60/40 Stock & Bond Portfolio – Guide to Asset Allocations, Pros & Cons

The stock market is a system that tends to follow tradition. Traditionally, investors have been expected to start young, build a buy-and-hold portfolio, and be careful with asset allocation in order to avoid high levels of risk.

Much has changed in investing over the past couple of decades with robo-advisors making moves for many investors, access to the market widely available through discount brokers, and a rise in short-term trading.

Still, many people feel more comfortable investing in the traditional ways, which is what makes the highly traditional 60/40 portfolio so popular.

Read on to learn about the 60/40 portfolio model, how to build one for yourself, and its pros and cons.

What Is the 60/40 Portfolio?

The 60/40 portfolio has been around for decades and is more of an investment strategy than a defined portfolio because there are no assets set in stone that build up the portfolio.

The strategy is based on a safe asset allocation strategy that has been used in retirement accounts for so long that it’s hard to pin down where it started or who first developed it.

The 60/40 portfolio strategy suggests 60% of your investment assets should be invested in equities like stocks, exchange-traded funds (ETFs), and mutual funds.

The other 40% of the portfolio’s assets should be invested in fixed-income securities like U.S. Treasury bonds, corporate bonds, and other debt securities that produce income through interest rates or a discount on the price of the security.

The idea is that by diversifying your portfolio across asset classes that experience different levels of volatility and risk, you’ll be able to access the gains the stock market provides during bull markets while minimizing losses during downturns or all-out bear markets.

Pro tip: David and Tom Gardener are two of the best stock pickers. Their Motley Fool Stock Advisor recommendations have increased 597.6% compared to just 133.7% for the S&P 500. If you would have invested in Netflix when they first recommended the company, your investment would be up more than 21,000%. Learn more about Motley Fool Stock Advisor.


The Investment Thesis Behind the 60/40 Portfolio

The 60/40 portfolio is based on a strategy of diversification that many believe provides the perfect balance between risk and reward. The thesis is simple.

Most experts agree that it’s nearly impossible to time movements in the stock market, but they also agree that by avoiding stocks altogether, you’re robbing yourself of the opportunity to produce significant returns. Despite their inherent volatility, it’s important to maintain exposure to the stock market while working to balance the risk of those equities falling on hard times.

That’s where fixed-income securities come into play. These investments come with significantly lower risk. Once these securities mature, investors are paid back their entire initial investment amount.

The interest payments received throughout the life of the investment (or the difference between the price of buying the security and the price paid at maturity) acts as the return.


Who Should Take Advantage of the 60/40 Portfolio?

Because the 60/40 portfolio is highly customizable, it’s a great fit for just about any investor. As you’ll learn, the portfolio can be adjusted for different risk levels and investment strategies.

However, there is one concern with the portfolio. The strategy is based on a strict asset allocation of 60% equities and 40% fixed-income investments. However, many experts disagree on what an optimal asset allocation looks like.

Because your goals and appetite for risk are likely to change over time, many suggest using your age to determine the split between equities and fixed-income investments.

For example, instead of allocating 40% of your assets to bonds and other debt securities and 60% to equities in all cases, this variation on the strategy suggests if you’re 21 years old, you should allocate 21% to fixed-income securities and 79% to equities.

This variation involves adjusting your holdings as you age to include more fixed-income assets and fewer equities, becoming more conservative as you near retirement.

Ultimately, a 60/40 portfolio is a traditional, moderate-risk portfolio that could result in slower growth than other options. By following the 60/40 portfolio to the letter, your risk may be too heavily moderated or too aggressively accepted, depending on your age and investment goals.


Pros and Cons of the 60/40 Portfolio

As with any other portfolio strategy, there are pros and cons that should be considered before diving into the 60/40 portfolio.

60/40 Portfolio Pros

There are several reasons to consider following the 60/40 strategy in your own portfolio. Some of the most exciting aspects of the portfolio include:

  1. Diversified to the Max. The portfolio, although made up of only a few assets at most, is designed to be highly diversified, offering complete exposure to whichever sector of the market you prefer. The mix of underlying assets in each fund acts as an insurance policy against volatility.
  2. Fully Customizable. The portfolio doesn’t outline the exact funds you should invest in, just that 60% of your investments should be in equities and 40% should be in fixed-income assets. This leaves you the option to choose the investment strategy, level of risk, and asset exposure of the funds you buy within the predefined allocation. Few portfolios offer this level of customization.
  3. Evenly Balanced Risk. Through the strict asset allocation rule, risk is evenly balanced. While there are opponents to the idea of fixed allocation, this is a tried-and-true strategy that’s been used for decades.
  4. Easy Management. Finally, there are very few assets to keep track of here. This makes maintaining balance and managing your portfolio an extremely simple process.

60/40 Portfolio Cons

While there are plenty of reasons to be excited about deploying this portfolio strategy, there are also a few drawbacks that should be considered before diving in. They include:

  1. Fixed Allocation. Asset allocation is fixed at 60% stocks and 40% bonds, which is rather modest for younger investors and a bit risky for those nearing retirement. Most financial advisors suggest following a fluid allocation strategy that changes as your risk tolerance and goals change.
  2. Low Bond Yields. In recent years, the market has been experiencing historically low bond yields as a result of a low-interest-rate environment. By allocating such a large percentage of your portfolio to fixed-income investments, you could be missing out on much of the gains the bull market has to offer.

Pro tip: Before you add any stocks to your portfolio, make sure you’re choosing the best possible companies. Stock screeners like Stock Rover can help you narrow down the choices to companies that meet your individual requirements. Learn more about our favorite stock screeners.


How to Duplicate the 60/40 Portfolio

As mentioned above, the contents of a 60/40 portfolio aren’t set in stone. It’s more of a guide explaining how you may want to go about asset allocation that can be applied to several different investment strategies.

As a result, there are several ways to go about building the portfolio — a task made easier by the abundance of low-cost ETFs on the market today.

Here are six popular ways to build a 60/40 portfolio for yourself based on your investing strategy and risk tolerance. The funds mentioned here are low-cost Vanguard index funds, but you can choose any fund you like that gives you exposure to the same types of assets.

The Low-Risk 60/40 Portfolio

For investors with a low risk tolerance who want access to the market as a whole, the build of the portfolio is best as follows:

  • 60% in Vanguard Total Stock Market Index Fund ETF (VTI). One of the most diversified ETFs on the market today, the VTI is designed to give investors exposure to the total United States stock market. The past performance of the fund has been stellar, beating others in its category relatively regularly over the past 10 years.
  • 40% in Vanguard Intermediate Term Treasury ETF (VGIT). The VGIT is focused solely on intermediate-term, high-quality U.S. Treasury securities. While these government bonds come with relatively low yields compared to longer-term options, their yields are stronger than short-term bonds and liquidity is reasonable.

The Moderate-Risk 60/40 Portfolio

While the low-risk 60/40 portfolio is a great option for many, investors know that the lower the risk associated with the investment, the lower the potential for gains.

One great way to slightly increase the risk while greatly expanding your earnings potential when using this portfolio strategy is to include international stocks in your equity holdings and swap out Treasury bonds for corporate bonds in the bond portion of the portfolio.

Here’s how that looks:

  • 60% in Vanguard Total World Stock ETF (VT). The VT ETF fund was designed to provide exposure to a highly diversified list of stocks, both in the U.S. and around the world. While the international side of the portfolio increases the risk, it also increases potential profitability, as emerging market growth tends to outpace growth in established markets like the United States.
  • 40% Vanguard Total Corporate Bond ETF (VTC). On the bond market, corporate bonds are known for paying higher yields than Treasury bonds but do come with increased risk. By investing in the VTC fund rather than VGIT, it’s possible to increase the earnings on the fixed-income side of your portfolio.

The High-Risk 60/40 Portfolio

Finally, if you’re willing to accept higher levels of risk, the potential returns of the 60/40 portfolio can be increased by including some different asset classes into both the equity and fixed-income sides of the equation.

Among your equities, consider mixing in some small-cap holdings. Small-cap stocks are known for high levels of volatility and risk, but they’re also known for the potential to outpace the returns of their large-cap counterparts.

On the fixed-income side, look into real estate investment trusts (REITs). These real estate investments are riskier than bonds but have much greater potential to increase your profitability while providing a source of predictable returns in the form of exceptional dividends.

Adjusting the portfolio for a high-risk investor is as simple as investing in the following funds:

  • 30% in Vanguard Total World Stock ETF (VT). The VT fund remains an anchor in this investing strategy, providing access to a diversified group of U.S. and international holdings. This fund should represent about 30% of your holdings in the high-risk rendition of the 60/40 portfolio, or half of your equity allocation.
  • 30% in Vanguard Small-Cap ETF (VB). The VB fund is made up of a diversified group of small-cap stocks, providing exposure to high-growth opportunities in smaller companies. This fund takes the other 30% allocation on the stocks side of the portfolio in this model.
  • 20% in Vanguard Total Corporate Bond ETF (VTC). About half of your fixed-income allocation, or 20% of the total portfolio, should be invested in the VTC fund to gain exposure to corporate bonds.
  • 20% in Vanguard Real Estate ETF (VNQ). Finally, the VNQ fund is an index made up of investable REITs, which gives you broad access to real estate investments while maintaining diversification within the asset class. This fund takes up the other half of your fixed income allocation, representing 20% of the portfolio.

The Growth 60/40 Portfolio

If you’d rather focus on a growth strategy than simply making bucket investments in diversified groups of equities, the growth 60/40 portfolio is the way to go. Here’s what it looks like:

  • 60% in Vanguard Growth Index Fund ETF (VUG). The VUG fund was designed to provide diversified exposure to U.S. large-cap growth stocks. These are companies that have a proven history of generating significant growth, but provide a level of safety in that they are all large-cap, established companies. In the growth rendition of the portfolio, this fund represents 60% of your investment allocation.
  • 40 % Vanguard Intermediate-Term Treasury ETF (VGIT). The other 40% of the portfolio would be invested in the VGIT, offering stability through intermediate-term Treasury securities.

The Value 60/40 Portfolio

If you’re following a value investing strategy, the best way to take advantage of this portfolio is to invest the stock portion of your assets into a value-centric fund like the Vanguard Value Index Fund ETF (VTV).

This fund provides diversified exposure to large-cap value stocks, meaning these are large-cap companies with valuation metrics that suggest they’re trading at a discount.

You can then invest the remaining 40% of your assets using the VGIT for your bond holdings.

The Income 60/40 Portfolio

Finally, those focused on income investing can also take advantage of this portfolio with one small tweak. As with the traditional 60/40 portfolio, 40% of your assets should be allocated to the VGIT, providing safety through investments in intermediate-term Treasury securities.

The other 60% of the portfolio should be invested in the Vanguard High Dividend Yield ETF (VYM). The VYM is made up of a wide range of stocks known for paying high dividend yields.

By investing in the fund, you’ll gain diversified exposure to stocks of all sizes in various sectors that all have one thing in common — they all have a history of offering investors a high dividend yield. That’s music to an income investor’s ears.

Pro Tip. M1 Finance offers expert pies designed around several portfolio strategies, including the 60/40 portfolio. If you’re not interested in building your own, use a prebuilt expert pie on M1 Finance to add the portfolio to your holdings.


Keep Your Portfolio Balanced

Regardless of which rendition of the 60/40 portfolio you choose to go with, it’s important to make sure to maintain balance. The entire thesis behind the portfolio is to provide meaningful returns while creating a safety net by balancing higher-risk equities with lower-risk fixed-income investments.

As time passes, some investments will rise in value and others may fall. As a result, your investment portfolio will fall out of balance. If the balance becomes too skewed, the portfolio may fail to meet your investment objectives.

The good news is that the 60/40 portfolio strategy is a buy-and-hold strategy, meaning you won’t be required to rebalance your portfolio monthly. However, it is best to take a look at your portfolio on at least a quarterly basis.

Moreover, with so few assets, maintaining balance is a relatively simple process. When one asset grows to take up more than its allotted percentage, simply sell a little of it and buy more of its counterpart to bring the portfolio back to the 60/40 balance.


Final Word

There’s a reason the 60/40 portfolio is one of the most talked-about strategies on Wall Street. For decades, investors have been deploying this strategy, which has worked to build wealth over time.

However, as times change, the traditional investing models are being replaced with newer, more fluid options. While the traditional 60/40 concept has been a go-to for some time, it’s not the best fit for all investors, nor is it optimized for investing during a bull market where bond yields are chronically low and stocks are on the rise.

Nonetheless, when markets are flat or falling bearish, and you feel a safer approach is best, the portfolio is a great fit. Moreover, if you’re willing to take the time to customize and are interested in REITs rather than heavy bond allocation, the portfolio can be adjusted to fit your needs.

Source: moneycrashers.com

12 Ways to Increase Rental Income From Your Vacation Home

Bought a vacation rental and wondering how to maximize your income from it?

First and foremost, shift into the mindset of an entrepreneur in the hospitality industry. You’re a businessperson now, and you need to think like one. In particular, focus on creating a strong product, marketing it, and building efficient business processes.

Ways to Increase Your Vacation Rental Income

Vacation rental properties rarely offer truly passive income. Even if you outsource property management, you still need to manage the manager. Instead, think of your vacation rental property as a side business you operate in addition to your full-time job.

Once you start approaching your vacation rental as a hospitality business, you can start optimizing that business to earn more revenue with less labor on your part.

1. Start With Strategic Finishes

After purchasing the property, your first project is putting it into marketable shape as quickly as possible. That includes any needed repairs, updates, and improvements. Don’t go overboard, but look for any obvious indicators of age in the property, including anything that looks dated or unattractive.

You should also be planning out your automation processes at this point, because they may impact your property updates. For example, you may decide to install a smart lock or key code lock on the front door (more on that later).

Think about any other smart home upgrades that may improve your marketing. Would guests feel more comfortable with a smart security system in place?

As you plan out your property’s finishes, keep resiliency in mind.

Aim to “tenant-proof” your property as much as possible, with scratch- and waterproof flooring such as luxury vinyl tile and door stoppers behind each door. Consider semi-gloss or glossy paint finishes to more easily wipe away scuffs, and use the same paint color throughout for easy touch-ups.

Your guests won’t be gentle with your property, so make it as indestructible as possible.

When your property repairs and updates are finished, it’s time to furnish and decorate it. You don’t need to buy furniture new; no guest expects to be the first person to have sat on the couch. But furniture needs to be tasteful and in good condition.

A word to the wise: Don’t decorate blandly. You are not operating a hotel, and one of the reasons guests choose to stay in a privately owned vacation home over a hotel is to get a more authentic experience. Tie in some local flavor and add a bit of your own personality.

Draw the line at political statements, though. I once stayed in an Airbnb filled with political posters and found them to be obnoxious and unprofessional.


2. Automate & Systematize Guests’ Stay

The less your guests must rely on you personally, the smoother their stay will be for both of you.

Find a way to automate guests’ check-in and checkout process, particularly their access to the unit. That could mean a smart door lock, a keypad lock, a lockbox, or keys left with a community office or doorman.

Note that smart door locks don’t have to cost an arm and a leg. You can buy the ULTRALOQ U-Bolt Pro for under $200, or go a little lower-tech with the AmazonBasics keypad lock for under $50.

Self-entry allows guests to arrive on their own schedule, rather than wasting both of your time in coordinating entry with you present.

But systematizing your renters’ stay doesn’t end at physical entry. You also need to plan for other frequent needs, such as gaining Wi-Fi access, and make them extremely intuitive and easy for your guests.

Create a concierge document that starts with bullets for the most common issues, such as the Wi-Fi network and password. You can then direct guests to longer explanations as needed. Consider a Google Document that you can both print physically for the unit and send a link digitally to guests before they arrive.

Automate this communication with guests. Create automated messages that go out to guests 48 hours before their arrival that include details like how to access the property, Wi-Fi information, and how to use any confusing appliances. Your concierge document can also include tips for local restaurants, attractions, and other entertainment.

As you systematize your vacation rental business, create policies for every contingency. That includes lost key policies and fees, late checkout procedures, pet policies and fees, your maid or cleaning service (which can be set up quickly through Handy.com), and backup contacts for times when you aren’t available.

In addition to operating a hospitality business, you also face standard landlord headaches like property repairs. Prepare for maintenance by building a network of contractors you can contact for immediate service, to minimize the risk of bad reviews and losing Airbnb guests over maintenance issues.


3. Perfect Your Pricing

One of the most fundamental building blocks for success as an Airbnb host is pricing.

To begin, ignore what long-term rental properties charge for monthly rents. Rather, look at them, but only to run a comparative cash flow analysis to determine which leasing model would generate more profit for your property.

Your competition as a vacation rental operator doesn’t include long-term rentals, but rather hotels and other comparable vacation units. Get a sense of what hotels and similar vacation rentals charge in your immediate area. Consider aiming for around 20% less on a nightly basis than nearby hotels.

Keep in mind that your pricing can and should rise as you establish yourself and your unit.

In the beginning, with few or no reviews, you’ll probably need to entice your first guests with bargain pricing. Once you establish legitimacy through reviews, you can raise your pricing to meet or slightly surpass nearby competitors. (More on building reviews shortly.)

Remember, pricing doesn’t end at your nightly rate. It also includes your cleaning fee, additional guest fees, pet fees, and any other fees you charge. By all means, charge a cleaning fee, but don’t use it as a backdoor gimmick to charge higher rates. Price it based on your actual cleaning fees, and keep your nightly rates transparent.


4. Incentivize Longer Stays

As with long-term rentals, the greatest labor and costs in managing short-term rentals come from turnovers. From cleaning to coordinating access with guests and answering their questions, it costs far more time and money to rent to 10 guests in a one-month period than to a single guest staying for an entire month.

What’s more, short bookings can actually cost you the more lucrative longer bookings. If someone rents your unit for one night, it prevents a prospective two-week guest from being able to book your unit for that block.

So, price accordingly. Charge a higher nightly rate for stays under a week, and then offer a discount for guests who stay at least seven days. Keep graduating that discount the longer they stay, up to a month.


5. Consider Pet-Friendly Policies — For a Price

Pet owners often have a hard time finding hotels and vacation rentals that accommodate their four-legged family members. That means a shortage of supply, which in turn creates an opportunity.

There’s certainly no shortage of demand. More than two-thirds of American households own a pet, according to the 2019-2020 survey by the American Pet Products Association.

Of course, pets cause more wear and tear on your rental property. That means you should charge extra for them to make it worth your while.

By accepting pets, you can not only collect more money on a nightly basis, but you can also attract more potential guests and achieve higher occupancy rates. And in the vacation rental business, profits come down to occupancy.

Young Woman Wearing Sweater Cuddling Pet Cat


6. Take a Multipronged Approach to Marketing

Putting together the perfect vacation rental listing is both an art and a science. Start your marketing with a killer rental listing.

First, hire a professional real estate photographer to take photos. It’s less expensive than you think, and it’s a one-time marketing expense that will continue paying off for years to come.

Photos should include several shots from different angles of each important room in the home. Pay particular attention to the kitchen, living spaces, bedrooms, and bathrooms. Show the photos to someone who has never been inside your property and ask them if they can visualize the layout and space.

Feature a few exterior shots as well, including the front of the property and any outdoor living spaces.

When filling out your listing profile, tick off each amenity, and select the bed sizes for each bedroom. Then in your written description, emphasize the property’s best features, and mention the most important amenities again.

If your location is a selling point, emphasize that as well. Include highlights like “Five-minute walk to the waterfront!” or “One block from the metro station!” Mention specific landmarks and tourist attractions nearby to boost your search rankings within vacation rental platforms — more on that momentarily.

Although Airbnb is the undisputed leader in the online vacation rental space, it is not the only player. Advertise your unit for rent on multiple platforms, including VRBO, Booking.com, and Craigslist. A previous player in this industry, HomeAway, was acquired by VRBO and merged in 2020.

But don’t stop there. Research ways you can market your vacation rental on social media, such as through local tourist groups on Facebook, or even paid Facebook ads.

The better your marketing reach, the higher your occupancy rate will be, which ultimately determines your bottom line.


7. Optimize for Search Rankings

Imagine your vacation rental is one of a hundred available in its neighborhood. A prospective guest logs into Airbnb and searches for units in that neighborhood — which ones does Airbnb display first, at the top of the page rather than buried at the end of that long list?

Vacation rental platforms have their own search algorithms, just like Google does. If you want your listings to appear first, you need to take pains to optimize for those algorithms.

First, listing platforms reward responsiveness. The faster you respond to inquiries, the higher the platforms will list your unit. Make it a priority to respond as quickly as possible, and if you can’t give prospects a precise answer immediately, at least reply back with a quick “I’ll check into that and follow up with you shortly.”

As with Google, click-through rate matters. That refers to the percent of users who see your listing title who actually click on it. So, boost your click-through rate by putting thought into your listing titles to make them irresistible. Your thumbnail photo also helps your click-through rate, so make it gorgeous.

Accept instant bookings, rather than requiring prospects to wait until you’ve manually reviewed them. Listing platforms include this as a search filter, so many prospects will never even see your listings if you don’t accept instant bookings.

Keep your calendar up to date. Airbnb rewards recency — the more recently your calendar was updated, the better.

Likewise, keep your listings up to date. Every two or three months, tweak your listings, perhaps to emphasize seasonal attractions in your area. This also makes a great time to review your listing for completeness within the listing platform, which also impacts your search rank.

“Completeness” refers to the percentage of available fields and selections that you’ve filled out. Even if you filled out every field before, they don’t remain static — listing platforms constantly add new features and options, and you need to stay current with them if you want your listings to appear before alternatives.

Be sure to mention local attractions in your listing description because some prospects search specifically for easy access to famous landmarks or other attractions. You want to make sure your listing appears front and center for those who do.

And, of course, the more positive ratings and reviews you have, the more platforms reward you with higher rankings.


8. Accrue Reviews ASAP

You can put together the best listing in the world, but if you have no reviews, guests will be reluctant to book with you.

Start with a simple two-pronged approach to scoring reviews. First, price your property competitively to beat your competition if you don’t have many reviews. Second, put together a guest follow-up strategy for securing reviews.

That strategy should include asking no fewer than three times for a review.

Mention it at the end of your checkout instructions message, then again in a post-checkout message thanking them for staying with you. Then leave a review for them as well, and message them to let them know you left a glowing review for them, and ask them if they would be willing to do the same if they enjoyed their stay.

Your goal is to reach 10 positive reviews as quickly as possible. When prospective guests see reviews in the double digits, they feel more confident in booking, and your occupancy rate will rise.


9. Create an Experience

As outlined above, you can and should automate your booking, check-in, and check-out processes as much as possible. Aim to make them so easy an 8-year-old could do it.

Send a series of messages out on an automated schedule. Spell out everything the guest needs to know about getting into your property and staying there comfortably.

Assemble a concierge document about how to use the various appliances in your unit, the best local restaurants, and standout local attractions. Mention both the famous nearby amenities they already know about and the insider scoop on local secrets.

For example: “Drop by the Bulldog for an iconic Amsterdam bar experience, but then walk over to Door 74, a tiny, hidden speakeasy with no signage and a Prohibition-era vibe.”

It’s those more unique guest experiences your renters will remember and rave about later both publicly in their reviews and privately to their friends.

Leave a bottle of wine or some other gesture that they wouldn’t receive at a hotel. You don’t need to spend much money on it, and half your guests won’t drink it anyway, but it makes a great first impression. Underneath it, leave a brief handwritten note welcoming them by name. And, of course, chocolates on the pillows don’t hurt either.

People remember the little things, the small touches that remind them why they chose an alternative to bland corporate hotels.

Bottle Of Wine Rose Red Woman Relaxing At Home Sofa Barefoot


10. Explore Co-Hosting

If you manage your own vacation rental, and other nearby units also serve as vacation rentals, start networking with the other neighboring owners. You can co-host for each other, or simply have one owner co-host for all the neighborhood units as a side hustle.

Co-hosts share property management responsibilities, such as communicating with guests, managing check-ins and checkouts, coordinating repairs, and more. See Airbnb’s explanation for a full list of responsibilities that co-hosts can perform. In compensation, the primary host can pay co-hosts a percentage of the nightly rate, a percentage of the cleaning fee, or both.

They can make an affordable and convenient way to outsource management, whether temporarily — for example, while you’re on vacation — or permanently. Or, if you live near the units yourself, co-hosting for neighboring vacation rentals offers an easy side gig to earn some extra money on other people’s properties.


11. Protect Yourself & Your Property

One way to protect your property is to physically make it damage-resistant, as mentioned above. But protection doesn’t end there.

Think carefully about the security deposit you charge. Charge as much as you think you can without scaring off guests.

Platforms such as Airbnb include some protections for hosts, and you should familiarize yourself with them. If you don’t use a platform and rent independently, look into other ways you can protect against damage, such as preauthorizing the guest’s card for an additional damage deposit, but not running the charge unless they cause damage.

But your guests aren’t the only people you need to worry about. If you buy the property with a family member, friend, or other partner, it inevitably causes conflict to one degree or another.

The most common disputes involve one partner wanting to use the property more often than the others, financial disputes over expenses, and disputes when one owner wants to sell and the others can’t afford to buy them out.

I’ve seen all of these disputes play out in my own family, and can attest firsthand to how vicious they can get — vicious enough to permanently poison relationships, even close family relationships.

Protect yourself by signing an agreement with your partners upon buying a property detailing exactly how you’ll split revenue, responsibilities, and access to the property, and spelling out the process you’ll follow if one partner wants to sell while others don’t.

A little foresight today can save a lot of stress and infighting tomorrow.

Further protect yourself with contingency plans in the event that laws or market conditions change.

Local regulation presents a real threat to vacation rental owners — cities like New York, San Francisco, and Santa Monica all but outlaw private properties being offered to short-term guests. Your city could change its regulations at any time, and you need a backup plan to protect against such seismic shifts.

Run the numbers to calculate how your property would create cash flow as a long-term rental, as one contingency plan. As another, look into leasing your property as a furnished corporate rental, for example, to travel nurses.

As a last resort, you can always sell the property, but it typically takes a few years for properties to appreciate enough to cover the closing costs from both the initial purchase and the eventual sale. But always have contingency plans in place, to protect against losses if conditions change.


12. Optimize Your Taxes

Vacation rental owners can benefit from both investment property tax breaks and small business tax breaks.

As a business owner, you can deduct expenses that you might otherwise have to itemize in order to take, allowing you to take the standard deduction while still deducting specific expenses. For example, you could potentially deduct for travel, home office, and charitable donations from your business, all while still taking the standard deduction. Just be careful not to get carried away and trigger an audit with the IRS.

Meanwhile, real estate investors get their own tax benefits. You can deduct costs from property management to maintenance, utilities to depreciation.

Beware, however, that a few cities — such as Santa Monica — require vacation rental owners to pay additional taxes. Make sure you include that expense when you run the cash flow numbers before you invest in a vacation rental in one of those cities.


Final Word

It’s a fun idea to own a vacation rental you can occasionally use yourself while earning some extra income.

But in many markets, it remains a competitive industry, and often property owners find themselves losing money at the end of the year without enough occupancy, particularly during slow seasons.

Always run conservative numbers when you calculate cash flow, and never lose sight of the fact that the property is an investment. Don’t get attached to any given property, or even to the idea. In real estate as well as stocks, emotion is the enemy of investing.

Even if the cash flow numbers work for a prospective vacation rental, run them for contingency plans such as using the property as a long-term rental. You never know when market conditions will change; look no further than the collapse of the travel industry in 2020 during the coronavirus pandemic and the energetic rebound in 2021.

Source: moneycrashers.com

11 Ways to Avoid a Financial Midlife Crisis

Midlife crises are expensive.

From flashy cars to trendy clothes and accessories to artificially trying to look younger with Botox or surgeries, midlife crises cost you both money and stress.

It’s not easy parting with the vigor, fitness, and attractiveness of youth. Nor is it easy to accept our own mortality on a visceral rather than conceptual level. As you navigate the middle years of your adulthood, try the strategies below to stop the emotional and financial bleeding, and inject some fresh vitality into your life.

What Is a Midlife Crisis?

The idea of a “midlife crisis” was first popularized by Freudian psychologists like Carl Jung in the early and mid-20th century. Because there’s no official diagnosis or definition for a midlife crisis, and it expresses itself in many different ways, it’s difficult to study scientifically.

Consider two different models for midlife crises. In the classic model, it takes the form of an acute emotional crisis, often triggered by a single event during adulthood such as a death, divorce, or job loss.

The American Psychological Association explains that emotional crises are usually marked by a “clear and abrupt change in behavior” and can manifest through depression, trauma, eating disorders, alcohol or substance abuse, self-injury, and suicidal thoughts. Sadly, the suicide rate among middle-aged adults is distinctly higher than other age groups, per the American Foundation for Suicide Prevention. Middle-aged white men see particularly high suicide rates, with men nearly four times as likely to die by suicide than women.

The other model for midlife crises is more protracted, expressed as a period of lower happiness or slow-burning depression. Studies such as a 2020 paper by Dartmouth’s David G. Blanchflower demonstrate a “happiness U-curve” over the course of adulthood, with happiness declining through our young adult and early middle years before bottoming out in middle age. Happiness levels then start to rise again, with older adults reporting greater satisfaction and well-being.

During midlife crises, adults tend to contrast the goals and dreams of their youth against their current life — and find it wanting. That can lead to thoughts like “I’ve wasted my youth,” or “What have I done with my life?”

It’s hard to imagine a worse feeling.

Signs and Symptoms of a Midlife Crisis

In response to these feelings, adults often start flailing for a lifeline — anything to make them feel young, successful, attractive, energized, or in control of their lives and destinies again.

Although a midlife crisis feels immensely personal while you’re experiencing it, you’re not alone. Over one-quarter of adults admit to experiencing a midlife crisis, according to the Midlife in the United States studies. Just imagine how many more people experience one and don’t talk about it.

The common signs that you or a loved one may be experiencing a midlife crisis can take a variety of forms. Some are physiological and psychological, including depression, changes in sleep patterns, and an uptick in substance use. This can produce effects ranging from trouble getting out of bed in the morning to maddening insomnia to abusing drugs or alcohol. (If you notice any of these symptoms, consider seeking the counsel of a doctor or therapist.)

A midlife crisis can also lead to changes in one’s attitudes and behaviors, such as a sudden obsession with physical appearance, an increased interest in status symbols, or infidelity. It often accompanies feelings of resentment or blame that can wreak havoc on personal and professional relationships, and may be characterized by feeling restless, apathetic, or unfulfilled.


Financial Impact of a Midlife Crisis

Midlife crises can ruin you financially.

Before letting yourself drift into a midlife crisis, think twice about the destruction you could sow. You can literally lose everything you own and hold dear.

Therapists are cheap by comparison.

Risk of Divorce

Few events in life are as traumatic — or expensive — as divorce. The divorce process itself can cost tens or even hundreds of thousands of dollars between attorney fees, home sale costs, and other expenses from separating all your legal assets. Which says nothing of ongoing costs like alimony or child support.

Everything you own goes under the microscope to be parsed and parceled. Anyone who tells you they came out ahead in a divorce clearly didn’t fight fair, because divorces inherently drain assets rather than build them. Only lawyers get rich off divorces.

As painful as life may feel in a midlife crisis, it can get worse. And often, “worse” looks like divorce.

Risk of Job Loss and Career Derailment

Those feelings of apathy and restlessness could cost you your job in addition to your marriage.

It’s common sense: depressed people who feel unfulfilled by their job simply won’t produce quality work. That means they won’t earn promotions, won’t secure glowing references to help them get a new job, and won’t be first on any friends’ or colleagues’ list to recommend when new opportunities arise.

That’s assuming they don’t get fired, of course. Or worse, flamboyantly quit and “go out in a blaze of glory.”

All of these outcomes can make it extremely hard to find a new job, especially a better job.

The Direct Cost of Splurges

Even people who don’t lose their jobs or spouses can still end up blowing absurd amounts of money on midlife crisis splurges.

Take your pick: sports and luxury cars, boats and yachts, motorcycles, flashy and expensive hobbies, outrageous vacations, vacation homes, cosmetic surgeries, overpriced designer clothes and accessories. The staples of midlife crises cost money, and a lot of it.

That’s money you could put toward building real wealth, toward your long-term financial goals that you’ve actually thought through rationally with your partner or financial advisor. Goals like, say, saving a down payment for your dream home, saving for retirement, or helping your children with their college costs.


Strategies for Preventing or Escaping a Midlife Crisis

Yes, every midlife crisis looks different. One person might take up with their much-younger secretary, while another goes down the rabbit hole of serial cosmetic surgeries.

But they all cost you, and usually in more ways than one.

The following strategies can all help you retain (or regain) control over your life, your happiness, and your personal finances. You’re not alone, no matter how it feels in the moment. Bring your life back into alignment with intentionality, and a focus on improving your personal relationships and progress toward long-term goals.

1. Talk Through It With Loved Ones and Professionals

Your spouse, family, friends, and other loved ones don’t know what you’re going through if you don’t tell them. Even if they suspect you’re falling into a midlife crisis, they don’t understand your perspective without you explaining it.

Try them. Be patient with them, just as you want them to be patient with you. They probably won’t fully understand it the first time you broach the topic, but that doesn’t mean you should never discuss it with them.

To meaningfully change your life, you need to bring the people who share that life with you on board with any changes. But it also helps to simply unload, to unburden yourself to a disinterested third party.

Talk to a counselor or other professional, not for advice per se — although they may offer sound ideas — but simply to get your grief and anxiety off your chest and out into the open. Left swirling inside of you, these emotions can build up pressure until they burst.

2. Retake Control With Lifestyle Design

Far too many people drift with the tides of life, falling into their jobs, their relationships, even the city where they live. It’s no wonder so many wake up one day and realize they’re living a life they don’t actually like.

Sit down and write out a description of your ideal life, starting with where you live, the kind of work you do, your family life, your social life, your hobbies, and every other detail you can put to paper. No holds barred, nothing off-limits — simply outline your perfect life.

Once you’ve written out the what, you can then start brainstorming the how. The process is called lifestyle design. It doesn’t happen overnight, but by steadily working toward a life you actually want to live, you’ll find fresh meaning and purpose.

3. Reevaluate Your Long-Term Goals

Similarly, your life should align with your long-term goals. When they no longer align, you start drifting in a direction you don’t truly want to go.

For example, my top financial goal is to reach financial independence within the next few years by building enough passive income to cover my living expenses. At that point, working becomes optional. I pursue passive income by budgeting a high savings rate (more on that momentarily) and funneling as much money as possible into investments. And despite feeling the occasional midlife pang, I can still sleep each night knowing that I ended the day closer to my goal than when I woke up that morning.

Whether you aim to buy a new home, retire early, help your kids with college, take dream vacations, or maybe even buy that dream sports car, take a second look at your long-term goals — then form a financial plan to reach them faster. And if you need some expert advice, don’t be afraid to reach out to a financial advisor or other financial professional.

4. Increase Your Savings Rate

Money can’t solve every problem — but it can solve many. And even when it can’t solve a problem entirely, it can usually help. For example, anyone can get sick or injured, but the more money you have, the better your health insurance and medical outcomes tend to be.

To paraphrase author Robert Kiyosaki: I’ve been happy and rich, I’ve been happy and broke, I’ve been unhappy and rich, and I’ve been unhappy and broke; and I can assure you that being unhappy and rich is still a lot better than being unhappy and broke.

So how do you build wealth faster? By growing the gap between what you earn and what you spend: your savings rate.

I don’t know what tomorrow will bring, but I do know that more wealth will better prepare me and my family for it. And I can also tell you firsthand that when I feel those midlife pangs, such as thoughts like “My old college roommates earn more than I do,” I find some comfort in my frugal but high-savings lifestyle.

5. Become Debt-Free

While you don’t necessarily have to pay off your home loan or even your car loan in full, you should definitely not carry any unsecured debts by the time you reach middle age.

First and foremost, that includes paying off your credit cards in full every month. But beyond credit card debt, it also includes student loans, personal loans, and any other unsecured loans.

Stop paying high interest rates on consumer debt. It’s awfully hard to achieve financial stability and build an emergency fund — much less build retirement savings in your IRA or 401(k) — when you have high-interest debt repayments hanging around your neck each month.

When you become debt-free, you suddenly start thinking offensively instead of defensively. It frees you to focus on building wealth, passive income streams, and perhaps even replacing your full-time salary with investment income. You gain a welcome feeling of control over your finances and your future, which does wonders in fending off midlife crises.

6. Consider a Career Change (Carefully)

Quitting in a blaze of glory might look great in movies, but it won’t do your career any favors. Of course, that doesn’t mean you should stay in that unfulfilling job either.

As part of your foray into lifestyle design, spend some time brainstorming careers that better fit your passions, strengths, and long-term goals. Bear in mind that the jobs you grow up hearing about — teacher, cop, accountant, and so forth — make up a minority of the actual jobs available today. Many of the jobs in today’s workforce didn’t exist five years ago, and you may never have heard of them.

Consider meeting with a career counselor to take a career aptitude test and discuss options. Although often not cheap, you walk out with a slew of ideas that had never previously occurred to you — ideas that could well fit you better than your current job.

And, of course, they might also offer a higher salary or better benefits.

In my post-college life, I’ve been a mortgage loan officer, a real estate investor, an Internet marketer, an e-commerce executive, a founder of an online startup, and a freelance writer. Twenty years ago, I would have raised an eyebrow if you’d told me I’d end up doing any one of those jobs.

For fun, explore alternatives like jobs that provide free housing and jobs that let you live anywhere. If you need a dash of adventure, becoming a digital nomad can certainly do the trick.

Just don’t lose your spouse in the process. Talk through major career or lifestyle changes with your partner before charging forward without their knowledge or support.

7. Consider a Side Hustle

Not everyone going through a midlife crisis is ready to change careers just yet. But they may still want something more from their working life, both financially and emotionally.

In that case, consider starting a side hustle while you figure out what you want to do with your career. You can turn a hobby of yours into a business and keep it fun if you like.

Starting a business doesn’t have to mean selling off all your assets and pouring it all into inventory and a commercial lease. To keep your startup costs low and build cash flow quickly, consider starting an online business.

All the while, you can keep working your day job while you decide what you want to do with the rest of your life.

8. Find a Mentor or Coach

Don’t try to reinvent the wheel on your own. Ask for guidance from people who have done what you want to do, and who can show you all the shortcuts.

Beyond helping you skip costly mistakes and detours, mentors and coaches can also help you ask the right questions. They have the benefit of both experience and outside perspective, and can see angles that you can’t while in the thick of your day-to-day struggles. “I know you think you want X, but from what you’ve told me, it sounds like Y would actually be a better fit for you.”

Mentors and coaches also help you feel less alone. They can take you by the hand and guide you back to the path you actually want to walk through this life.

9. Embrace Adventure — Constructively

My wife and I may not earn enormous salaries like some of our friends do, but we lead a life of adventure, travel, and endless opportunities.

We spend 10 months per year overseas. It took some work to move abroad, between my wife finding a job as an international school counselor and me establishing income streams I can earn from anywhere. But we did it because we didn’t want to follow the same trajectory of white picket fences and overpriced mortgages that we saw our friends following.

It was one of the best decisions we ever made. We live in a country with a low cost of living, enjoy free housing and outstanding health care, and get to visit an average of 10 countries each year.

But we did it together, and we planned it carefully. We put in the work, rather than one of us just running off one day in the throes of a full-blown personal crisis.

You don’t need to go as far as moving abroad to inject some adventure into your life. Start smaller if you like, and if you’re worried about money, explore these ways to travel the world for free.

10. Take Care of Yourself Physically

Once when I was going through a depressive period, my father told me to do three things: get eight hours of sleep every night, eat healthier, and work out every day. “Go through the motions of being healthy, and one of these days you’ll wake up and realize you feel better both physically and emotionally.” As usual, he was right.

Your body and mind form a feedback loop. One of the easiest ways to jumpstart an emotionally healthier loop is to force yourself into a physically healthier routine.

It doesn’t have to cost you more money. You can eat healthy on a budget, and work out at home with no expensive equipment or gym memberships. Neither do you need expensive or habit-forming sleep aids, with all the natural sleep remedies available.

Finally, consider quitting drinking. Alcohol is expensive, both in terms of your wallet and your health. Worst of all, it correlates strongly with depression: everything in your life looks worse after you’ve been drinking.

As a byproduct of living healthier, you might just find you feel younger, too.

11. Volunteer More

How many hours do you volunteer each month?

Countless studies show that volunteering improves personal happiness levels, lowers rates of depression, and generally boosts our sense of well-being — see this study from BMC Public Health for an example.

That says nothing of all the unselfish reasons to volunteer like, say, giving back to the world.

There are plenty of ways to volunteer locally, but if you want to combine volunteering with travel, try out these ideas to volunteer abroad for free travel.


Final Word

Less than a year ago, I was clinking giant steins at Oktoberfest. Today I have a baby and have crossed into my 40s. I’ve spent more than a few nights wondering what happened to the excitement of my younger days.

Middle-aged adults can find comfort in research from the Institute for Human & Machine Cognition demonstrating a silver lining to midlife crises. Most people who experience them come out the other side with a greater sense of curiosity about the world around them — and where they fit into it. Armed with a better understanding of themselves and their place in the world, middle-aged adults emerge more thoughtful, worldly, and compassionate than their younger selves.

As fun as it is to be young and fit and glamorous, growing wiser and wealthier with age comes with its own rewards. If the price you pay for them is letting go of the trappings of youth, just remember you’re going to lose them regardless. You might as well relinquish them gracefully, and embrace the perks of more mature adulthood.

Source: moneycrashers.com

The Best Certified Professional Phoenix Credit Repair Service

Professional credit repair services, known as credit counselors or debt consolidators, are literally everywhere.  You can hardly turn on the television anymore without hearing an advertisement that promises to repair your credit and raise your credit score, no matter what your financial situation.

The truth is, many of these organizations really can help to repair your credit, and do so in a professional manner.  Services like Credit Absolute works with you to assess exactly where you credit stands as opposed to where you would like it to be –then help you set goals and provide motivation to reach those goals.

Credit Repair Services That Should Be Avoided

There are, however, many credit repair companies that aren’t entirely on the up-and-up.  Avoid companies that make outrageous claims, such as:

•    Completely Erase Bad Financial Records
•    Erase Bankruptcies
•    Create A Whole New Credit Identity For You

Companies that make claims like these – or even similar to these – should be avoided.

Likewise, it is best to avoid companies that ask for money up-front.  Some of these shady organizations may also refuse or neglect to disclose your legal rights for fear that they will lose your business – and therefore, your money.  Stay away from companies that ask for a fee before doing any work or seem to divert you from asking questions of a legal nature.

The Most Trusted Phoenix Credit Repair Service

There is a school of thought that says you don’t need the services of a professional credit repair company at all.  Much of the work can indeed be done yourself to repair your credit, but it can be extremely difficult without experience.  The fact that it can be very time-intensive also turns many away from self-credit repair.

Credit Absolute was founded on helping people repair their credit, not taking advantage of them to make money.  As the most trusted credit repair service in Phoenix, Credit Absolute has helped many reclaim their financial security, and we’d like to help you as well.

Contact Credit Absolute today for a free certified credit consultation.

Source: creditabsolute.com

Phoenix Credit Repair Programs From Credit Absolute

There are two different kinds of credit repair programs you can get in the Phoenix area.  The first is a class or seminar that is most commonly offered by credit counseling services with the hopes of securing your business.  Local colleges and universities may also offer credit repair classes, and local government entities may offer similar programs as public relations and community outreach tools.

These seminars and classes normally explain how to:

•    Get Your Credit Score
•    Read Your Credit Report
•    Take Steps To Repair Credit Problems

They are usually one-day courses designed to give you the tools you need to obtain, responsibly use, and monitor your own credit.  This type of Phoenix credit repair program will help you repair your credit and stay out of debt permanently.

Credit Repair Software Programs

A new phenomenon where credit repair is concerned involves the computer industry – of course.  There are many software programs available for sale that all claim to help repair your credit with the click of a mouse.  Most of these are credit repair programs are priced reasonably and can be used with any operating system.

Their claims can be a little out there, but Consumer’s Digest has done extensive research and found that they can often legitimately help people with credit problems.  These programs can detect errors in your credit report and help to correct them – plus, they often come with financial software that can help to keep you out of debt after you’ve repaired your credit report errors.

The best credit repair software comes with a money-back guarantee and even a free trial so you can see if it will meet your particular needs.  They also require little computer experience as they commonly offer easy step-by-step instructions to take you through the entire process with ease.

All-in-all, a good credit repair software program is capable of exactly what a credit counseling service can do at a fraction of the price and from your own home.

Professional Phoenix Credit Repair

If you’re still having trouble getting your credit back on the right track, contact Credit Absolute, the best Phoenix credit repair agency.  We can help you learn how to fix your credit and maintain a healthy credit score.  We’re waiting to hear from you.

Source: creditabsolute.com

5 Reasons You Should Not Delay Retirement

Grandfather reading to his granddaughter
LightField Studios / Shutterstock.com

Some people view retirement as something that should be delayed as long as possible. They say that, for many older workers, waiting as long as possible to collect Social Security benefits is the prudent choice.

Important as this advice is for many of us, it may not apply to you. If you are financially prepared, there are good reasons to consider retiring at the traditional age of 65, or maybe even sooner.

“Time is the most valuable asset anyone can ever have,” Mike Kern, a certified public accountant based in South Carolina, tells Money Talks News. “I would encourage anyone who has the ability and wants to retire early to do so.”

There is plenty to see, do and learn in retirement. Many retirees go on to pursue new careers or fulfill lifetime goals they didn’t have time for when they were working. Freed from the burden of a 9-to-5 job, they find that life has many new possibilities.

What follows are powerful reasons not to delay your retirement.

1. Delaying Social Security may not be right for you

Before deciding, consider your personal circumstances, advises Money Talks News founder Stacy Johnson:

“For some people it’s a great idea to take Social Security early, and for some people it’s a great idea to wait.”

You generally can start receiving Social Security as soon as age 62. Some people wait as late as age 70. If you plan to continue working until your benefits reach their maximum at age 70, delaying your claim will result in greater monthly payouts. However, if you have concerns about how long you may live or you need the money right away, filing an early claim may make the most sense.

Good to know: The system is actuarially neutral, designed to make your overall benefits work out approximately the same over the course of your retirement, no matter when you first claim them. Delaying your first claim increases your monthly retirement benefit, but it may not affect the total amount you receive over a lifetime.

2. Retirement can lower your housing costs

When you retire, you no longer need to live close to a job. Where you decide to live in retirement can affect your quality of life, due in part to the price of real estate and rental homes.

“Your house is typically the biggest expense in your budget,” says Kern. “Oftentimes, the best way to considerably decrease your costs is by downsizing or moving to a cheaper place.”

Smaller towns generally have less-expensive housing than large metropolitan areas. For example, in early February, the median home value in Boise, Idaho — a community of about 229,000 residents — was $406,579, according to Zillow.

Sound expensive? Well, compare that to San Francisco. Zillow says Frisco’s median home value in early February was $1,402,470.

3. Your good health may not last

Nobody lives forever. If you don’t get started on your post-retirement goals in a timely manner, you may never reach them.

“As grim as it sounds, if your health is on the decline, then it may make sense to take an early retirement in order to maximize the net payout of your lifetime,” says attorney Jacob Dayan, CEO of Chicago-based tax services company Community Tax.

Consider, too, that you may experience health problems as you age. If your retirement goals require being in good physical shape so that you can hike the Inca Trail in Peru or bicycle through Ireland, it makes sense to retire sooner.

4. You want to start a new career

Retiring allows you to pursue your true passions. Some retirees use their savings and pension benefits to finance the start of another career.

You can’t claim Social Security retirement benefits until age 62, but if you’ve invested in a retirement plan or qualify for a pension, you may be able to use part of those funds to launch a new career.

Dayan advises careful planning and consideration before making a change. If retiring early and starting a new career requires a substantial financial investment, consider all the risks, including tapping your retirement funds. Make sure the switch won’t put you in financial distress.

5. You can afford to do it

Money doesn’t buy happiness, but, with careful planning, an adequate retirement account may allow you to quit your job. If you no longer feel fulfilled at work and can afford it, it may be time to make the transition. A few things to consider:

  • When you’re starting out in your career, it’s easy to become obsessed with getting ahead. At some point, though, you reach your goal. You deserve a reward for your hard work.
  • If you have loved ones who need your help, and you can afford to stop working, retiring frees you to help them with their day-to-day activities.
  • Retirement offers you time to grow, cultivate new interests, pursue hobbies and spend time with loved ones. It frees you to do the things that matter most.

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

Source: moneytalksnews.com

Do It Yourself (DIY) or Hire a Contractor for Home Improvement Projects?

When you buy a fixer-upper, you can expect to spend many thousands of dollars on home improvement projects. According to HomeAdvisor, it costs an average of around $10,000 to remodel a bathroom, $20,000 for a basement, and $25,000 for a kitchen remodel.

For most of these jobs, labor accounts for a big chunk of the cost. For instance, HomeAdvisor says it adds up to between 30% and 35% of the cost for a kitchen remodel and about half the total price of a bathroom remodel. Thus, supplying your own labor for a home repair or remodel can save you a big chunk of change.

However, just because you can do it yourself doesn’t mean you should. Some jobs are easy to handle on your own, while others are best left to skilled professionals. The trick is figuring out which is which.

Deciding Which Jobs to DIY

My husband and I are fairly dedicated DIYers. I have a long list of all the projects we’ve done on our house in the eight years we’ve owned it, and the overwhelming majority of them were DIY jobs — both small ones, such as replacing cabinet hardware, and big ones, like insulating our attic.

Yet there are a handful of jobs on that list for which we hired professional contractors without hesitation or regret. In every case, we chose to do so for one of three reasons: safety, difficulty, or time. These are the three points experts say are most crucial to consider when deciding whether to DIY.

Safety First

There are three major signs a job is too dangerous for DIY:

  1. It Could Kill You. The first question you need to ask yourself about any DIY project is, “What’s the worst possible thing that could happen if I mess it up?” For some jobs, such as roofing or major electrical work, the answer is, “I could get killed.” That answer is a clear warning sign this is a job for a professional trained to handle its dangers.
  2. It Could Destroy Your Home. Major plumbing jobs, such as moving bathroom fixtures, fit into this category. A mistake on this kind of job could result in a water leak weakening a wall to the point of collapse. Of course, plumbers can make mistakes too, but they could be on the hook to pay for the damage if they do.
  3. It Requires a Permit. Some home improvement projects require a building permit, a document guaranteeing they were done safely and in accordance with local building codes. Each city has its own rules about which jobs require permits, how much they cost, and how hard it is to get one. In some areas, you can’t get a permit at all unless you’re working with a licensed contractor. But even if you can, the fact that you need one is a sign the job might be too complicated for DIY.

One job that fit into this category for us was replacing our water heater. If it had been electric, we might have tried to do it ourselves. However, ours ran on gas, which poses a risk of fire, explosion, or poisoning. We decided any job that involves cutting into gas lines is a job we aren’t going to touch.

Know the Ropes

There’s no way you can tackle a home repair job unless you know how. In some cases, having no experience isn’t a deal-breaker because you can learn everything you need from a DIY book or YouTube video. Sources like the DIY Network can teach you how to handle all kinds of straightforward repair jobs, such as fixing a leaky toilet or squeaky door hinge.

But other jobs are so highly specialized it takes years of training to handle them on your own. Even Nicole Curtis of the DIY Network show “Rehab Addict,” who fixes up houses for a living, hires subcontractors to help her with complicated jobs like moving plumbing fixtures or pouring concrete.

There are a few reasons for choosing a professional to do a difficult job.

  • It’s Dangerous. The danger component bears repeating. Many jobs that require technical know-how are jobs that are dangerous to do yourself. In these cases, hire a contractor for safety reasons.
  • Mistakes Could Be Costly. If you’re not quite sure what you’re doing when you tackle a job, you risk having to call in a contractor to fix your mistakes. Instead of saving money by doing it yourself, you could end up paying twice for the same job.
  • It Could Hurt Your Home’s Value. In an article written for NEA Member Benefits, real estate broker Jim Smith warns that slipshod work is a turn-off for future buyers. Elizabeth Goltz, a designer quoted in Consumer Reports’ guide to bathroom remodeling, agrees, saying even the priciest bathroom tile looks cheap if it’s poorly laid.

My husband and I ran into this problem when we noticed the bricks of our side porch stoop coming loose. At first, we thought we could simply reset the loose bricks, but it soon became clear the entire stoop was falling apart. When we talked to a contractor about it, we discovered it was because of poor drainage, which was weakening the foundation.

At that point, we realized it was simply too complicated a job for us to tackle ourselves. It made more sense to pay a professional to rebuild the stoop properly than fix it ourselves and end up having to do the whole job over a year later.

Time Is Money

You get the most value from DIY home improvement when it’s much cheaper to do it yourself than hire a pro. The snag is that the more a job costs to have done professionally, the more of your time it’s likely to take.

To figure out whether it’s worth it, you need to estimate both the cost and time involved and work out your savings on a per-hour basis.

  1. Price the Professional Job. The most accurate way to figure out how much it would cost to have the job done professionally is to get quotes from contractors. But you can also get a quick estimate from Homewyse. Just select the job and enter your zip code, and the site displays a price range based on cost data for your area.
  2. Add Up the DIY Cost. Next, figure out how much it would cost to do the job yourself. Add up the prices for materials, tools, and permits to get your total DIY cost. Then subtract this total from the cost of a professional job to determine how much you can save by doing it yourself.
  3. Estimate the Time Required. Time is a lot harder to estimate than cost because it depends on your experience and skill level. But home repair books often give estimates of how long a job usually takes for novice, intermediate, and expert do-it-yourselfers. You can also find time estimates for some DIY jobs with an Internet search.
  4. Calculate Your Hourly Wage. Divide the potential savings from DIY by the time required to find out how much money you can save for each hour of work. In effect, that’s the amount you can earn per hour for doing this job yourself. Now all you need to decide is whether you’re willing to work for that wage.

For example, my husband and I decided to rewire our basement, including adding several new ceiling lights and moving around all the switches. It was going to be a much more complex job than we’d previously done. And since we both worked full time, we knew we’d only be able to work on it during evenings and weekends.

Based on the size of the job, we realized it would probably take us weeks (if not months) to complete, while an electrician could do it in one day. Furthermore, it was a job that required a permit, and getting one in our town is not an easy task. We decided shelling out $600 to save ourselves all that time and hassle would be money well spent.


Keeping Costs Down

Both DIY and professional jobs have their costs. For a DIY job, the most significant investment is time. When you hire a contractor, it’s cash.

But in both cases, you want to get the most bang for your buck. By keeping a few tips in mind when you start a remodeling project, you can maximize your investment in both time and money.

Saving on Professional Jobs

DIY is probably the most crucial way to save money on home renovation projects, but it isn’t the only way. Even when you hire a contractor, you can take several steps to keep the cost under control.

Choose High-Return Projects

Repairs are necessary, but home remodeling jobs are optional. To get the most out of them, you can choose to focus on the projects that add the most value to your home when it’s time to sell it.

For instance, the 2020 Cost vs. Value Report from industry publication Remodeling magazine shows that when you add manufactured stone veneer to the front of your house, you can expect to get back over 95% of the project cost when you sell. But adding a new master suite returns only a little over half its cost.

Exact costs and values for different projects vary based on where you live. For more specific information, go to the Cost vs. Value Report and select your location.

Choose the Right Contractor

The single most meaningful thing you can do to get the best value from a professional remodeling job is to find a good contractor. Ask your friends and neighbors for recommendations, and get quotes from at least three contractors. Ask them about their fees and experience with this type of work.

Next, do a little homework on all the contractors. Check their ratings with the Better Business Bureau and ensure their licenses and insurance are up to date. Then you can make an informed choice, balancing the contractors’ quoted prices against the quality of the work you can expect from them.

Communicate

According to Consumer Reports, most of the problems homeowners have with contractors (and vice versa) come from faulty communication. Homeowners get upset when contractors don’t show up on time or listen to their requests or leave a mess. Contractors get upset when homeowners call them at inappropriate hours or let their kids and pets interrupt the work.

To avoid such problems, establish clear guidelines about what you each expect: working hours, working conditions, cleanup, and where to go if you have questions. If a problem arises, talk to the contractor about it as soon as possible. Putting it off just makes it more expensive to fix.

Do Your Own Demo and Cleanup

Even when you can’t DIY an entire job, you can often save money by doing parts of it yourself. Demolition is one example. It doesn’t require a professional’s skill to swing a sledgehammer — just do so carefully.

You can also save money at the other end of the project by doing all the cleanup and other finishing touches, such as painting. That way, you only need to pay the contractor for the parts of the job that an expert really needs to do.

Saving on DIY Jobs

Given the cost of materials, tools, and permits, even a DIY job can get expensive. But there are several tricks for keeping these costs down and getting the best value from your work.

Build Your Skills

Even if it’s your first time doing DIY, you can tackle small jobs like fixing a leaking faucet or putting up a shelf. Instructions are available online, and you can’t do too much damage if you mess up. After building your skills and confidence with little jobs like these, you can work your way up to bigger ones, such as replacing a toilet or building a bookcase.

Prioritize

According to the Consumer Reports bathroom remodeling guide, it’s a mistake to skimp on elements that have to stand up to heavy use, such as bathroom tile. But you can save money with more basic light fixtures or faucets since performance is about the same at all points on the price spectrum.

Save on Materials

You can save on all sorts of materials for home building projects, from kitchen cabinets to windows and doors, by shopping at reuse centers. These stores take unwanted materials, such as leftovers from building projects, salvage from demolition, and items homeowners have discarded, and sell them to the public for bargain prices.

One of the best-known reuse centers is the Habitat for Humanity ReStore, a chain of nonprofit stores and donation centers run by Habitat for Humanity. You can look for listings for reuse centers in your area at The Loading Dock or do an online search for your location and “reuse center” or “architectural salvage.”

Save on Tools

If a DIY job requires a tool you don’t have, borrow it from a friend or neighbor. If that’s not an option, check out Craigslist, eBay, and (if you have time) local garage sales to see if you can buy it secondhand.

If it’s a large tool, such as a floor sander or paint sprayer, you can rent it from a store like Home Depot instead of buying it. For something you only expect to use once or twice, renting is almost always cheaper than purchasing.

If buying new is your only option, find a family member, friend, or neighbor who would like to share the tool with you and split the cost. That way, neither of you has to pay full price for a device you only expect to use occasionally.


Final Word

The choice between DIY and hiring a contractor is more than just a matter of dollars and cents. It’s a careful balancing act between money and a long list of other factors: less hassle, faster results, safety, and professional-quality work. All these advantages explain why so many homeowners come down on the side of hiring a professional despite the higher cost.

However, there’s one advantage of DIY you can’t put a price on: your pride in showing off a job you did yourself. If nothing else gives you quite the same thrill as taking your friends on a tour of the newly finished basement you built with your own hands, that’s more than enough to make up for all the time and work you put into it, even when the cost savings are minimal.

Source: moneycrashers.com