money management Archives - The Free Financial Advisor

Inflation, Gold, Semiconductors

April 28, 2021 by Jacob Sensiba Leave a Comment

There are a lot of moving parts in the economy right now. Inflation has become a concern, people are looking at gold more as a hedge, and there’s a shortage in semiconductors. In this piece, we’ll explore some of those dynamics and what some of the investment implications are.

Inflation

Inflation will most likely increase. Many projections estimate the FED will meet/beat their target of 2%.

I do believe that an increase in goods and services will not affect demand as it would have in the past. Stimulus payments to consumers created enough excess cash that people didn’t mind, or even notice, an increase in prices.

I do realize I’m painting with a broad brush here, and undoubtedly there will be some that will notice the difference. I’m simply stating that demand will not suffer from price creep as it used to, at least while the government continues writing checks.

Gold

We could see another uptrend in gold. There’s a certain recipe that makes the case for a bullish perspective on gold – inflation pressures, increased money supply, and low-interest rates.

The FED continues to supply the market with liquidity with its asset-buying program. An increase in the money supply dilutes the value of the dollar (USD). When the USD decreases in value, typically gold does well.

There is a caveat to that, however. Demand for US Treasury securities is weakening, specifically from foreign investors. To double down on that, foreign investors are net sellers of Treasuries. There have to be enough buyers to meet Treasury issuance, otherwise, the FED won’t have enough “reserves” to inject liquidity into the system.

With regard to low rates, that is a good sign for gold, but it’s also a good sign for equities (companies) with a high tendency to borrow. I’m mainly looking at the technology sector. Especially these unicorns that have high valuations, but low (or negative) profits.

Semiconductors

There’s also a current market disruption at play here…semiconductor shortage. Demand across many applications are at multi-year, sometimes multi-decade, highs. Personal computers, electric vehicles, autonomous vehicles, AI, and the like all use semiconductors.

A semiconductor shortage has many implications:

Decrease in production
Price increase
Nationalist mentality
R&D disruption

A decrease in production can hurt the bottom line. It all depends on when the shortage ends. If production reduces enough for a sustained period, adjustments will have to be made by corporations.

A price increase is likely because of supply and demand dynamics. The price of semiconductors will go up, so the price of the products they’re used in will also go up. This could hurt demand for those products and could hurt consumers.

There are a select few companies that supply the majority of the world’s semiconductors. This could have a similar effect as Covid had with regard to supply chain management. Companies relied on global trade and cooperation to sustain their supply chain operations. When countries shut down due to the pandemic, global trade suffered as a result. Countries might shift to manufacturing their own semiconductors instead of relying on supply from trading partners.

Semiconductors are only getting less expensive and more efficient. With a shortage, and possibly less money coming into the manufacturers, it’s possible that this dynamic of cheaper and better plateaus…at least temporarily. It’s also possible that the shortage improves operations and makes the manufacturers more agile. Some countries have a very unique ability to progress, strengthen, and adapt when a roadblock presents itself.

With that said, I believe semiconductors will be a great investment opportunity. Their demand is only going to increase because of the push to provide the world with electric vehicles and clean energy. I would, however, pay attention to the shortage and I might wait until that shortage ends and prices stabilize.

What to Know Before Filing for Bankruptcy

February 11, 2021 by Justin Weinger Leave a Comment

Filing for bankruptcy is nothing to be taken lightly. In doing so, you’re asking the court to get involved in your finances, something most people would rather avoid. What’s more, once you’ve filed, there’s no going back. Given the consequences of bankruptcy – some good, some bad, but all significant – those considering this option have an obligation to themselves and others to weigh all factors before making a final decision.

While the decision to declare bankruptcy is ultimately yours to make, the following are some useful things to know before making a choice one way or another:

The choice of a lawyer is important

It’s possible to file for bankruptcy and succeed without the help of a bankruptcy lawyer. However, it’s not easy and it’s likely to lead to a less desirable outcome. With that said, picking an attorney to handle your bankruptcy filing takes more than hiring the first name you see in a Google search.

For one thing, it’s imperative to read between the lines. Most of their advertising and outreach will focus on potential clients’ financial problems while skipping over their experience and qualifications. If the bankruptcy lawyer marketing you see includes several indicators regarding skills and insights, put that name in the “maybe” pile. Follow up with research and careful reading of online reviews.

Once you’ve amassed a short list of contenders, call and arrange for a meet and greet. Most bankruptcy lawyers will agree to a free first-time consultation. This lets them get a sense of your situation while you get a sense for the cost of their services.

It’s harder than it used to be

Article 1, Section 8, Clause 4 of the United States Constitution explicitly defines the federal government’s all-encompassing role regarding bankruptcy law. In other words, the federal government gets the final say on how bankruptcies work across the entire country.

As a result, Congress occasionally updates and overhauls the bankruptcy code. The most recent changes occurred 16 years ago with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Simply put, if your existing understanding of bankruptcy court is based on events experienced prior to 2005, you’ll be in for a surprise if filing in 2021. As the name suggests, the law was passed to prevent abuse of the bankruptcy system. Filing has become harder and more strenuous.

Not everything gets discharged

One of the first things a lawyer will tell you is that certain debts are resistant to the bankruptcy process. That means it’s possible you won’t walk away from bankruptcy completely free from debt.

For example, student loan debt will linger after filing for bankruptcy. The same goes for unpaid taxes, alimony, child support, and monies owed based on civil court rulings.

You can keep your house

Homeowners who choose to file for bankruptcy can rest assured they probably won’t be forced to leave their house. The current bankruptcy code is designed to let people keep their homes.

With that said, some folks may be subject to eviction due to bankruptcy filings. Those behind on their mortgage payments, or those occupying a secondary dwelling in addition to their primary place of residence, will run the risk of their properties being seized to satisfy the demands of creditors.

The decision to declare bankruptcy is a significant one. Nobody should ever go forward with filing for bankruptcy without first considering the implications and consequences.

Crypto, Reddit, Stock Market Thoughts

February 10, 2021 by Jacob Sensiba Leave a Comment

The last couple of weeks have been crazy in the stock market. With Reddit putting a short squeeze on Wall Street, crypto assets going gangbusters, and speculation about what inflation will do in the near future, there’s a lot to talk about.

Reddit vs Wall Street

Gamestop and AMC Entertainment are the two biggest names when we talk about Reddit investors.

A large number of shorts were put in by hedge funds and other big players on Wall Street. A specific Reddit account “recruited” its following to pile into the two companies named above. This group of “retail” investors drove the stock price up (as well as other investors that caught wind of their efforts).

Those hedge funds were forced to cover their shorts so they didn’t lose more money. The stock price for those two companies plummeted in the following days, but that doesn’t negate what Reddit did – they beat the big guys.

What’s a short?

A short is a type of trade. What you do is you borrow shares of a stock at a specific price in hopes that the stock price will drop. If it does, you buy back those shares at a lower price and collect the difference.

For example, if you bought shares of XYZ company at $20 and the share price of XYZ drops to $10, you would cover your short and earn $10 per share as a return.

It’s not for the faint of heart because stock prices effectively have no ceiling, so you could lose A LOT of money.

Crypto

Cryptocurrencies gained traction over the last few years as investors saw potential. After Bitcoin rose to $20,000 per BTC and crashed, it lost its allure.

Social media brought it back, thanks to Elon Musk. Slight changes in his Twitter bio moved the needle very effectively. Bitcoin is now hovering at $50,000 per BTC. Tesla invested a healthy sum in Bitcoin and will now accept payments in Bitcoin.

I believe other companies will adopt this policy and we will see Bitcoin used for purchases more regularly. There is a place for cryptocurrencies in this world, but it’s uncertain what kind of role it will play.

Short-term Thoughts

I go through quite a bit of research each week to get an idea of what the market environment looks like, what the economy is doing, and where there are risks and opportunities in the market.

With that said, the amount of times I’ve read the word “bubble” is alarming. The comparisons to the Dot Com Bubble and the Great Financial Crisis (GFC) are also a cause for concern.

Pundits are using the word “euphoria” more often.

There are a few things to pay attention to:

The divergence between the stock market and the economy. Typically, near the end of the business cycle, a difference between how the market is doing and how the economy is doing grows. Eventually, things will revert to the mean. That’s to say, the difference between the two will shrink.
Inflation. The Biden Administration is taking a different stance from past presidents. Inflation and overstimulation of the economy were areas of concern. President Biden is taking the other side of this argument, saying that he’d rather do too much, than not enough. Look for increased stimulus and less regard for inflation. If inflation starts to run hot, expect the FED to cool it down somehow.

Conclusion

Short-term policy changes and speculative movements in the stock market have little to no impact on the long-term performance of your portfolio. The one thing that really moves the needle is your behavior and how you respond to the news.

If you keep your long-term perspective in mind and keep your emotions in check, you should fare better than those that don’t.

The FED, The Dollar, and Opportunities

January 13, 2021 by Jacob Sensiba Leave a Comment

My post for today was supposed to be a personal reflection, but in lieu of that, I’m going to lay out my thoughts on the market and the economy. Which includes the FED, the dollar, and inflation. In addition to that, I want to explain where I see risks and opportunities right now.

The dollar

We can expect the Federal Reserve to continue an accommodative monetary policy. They will invest in the fixed income market and they’ll resume the low-interest-rate stance.

If they continue this response to the Covid crisis, the dollar should go down in value. There are some risks and opportunities that arise if that happens.

Gold and cryptocurrencies should increase in value. A devaluing in the dollar is, normally, the right landscape for “alternative currencies” to do well.

International securities, especially emerging markets, do well when the value is priced lower. A large majority of international transactions take place using the USD. The value of their home currency goes up in relation to the USD.

The technology sector also has a negative correlation to a falling dollar. When the dollar goes down, that sector tends to outperform.

If the dollar, indeed, goes down look at these areas for possible investment opportunities.

The FED

As I mentioned earlier, the FED will continue to create an accommodative environment for the economy…until they don’t.

At some point, the recovery will gain momentum. GDP will go up and the population will gain confidence in that recovery. At this juncture, inflation will pop onto people’s radars.

If inflation runs too hot, the FED could possibly stop, or reduce, QE. They could halt the bond-buying program and they could raise rates. If that happens, keep your eyes out for a pullback.

We saw this happen at the end of 2018. The FED started raising rates until they went too far, and we had a 20%-25% decline in Q4. Then they reversed course and began easing again. We had a run-up in the market until March of 2020 when Covid hit.

Long term

I believe tech and healthcare will be the two sectors to watch over the next decade or more. With technology getting more advanced every day, investment opportunities will present themselves in these two areas.

Green energy, especially with the incoming administration, is also an industry with big potential. Technology will play a large role in the advancement of renewable energy.

My biggest concern

And I’ll preface this by saying I’m concerned because I truly don’t know the implications of it. MMT looks as likely as ever at this point.

The favorable stance by the FED plus the democratic party holding the House, the Senate, and the Presidency leads me to believe printing money is going to pop off.

An aggressive agenda to provide relief for Americans struggling because of Covid, a push for expanded Medicare/Medicaid benefits, possible student debt relief, as well as other initiatives.

It appears that reducing the national debt is not a concern. To be fair, it wasn’t a concern for the Trump administration either.

The bill comes due for everyone, and if other countries (namely China) are no longer buying US Treasuries like they were, I do not know how we can fund policies, branches, or even service the existing debt. Only time will tell.

Conclusion

I will close by saying that these are my opinions. Granted, I do a lot of research to come to these conclusions, but what I said above are still my thoughts and not foregone conclusions. Do your own research.

How Much Cash Is Needed to Start a Pawnshop?

January 6, 2021 by Jacob Sensiba Leave a Comment

So you want to start a pawnshop. Where do you start? What do you buy? How much is this all going to cost?

A pawn shop can be a very cash-positive business. While doing research for this post, I stumbled onto a Quora thread that showcased how much money can be made with such an operation. The profits ranged from $30,000 per year to $60,000 per month.

But, you have to get started. In today’s post, we’ll highlight what you need and what it’s going to cost.

What do pawn shops do?

First off, we have to talk about what a pawnshop actually does. Pawnshops buy, sell, and trade items. These items can come from the owner’s personal collection, something they acquired via purchase or something they acquired via loan collateral.

When someone comes to a pawn shop to borrow money, they have to bring something of value for collateral. When the pawnshop lends money to this individual, they retain that valuable item until the principal (plus interest) is repaid. If they fail to repay, the pawnshop keeps the item.

Legal and location

There are many things you need to obtain when you start a pawnshop.

You need to take care of the legal requirements first. This includes licenses, articles of incorporation for your business entity, and permits.

Licenses include pawnbroker’s license, precious metal dealer license, secondhand dealer license, Federal Firearms License (if you plan on selling firearms) from the ATF.

The next thing you need is space. Where you set up shop is an important decision. The right location can bring in a lot of traffic and improve your earning potential. However, the right location comes at a cost.

Areas with high foot traffic cost more. Often, pawnshops will choose a space that’s close to a popular area, far enough away that it’s not too expensive, but close enough to make it convenient for the consumer.

Assets

There’s a minimum asset requirement needed to open. That number depends on the municipality, state, and country you plan on setting up shop in. For example, Texas has a $150,000 minimum requirement.

What do you need?

After you have all of the proper licenses and permits and pick where you’ll operate, you need to buy things to be operational.

These items include a computer (computer system/network), cash register, signs, equipment to display your products, record keeping, insurance, lockable cases, and a state of the art security system.

What you’ll also need is an adequate amount of capital to purchase more inventory and lend money to consumers.

What’s going to cost

Depending on the size of your pawnshop and the anticipated foot traffic, your start-up costs will vary. If you’re a larger shop with a high probability of having a lot of visitors/customers, your starting capital could be between $50,000 and $75,000. A smaller shop with lower projected traffic can get by with $15,000.

Last bit of advice

When you start a pawnshop, you need to refine and learn some new skills. You have to educate yourself on how to assess the value of goods so you can acquire sellable items, but not at a cost that eats into your profit margin.

Also, you have to come up with a business plan. What interest rate will you charge on your loans? How much will you mark up the items you sell? How much are you willing to pay for inventory?

All of these questions need answers. Keep in mind, this planning process should take place prior to buying the necessary licenses and other items to get the business started.

5 Steps to Care For an Older Car

December 30, 2020 by Jacob Sensiba 32 Comments

As of 2019, the average car age is 11.8 years. People are driving vehicles longer (source). That’s great news for everyone’s pocketbook. When people drive their cars longer, the possibility that they have a loan payment for that car goes down. During that period between making their final payment and buying a new car, they can save more money! To improve the longevity of your vehicle, you have to take care of it. In this post, we’ll go over the steps to care for an older car.

Change Fluids And Filters Regularly

There are several different types of fluids your car uses. Oil, coolant, brake fluid, transmission fluid, etc.

It’s important to regularly change those fluids, and clean out the paths that those fluids travel in. You should change your oil and oil filter every 3,000 – 5,000 miles (depending on the car and the oil you use).

The recommendation for your transmission fluid is a full flush every 30,000 – 60,000 miles. You should flush your coolant every 30,000 miles.

Your brake fluid should get flushed every 20,000 miles. Bleed the fluid by removing the end that supplies the brakes and stomp on the brakes until nothing comes out. If the liquid coming out is an amber color, you’re good. If it comes out looking dirty, then a flush is in your best interest. (Step by step process provided by Brake Performance)

It’s also important to inspect your air filters during every oil change. You can probably go 2-3 oil changes until you have to change your air filter.

Another piece of advice I saw while doing research for this post was to use high-octane fuel once per year. High-octane gas runs hotter than normal gasoline but also has more additives and detergents that help clean out the engine.

Inflate Your Tires

It’s incredibly important that you keep your tires properly inflated. On the inside of the driver’s door, there’s a sticker that says what the desired tire pressure is for your car. The correct tire pressure will help with the handling of your vehicle and will also improve your miles per gallon (saving you money).

You should also regularly rotate your tires. How often you do this depends on the brand of tire you use, but the standard recommendation is every 3,000 to 5,000 miles.

Keep It Clean

Frequent wash-and-wax of your paint job keeps the car sparkling and prevents rust. It also helps hold up the resale value for that day when you’ll finally sell the vehicle. Don’t forget the interior. Catching spills quickly, vacuuming the interior, and shampooing carpets can keep your older car looking like new.

If gauges fail, have them repaired immediately. For someone caring for an older car, checking engine gauges often is your key to successfully keeping your ride on the road.

Find A Good Mechanic

Similar to visiting a doctor for a yearly physical, you should take your car to a qualified mechanic regularly to check out and avert any potential problems. Remember the key here: the longer your older car runs, the longer you’ll avoid costly car payments.

Paying a few dollars to the right mechanic is a small price to pay to keep your vehicle healthy and avoid much more expensive new car costs.

Spark plugs

The last piece of advice, with regard to taking care of an older car, I’ll leave you with is to replace your spark plugs. The recommendation for this is to replace every 30,000 to 90,000 miles (depending on the make and model of your car).

A bad spark plug can lead to a misfire in one of your cylinders. If you have a 6 cylinder car, but only 5 are firing, your engine is working harder than it needs to. That can lead to problems down the road.

By practicing good care for an older car, you’ll help your dollars stretch so you can use them for more important items on your agenda.

If you’d like an in-depth breakdown of repairs and costs, Edmunds has a fantastic article.

Why Are Fixed Expenses Difficult to Reduce?

December 23, 2020 by Jacob Sensiba Leave a Comment

When you’re making a budget, there are two columns: income and expenses. A large majority of those expenses don’t change from month to month or change very little. These are fixed expenses. If you’re trying to cut costs, you may find that the fixed expenses are difficult to reduce. Why is that? How do you reduce fixed expenses?

We’ll explore the answer to those questions, among others, in today’s post.

Types of expenses

There are two types of expenses. Fixed and variable.

As the names suggest, fixed expenses don’t change or rarely change. Generally speaking, fixed expenses are the largest, recurring expense. Things like your rent or mortgage, utilities, internet, streaming/cable, debt payments, and insurance are all part of your fixed expenses.

Variable expenses, on the other hand, are constantly changing. There isn’t a bill or invoice you get every month. A variable cost is paid by your own directive. Things like groceries, “fun money”, and the like are variable expenses.

Fixed expenses rarely change or vary slightly, and someone or some entity is looking for a payment. Variable expenses constantly change and are voluntarily paid.

Why are they so difficult to reduce?

When you first “sign up” or “agree” to these expenses, more often than not, you’re already shopping for the lowest price for that item.

What else? Internet, streaming, and cable have a pretty standard rate when compared to competitors. Debt payments are structured by the length of the term, interest, and (when referring to credit cards) minimum payments.

Basically, the costs are what they are, and they don’t vary a whole lot.

Methods for reducing fixed expenses

Mortgage payments could decrease if you refinance at the right time. Utilities could go down if usage goes down. Insurance premiums could go down if you mess with coverages and deductibles, but I advise you to talk with an agent first.

Cable/dish generally increases after one year. Often, you get an introductory rate for the first 12 months. If it goes up too much, call and complain or threaten to leave. Normally, they’ll oblige and agree to lower your monthly bill.

If you have a debt to pay and money is tight, talk with your lender or credit card company. Let them know about your situation and they might be willing to work with you.

What to do when you are one month behind on your mortgage

December 16, 2020 by Jacob Sensiba Leave a Comment

What happens when you’re one month behind on your mortgage? Do you go to collections? Does your credit take a hit? What can you do?

We’re going to answer all of those questions in today’s post.

What happens?

First of all, what happens? If you fall behind on your mortgage, there are a few things you need to know.

There’s a grace period. You have 15 days to get a payment in. There’s a standard grace period for your payment to be considered “on-time” and it’s within 15 days of the due date (typically the first of the month.

After the grace period is over and you still haven’t made your payment, then it’s considered late. A penalty will then be assessed to your account, so you’ll have to make the payment plus the late penalty.

We’ve written extensively on this topic, so if you’d like to learn more, click here.

What should you do?

There are several reasons why someone falls behind on their mortgage…especially now with COVID wreaking havoc across the country. You could have lost your job due to cutbacks, or gotten sick, and have been unable to work. You could have lost your spouse/partner due to the virus and thus, have to make payments on your own.

However you got to this point, you need to get on top of the situation.

You need to contact your lender. Fear, anxiety, and judgment influence our behaviors. They might tell you to keep this a secret. You may fear judgment or what they will say, but you need to let them know where you’re at.

Steps you can take

Once you let your lender know about the position you are currently in, it’s time to take action. What can you do?

You can negotiate with the lender:

Make a plan – If repayment is possible, develop a plan to get there. Review your expenses and income. Can you cut costs somewhere? Can you pick up extra shifts or work overtime? Is there a way to get current on your loan? If not, there are alternative strategies.
Have them tack the payment onto the end of the loan – You can’t make it up, so you can ask the lender to extend your term and have them place the payment on the end of your loan. A late penalty will still apply, but you forgo having to “get current”.
Refinance – Work with your lender to “restructure” your loan and make it more favorable.
Repayment plan – Work with your lender to develop a repayment plan. A repayment plan is a way for you to get current on your loan by making increased mortgage payments over several months.
Get assistance – If you’re having trouble communicating with your lender, or they’re not receptive to anything you’ve suggested, it’s time to get some help. Contact a HUD-certified counselor. They can guide you through this process, answer your questions, and go to bat for you.

Falling behind on your mortgage is tough, and it usually comes from unfortunate circumstances. And though the stress is real and the consequences are challenging, there’s at the end of the tunnel. Get your bearings, develop a plan, and take action.

What Happens When Your Debit Card Expires?

December 9, 2020 by Jacob Sensiba 1 Comment

Depending on what financial philosophy you subscribe to, a debit card may be your best friend. Paying with a debit card is a surefire way (outside of loans) to make sure you don’t have any debt. But what happens when your debit card expires?

In today’s post, we’ll answer that question, as well as some related questions.

Why do debit cards expire?

The reason debit cards expire is to prevent fraud. Banks and credit unions make you “renew” your card to thwart fraud.

Think about it. When you’re making a purchase online, they ask for various pieces of information. Name, billing address, card number, security code (CVV), and EXPIRATION DATE.

This also gives the card issuer (bank or credit union) the ability to keep their customer’s identity safe. Every few years, cards get more sophisticated and come up with a new feature. Magnetic strip, then chip reader, then contactless.

Your card number shouldn’t change when it is renewed. The only time your number would change is if you cancel your card, due to losing it or someone stealing it (or the number, expiration date, and CVV), and you need your financial institution to issue you a new one.

Your replacement card

When your debit card expires, your replacement card will come in the mail at least one week before your card is set to expire.

Once you receive your replacement card, activate it, and securely destroy your old card. There are a couple of ways to destroy your old debit card.

Shred it
Cut it up and place pieces of the old card in different refuse bins around your home. Better to even throw out pieces across multiple pickups. One week, throw out a piece. Then throw out more than next week. And so on.
For more…read a related post about recycling bank statements.

Word to the wise

Expired debit cards cannot be used to make purchases. If you try, your card will decline. If you have recurring purchases tied to your card, make sure that’s updated with the new expiration date.

The Best, Low Maintenance Way to Invest 30K

December 2, 2020 by Jacob Sensiba Leave a Comment

If you’ve been building your savings to start investing and you’ve managed to put aside $30K, you may be wondering what your next step should be. How do I invest 30k? What is the best, low maintenance approach?

Here are some great ways to apply that 30K towards growing your wealth.

Pay Off Debt

First and foremost, use some of the money to pay off any debt you may have. It will save you money in the long-run. If you’re carrying a $10K credit card balance with a 15% interest fee, you’ll be paying an extra $1500/year in interest. That’s money that can be better spent on investments down the road. If you want to invest 30k, first start by getting rid of debt.

Emergency Fund

If you don’t already have one, put some of your money aside in an emergency fund so you know you’ll be able to manage if something unexpected happens. You should have 3-6 months’ worth of expenses put aside in an easily accessible account like a savings account. Just make sure it’s not linked to your debit card so you can’t spend it. The period of time you need to cover varies based on how long you think it would take you to find another job should something happen to your current job.

Earning return

What’s next has all to do with three things: risk tolerance, time horizon, and investment objectives. As a matter of fact, that’s how all of your investment decisions are made.

There are several different vehicles you can utilize, so what I’m going to do is give each vehicle its own section, explain what it is, and then give a little more detail as to when it could be used.

Certificate of Deposit (CD)

A bank product with a specified interest rate and a specified maturity. CDs are used to hold money for a specified period of time in a virtually risk-free fashion. More about CDs.

You’ll choose a CD for two reasons. The first is if you want a safe, federally insured vehicle to stash away some cash. The other reason is if you do not want to touch that money for a specified period. For example, you’re going to buy a house in three years and you don’t want to jeopardize that down payment. You buy/invest in a 3 year CD. At the end of year three, you’ll get back your principal (what you put in) and some accrued interest. Early withdrawal penalties apply.

Savings/Money Market Accounts

Typically used for your emergency fund. Easily accessible, and able to earn a little interest.

That’s pretty much it when it comes to these accounts. The interest they offer will be (not always) pretty low, but, like the CD, it offers a very safe place to store your cash until you need it. Unlike the CD, however, there are no early withdrawal penalties.

Qualified accounts

Basically any retirement account. Traditional IRA, Roth IRA, and employer-sponsored plans (401k, Simple IRA, etc.). There are contribution limits associated with these accounts.

With these accounts, as I said, contribution limits are something to pay attention to. With your Traditional and Roth IRA, there’s a $6,000 contribution limit ($7,000 if you’re 50 and older). 401ks have a limit of $19,500 (25,500 for 50 and older). Simple IRA limit is $13,500 ($16,500 for 50 and older).

This is a long term investment solution, as early withdrawal penalties apply. There are several ways to “exempt” yourself from that penalty, however, such as a first home purchase. For an extensive list of these exemptions, click here.

These accounts are also called “tax-advantaged” accounts because, as the name suggests, there are tax advantages. You either lower your taxable income with your contributions or have the ability to withdraw the funds “tax-free” (barring an early withdrawal penalty, of course).

Non-Qualified Accounts

Brokerage accounts or any investment vehicle that doesn’t have any tax benefits. Meaning, you pay taxes on any capital gains and dividends you receive. No contribution limits.

Honestly, the only advantage to these accounts is there is no contribution limit. For example, if you’ve maxed your contribution for your employer-sponsored plan and your IRA, then you can dump the rest of your money here.

Health Savings Account (HSA)

Accounts specifically designed to help you with your medical expenses. Money that you contribute to this account is “tax-free” or “tax-deductible”, which means it lowers your taxable income. Also, the funds, if used for qualified medical expenses, are tax-free.

With some, not all HSAs, you can invest what you’ve contributed. So if you have 30k to invest, I’ll point you to the below section to help with that. There are contribution limits with the HSA, however, so keep that in mind.

Asset allocation

After you’ve selected an investment vehicle (this section does not apply to CDs, savings accounts, or money market accounts), it’s time to invest your capital.

Asset allocation is my preferred method to invest, and I’ve written extensively on it here. So if you want to invest 30k, here’s what you need to ask yourself. How long until I need these funds? What is my ultimate goal for these funds? What am I willing to lose?

If your time period is less than 5 years, ignore this section and stick your money in a savings account or a CD. The risk/reward is unfavorable in this scenario.

If you have, ideally, 10+ years, then you have some options. The next question is about risk tolerance. What kind of portfolio are you comfortable with? Using the stocks/bonds/cash breakdown, are you a 60/40/0 type of person? Maybe you’re quite tolerant and prefer an 80/20/0 approach.

For those of you that are not tolerant of risk and/or you have a shorter number of years until you need to access these funds. Your portfolio should start at 50/50/0, and then adjust as you see fit. The cash portion in this breakdown should be used as investable cash for when you see a buying opportunity and/or funds you’ll need access to in the near future (unriskable capital).

Risk Tolerance

If you really want to know what your unique risk tolerance is, take our quiz!

I know I didn’t really give a concrete answer to what’s posed in the headline, but that’s the thing about investing – it’s incredibly personal. You need to do what’s best for you.

If time is on your side, max your retirement contribution, then put the rest in a savings account until next year. At that time, max it again.

If time isn’t your friend, a CD isn’t a bad idea. As I said earlier, paying down/off debt is incredibly worth it. That’s an automatic 15% return on your money if you pay off your credit card. Money that can be used more effectively going forward.

Read our articles, ask for advice, and do what’s best for you. That’ll help you answer the question: how do you invest 30k?

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see website for full disclosures: www.crgfinancialservices.com

Inflation

Gold

Semiconductors

Related reading:

The choice of a lawyer is important

It’s harder than it used to be

Not everything gets discharged

You can keep your house

Reddit vs Wall Street

What’s a short?

Crypto

Short-term Thoughts

Pundits are using the word “euphoria” more often.

Conclusion

Related reading:

The dollar

The FED

Long term

My biggest concern

Conclusion

Related reading:

What do pawn shops do?

Legal and location

Assets

What do you need?

What’s going to cost

Last bit of advice

Related reading:

Change Fluids And Filters Regularly

Inflate Your Tires

Keep It Clean

Find A Good Mechanic

Spark plugs

Related reading:

Types of expenses

Why are they so difficult to reduce?

Methods for reducing fixed expenses

Related reading:

What happens?

What should you do?

Steps you can take

Related reading:

Why do debit cards expire?

Your replacement card

Related reading:

Pay Off Debt

Emergency Fund

Earning return

Certificate of Deposit (CD)

Savings/Money Market Accounts

Qualified accounts

Non-Qualified Accounts

Health Savings Account (HSA)

Asset allocation

Risk Tolerance