9 Habits Happy People Use to Make Life Better

Woman listening to music
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C’mon, everyone, get happy! If that sounds too hard, maybe you’ve been going about it all wrong.

It’s time to stop waiting to hit the jackpot, meet Mr. or Ms. Right, or land that sweet job. True happiness doesn’t come from external factors like that.

Instead, take a cue from happy people. Embrace the following habits that help them feel great.

1. Evaluate your bandwidth and set boundaries

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It goes without saying that you won’t be happy if you’re overwhelmed with life. Happy people know their limits and pare back obligations to fit both their energy and time. They also know this is not a one-time evaluation and is something that needs to be reviewed periodically.

Once happy people know their bandwidth — that is, how much time and energy they have to spend on various activities — they set boundaries so other people don’t encroach on it. That means learning to say no … a lot.

2. Schedule regular downtime

A black man relaxes in a hammock next to a pool
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All work and no play is no fun. It can also be a real drain on your happiness. A 2016 survey by Booking.com found that 49% of respondents consider vacation more vital to their happiness than other big life events, including their own wedding day.

Of course, you don’t need to go on vacation to find happiness. Scheduling regular work breaks and time for leisure activities works just as well for many happy people.

Also, make sleep a priority. The American Psychological Association says chronic sleep deprivation may be “one of the most significant and overlooked public health problems in the U.S.” It’s hard to be happy when you’re dragging through the day, so get those ZZZs.

3. Create realistic goals

Goals Dart Board
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Setting goals and creating to-do lists seem to be ingrained in our collective psyche. However, happy people don’t let unrealistic expectations rule them. Instead, they see goals as guides that can be adjusted as needed.

Realistic goals only make you happy if you meet them. In his book “The Miracle Morning: The Not-So-Obvious Secret Guaranteed to Transform Your Life (Before 8AM),” Hal Elrod says visualization is one key to success. As Elrod describes it, this practice can be as simple as closing your eyes for a few minutes and mentally walking yourself through all the tasks of the day that need to be done to meet goals, create success and enjoy happiness.

4. Listen to music

Teenager listening to music on headphones
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A pair of University of Missouri studies published in 2013 found that people who listened to positive or upbeat music, such as that of composer Aaron Copland, reported feeling happier than those who listened to more somber composers, such as Igor Stravinsky.

The catch is that participants also had to be trying to feel happier in order to get a mood boost from music.

5. Volunteer regularly and be generous

volunteer
By-Africa-Studio / Shutterstock.com

One way happy people show generosity is by volunteering their time and talents. To maximize the happiness you get out of this habit, volunteer with an eye toward a specific goal. According to a Stanford researcher, having concrete giving goals creates more happiness than vague ones.

So, instead of volunteering with the intent of saving the world (vague), volunteer with the intent of increasing local recycling participation (concrete).

Also, be generous in other ways. A 2017 study out of the University of Zurich found those who planned to share even a small portion of an unexpected windfall reported higher levels of happiness than those who planned to keep the money all to themselves.

6. Spend time outside

A girl relaxes in the grass
Olga Danylenko / Shutterstock.com

We weren’t made to live in a cubicle, and supremely happy people know this. Instead of staying cooped up indoors all day, they make a beeline for the outside world.

Of course, not all outdoor spaces are the same, and science says spending some time in a natural setting is more likely to improve your happiness level than going for a walk in a busy downtown.

7. Get moving daily

Aerobic exercise class.
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By now, you’ve certainly heard that sitting is the new smoking. However, it isn’t just your body that will benefit from a little more movement. Your mind will thank you, too.

Fortunately, you don’t need to clock in long hours at the gym to get a mood boost from exercise. As little as five minutes can have a positive effect on your happiness quotient. To really maximize the experience, spend that five minutes walking outside in a park, and you can check off two happiness habits at once.

8. Connect with good friends regularly

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Humans are social creatures, and happy people make time to connect with others. They may be part of formal clubs, groups and organizations or prefer the company of only a few close compadres.

If you spend all day around people who are negative or demeaning, it’s going to be hard to feel happy. Instead, make it a habit to seek out positive people and limit time around those with toxic personalities.

While connecting with others is good, using social media can be a real downer. Studies have shown that spending time on sites like Facebook can cramp real-life personal relationships and reduce overall life satisfaction. Adopt the happiness habit of limiting your social media check-ins to specific times.

9. Find God — or spirituality — and count your blessings

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There are plenty of studies supporting the notion that spiritual people are happier people. Researchers suggest it may have something to do with religious groups providing a ready-made social network or spirituality supplying a sense of meaning for life. Whatever the reason, you may want to reconsider your Sunday or Saturday morning routine if you’re serious about finding happiness.

Happy people also regularly remind themselves of all the good things going on in their lives. They keep gratitude journals, share personal triumphs during family dinners and mentally tick off their favorite parts of the day before turning in each night.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

What is a Reverse Mortgage & How it Works

Reverse mortgage is a loan product that lenders provide to elderly homeowners with home equity as collateral. The product is tailored to supplement the borrower’s income by tapping into his/her home equity while still residing in their home.

Unlike traditional mortgages where the borrower repays monthly installments, with a reverse mortgage he/she receives payment from the lender. The service is known as Home Equity Conversion Mortgage or simply HECM.

Here is all you need to know about the loan and how it works:

Reverse MortgagesReverse Mortgages

Eligibility

The borrower must be a senior who is 62 years or older. For a couple, the younger spouse must meet the age requirement. One has to be the outright owner of the home or have a mortgage whose balance is considerably lower than the home’s value. The home has to be a permanent resident of the borrower and be in good condition prior to applying for the loan.

Since it’s the borrower who gets paid for this kind of loan, credit scores and reports do not play a big role in the qualification. However, he/she must prove the ability to maintain the house and settle housing costs. These include property taxes, insurance, and homeowner’s association fees.

The Loan Amount

The principal amount from a reverse mortgage is dependent on the age of the borrower, current interest rates, and appraisal value of the home as well as the limit set by the Federal Housing Administration (FHA).

FHA insures the loan and as such, it sets the limit on the maximum amount that a home can be mortgaged at. A borrower gets the lesser of the home’s appraisal value or the set maximum claim limit which is currently at $679,650.

An 85-year-old borrower will basically qualify for a higher amount compared to a 70-year-old. The loan amount is usually priced at 42% of FHA maximum limit or appraisal value for 62-year-olds with the percentage going up with the borrower’s age.

Similarly, the more valuable a house is the higher the reverse mortgage. It is upon the borrower to also shop for a lender whose offer carries the lowest interest rates for higher loan amounts.

How a Reverse Mortgage Works

Homeowners get to extract their home equity or a fraction of it depending on the approved loan amount. Home equity, in this case, refers to the difference between the value of your home and any balances on conventional mortgages.

After the loan has been closed, the borrower must immediately pay off any debt left on the traditional mortgage. This frees them up from paying ongoing monthly payments and interests.

The funds can be accessed in a number of ways:

Lump sum payment: Borrowers who opt for this payment must withdraw the whole amount at the close of the loan. This option is popular for homeowners who need to settle other large loans, fund large purchases or settle hefty school fees for their children.

A line of credit: The borrower gets to withdraw as much as they need after the loan has been approved. The remaining funds can then be accessed in any way they see fit. No interest is accrued on the amount that has not been withdrawn/not in use, making it the most popular option.

Monthly Payments: The payment is structured into either term or tenure withdrawals. In ‘term’ payments, the fund is divided by a fixed number of years and you receive the corresponding monthly fixed amounts. Tenure payment, on the other hand, allows the borrower to receive monthly payments for as long as they live in the home.

Combination: Lenders are flexible; they allow borrowers to modify payment to include a combination of any of the above.

Loan Repayment

The borrower can choose to periodically pay off the loan. They can also pay it off from savings or by selling the property. However if the loan is not cleared during the lifetime of the borrower or if they are absent from the house for over 12 months, it becomes due.

It’s upon the heir of the estate to pay the amount owed. In case they choose not to, the lender gets to sell the house and recover the dues with the surplus going to the heir. In instances where sale doesn’t cover the debt, the loss is paid off by HFA who are the mortgage insurers.

Conclusion

Reverse mortgages are some of the useful financial tools that are available to seniors. That said, borrowers need to understand the different aspects and workings of the loan before they apply for one.

Source: creditabsolute.com

The Most Important Tax Implications Involved with Buying Investment Properties

6 Things about Rental Properties That Can Impact Your Taxes

Investing in real estate has long been, and continues to be, a reasonably sound financial investment for those looking for a reliable source of supplemental income. The IRS will consider the income being generated by your property as taxable income, so this is certainly something you must keep in mind.

The tax implications, however, may not be as severe as you might be thinking, especially if you understand the tax write-off opportunities granted by the IRS to landlords. With that in mind, here are six things you need to know about investment properties and how they can affect your tax liabilities.

buying a rental propertybuying a rental property

Rent Income

The IRS considers all monies you receive from your rental property as income, not just the monthly rent payment. This means any fees you charge tenants for things like breaking their leases early, the portion of the security deposit you keep, advance payments, and more, are considered income and therefore taxable.

Mortgage Interest

If you are paying a mortgage on your investment property, then you can deduct your rental income amount from the mortgage interest you pay, which will help reduce your tax threshold. You can also deduct the interest paid on credit cards that you use to pay for property-related expenses like repairs, renovations, appliances, pest services, and the like.

Property Depreciation

Over time, a rental property’s value can depreciate. Because of this, the IRS allows landlords to compensate for this decline by allowing them to reduce their taxable rental income by the property’s annual depreciation value. This deduction is available after the first full year of renting your property, and you can use it every year up until the total amount of your deductions equal the cost of what you paid for your rental property.

buying a rental propertybuying a rental property

Travel Deductions

If you use a vehicle to perform tasks associated with your investment property, then you can deduct the standard business mileage rate for the miles you drive. If your role as landlord requires you to pay tolls, parking fees, meals, or other travel costs, then you can also deduct 50% of those expenses as well.

Things like fuel, oil, insurance, maintenance, new tires, registration and license renewals, and any other expense related to keeping the car on the road can also be deducted from your total rental income.

Property Repairs

The IRS allows the cost of property repairs to be deducted from the total rental income, if you hired a professional to perform the work. If you did the work yourself, then you may be able to deduct the cost of materials, but not the labor. Keep in mind that if you hired a professional, you will need to provide proof to take advantage of the full deduction.

Other Business-Related Write-Offs

Owning a rental property is considered running a business, so there are many different things you can write-off on your taxes. For instance, if you pay for advertising, tax accountant services, a business-only cell phone, a property management firm, or anything else pertaining to the running of your property, then you can claim deductions for them, as well.

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The Most Important Rule – Keep Your Records Organized

With so many expenses capable of being deducted from your taxable rental income, you need to be fastidious about keeping organized records. If you ever get audited, you need to be able to back up all your deductions with the necessary paperwork and receipts. This should be Rule #1 for any property investor.


Carson is a real estate agent based out of Phoenix, Arizona. Carson loves data and market research, and how readily available it is in today’s world. He is passionate about interpreting these insights to help his clients find and buy their perfect home. Carson got into the real estate industry because he loves the feeling of handing over the keys to a new home to happy clients. In his free time, he works on his backyard bonsai garden and spends time with his wife, Julia.

Source: homes.com

Where the Most (and Fewest) Homes Sell Below Asking Price

Family Home Sold
Andrey_Popov / Shutterstock.com

Editor’s Note: This story originally appeared on Stessa.

It is no secret at this point that one of the economic effects of the COVID-19 pandemic has been a red-hot housing market. With more people at home, consumer spending in 2020 was down and savings rates were up, while the government pumped money into the economy with low interest rates and direct stimulus to American households. These conditions gave more people the means to save up for a home and brought a stampede of new would-be buyers into the housing market. But with many sellers staying out of the market, prices are at record highs and inventories at record lows.

While the pandemic has created conditions for dramatically accelerated demand for homes over the last year, the reality is that these trends have been ongoing for several years. One key factor is demographics: the millennial generation is now in their late 20s and 30s, and as they settle into their careers and family life, more have been entering the housing market. According to the National Association of Realtors, millennials represented 38% of homebuyers last year, and a large share of those were first-time buyers.

The increased demand has translated to rapidly increasing rates of homeownership and decreasing rates of homeowner vacancy. Just five years ago, in 2016, homeownership rates were at 63.4% — their lowest level since the 1990s, according to U.S. Census Bureau data. In 2020 that figure was 66.6%, which was a 2 percentage point increase just over the previous year. Vacancy rates, meanwhile, have taken the opposite trajectory. After spiking to nearly 3% when the housing bubble burst in the mid-2000s, vacancy rates have declined sharply and dipped to a low of 1% in 2020.

With higher demand and lower inventory, prices inevitably start to rise. The trend of price increases extends to homes of all sizes. Based on Zillow data dating back to 1996, prices for one, two, three, four and five (or more) bedroom homes have all been creeping steadily upwards since around 2012, when the recovery from the last recession began to pick up steam. Within the last year, the trend lines in each category have moved more steeply upward, an indication that record low inventory is pushing up prices for all home types.

Large metros with the most homes selling below asking price

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While home pricing is usually cyclical — with higher prices and fewer cuts during spring and summer months — 2020 and 2021 have proven to be aberrations. The share of listings with price cuts stayed relatively flat throughout 2020, between 11% and 13%, before turning sharply downward at the end of the year. In February 2021, the share of listings with a price cut was at 8.2%, a decrease of more than half from a recent peak of 17.8% in September 2019.

This is not the reality in every market, however. Some cities where housing is plentiful and easy to build—like Houston—or where demand is lower—Rust Belt metros like Pittsburgh and Dayton—are still seeing substantial price cuts after homes come on the market. In contrast, cuts are almost nonexistent in some other areas where the inverse is true.

To find these locations, our team of researchers used data from Zillow to identify the share of listings with a price cut, the median price cut as a percentage of list price, the median price cut in dollars, and the median home value in all metro areas with available data. These figures all come from data collected from September 2020 through February 2021 to reflect the latest market trends.

Here are the metropolitan areas with the most and fewest homes selling below asking price.

1. Chicago, IL

Homes in Chicago, Illinois
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  • Share of listings with a price cut: 17.9%
  • Median price cut as a percentage of list price: 2.4%
  • Median price cut in dollars: $7,350
  • Median home value: $257,400

2. Louisville-Jefferson County, KY

Louisville Kentucky homes
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  • Share of listings with a price cut: 16.9%
  • Median price cut as a percentage of list price: 2.7%
  • Median price cut in dollars: $5,322
  • Median home value: $195,880

3. Indianapolis, IN

winter scene homes in Indianapolis, Indiana
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  • Share of listings with a price cut: 16.8%
  • Median price cut as a percentage of list price: 2.5%
  • Median price cut in dollars: $5,475
  • Median home value: $199,721

4. Pittsburgh, PA

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  • Share of listings with a price cut: 16.4%
  • Median price cut as a percentage of list price: 3.3%
  • Median price cut in dollars: $6,344
  • Median home value: $175,315

5. Houston, TX

Houston homes neighborhood
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  • Share of listings with a price cut: 16.3%
  • Median price cut as a percentage of list price: 2.3%
  • Median price cut in dollars: $7,810
  • Median home value: $229,957

6. Dayton, OH

Dayton Ohio
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  • Share of listings with a price cut: 16.1%
  • Median price cut as a percentage of list price: 2.9%
  • Median price cut in dollars: $5,006
  • Median home value: $149,572

7. Oklahoma City, OK

Oklahoma City
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  • Share of listings with a price cut: 15.5%
  • Median price cut as a percentage of list price: 2.0%
  • Median price cut in dollars: $5,000
  • Median home value: $168,394

8. Charleston, SC

Houses in Charleston, South Carolina
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  • Share of listings with a price cut: 15.3%
  • Median price cut as a percentage of list price: 1.9%
  • Median price cut in dollars: $6,733
  • Median home value: $292,942

9. Albuquerque, NM

Albuquerque, New Mexico
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  • Share of listings with a price cut: 15.3%
  • Median price cut as a percentage of list price: 2.2%
  • Median price cut in dollars: $6,083
  • Median home value: $234,844

10. Columbus, OH

Historic homes in Columbus, Ohio
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  • Share of listings with a price cut: 15.3%
  • Median price cut as a percentage of list price: 2.4%
  • Median price cut in dollars: $5,625
  • Median home value: $230,663

Large metros with the fewest homes selling below asking price

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By maroke / Shutterstock.com

Meanwhile, the chances of finding a home selling below its asking price are less likely in these markets.

1. El Paso, TX

El Paso Texas neighborhood
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  • Share of listings with a price cut: 6.0%
  • Median price cut as a percentage of list price: 2.3%
  • Median price cut in dollars: $5,006
  • Median home value: $147,524

2. Stockton, CA

Stockton California
Terrance Emerson / Shutterstock.com
  • Share of listings with a price cut: 7.2%
  • Median price cut as a percentage of list price: 2.4%
  • Median price cut in dollars: $10,072
  • Median home value: $423,916

3. Urban Honolulu, HI

Honolulu City neighborhood
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  • Share of listings with a price cut: 7.4%
  • Median price cut as a percentage of list price: 3.0%
  • Median price cut in dollars: $14,186
  • Median home value: $739,690

4. Boise City, ID

Boise, Idaho neighborhood
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  • Share of listings with a price cut: 7.5%
  • Median price cut as a percentage of list price: 2.1%
  • Median price cut in dollars: $8,908
  • Median home value: $381,759

5. Ogden, UT

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  • Share of listings with a price cut: 7.9%
  • Median price cut as a percentage of list price: 2.3%
  • Median price cut in dollars: $9,994
  • Median home value: $371,978

6. Providence, RI

Providence, Rhode Island houses homes
Joy Brown / Shutterstock.com
  • Share of listings with a price cut: 8.2%
  • Median price cut as a percentage of list price: 3.1%
  • Median price cut in dollars: $10,000
  • Median home value: $350,548

7. Madison, WI

Houses in Madison, Wisconsin
MarynaG / Shutterstock.com
  • Share of listings with a price cut: 8.2%
  • Median price cut as a percentage of list price: 2.8%
  • Median price cut in dollars: $10,000
  • Median home value: $305,550

8. Colorado Springs, CO

Colorado Springs Neighborhood
Nirmal Bhagat / Shutterstock.com
  • Share of listings with a price cut: 8.6%
  • Median price cut as a percentage of list price: 2.3%
  • Median price cut in dollars: $10,567
  • Median home value: $359,246

9. Riverside, CA

Riverside California neighborhood
Matt Gush / Shutterstock.com
  • Share of listings with a price cut: 8.6%
  • Median price cut as a percentage of list price: 2.5%
  • Median price cut in dollars: $10,228
  • Median home value: $425,713

10. Virginia Beach, VA

Virginia Beach, Virginia
JoMo333 / Shutterstock.com
  • Share of listings with a price cut: 8.7%
  • Median price cut as a percentage of list price: 2.1%
  • Median price cut in dollars: $5,211
  • Median home value: $261,139

Detailed findings & methodology

Realtor in front of large brick home.
SpeedKingz / Shutterstock.com

The data used in this analysis is from Zillow. Researchers calculated the share of listings with a price cut, the median price cut as a percentage of list price, the median price cut in dollars, and the median home value. All were obtained using data from September 2020 through February 2021. The analysis includes all homes, including single-family, condominium, and co-operative homes with a county record. Metropolitan areas were ranked based on the share of listings with a price cut. In the event of a tie, the location with the higher median price cut percentage was ranked higher. Only the largest metropolitan areas in the U.S. with available data from Zillow were included.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

6 Reasons to Invest in Fixed-Income Securities Such as Bonds

For most, the stock market is synonymous with wealth. Images of fast cars, mansions, yachts, and beautiful people plaster computer screens explaining to beginners what they could have in the fast-money world of investing and trading. Many new investors believe the extravagant story surrounding the stock market and the fast money that lives within it.

But recall Aesop’s fable of “The Hare & the Tortoise.” The story captures the fascination humans have for the flashy, self-assured, charismatic personalities and our tendency to overlook those steady, responsible individuals who surround us each day.

Equity securities — or stocks and other instruments that allow you to purchase equity ownership of underlying securities — are the “hares” of the investment world. They draw us to them with the promise of an easy buck — a short ride to quick riches and a future full of mansions, exotic cars, and beautiful people. Life as a hare can be exciting, but it requires a strong stomach to handle the volatility and the frequent gaps between the promises and your results.

The vast majority of investors would be better served by regular investments in fixed-income securities — the “tortoises” of Wall Street. Debt investments are the foundations of great American fortunes. One of the richest people in the United States in his era, financial magnate Andrew Mellon reportedly said, “Gentlemen prefer bonds.”

Despite their lack of popularity with some investors, the global bond market is enormous, with more than $92 trillion of bonds, compared to $70 trillion of equity investments in 2016. Approximately $30 billion of corporate bonds are traded daily in the United States, with average interest rates between 3.66% and 4.71%, the lower rate being charged on corporate bonds with a Moody’s credit rating of Aaa and the higher being charged on bonds with the Baa credit rating.

Chief investment officer for the Gates Foundation and Bill Gates’ personal portfolio, Michael Larson, considers himself “an old-fashioned investor with a macro view,” according to GuruFocus. Larson believes his primary job to be asset allocation, and he maintains a significant percentage of the portfolios in fixed-income securities.

Reasons to Own Fixed-Income Securities

While investors who are seeking a regular monthly income generally rely on fixed-income investments, they are appropriate in nearly every investment portfolio due to the following:

1. Safety of Principal

Is investing in bonds safer than investing in stocks?

Unlike stocks, when you invest in a bond, you’re guaranteed to receive your initial investment back when the bond matures — plus interest — unless the borrower defaults. According to Standard and Poor’s (S&P), the default rate for investment-grade bonds worldwide between 1981 and 2016 averaged 0.06%. Speculative bonds during the same period had an average default rate of less than 5%. As a consequence, the vast majority of bond owners get 100% of their investment returned when the bond is due.

Sometimes what matters is not what you can make, but what you can keep.

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2. Consistent Income

Bond owners receive a regular, predictable income in both good and bad economies. A legal contract between the business issuing the bonds and the purchasers of the bonds confirms and documents the interest rate and payment schedule, which secures timely and consistent payouts.

While some companies pay regular dividends — and many have a long history of doing so — the interest rate of investment-grade bonds is almost twice as much as the dividend rate for the average S&P 500 company, and can be similar to some high-dividend investments. According to MarketWatch, 82.6% of the S&P 500 companies paid a dividend with an average return of 1.87% in 2017, based on the closing equity price at the end of the year. In the same period, the Federal Reserve Bank of St. Louis reported an average interest rate of 3.51% for Aaa-rated bonds — the highest grade of long-term bonds. Issuers of lower-quality bonds are required to pay higher rates.

3. Reduced Volatility

The extent to which the price of a security changes over time compared to previous periods is known as volatility. Historically, bond volatility is significantly lower than stock volatility, since changes in a bond price are tied to market interest rates rather than investor emotions.

According to Forbes, the 30-day volatility for stocks over the past five years is 12% versus 2.8% for bonds over the same period. As a consequence, Gregg Fisher of the investment management firm Gerstein Fisher told the New York Times, “You own bonds to reduce volatility, not to earn a return.” Owning less-volatile bonds as a buffer can help you stick to your long-term plans and remain invested when stock prices drop.

4. Identified Return

Equity investment returns are the combined dividends and increase in value during the holding period — neither of which is guaranteed. Prices of common stock are influenced by factors beyond the investors’ control, including economic and sociological trends as well as investor confidence. As a consequence, planning equity investment returns is complicated, and the outcomes are uncertain.

On the other hand, the terms of interest payments for a bond are set by contract between the lender and the borrower with defined legal remedies in the event of a default. Also, a bond’s principal — its face value — is guaranteed to be returned to the bond’s owner at maturity. In other words, as a bondholder you know when and how much cash you will receive during the life of the bond, enabling you to plan for specific events such as retirement.

5. Liquidity

Liquidity is the ability to turn an asset into cash within a reasonable time and at a reasonable price. “Immediacy” is ultra liquidity — a state where there is always an equilibrium between buyers and sellers so that most transactions do not change the price of the asset. Bonds of public corporations and governments are generally liquid because their price is only affected by interest rate changes.

Allan Roth, Founder of the Wealth Logic Advisory Firm, told the New York Times, “Bonds provide liquidity and courage when stocks are falling.” Nevertheless, the American Association of Individual Investors warns that there are many different bond markets and types of investors in the bond market, so some bonds and bond markets may be more liquid than others.

6. Tax Advantages

The interest received from investing in municipal bonds — bonds issued by a state, city, or local government — is exempt from federal income tax. Also, the interest on municipal bonds issued within the owner’s state of residence is usually free from state or local taxes. Moreover, those in higher tax brackets can significantly benefit from investing in municipal bonds.

Although the interest exemption remains intact following the passage of the Tax Cuts and Jobs Act of 2017, The Bond Buyer predicts lower volumes in municipal financings due to the elimination of advance refunding and the potential loss of state funds due to lower property tax revenues. The combination of stable demand for municipal bonds and lower supply may stimulate a rise in bond prices and lower yields.


A Portfolio Approach for Fixed-Income Investment

Financial professionals know that the most successful approach to investment success is diversification and balance in a portfolio:

  • A portfolio of equities might produce the greatest return over a period but is extremely volatile. A report in Atlantic magazine notes that 401(k)s and IRAs lost $2.4 trillion in value in the last half of 2008, dropping as much as 25%. Many people planning to retire were forced to keep working or scale back their retirement plans as a consequence.
  • A portfolio consisting solely of fixed-income securities, while avoiding the losses of the market like we experienced in 2008, provides security at the cost of performance. A study by The Balance indicated that equities consistently outperformed bonds over the three-, five-, and 10-year periods ending on September 30, 2014. Christine Benz of Morningstar predicts that equities will earn 8% to 10% and half that amount for bonds over the next 20 to 30 years.

A common way to approach allocation of fixed-income investments is to consider your age. For example, if you are 33 years old, 33% of your investing dollars should be stored in these relatively stable investments, leaving 77% of your investment portfolio available for higher-return investments like traditional stocks.

As you age, your tolerance for risk will reduce due to a shortened time horizon that will allow for less of a recovery should things go wrong. As a result, increasing your allocation to fixed-income investments as you age will help to properly balance exposure to the larger gains provided by investments in stocks with the insurance provided by investments in bonds and other fixed-income securities.


Final Word

The decision to invest in bonds or equities should not be a question of “either/or,” but “both/and.” Each security has its place in a portfolio, ideally reducing risk without significantly affecting returns. When thinking about your portfolio mix, consider the lesson of another Aesop fable, “The Lion and the Boar,” about the two beasts struggling over who was to drink first at the well. During their ferocious battle, they spied a committee of vultures happily anticipating their next meal. The two antagonists subsequently decided that working together was a better outcome for both, since neither knew who might survive the battle.

According to Zacks, the fixed-income market is huge, with more than $40 trillion being owed through fixed-income securities in the United States. There is a fixed-income security for every need with a market of different types, issuers, terms, maturities, securities, and options. For those who might be reluctant to buy bonds in lieu of equities, one outcome is certain — you will sleep much easier in bear markets with at least some bonds in your portfolio.

Do you have bonds in your portfolio? Will you add bonds in the future?

Source: moneycrashers.com

8 Foods You Should Never Buy at Costco

Costco bakery
Trong Nguyen / Shutterstock.com

No question, I’m a Costco fan. I’ve written about the things I always buy at the massive warehouse store, and I’m a fan of their food court’s $1.50 hot dog and drink combo too. But just as with my beloved Target, I admit that not every store should sell everything.

I’ve been a Costco shopper for decades now, and I’ve learned through my mistakes that some items are better bought elsewhere. It can be hard to look at those cheap Costco prices and giant sizes and walk on by, but a deal’s not a deal if it’s a massive daycare-size jar of jelly and you have a family of three.

Here’s a look at some foods I never buy at Costco.

1. Milk

Milk at Costco
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Our family is slowly shifting to dairy alternatives, like oat milk, but even before that, I was no fan of buying regular milk at Costco. The price is acceptable — my store sells 2 gallons for less than $5. But the 2 gallons are yoked together, making it a lumpy, uncomfortable item to heave into my cart and trunk.

And have you ever tried to pour milk out of a Costco gallon? The plastic container is shaped oddly — probably for better stacking in the store — but I spill it every time I pour. Not to cry over spilled milk, but the awkward container makes any savings not worth it.

2. Extra virgin olive oil

Extra virgin olive oil at Costco
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To ensure you consume this healthy fat at its freshest, the Olive Center at the University of California, Davis, advises consumers to not buy a container of olive oil they can’t use up in about six weeks. But unless you’re feeding a big family and using olive oil at every single meal, you’re unlikely to go through a Costco-size bottle that quickly.

3. Croissants

Croissants at Costco
TonelsonProductions / Shutterstock.com

I’m a fan of Costco birthday cakes, and there’s usually some container of other baked sweets at the warehouse club that I can buy for my book club. But I’ll always pass on the store’s croissants.

The price is right: My local store sells a dozen for less than $5. But the croissants are huge — like New York-style pizza-slice huge — so I find about half of each croissant ends up uneaten. And while they’re acceptable for a mass-produced baked good, I’ve been spoiled by my local French bakeries, which turn out flaky, fresh croissants that remind me of Paris. Costco’s croissants just aren’t for me.

4. Salsa

Salsa and tortilla chips
losinstantes / Shutterstock.com

Costco sells whopping jugs of salsa in many varieties, and who doesn’t love the accent that salsa gives to a good Mexican meal? But I’ve tried multiple flavors there and miss the freshness of salsas from delis or specialty brands. One of our local grocery stores churns out its own small-batch salsa and its own tortillas, and I just can’t go back to the ho-hum salsa Costco sells. Plus, I’ll never get through a giant jar before it starts to grow mold.

5. Coffee

Starbucks coffee at Costco
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Even though I live in coffee-centric Seattle, I’m not a java snob — I can drink almost anything. But I don’t even slow down in the Costco coffee aisle. Those 3-pound cans and bags of whole beans or ground coffee are probably perfect for when Pam on “The Office” has to stock the Dunder Mifflin break room, but for our small family, they’re too much and not worth the storage space.

6. Avocados

Avocados at Costco
TonelsonProductions / Shutterstock.com

I adore avocados — whether sliced on a sandwich or smashed into guacamole. But Costco sells them by the bagful, and they’re all usually hard as rocks when sold. That makes sense — shoppers don’t have to eat them up the very next day. But avocados have such a brief window of perfect softness, going from boulder-hard to brown and squishy in a blink, that I waste more than I use. It’s a pain to stand at my local grocery store and hand-select an individual avocado or two based on softness, but it saves on food waste.

7. Applesauce

Apple sauce
Moving Moment / Shutterstock.com

Applesauce from Costco seems like a fine purchase for daycare centers. But four giant jars shrink-wrapped together, as is sold at my store, would be a lifetime supply for my family’s home. I was actually happy to discover that regular grocery stores now sell four-packs of individual cups of applesauce since one small cup makes a good lunchbox addition or a decent serving to accompany pork chops. (My Costco sells the individual cups too, but the smallest container I saw has 36 cups.)

8. Spices

Spices at Costco
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Costco’s spice section is a restaurant owner’s dream. Turmeric, chopped dried onion, crushed red pepper, chili powder, cumin, taco seasoning — the solid staples of a spice rack are all there. But spices lose their potency if you keep them for a long time, and it would take me years to use up 12 ounces of ground turmeric. Plus, my kitchen has a nifty pull-out spice rack that is made for individual 2-ounce jars, and I don’t need six times as much.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

What is debt-to-income ratio?

woman using a laptop

Debt-to-income ratio (DTI) is a personal finance metric that represents an individual’s debt payment to his or her overall income, expressed as a percentage.

In layman’s terms, debt-to-income ratio is a single number that predicts your ability to pay back the money you’ve borrowed. Lenders often use your debt-to-income ratio as a qualifier for taking out loans like a mortgage. But it’s also a useful way to check in on your own financial situation, as a high debt-to-income ratio may be a warning sign that you need to take a closer look at your finances.

In order to get a better understanding of what debt-to-income ratio represents and how it’s used, it’s best to first learn how it’s calculated.

Types of debt-to-income ratios

There are two different types of debt-to-income ratios — back-end and front-end.

Back-end debt-to-income ratio — or more commonly known simply as debt-to-income ratio, defined above — gives a wider look at where you sit financially compared to the state of your debt.

Front-end debt-to-income ratio is a version of DTI that calculates how much of a person’s gross income is going toward housing costs. If someone has a mortgage, the front-end DTI ratio is calculated as housing expenses (mortgage payments, mortgage insurance, etc.) divided by gross income.

What factors make up debt-to-income ratio?

As the name suggests, one of the most important things you need to know in order to understand debt-to-income ratio is how much debt you have. Your total debt includes things like:

  • Mortgages
  • Auto loans
  • Student loans
  • Personal loans
  • Alimony, child support and other financial judgments
  • Minimum credit card payments

how to calculate your monthly debt payments

How to calculate debt-to-income ratio

equation for debt to income ratio

Whether you have debt or not, everyone has a debt-to-income ratio. Fortunately, as complex as it may sound, if you learned to divide in elementary school, you’ll be able to understand this simple concept! In fact, you probably already think about it to some extent every month when you plan out your budget.

The first step to budgeting — and calculating your debt-to-income ratio — is to figure out how much money will be coming in each month after taxes. That will be your gross monthly income. Then consider how much you will spend each month on debt payments.

Here’s a basic formula you can follow to calculate your debt-to-income ratio:

DTI = TOTAL MONTHLY DEBT PAYMENTS / GROSS MONTHLY INCOME

debt to income ratio example

What is a good debt-to-income ratio?

debt to income ratio

It’s hard to know what’s considered “good,” so knowing how to calculate your debt to income ratio doesn’t mean much until you have some context. Generally, the lower your debt-to-income ratio, the better, because it means you’re not spending a large portion of your income paying off debt. While it can be subjective on a lender by lender basis, a good debt-to-income ratio is typically anything smaller than 36 percent. If your debt-to-income ratio is more than 50 percent, you have too much debt and you’re spending at least half of your monthly income to pay for it.

Debt-to-income ratio for a mortgage

debt to income ratio home

If you’re looking to buy a house in the near future, you should calculate your debt-to-income ratio, because the maximum ratio that a prospective homebuyer can have is 43 percent. Anything above 43 is a sign to the lender that you may not make your payments and as a result are too risky to lend money to. There are some exceptions on either end, of course.

While 43 is the maximum, some conventional lenders would prefer to see a debt-to-income ratio closer to 36 percent. This would be a benefit to the prospective homebuyer as well because they may be able to get better loan terms as a result. Conversely, for Federal Housing Administration loans, lenders may be able to accept a DTI ratio as high as 50%.

Does debt-to-income ratio affect credit scores?

Your debt-to-income ratio does not directly affect your credit score. Credit agencies don’t have access to your income, meaning they have no way to know your debt-to-income ratio. They do, however, look at your credit utilization which is another metric of your overall financial health.

How to improve debt-to-income ratio

Maybe you’ve had some trouble buying a car or maybe you’d like to start thinking about buying a house in the near future. If you’re not satisfied with your debt-to-income ratio, there are two ways to improve it.

Option 1: Increase your income.

This may be easier said than done, but consider whether it’s feasible for you to take on some overtime, ask for a raise or maybe start a side hustle based on a hobby you have. Ideally, some form of passive income would be the best way to boost your monthly income without having to spend all of your free time working.

Option 2: Pay off your debt.

Your debt-to-income ratio is variable based on how much you’re paying toward debt each month. While you should be paying at least the minimum payment, you can pay more to pay the debt off faster. Your debt-to-income ratio may be higher in the short-term, but will eventually get back to an acceptable level once you’ve paid your debts. Consider options like debt consolidation if you’re having trouble managing your payments.

Consumer debt is growing at an alarming rate, meaning a high debt-to-income ratio, unfortunately, isn’t all too uncommon. Coming to terms with your debt is never easy, but continuing to recklessly accrue debt only makes it harder on you down the line. It’s never too late to improve your financial habits and turn your situation around. If you feel that you’re in need of credit repair or other financial services, contact credit advocates to start making a change.

Source: lexingtonlaw.com