What Does That Mean?

October 10, 2022 by Tamila McDonald Leave a Comment

Starting your career and landing a job that comes with a retirement plan is a major financial milestone—congrats! Now that you have the standard 401(k), you might be wondering what it is and how it actually works. Below we’ll demystify the investing process and share some tips and tricks to help you get the most out of your 401(k).

But if you’re one of the 69 million workers who doesn’t have access to the standard 401(k) through your employer, don’t worry! We’ll cover other ways you can invest for retirement to ensure you still meet your financial goals.

What Is the Standard 401(k)?

The standard 401(k) is a relatively recent invention created by Ted Benna in 1979. It was intended to be an additional retirement benefit that employers could offer to supplement pension plans. But the standard 401(k) eventually overtook pensions because it’s cheaper for companies and more portable for employees. Pensions have to stay invested with the original employer, whereas 401(k) plans can be transferred when workers switch jobs.

Technically, there isn’t a “standard” 401(k) because every company’s plan has slightly different rules. Your vesting schedule, employer match, and investment options probably won’t be the same as your friend who works at another company. However, all 401(k) plan providers have a legal responsibility to offer investment options that are in your best financial interest. So you can feel confident that investing in your 401(k) is a good money move.

Any contributions you make will be taken directly from your paycheck, making it easy to build a nest egg. Plus, contributions are pre-tax, so you won’t owe income taxes on the amount you send to your retirement plan immediately. Instead, you’ll pay taxes on your withdrawals in the future, which is beneficial if you think you’ll be in a lower tax bracket after you retire.

How the Standard 401(k) Works

If you’ve ever had a brokerage account, the standard 401(k) investing process is similar. Usually you can select from a variety of stocks, bonds, ETFs, or mutual funds. Some assets available in your retirement plan may have fees, so pay attention to the cost when choosing what to invest in.

Many people choose target date funds because they’re pretty hands-off. They automatically shift to lower-risk investments as you get closer to your retirement date, so you don’t have to worry about rebalancing your portfolio.

Don’t overthink this decision too much, because you should be able to make changes later if needed. You can usually adjust your asset allocation to tweak your investing strategy. However, there may be limits on how often you can alter your investment mix to prevent overtrading, so keep that in mind.

Although all investments carry some level of risk, you can generally expect your retirement plan to increase in value over time. Depending on market conditions, the standard 401(k) typically yields a return of 5% to 8% on average. You may see some temporary downturns during bear markets and recessions, but your assets should bounce back as long as you don’t panic sell.

The Benefits of the Standard 401(k)

Aside from being a simple way to set money aside for retirement, the standard 401(k) comes with many other benefits. As mentioned above, contributions come directly from your paycheck automatically, which makes saving for retirement a breeze. The contributions are also pre-tax, so they can reduce your current tax burden.

In most cases, companies offer contribution matches with their standard 401(k) plans. This means that your employer will contribute up to a certain percentage of your income based on the amount you’re setting aside.

For example, many companies offer a partial match of up to 6%. So if you contribute 6% of your earnings, your employer will match 50% of that amount—an additional 3% of your salary. This is functionally free money that can boost the value of your portfolio significantly, especially over time.

The Power of the Employer Match

Say you’re 30 and just started saving 6% of your $70,000 gross income for retirement. For simplicity’s sake, let’s assume you earn a 7% real return and don’t increase your contributions or income. In 35 years, you’ll have about $580,000 (in today’s dollars) in your retirement account.

The standard 401(k) growth — Investor.gov

But if you factor in the partial employer match that equals 3% of your salary, it’s estimated that your investments will grow to roughly $870,000—a $290,000 increase. This shows how important it is to contribute enough to your standard 401(k) to get the maximum match your company offers. It’s also a good idea to up your 401(k) contribution when you get raises to boost your savings rate and grow your nest egg even more.

What Happens If You Leave Your Job?

If you leave your employer, you have options about what happens to your 401(k). Some companies may allow it to remain invested where it is. Alternatively, you might be able to roll the account over when you exit, transitioning the funds to your new 401(k) or an IRA.

You could also withdraw your funds from the account early, but doing so can trigger a financial penalty. Plus, you’ll have to pay income tax on the disbursement, and you’ll miss out on potential gains in the future.

How to Invest Without a Standard 401(k)

Investing without the standard 401(k) — Pexels

If you don’t have access to the standard 401(k), you’re not alone. Roughly half of workers have to save for retirement without one. Luckily you can open an IRA to invest for your future, which stands for “individual retirement account.” There are two main types—Roth and traditional.

Roth IRAs allow you to invest for retirement with post-tax dollars. This means you can take tax-free withdrawals from your Roth after you turn 59 ½. However, a major downside of this type of IRA is that it has income limits.

Single-filers who earn more than $161,000 of adjusted gross income aren’t allowed to contribute to a Roth IRA. But fortunately high-earners can still utilize traditional IRAs. They don’t have any income limits and allow you to set aside pre-tax dollars for retirement, similar to the standard 401(k).

It’s important to note that both types of IRAs have relatively low contribution limits. In 2025, you can only contribute up to $7,000 in your IRA, which is much less than the max of $23,500 for 401(k) plans.

Options for Business Owners

If you’re self-employed or run a business on the side, you can open a SEP IRA or Solo 401(k) instead. These accounts allow you to invest up to $69,000 per year or 25% of your total income/profits, whichever is lower.

If you have the standard 401(k), how’s it working for you? Share your thoughts in the comments below.

Tamila McDonald