Financial independence can mean different things to everyone. A 2013 survey from Capital One 360 found that 44 percent of American adults feel that financial independence means not having any debt, 26 percent said it means having an emergency savings fund, and 10 percent link financial independence with being able to retire early.
I define financial independence as the time in life when my assets produce enough income to cover a comfortable lifestyle. At that point, working a day job will be optional.
But what about the rest of America? How would you define financial independence? If freedom from debt is what you’re seeking, here are five areas that could be holding you back.
1. Not having clear, financial goals
If you’re not planning for financial independence, chances are you won’t reach it. The future is full of unknowns, but having an idea of when you’d like to achieve financial freedom should be your first step.
Do you want to retire before you turn 65? Do you want to travel the world with your spouse once you reach early retirement? Both goals will require a significant amount of cash stashed away, so it’s important to start saving ASAP to make those dreams come true. (See also: 15 Secrets of People Who Retire Early)
2. Not saving enough
It’s important to identify how much you’re currently saving, and how much you need to save in order to retire when you want to, or reach another major financial goal. Using a calculator like Networthify can help you play with various money-saving scenarios and make realistic projections about retirement.
Another way to make saving money easier is to automate it. Setting up an automatic weekly or monthly transfer from your checking account into your savings account will take the extra task off your already full plate. Even if it’s as little as $5 a week, it’s enough to start building that nest egg. (See also: 5 MicroSaving Tools to Help You Start Saving Now)
3. Not paying off consumer debt
If you’re carrying a credit card balance each month, financing cars, or just paying the minimum on your student loans, compound interest is working against you. Creating an aggressive plan to pay off debt quickly should be a number one priority for anyone who is serious about achieving financial independence. Otherwise, your money is working for your creditors, not you.
If you prefer to tackle credit card debt first, there are several debt management methods you can try, including the Debt Snowball Method and the Debt Avalanche Method. The Debt Snowball Method has you paying off the card with the smallest balance first, working your way up to the card with the largest balance. The Debt Avalanche Method is similar, but here you would pay more than the monthly minimum on the card with the highest interest rate first, working towards paying off the card with the lowest interest rate. Both are highly effective methods, and choosing one really just depends on your preference.
4. Giving into lifestyle creep
A high income does not automatically make you wealthy. As you move up in your career, the temptation to upgrade your lifestyle to match your income will be ever-present. After all, you work hard, so why not reward yourself with the latest gadgets and toys?
However, if you continue to spend and live modestly, you can put more money away for travel or retirement with every pay raise you earn. Financial freedom will be just around the corner if you resist that temptation to upgrade your home, car, and electronics to match your income bracket. (See also: 9 Ways to Reverse Lifestyle Creep)
5. Being driven by FOMO
Fear Of Missing Out, aka FOMO, is the modern version of keeping up with the Joneses. Except now you have access to the Joneses’ social media platforms, and they go on all kinds of fun adventures. Social media is a great tool for keeping in touch, but it can also make you want to spend all your money on lavish vacations, clothes, spa treatments, and other extravagent things. Resist that urge. And block the Joneses on social media if needed. (See also: Are You Letting FOMO Ruin Your Finances?)
You know that plumber who lives on your street and drives the beat up pickup truck? He’s much more likely to be a millionaire than the executive next door driving the BMW.
Don’t believe me? Well that was a common theme found in The Millionaire Next Door:The Surprising Secrets of America’s Wealthy by William Danko and Thomas Stanley.
The authors surveyed thousands of real millionaires and their answers revealed many surprising lessons, such as:
1. The wealthy don’t always look wealthy and vice-versa.
People who look rich may not actually be rich.
They spend more than they can afford on symbols of wealth but have modest portfolios. Some are living paycheck to paycheck, heavily in debt with little or no savings.
Conversely, real millionaires usually live in middle class neighborhoods, drive cars they own outright, and don’t spend extravagantly on material things.
2. They don’t spend a lot of money on cars.
The authors point out that cars are the second biggest material expense in our lifetime.
If you add up all the money you’ve spent on cars over the years it can be really eye-opening.
Even if you’re young, the amount you’ve spent on cars compared to how much money you’ve earned is usually pretty high.
According to their survey results, most real millionaires buy a nice car, like an Acura or Lexus. They buy it with cash, or make payments until they own it, and ultimately hold on to the car for at least a decade.
Forbes backs this up, stating 61% of those earning at least $250,000 a year are driving Honda, Toyota, Acura and Volkswagens.
3. They save and consistently invest.
In America, our average household savings rate dipped into the negative in 2005, for the first time since the Great Depression. The savings rate has improved but is still only 5% currently.
Which brings us back to your original question; What are the secrets only the wealthy now and the middle class is unaware of?
Now, we all know saving money to acquire wealth is not a secret. But clearly this is an area the middle class can improve in
Compare that negative savings rate to that of the average millionaire, who invests nearly 20% of their income.
In its simplest form, that’s really all wealth is; earning more than you spend and investing the difference — consistently.
Consistently investing means you are fully capitalizing on compounding interest.
It means you are turning small contributions into large sums over time.
4. They adhere to a budget.
The majority of millionaires stick to a budget.
Even among those who don’t budget, they pay themselves first with money directly to their savings and investment accounts. They then work from the remaining funds.
But the majority do take the time to budget, even if they don’t want to, because the know the long-term benefits first-hand.
5. They spend a lot of time managing their money.
The wealthy spend a lot of time budgeting, goal setting and managing their portfolios.
According to Danko and Stanley, the wealthy spend nearly twice as many hours per month managing their finances as those without wealth.
The good news?
You don’t have to earn a big six-figure salary to accumulate wealth, as long as you plan for it.
In their survey of 854 middle-income workers, the authors found a strong correlation between investment planning and wealth accumulation citing; “Most prodigious accumulators of wealth have a regimented planning schedule. Each week, each month, each year, they plan their investments.”
6. They own their own business or work for themselves.
Not everyone that gets rich owns their own businesses.
But in The Millionaire Next Door, they discovered a lot of folks who ran their own service businesses such as landscapers, plumbers, electricians, commercial cleaners and so on.
One of the key takeaways of this book for me is many millionaires attributed their dedication to financial planning as a requirement of doing business.
Because their business finances and personal finances are so closely intertwined, they really have no choice but to consistently examine their finances in order to survive — and thrive.
There’s many more lessons in the book but I wanted to mention some of the biggest takeaways for me.
I initially read The Millionaire Next Door around the year 2000. I don’t remember the exact year. But it was very impactful in my life, so much so that I’ve read it several times since then.
It’s a mindset book as much as it’s a nuts-and-bolts how-to book. Much of the advice is tried and true stuff your parents or grandparents would tell you. You’d be wise to listen to it, as tried-and-true tactics provide the best template to follow for proven success.
At the same time, the data from their surveys also uncovers many surprising similarities among millionaires. Tendencies and habits that challenge conventional wisdom and make you rethink your employment, lifestyle and personal finance decisions.
It’s definitely one of my favorite personal finance books, which is why I wanted to share the lessons I’ve learned from it here.
The Millionaire Next Door is a must-read, no matter where you are in your personal finance journey. It really provides the proper mindset needed to successfully manage your money.
It sets the right foundation for your money goals. When you see the common habits of hundreds of millionaires, along with the logic behind those habits, it’s becomes painfully obvious the personal choices you need to make to become a millionaire yourself, or at least improve your personal finances significantly.
Have you read The Millionaire Next Door? What is the biggest lesson you learned from reading it?
The 50/30/20 rule (also referred to as the 50/20/30 rule) is one method of budgeting that can help you keep your spending in alignment with your savings goals. Budgets should be about more than just paying your bills on time—the right budget can help you determine how much you should be spending, and on what.
The 50/30/20 rule can serve as a great tool to help you diversify your financial profile, reach dynamic savings goals, and foster overall financial health.
In this post, we’re taking you through the steps of budgeting using the 50/30/20 approach so that you can learn how to set up a budget that’s sustainable, effective, and simple. Use the links below to navigate or read all the way through to absorb all of our tips on how to budget using the 50/30/20 method:
What is the 50/30/20 Budgeting Rule?
Popularized by Senator Elizabeth Warren and her daughter, the 50/30/20 budgeting rule–also referred to as the 50/20/30 budgeting rule–divides after-tax income into three different buckets:
Essentials: 50% of your income
To begin abiding by this rule, set aside no more than half of your income for the absolute necessities in your life. This might seem like a high percentage (and, at 50%, it is), but once you consider everything that falls into this category it begins to make a bit more sense.
Your essential expenses are those you would almost certainly have to pay, regardless of where you lived, where you worked, or what your future plans happen to include. In general, these expenses are nearly the same for everyone and include:
The percentage lets you adjust, while still maintaining a sound, balanced budget. And remember, it’s more about the total sum than individual costs. For instance, some people live in high-rent areas, yet can walk to work, while others enjoy much lower housing costs, but transportation is far more expensive.
Wants: 30% of your income
The second category, and the one that can make the most difference in your budget, is unnecessary expenses that enhance your lifestyle. Some financial experts consider this category completely discretionary, but in modern society, many of these so-called luxuries have taken on more of a mandatory status. It all depends on what you want out of life and what you’re willing to sacrifice.
These personal lifestyle expenses include items such as: your cell phone plan, cable bill and trips to the coffee shop. If you travel extensively or work on-the-go, your cell phone plan is probably more of a necessity than a luxury. However, you have some wiggle room since you can decide upon the tier of the service you’re paying for. Other components of this category include gym memberships, weekend trips, and dining out with your friends. Only you can decide which of your expenses can be designated as “personal,” and which ones are truly obligatory. Similar to how no more than 50 percent of your income should go toward essential expenses, 30 percent is the maximum amount you should spend on personal choices. The fewer costs you have in this category, the more progress you’ll make paying down debt and securing your future.
Savings: 20% of your income
The next step is to dedicate 20% of your take-home pay toward savings. This includes savings plans, retirement accounts, debt payments and rainy-day funds—things you should add to, but which wouldn’t endanger your life or leave you homeless if you didn’t. That’s a bit of an oversimplification, but hopefully you get the gist. This category of expenses should only be paid after your essentials are already taken care of and before you even think about anything in the last category of personal spending.
Think of this as your “get ahead” category. Whereas 50%(or less) of your income is the goal for essentials, 20 percent—or more—should be your goal as far as obligations are concerned. You’ll pay off debt quicker and make more significant strides toward a frustration-free future by devoting as much of your income as you can to this category.
The term “retirement” might not carry a sense of urgency when you’re only 24 years old, but it certainly will become more pressing in decades to come. Just keep in mind the advantage of starting early is you will earn compounding interest the longer you let this fund grow.
Establishing good habits will last a lifetime. You don’t need a high income to follow the tenets of the 50/30/20 rule; anyone can do it. Since this is a percentage-based system, the same proportions apply whether you’re earning an entry-level salary and living in a studio apartment, or if you’re years into your career and about to buy your first home.
A note of caution, though: Try not to take this rule too literally. The proportions are sound, but your life is unlike anyone else’s. What this plan does is provide a framework for you to work within. Once you review your income and expenses and determine what’s essential and what’s not, only then you can create a budget that helps you make the most of your money. Years from now, you can still fall back on the same guidelines to help your budget evolve as your life does.
Ask Yourself: Why is a 50/30/20 Budget Necessary?
According to Consumer.gov, there are plenty of different reasons why people start a budget:
To save up for a large expense such as a house, car, or vacation
Put a security deposit on an apartment
To reduce spending habits
To improve credit score
To eliminate debt
To break the paycheck to paycheck cycle
Identifying the reason why you’re budgeting with the 50/30/20 method can help you stay motivated and create a better plan to reach your goal. It’s kind of like the “eye on the prize” mentality. If you’re tempted to splurge, you can use your overarching goal to bring you back to your saving senses. So ask yourself: why am I starting to budget? What do I want to achieve?
Additionally, if you’re saving up for something specific, try to determine an exact number so that you can regularly evaluate whether or not your budget is on track throughout the week, month, or year.
How to Budget with the 50/30/20 Rule
To make the most of this budgeting method, consider following the steps below:
Deep Dive Into Your Current Spending Habits
Before implementing a 50/30/20 budget, take a long, hard look in the mirror (or maybe your wallet, rather). We’re talking about analyzing your spending habits. Do you overspend on clothes? Shoes? Food? Drinks? Figuring out your spending vices from the very beginning will help you learn how to use a 50/30/20 budget that effectively cuts spending where you need it most.
Take a look at your bank and credit card statements over the last few months and see if you can find any common trends. If you find that you’re overspending on going out for food and drinks, come up with a plan for how you can avoid this scenario. Cook dinner at home before, have a potluck with friends, find happy hour specials around town. There are plenty of ways to budget and save money without compromising your social life.
Pro Tip: Using Mint’s easy budget categorization, you can identify where you can cut back on unnecessary expenses.
Identify Irregular Large Ticket Expenses in the “Wants” Category
Of course, there are expenses in life that we simply can’t avoid. Maybe you need to make a repair on your vehicle, or perhaps you’re putting a down payment on a house in the next six months. Oftentimes these bills are necessary expenses, so you’ll have to factor them into your budget.
When you’re coming up with your 50/30/20 budget, take a moment to look at your calendar so that you can plan for these expenses and adjust your spending in the time before and after you incur the expense.
Add Up All Income
Totaling your income is an important first step when learning how to budget your money using the 50/30/20 rule, but it’s not always as simple as it sounds. Depending on your job, you might have a relatively steady paycheck or one that fluctuates from month to month. If the latter is the case, collect your paychecks from the last six months and find the average income between them.
Is the 50/30/20 Budget Right for You?
The 50/30/20 budget isn’t the only option. Other popular methods include:
Zero-sum: The principle of the zero-sum budget is that you must allocate each and every dollar you earn toward a specific expense, savings account, debt, or disposable income account. This style can help deter unnecessary spending because you’ll know exactly how much you have to spend on what items.
Envelope budgeting: Swiping your card left and right is easy—but the envelope method doesn’t let you succumb to this temptation. Rather than using your card to spend, you use a predetermined amount of cash as your spending pool, nothing more.
Choosing a budgeting style that works for you depends on a variety of factors; there’s no one-size-fits-all approach to budgeting and saving money. That said, the 50/30/20 tends to be a simple yet effective option for getting started on your budgeting journey.
Main Takeaways: How to Budget Using the 50/30/20 Rule
Here are the key tenets of the 50/30/20 rule of budgeting:
This budget rule is a simple method that can help you reach your financial goals
This budgeting method stipulates that you spend no more than 50% of your after-tax income on needs
The remaining after-tax income should be split up between 30% wants or “lifestyle” purchases, and 20% to savings or debt repayment
Mint offers budgeting software and a helpful budgeting calculator that makes it easy to live in accordance with the 50/30/20 rule (or any budget that suits your lifestyle) so that you can live life to its fullest. After spending just a little bit of time determining which of your expenses fall into which category, you can create your very first budget and keep track of it every day. And when your situation undoubtedly changes, Mint lets you adjust, so your budget can change with you.
Sign up for your free account today, build your 50/30/20 budget, and make this the year you build a strong foundation for your future.
Learning the steps toward becoming more financially secure doesn’t have to be daunting. Here are 5 easy ways to get a better sense of your finances.
Albert Cooper, Partner
January 22, 2021
financial security with having a million dollars in the bank. While having a hefty bank balance does not hurt, it is only part of the story.
Many top earners are learning this the hard way recently, as the economic uncertainty has left them on the hook for expenses they can no longer afford to pay. However, this does not have to happen to you: here are five ways to be financially secure.
When considering how to become financially secure, your priority must be to ensure that you have enough income to cover your expenses. If you cannot pass this hurdle, then you should reconsider your lifestyle. Granted, this might be harder for some people, but even if you can put away $10 per week, this will help you to have the emergency funds you need to weather times of uncertainty, such as the COVID pandemic.
Step 1: Develop good habits
Managing your finances requires discipline, which means that you need to have good habits, as this is the only way that you can keep yourself from falling into traps. One way to do this is to keep your credits cards at home when you leave the house, as this will keep you from splurging on impulse buys. You might also want to think about getting a separate bank account for your daily spending needs, because this will limit the funds available to you at any given time.
Having good spending habits means that you need to be disciplined. However, if there is a large expense that makes sense and you have planned for it, then you should consider making it.
Another healthy financial habit is to always do your due diligence. For example, according to reverse mortgage expert Michael G. Branson, you can leverage the existing value of a property you own as a senior citizen with a reverse mortgage—but that doesn’t mean you shouldn’t research the pros and cons. Anytime you take out a loan (whether it’s a mortgage loan, personal loan, or a payday loan), open a new credit card, or finance a new car, always look at the fine print. Pay particular attention to interest rates, penalties, annual fees, and APR.
Step 2: Leave your car at home
Or better yet, sell your car. This is especially true if you are living in a city or a town where all your daily needs can be filled from shops within walking or cycling distance. Not using your car means that you can save money on gas and maintenance, and getting rid of your vehicle altogether will eliminate monthly payments for your auto loan and insurance.
If you need a car for just a day or two, then you should consider renting or using a ride-sharing app. You could also consider purchasing a “new to you” vehicle as they will usually cost less than a new car.
Exceptions to this might be if you need to use your car for work. In this case, you are using your vehicle to make money, and as such, it might be considered an investment. However, if you are using your car to make money, then you want to make sure you are accurately tracking your expenses. Not only will this help you to get any tax advantages, but it will give you the basis to determine if the money you are spending on your car is yielding the return you expected.
Step 3: Make as many pre-tax deductions as possible
While the rules might vary depending on where you live, you want to make sure that you take full advantage of any pre-tax contributions you can make. While doing so means that you will be taking home less money, it also means that you will be paying less in tax while putting money away for your future. As such, this approach is a big win for you and your financial future.
Step 4: Be insured
Having the right life insurance policy can help to protect you and your family when the time comes. As such, you want to make sure that you have enough life insurance to look after your family and to cover funeral expenses. Also, some policies can be used as collateral for loans.
While going into debt is usually not recommended when trying to become financially secure, using it to buy revenue-generating property or business might be an excellent way to get closer to your goal. As such, having insurance could help you down the road.
Step 5: Regularly review your financial health
Just like you go to your doctor for an annual checkup, you should regularly review your financial health. Doing so will give you an idea of where you stand and what additional steps you need to take to reach your goals. If you want to become financially secure, then you want to make sure that you check your financial health (e.g., budget, savings, etc.) at least once a month.
Where would you live if you could work from anywhere? The idea of geographic independence had remained just that for many workers — an idea — until the pandemic offered an opportunity to try it in action. Many U.S. workers found themselves working from home in 2020, which actually turned out to be “work from anywhere,” giving them a firsthand taste of digital nomadism.
Now, as more companies promise ongoing flexible remote-working opportunities in 2021 and beyond, some employees are weighing the benefits, complexities and uncertainties of giving up a permanent home for good.
Yet there’s far more to becoming a digital nomad than packing your stuff into storage. From taxes to transportation, here are five factors to keep in mind before hitting the road as a U.S.-based nomad.
While domestic nomads don’t have to worry about overseas tax rules, they must still navigate the complex web of state income taxes. Since each state has its own independent rules, this can get overwhelming in a hurry.
“The general idea for freelancers is that states want to tax people based on where their butt is, doing work,” explains Adam Nubern, the founder of Nuventure CPA, which specializes in digital nomad taxation. “So if your butt is in Arizona doing work, then Arizona is more often than not going to want to tax you.”
Freelancers and others who earn self-employment income must either navigate these rules on their own or hire a professional to do so for them. And full-time employees earning W-2 income face another challenge: Pitching nomadism to their employers.
“Set expectations that your employer will not want to do this,” Nubern says. “They may have to file in each state you will be in. The complexity, especially for a small employer, can be a massive knowledge and compliance hurdle.”
For example, if you spend a tax year in six different states, your employer could be expected to file returns in each, navigating the reciprocal tax agreements between them. Some states even lack these agreements, so “they will not give a dollar-for-dollar tax credit for the amount you pay to the other state,” according to Nubern. In other words: You could get taxed twice.
2. Quality of life
Geographic independence is about much more than byzantine tax codes, of course. The big appeal of becoming a digital nomad is that it allows you to work where you want rather than live where you work. What makes for a high quality of life differs from person to person, but it’s important to start thinking about what matters most to you.
“I personally love staying in places that have great hiking and nature, right outside of the major U.S. cities,” says Julia Lipton, founder of venture capital fund Awesome People Ventures, who is approaching her four-year mark as a nomad. She cites Sausalito and Encinitas in California; Beacon, New York; and the Oregon coast as examples of beautiful locales not far from urban cores.
Consider listing several locations and scoring each across several criteria, including (based on your preferences):
Arts and culture.
And keep in mind that the stakes are much lower as a digital nomad. If you don’t enjoy a particular destination, you can always move on.
3. Cost of living
Geographic independence can, in theory, significantly reduce your cost of living. That’s why the “Silicon Valley exodus” has seen tech workers fleeing the expensive Bay Area for greener, more affordable pastures.
Yet for digital nomads, estimating the real cost of living requires more than simply adding up the cost in a particular area and dividing it by the time spent there. That’s because nomadism incurs additional costs, including:
Transportation within and between destinations.
Higher short-term lodging costs.
Higher food costs (if you eat out more).
Plus, unlike internationally traveling digital nomads who can leverage extremely low costs in other countries, U.S.-based nomads confront bigger financial hurdles.
“When I first started doing this, I was living in places like Thailand where for $500, I could live in a hut on the beach,” Lipton says. “In the U.S., especially because I like to be near my friends in expensive cities, it’s harder to make the math work.”
Cost-of-living calculators are helpful for determining the relative priciness of potential destinations (Hawaii is really expensive, as it turns out), but don’t capture the cost of moving around. One way to mitigate these costs is to move less: Stay in each destination for several months or seasons, rather than several weeks.
Another factor to consider: Some employers offer salaries based on location. So if you decide to move from the Bay Area to, say, Detroit, you could get a pay cut that offsets cost-of-living savings. Make sure you understand these policies before packing up.
Whether hopping between cities or between national parks, finding good, affordable housing poses one of the biggest challenges to domestic digital nomads. There’s no one solution to solving the housing riddle, but some potential strategies include:
Long-term vacation rentals.
Housesitting and swapping.
RV or van life.
These approaches are not mutually exclusive, and many nomads cycle among housing opportunities. Getting creative, combining strategies and thinking outside the box is the best way to avoid overpaying.
“I try to keep my monthly rent below $2,000. This means I have to be crafty and try to sublet local markets or make deals with people off of Airbnb,” Lipton says.
Getting around is obviously a big part of being a nomad, and it’s worth considering different strategies for how to handle it. Indeed, the means of transportation will determine where you can reasonably go.
For example, you could fly between cities, and then either rent a car or rely on public transportation at your destination. This maximizes flexibility in terms of where and when you travel, but limits the range of potential home bases to major cities. Or, you could drive between destinations, which solves the problem of getting around once you’re there, but will be difficult if you’re traveling far or trying to park in dense urban centers.
Again, it all comes down to preference.
“I travel by plane and pick places where I don’t need a car,” Lipton says. “Exploring by foot is one of my favorite activities, so I try to optimize for that.“
If you’re looking to escape into nature, you’ll want to have a vehicle (and find a way to get reliable internet service from the road). And keep in mind that you can mix and match these strategies as you go — there’s no need to lock yourself into a particular strategy until you find what works.
The bottom line
Location flexibility has suddenly become the new normal. Untethered to a specific office or city, many are considering uprooting themselves for good and traveling the country as digital nomads. This lifestyle affords many perks, as well as some potentially unforeseen financial consequences.
It’s all about finding the right balance of high quality of life with low cost of living while juggling tax rules and transportation options. It’s a challenge to get it all right, but part of the beauty of being a nomad is that you can take chances. If something doesn’t work: Move!
How to Maximize Your Rewards
You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2021, including those best for:
I hope this list of income-earning blogs inspires you and proves you can make money online through blogging.
15. Making Sense of Cents
Founder – Michelle Schroeder-Gardner Income – $146,498 per month.
Michelle Schroeder-Gardner started Making Sense of Cents to “help improve my finances, keep track of my progress and to help readers improve their finances along the way.”
Well, let’s see — how has Schroeder-Gardner done in these areas?
She’s certainly improved her finances, paying off over $38,000 in student loan debt in just 7 months while growing the site’s revenue year-over-year.
Schroeder-Gardner has transparently tracked her progress in her popular monthly income reports. She says the reports act as a journal for her and keeps her accountable, while also showing others that side income is possible.
And she’s also helping others with their finances by publishing thousands of how-to articles about earning more, saving more, and becoming financially fit. Making Sense of Cents’ primary income comes from affiliate marketing. You can see a complete breakdown of this profitable blog’s earnings here.
#14. Smart Passive Income
Founder – Pat Flynn Income – $152,276 per month.
Smart Passive Income (SPI) founder Pat Flynn is a beacon of light in the sometimes dark and shady internet marketing space.
Calling himself a “crash test dummy of online business,” Flynn transparently shows what’s working and what isn’t working in his business.
His site details his online business experiments and gives readers actionable blueprints to follow and outlines mistakes to avoid.
Flynn didn’t invent the online income report, but he certainly popularized them. He’s been publishing monthly income reports on the blog since 2008, detailing his income sources, revenue figures, as well as his expenses. It’s still one of the most trafficked pages on the site.
Flynn is a great example of a blogger who has successfully branched out into other areas as well.
In 2010, Flynn launched the Smart Passive Income Podcast which is routinely in iTunes top 10 Business podcasts. To date, the show has been downloaded an impressive 33 million times.
He also broadcasts Ask Pat, a Q and A online business podcast, and SPI TV for visual learners.
Flynn is now a Wall Street Journal best-selling author with 2016’s release of Will It Fly?.
And while his individual success has been plentiful and hard-earned, Flynn gives back by serving on the board of the non-profit Pencils of Promise, helping to build new schools for children in underprivileged regions around the world. SPI’s primary income comes from affiliate marketing, with other earnings from podcast sponsorship and products.
Founder – Gina Trapani Income – $154,000 per month
Lifehacker was founded in 2005 by Gina Trapani as part of the Gawker Media network.
From the start, Trapani acted as the sole contributor, writing 8 articles a day. Talk about blogging like a boss!
She impressively launched the site with an exclusive sponsorship from Sony, rumored to be 3 months for $75,000. Yeah, she’s a boss.
Lifehacker eventually added other contributors and the blog continued to grow in popularity.
As its motto claims, the site’s content is about “tips, tricks and downloads for getting things done.”
Trapani moved on from the company in 2009, and Nick Denton has run it ever since.
The site still churns out 18 articles a day, all designed to make you more productive. Lifehacker earns its most of its revenue from advertising and it’s been one of the top-earning blogs since it’s inception.
#12. Timothy Sykes
Founder – Timothy Sykes Income – $165,000 per month
Timothy Sykes is a multimillionaire stock trader who famously earned $4 million while day trading in college.
As a high school student, Sykes took $12,415 of his bar mitzvah gift money and turned it into $1.65 million by day trading penny stocks.
Not stopping there, Sykes has created a hedge fund and starred in the television program Wall Street Warriors. These days, Sykes documents his trades and strategy on his popular blog, TimothySykes.com. His top-earning blog offers a Millionaire Challenge and a successful subscription service where users can get real-time trading alerts and access a vast library of trading videos.
Founder – Collis Ta’eed, Cyan Ta’eed and Jun Rung Income – $175,000 per month
Collis Ta’eed, Cyan Ta’eed and Jun Rung founded Tut+ as a modest blog with tutorials on freelancing and Photoshop.
The site ultimately grew into a network of 15 educational blogs, helping people learn profitable online skills, from coding to videography.
At the center of it all remains Tuts+. In 2014, the group combined all 16 blogs into one central hub called Envato Tuts+.
Envato Tuts+ Premium, a subscription-based membership area offering video courses and ebooks, is the primary source of the site’s income. You can still find plenty of free content to learn creative skills and yes, they still have tutorials on freelancing and Photoshop.
Tuts+ is one of my favorite blogs and it’s inspiring to know it started as a hobby and developed naturally and organically into one of the highest-earning blogs online.
#10. Smashing Magazine
Founder – Sven Lennartz and Vitaly Friedman Income – $215,000 per month
Smashing Magazine is the superb creation of Sven Lennartz and Vitaly Friedman.
The blog debuted in 2006 with the goal of helping people with web design and web development interests.
Today, Smashing Magazine is a go-to site for anyone looking to acquire these lucrative skills, with an enormous amount of informative and actionable content.
Not surprisingly, the blog receives 5 million page views a month.
The site now hosts frequent web development conferences and full-day workshops all over the world, to help both professionals and amateurs improve their craft.
This top earning blog’s main income comes from their membership area, where users can learn from an impressive number of tutorials covering everything from coding, web design, mobile app development, UX design, graphics and WordPress.
Founder – John Lee Dumas Income – $223,000 per month
I’m convinced John Lee Dumas never sleeps.
He operates EOFire.com, short for Entrepreneurs on Fire, delivers a daily business podcast, and in recent years has published two best-selling journals — The Freedom Journal and The Mastery Journal.
But his bread and butter is the EOFire podcast, which is fantastic. In 2012, he noticed none of his favorite podcasts were podcasting daily, leaving him wanting more. So he launched his daily podcast interviewing entrepreneurs, and the rest, as they say, is history.
JLD, as he’s affectionately known, has now interviewed over 1600 entrepreneurs, including Tim Ferriss, Barbara Corcoran, Seth Godin and Gary Vaynerchuk.
In 2013, EOFire was named Best of iTunes.
His journals wrote the book (no pun intended) on how to run a successful crowdsourcing campaign. And through a partnership with Pencils of Promise, Dumas is parlaying the success of his journals into the creation of schools in underprivileged countries. You can see one of the schools Dumas made possible here. EOFire earned a gross income of $595,936 in February of 2016. That’s an incredible feat for one month and well-deserved for JLD.
It’s always good to see good people doing good work and succeeding.
Founder – Peter Rojas Income – $325,000 per month
Peter Rojas is so awesome he’s on this list twice.
Rojas created Gizmodo to cover technology, entertainment, politics, science and science fiction.
Gizmodo launched in 2002 as part of the Gawker Media network run by Nick Denton with Rojas as Editor in Chief. The blog quickly grew in popularity by partnering with a variety of international firms to deliver translated versions of its content in Europe.
When you visit the site’s home page, one of the first things you notice is an above-the-fold banner that is larger than most. As you scroll down, you’ll find Gizmodo does a great job of showing a lot of content with only a couple of display ads along the side, with one of them being the same advertiser found at the top of the page. When you finally scroll past all the content (there’s a lot!) and reach the bottom of the page, you’ll find another large banner just above the footer, and yes, the advertiser is the same as in the other two spots. Gizmodo’s home page has a great balance of being heavily content-focused but still being able to make a tidy profit with ads. The ads are unobtrusive but still get noticed, and because of the repetition, the advertiser gets noticed too. It’s a win-win advertising model for other sites to emulate.
#7. Perez Hilton
Founder – Perez Hilton Income – $575,000 per month
Perez Hilton is a great example of a successful blogger who capitalized on other opportunities outside of blogging. He’s also a television personality, nationally syndicated host of Radio Perez, and author of a children’s book.
But what he’s most famous for is his celebrity gossip blog PerezHilton.com. Millions visit his site every day to revel in his brand of snarky gossip entertainment. Hilton, born Mario Armondo Lavandeira Jr, started his blog as a hobby and decided to focus on Hollywood “because it was something I was inherently curious about, and fascinated with. And, let’s face it, celebrities — a lot of them — are crazy.”
This profitable blog earns its revenue from advertising banners on the site.
Founder – Brian Clark Income – $1,000,000 per month
With Copyblogger, Brian Clark created an audience-focused content marketing machine.
In fact, Forbes recently called it “the most influential content marketing blog in the world.”
Copyblogger has been helping people write better, sell more, and get more traffic since 2006.
The site’s original tagline was “Internet Marketing For Smart People.” In other words, they’re not selling snake oil and get rich quick schemes.
Now the tagline is “Words That Work” and boy, do they ever. Clark and his team are outstanding at writing copy.
When I read they’re sales copy, I’m always compelled to buy. In fact, this site operates on their Genesis Framework and a StudioPress blog theme. Based on their audience research and communication, they’ve strategically added tools and platforms to help content marketers and digital entrepreneurs grow their businesses.
Founder – Pete Cashmore Income – $2,000,000 per month
Mashable was started in 2005 by Pete Cashmore, a 19-year-old who still lived at home with his parents in Scotland.
He began by documenting the latest news about social media and emerging Internet technologies.
His work resonated with lots of folks and Mashable became an immediate success, attracting 2 million readers within the first 18 months.
Mashable has come a long way since those early days. It’s no longer just Cashmore contributing Mashable’s content (they’re hiring!), and they are now headquartered in New York City. Mashable is positioned to be one of the top-earning blogs online for some time.
The blog is still growing with over 45 million readers a month and the content has expanded to cover business, entertainment and lifestyle and now offers 5 international editions.
Mashable’s income primarily comes from advertisements on the site.
Founder – Michael Arrington and Keith Teare Income – $2,500,000 per month
Michael Arrington and Keith Teare started TechCrunch in 2005 to cover technology industry news.
The blog has grown immensely and now features big-name columnists in the startup and venture capital industries.
AOL bought TechCrunch in 2005 for a rumored $25 to $40 million.. TechCrunch earns revenue from display advertising on the blog Specifically, they charge between $19.25 and $36.50 per CPM (Cost Per Thousand views).
According to the site, they receive 12 million visitors per month and 35 million page views per month. With such a high CPM, you can see how this top-earning blog makes its considerable income.
Founder – Rand Fishkin and Gillian Muessig Income – $3,300,000 per month
Moz is the go-to place for all things SEO. Search engine optimization pros check out Moz daily to see what’s happening in the space.
They also come to use their tools and resources to help them rank their sites and extend their visibility.
Rand Fishkin co-founded the site with Gillian Muessig, who happens to be his mother. The two initially operated a web design shop and Rand had to learn SEO to promote the business. He shared what he learned in SEO forums and quickly became known as an authority in the field.
Frustrated by the secretive world of SEO, they started SEOMoz in 2004 as a way to openly share the knowledge. In fact, the Moz part of their name is a direct nod to the open-source sharing philosophy made famous by the Mozilla Foundation and Dmoz Web directory project.
These days the profitable blog and community simply go by Moz, and Fishkin jokingly refers to his title as “Wizard of Moz.” Moz earned $42 million in 2016, primarily from its paid membership area, which offers valuable tools and services for the avid search engine marketers.
True to the name, Moz still offers numerous tools for free and even the membership area comes with a 30-day free trial.
Founder – Peter Rojas Income – $5,500,000 per month
We last saw Peter Rojas at #8 with Gizmodo and while that blog focuses on many topics, with Engadget, it’s all about tech.
Rojas created Engadget to give sound advice and detailed reviews on technology and consumer electronics. From the beginning, the site has employed numerous writers and editors to contribute to its content machine.
Engadget is now run by AOL, who acquired the blog in 2005. The lesson here is if you ever want to sell your blog, it’s best if it is a brand on its own and not a personal brand.
The company earns massive revenue from advertising on the site.
Founder – Arianna Huffington Income – $14,000,000 per month
In 2005, Arianna Huffington launched the Huffington Post with the goal of becoming a political counterpart to the popular Drudge Report. The blog provided a liberal view of politics and lifestyle and quickly gained a strong following.
The site has grown year after year and in 2011, Huffington sold the blog to AOL for $315,000.
Huffington received $21 million-plus stock options in the company as part of the sale and stayed on as Editor-in-Chief. She resigned from that post in August 2016, and now devotes her time to a new startup Thrive Global, a health and wellness site.
The site has rebranded and is now known simply as HuffPost.
It is the #1 most popular political blog according to a study by eBizMBA. Alexa Global, Compete and Quantcast.
The top-earning blog is an enormous success, earning $14,000,000 in revenue in 2016, and it is estimated to be worth $1 billion currently.
Sponsored advertising revenue provides the majority of HuffPost’s income. The site provides banners and other ads across it’s variety of channels.
What do you think?
I hope this list shows you what is possible and inspires you to follow your own path to the top.
As always I would love to hear your thoughts. Please leave a comment and let me know what you think
15 Top Earning Blogs Making Money Online Infographic
As always I would love to hear your thoughts. Please leave a comment and let me know what you think
As always I would love to hear your thoughts. Please leave a comment below. What did you think?
Are you at the point where you’re ready to invest more in retirement each month but aren’t quite sure how? Maybe you want to increase your savings rate but the numbers don’t add up. I’ve always said that saving something is better than nothing. If you can’t max out savings like your retirement account, it’s not a big deal and you can always work your way up to this goal year after year. We’ve put together 5 sacrifices to max out your retirement account.
Right now, the maximum contribution limits for a 401(k) is $19,000 and $6,000 a traditional or Roth IRA. This year, I was finally able to max out my retirement account contributions for the first time. I know how it seems like you’d have to fork over a lot of money each year to do the same thing, and that’s because you will. However, you can save enough to max out your retirement for the year and still live a comfortable life.
You may have to make some sacrifices, but they may not produce super drastic changes to your budget or your lifestyle. Here are 5 reasonable sacrifices to help max out your retirement account next year and every year afterward.
One thing that you can sacrifice to help you max out your retirement account is your car. While you can probably save a ton of money by not having a car especially if you live in a big city, you don’t have to give up owning a car completely. My husband and I both drive older paid-off cars and we love it. With the average car payment hovering around $400 to $500 per month, that’s a lot of money to fork over each month just to drive.
In fact, $500 per month is all you need to max out an IRA right now since the annual contribution limit for anyone under 50 is $6,000. Since cars depreciate in value so much, it often doesn’t make financial sense to buy a brand new car. Used cars can be paid off quicker and you may even be able to buy a decent used car in cash. From there, you can use that money that you would save by not having a car loan and put it toward retirement savings.
Here are 5 reasonable sacrifices to help max out your retirement account . Click To Tweet
Live in a Smaller Home
My husband and I are sacrificing our dream home right now and I’m totally fine with that. We bought our first home a few years ago when we were 26 and 29 years old. It’s a nice starter home and it’s small. We don’t even have a basement but our family size is small right now so it’s fine. By having a smaller home and making it work, we save a ton of money on our mortgage, maintenance, repairs, and cleaning.
Now, would I love to have more space, walk-in closets or an extra enclosed room to serve as my office? Sure, but it’s not killing me that we live in a 1,300 sq ft home and instead I’m choosing to focus on what I love and enjoy about our home. I love how we have an extra bathroom and a nice fireplace in the family. We always have a decent-sized yard with a wrap-around deck and garden boxes that were already set up when we moved. Even though we are technically ‘sacrificing’ our dream home right now, I know that we will buy it later down the line and I’m content with where we’re at now.
RELATED: 6+ Easy Ways to Save Thousands on Home Repair
Some people give up traveling to pay off debt and save more. You don’t have to do this even if you’re willing to make sacrifices to max out your retirement next year. Instead of giving up travel altogether, find ways to make it more affordable so you can go on trips, and still invest generously. This is why I love frugality. Being frugal allows you to get creative and use the resources available to spend wisely on your values and save where you can.
Instead of paying for flights full price, you can wait for sales or sign up for a rewards credit card. Instead of spending tons of money on a hotel, see if you can stay with a friend or relative when you travel or book an Airbnb. Usually, when I travel, I’m not super picky about where I stay so long as it’s clean. I also plan to cook some meals if possible if our accommodations allow it.
I’ll usually book an Airbnb or a suite with full kitchen access so I can prepare breakfast and snacks. You don’t have to dine out for all 3 meals when you travel and breakfast is one of the easiest meals to prepare whether you have full access to a kitchen or not.
RELATED: How to Plan for Budget Travel This Year
Delay Your Gratification
We live in a society where people want everything fast and right now. This often leads to getting items and services before you can pay for them in full. If you want to avoid debt and living above your means, practice delayed gratification regularly and budget for larger purchases instead of financing them.
My husband and I used to have a ton of credit card debt, student loans, personal loans, and car loans. This debt really ate into our disposable income. Even after paying it off, I’ve still been tempted to finance things like furniture and other purchases. I choose not to and to delay my gratification. By simply waiting and planning, I save a lot of money and do a better job of committing to live below my means.
When you slow down on financing purchases and making impulse buys regularly, you’ll find that your budget is not so tight. You may even wind up with thousands extra each year that you can invest.
Time is not a renewable asset. Once you use your time, it’s gone. You can never go back or relive a day where you wasted time. Keep this in mind when considering sacrifices to max out your retirement account. However, it should also be motivation to make good use of your time especially when it comes to working and earning extra money. If you’re looking to start maxing out your retirement account, odds are you’re still earning an active income where you’re trading time for money. If you want to earn more or increase your savings rate, you may have to get a second job or a side hustle.
Even if you want to establish a passive stream of income, you’ll need to dedicate time or energy to get that idea off the ground. Of course, sacrificing your time to work is not a waste. You can even make the most of your effort by choosing work that is enjoyable and fulfilling. Or start a side business where you can do things you love and still make good money.
Try to stick to your budget and save your money wisely to make it all worth it in the end. Pay yourself first consistently and remain dedicated to your goal in order to max out your retirement next year and each year afterward.
Hooray, you have some extra money each month to pay down debt! This 6-step process will help you decide how to use that money wisely to reach your financial goals.
Laura Adams, MBA
May 13, 2020
10 Things Student Loan Borrowers Should Know About Coronavirus Relief
6 Steps to Decide Whether to Pay Off Student Loans or a Mortgage First
Let’s take a look at how to prioritize your finances and use your resources wisely during the pandemic. This six-step plan will help you make smart decisions and reach your financial goals as quickly as possible.
1. Check your emergency savings
While many people begin by asking which debt to pay off first, that’s not necessarily the right question. Instead, zoom out and consider your financial life’s big picture. An excellent place to start is to review your emergency savings.
If you’ve suffered the loss of a job or business income during the pandemic, you’re probably very familiar with how much or how little savings you have. But if you haven’t thought about your cash reserve lately, it’s time to reevaluate it.
Having emergency money is so important because it keeps you from going into debt in the first place. It keeps you safe during a rough financial patch or if you have a significant unexpected expense, such as a car repair or a medical bill.
How much emergency savings you need is different for everyone. If you’re the sole breadwinner for a large family, you may need a bigger financial cushion than a single person with no dependents and plenty of job opportunities.
If you’re the sole breadwinner for a large family, you may need a bigger financial cushion than a single person with no dependents and plenty of job opportunities.
A good rule of thumb is to accumulate at least 10% of your annual gross income as a cash reserve. For instance, if you earn $50,000, make a goal to maintain at least $5,000 in your emergency fund.
You might use another standard formula based on average monthly living expenses: Add up your essential costs, such as food, housing, insurance, and transportation, and multiply the total by a reasonable period, such as three to six months. For example, if your living expenses are $3,000 a month and you want a three-month reserve, you need a cash cushion of $9,000.
If you have zero savings, start with a small goal, such as saving 1 to 2% of your income each year. Or you could start with a tiny target like $500 or $1,000 and increase it each year until you have a healthy amount of emergency money. In other words, it might take years to build up enough savings, and that’s okay—just get started!
Your financial well-being depends on having cash to meet your living expenses comfortably, not on paying a lender ahead of schedule.
Unless Maya’s brother has enough cash in the bank to sustain him and any dependent family members through a financial crisis that lasts for several months, I wouldn’t recommend paying off student loans or a mortgage early. Your financial well-being depends on having cash to meet your living expenses comfortably, not on paying a lender ahead of schedule.
If you have enough emergency savings to feel secure for your situation, keep reading. Working through the next four steps will help you decide whether to pay down your student loans or mortgage first.
2. Reach your retirement goals
In addition to saving for potential emergencies, it’s critical to save regularly for your retirement before paying down a student loan or mortgage early. So, if Maya’s brother isn’t contributing regularly to meet a retirement goal, that’s the next priority I’d recommend for him.
Consider this: If you invest $500 a month for 35 years and have an average 8% return, you’ll end up with an impressive retirement nest egg of more than $1.2 million! But if you wait until 10 years before retirement to start saving, you’d have to invest over $5,000 a month to have $1 million in the bank. When it comes to your retirement savings, procrastinating can make the difference between scraping by or have a comfortable lifestyle down the road.
When it comes to your retirement savings, procrastinating can make the difference between scraping by or have a comfortable lifestyle down the road.
A good rule of thumb is to invest at least 10% to 15% of your gross income for retirement. For instance, if you earn $50,000, make a goal to contribute at least $5,000 per year to a tax-advantaged retirement account, such as an IRA or a retirement plan at work, such as a 401(k) or 403(b).
For 2020, you can contribute up to $19,500, or $26,000 if you’re over age 50, to a workplace retirement account. Anyone with earned income (even the self-employed) can contribute up to $6,000 (or $7,000 if you’re over 50) to an IRA.
The earlier you make retirement savings a habit, the better. Not only does starting sooner give you more time to contribute money, but it leverages the power of compounding, which allows the growth in your account to earn additional interest. That’s when you’ll see your retirement account value mushroom!
3. Have the right insurance
In addition to building an emergency fund and saving for retirement, an essential part of taking control of your finances is having adequate insurance. Many people get into debt in the first place because they don’t have enough of the right kinds of coverage—or they don’t have any insurance at all.
Without enough insurance, a catastrophic event could wipe out everything you’ve worked so hard to earn.
As your career progresses and your net worth increases, you’ll have more income and assets to protect from unexpected events. Without enough insurance, a catastrophic event could wipe out everything you’ve worked so hard to earn.
Make sure you have enough health insurance to protect yourself and those you love from an illness or accident jeopardizing your financial security. Also, review your auto and home or renters insurance coverage. And by the way, if you rent and don’t have renters insurance, you need it. It’s a bargain for the protection you get; it only costs $185 per year on average.
And if you have family who would be hurt financially if you died, you need life insurance to protect them. If you’re in relatively good health, a term life insurance policy for $500,000 might only cost a couple of hundred dollars per year. You can get free quotes for many different types of insurance using sites like Bankrate.com or Policygenius.com.
If Maya’s brother is missing critical types of insurance for his lifestyle and family situation, getting it should come before paying off a student loan or mortgage early. It’s always a good idea to review your insurance needs with a reputable agent or a financial advisor who can make sure you aren’t exposed to too much financial risk.
4. Set other financial goals
But what about other goals you might have, such as saving for a child’s education, starting a business, or buying a home? These are wonderful if you can afford them once you’ve accounted for your emergency savings, retirement, and insurance needs.
Make a list of your financial dreams, what they cost, and how much you can afford to spend on them each month. If they’re more important to you than paying off student loans or a mortgage early, then you should fund them. But if you’re more determined to become completely debt-free, go for it!
5. Consider your opportunity costs
Once you’ve hit the financial targets we’ve covered so far, and you have money left over, it’s time to consider the opportunity costs of using it to pay off your student loans or mortgage. Your opportunity cost is the potential gain you’d miss if you used your money for another purpose, such as investing it.
A couple of benefits of both student loans and mortgages is that they come with low interest rates and tax deductions, making them relatively inexpensive. That’s why other high-interest debts, such as credit cards, personal loans, and auto loans, should always be paid off first. Those debts cost more in interest and don’t come with any money-saving tax deductions.
Especially in today’s low interest rate environment, it’s possible to get a significantly higher return even with a reasonably conservative investment portfolio.
But many people overlook the ability to invest extra money and get a higher return. For instance, if you pay off the mortgage, you’d receive a 4% guaranteed return. But if you can get 6% on an investment portfolio, you may come out ahead.
Especially in today’s low-interest-rate environment, it’s possible to get a significantly higher return even with a reasonably conservative investment portfolio. The downside of investing extra money, instead of using it to pay down a student loan or mortgage, is that investment returns are not guaranteed.
If you decide an early payoff is right for you, keep reading. We’ll review several factors to help you know which type of loan to focus on first.
6. Compare your student loans and mortgage
Once you have only student loans and a mortgage and you’ve decided to prepay one of them, consider these factors.
The interest rates of your loans. As I mentioned, you may be eligible to claim a mortgage interest tax deduction and a student loan interest deduction. How much savings these deductions give you depends on your income and whether you use Schedule A to itemize deductions on your tax return. If you claim either type of deduction, it could reduce your after-tax interest rate by about 1%. The debt with the highest after-tax interest rate is typically the best one to pay off first.
The amounts you owe. If you owe significantly less on your student loans than your mortgage, eliminating the smaller debt first might feel great. Then you’d only have one debt left to pay off instead of two.
You have an interest-only adjustable-rate mortgage (ARM). With this type of mortgage, you’re only required to pay interest for a period (such as several months or up to several years). Then your monthly payments increase significantly based on market conditions. Even if your ARM interest rate is lower than your student loans, it could go up in the future. You may want to pay it down enough to refinance to a fixed-rate mortgage.
You have a loan cosigner. If you have a family member who cosigned your student loans or a spouse who cosigned your mortgage, they may influence which loan you tackle first. For instance, if eliminating a student loan cosigned by your parents would help improve their credit or overall financial situation, you might prioritize that debt.
You qualify for student loan forgiveness. If you have a federal loan that can be forgiven after a certain period (such as 10 or 20 years), prepaying it means you’ll have less forgiven. Paying more toward your mortgage would save you more.
Being completely debt-free is a terrific goal, but keeping inexpensive debt and investing your excess cash for higher returns can make you wealthier in the end.
As you can see, the decision to eliminate debt and in what order, isn’t clear-cut. Mortgages and student loans are some of the best types of debt to have—they allow you to build wealth by accumulating equity in a home, getting higher-paying jobs, and freeing up income you can save and invest.
In other words, if Maya’s brother uses his excess cash to prepay a low-rate mortgage or a student loan, it may do more harm than good. So, before you rush to prepay these types of debts, make sure there isn’t a better use for your money.
Being completely debt-free is a terrific goal, but keeping inexpensive debt and investing your excess cash for higher returns can make you wealthier in the end. Only you can decide whether paying off a mortgage or student loan is the right financial move for you.
Planning budget-friendly date nights can keep your relationship and your finances healthy.
Whether you’re cozying up on the couch together with a bottle of wine or headed out to the trendy restaurant everyone’s talking about, date night is an essential part of most relationships.
“Date nights are important because they give new couples a chance to get to know each other and established couples a chance to have fun or blow off some steam after a rough week,” says Holly Shaftel, a relationship expert and certified dating coach. “Penciling in a regular date can ensure that you make time for each other when your jobs and other aspects of your life might keep you busy.”
There’s just one small snag. Or, maybe it’s a big one. Date nights can get expensive. According to financial news website 24/7 Wall St., the cost of an average date consisting of two dinners, a bottle of wine and two movie tickets is about $102.
When you’re focused on improving your finances as a couple, finding ways to spend less on date night is a no-brainer. But you may be wondering: How can we save money on date night and still get that much-needed break from the daily grind?
There are plenty of ways to save money on date night by bringing just a little creativity into the mix. Here are eight suggestions to try:
1. Share common interests on the cheap
When Shaftel and her boyfriend were in the early stages of their relationship, they learned they were both active in sports. They were able to plan their date nights around low-cost (and sometimes free) sports activities, like hitting the driving range or playing tennis at their local park.
If you’re trying to find ways to spend less on date night, you can plan your own free or low-cost date nights around your and your partner’s shared interests. If you’re both avid readers, for example, even a simple afternoon browsing your local library’s shelves or a cool independent bookstore can make for a memorable time. If you’re both adventurous, check into your local sporting goods stores for organized hikes, stargazing outings or mountaineering workshops. They often post a schedule of events that are free, low-cost or discounted for members.
2. Create a low-budget date night bucket list
Dustyn Ferguson, a personal finance blogger at Dime Will Tell, suggests using the “bucket list” approach to find the best ways to save money on date night. To gather ideas, make it a game. At your next group gathering, ask guests to write down a fun, low-budget date night idea. The host then gets to read and keep all of the suggestions. When Ferguson and his girlfriend did this at a friend’s party, they submitted camping on the beach, which didn’t cost a dime.
The cost of an average date consisting of two dinners, a bottle of wine and two movie tickets is about $102.
To make your own date night bucket list with the best ways to save money on date night, sit down with your partner and come up with free or cheap activities that you normally wouldn’t think to do. Spur ideas by making it a challenge—for instance, who can come up with the most ideas of dates you can do from the couch? According to the blog Marriage Laboratory, these “couch dates” are no-cost, low-energy things you can do together after a busy week (besides watching TV). A few good ones to get your list started: utilize fun apps (apps for lip sync battles are a real thing), grab a pencil or watercolors for an artistic endeavor or work on a puzzle. If you’re looking for even more ways to spend less on date night, take the question to social media and see what turns up.
3. Alternate paid date nights with free ones
If you’re looking for ways to spend less on date night, don’t focus on cutting costs on every single date. Instead, make half of your dates spending-free. “Go out for a nice dinner one week, and the next, go for a drive and bring a picnic,” says Bethany Palmer, a financial advisor who authors the finance blog The Money Couple, along with her husband Scott.
4. Have a date—and get stuff done
Getting stuff done around the house or yard may not sound all that romantic, but it can be one of the best ways to save money on date night when you’re trying to be budget-conscious. And, tackling your to-do list—like cleaning out the garage or raking leaves—can be much more enjoyable when you and your partner take it on together.
5. Search for off-the-wall spots
If dinner and a movie is your status quo, mix it up with some new ideas for low-cost ways to save money on date night. That might include fun things to do without spending money, like heading to your local farmer’s market, checking out free festivals or concerts in your area, geocaching—outdoor treasure hunting—around your hometown, heading to a free wine tasting or taking a free DIY class at your neighborhood arts and crafts store.
“Staying creative allows you to remain flexible and not bound to simply doing the same thing over and over,” Ferguson says.
6. Leverage coupons and deals
When researching the best ways to save money on date night, don’t overlook coupon and discount sites, where you can get deals on everything from food, retail and travel. These can be a great resource for finding deep discounts on activities you may not try otherwise. That’s how Palmer and her husband ended up on a date night where they played a game that combined lacrosse and bumper cars.
There are also a ton of apps on the market that can help you find ways to save money on date night. For instance, you can find apps that offer discounts at restaurants, apps that let you purchase movie theater gift cards at a reduced price and apps that help you earn cash rewards when shopping for wine or groceries if you’re planning a date night at home.
7. Join restaurant loyalty programs
If you’re a frugal foodie and have a favorite bar or restaurant where you like to spend date nights, sign up for its rewards program and newsletter as a way to spend less on date night. You could earn points toward free drinks and food through the rewards program and get access to coupons or other discounts through your inbox. Have new restaurants on your bucket list? Sign up for their rewards programs and newsletters, too. If you’re able to score a deal, it might be time to move that date up. Pronto.
8. Make a date night out of budgeting for date night
When the well runs dry, one of the best ways to save money on date night may not be the most exciting—but it is the easiest: Devote one of your dates to a budgeting session and brainstorm ideas. Make sure to set an overall budget for what you want to spend on your dates, either weekly or monthly. Having a number and concrete plan will help you stick to your date night budget.
“Staying creative allows you to remain flexible and not bound to simply doing the same thing over and over.”
Ferguson says he and his girlfriend use two different numbers to create their date night budget: how much disposable income they have left after paying their monthly expenses and the number of date nights they want to have each month.
“You can decide how much money you can spend per date by dividing the total amount you can allocate to dates by the amount of dates you plan to go on,” Ferguson says. You may also decide you want to allot more to special occasions and less to regular get-togethers.
Put your date night savings toward shared goals
Once you’ve put these creative ways to save money on date night into practice, think about what you want to do with the cash you’re saving. Consider putting the money in a special savings account for a joint purpose you both agree on, such as planning a dream vacation, paying down debt or buying a home. Working as a team toward a common objective can get you excited about the future and make these budget-friendly date nights feel even more rewarding.
Your guide to understanding how a Fed rate cut could impact your mortgage as a homeowner or prospective buyer.*
Just about everybody with a wallet is impacted by the Federal Reserve. That means you—homeowners and prospective buyers. Whether you’re already nestled in to the house of your dreams or still looking to find it, you’ll probably want to track what happens to mortgage rates when the Fed cuts rates. When the Fed (as it’s commonly referred to) cuts its federal funds rate—the rate banks charge each other to lend funds overnight—the move could impact your mortgage costs.
The Fed’s overall goal when it cuts the federal funds rate is to stimulate the economy by spurring consumers to spend and borrow. This is good news if you are carrying debt because borrowing tends to become less expensive following a Fed rate cut (think: lower credit card APRs). But in the case of homeownership, what happens to mortgage rates when the Fed cuts rates can be a double-edged sword.
The connection between a Fed rate cut and mortgage rates isn’t so crystal clear because the federal funds rate doesn’t directly influence the rate on every type of home loan.
“Mortgage rates are formed by global market forces, and the Federal Reserve participates in those market forces but isn’t always the most important factor,” says Holden Lewis, who’s been covering the mortgage industry for nearly 20 years and is also a regular contributor to NerdWallet.
To understand which side of the sword you’re on, you’ll need an answer to the question, “How does a Fed rate cut affect mortgage rates?” Read on to find out if you stand to potentially gain on your mortgage in a low-rate environment:
How a fixed-rate mortgage moves—or doesn’t
A fixed-rate mortgage has an interest rate that remains the same for the entire length of the loan. If the Fed cuts rates, what happens to mortgage rates if you are an existing homeowner with a fixed-rate mortgage? Nothing should happen to your monthly payments following a Fed rate cut because your rate has already been locked in.
“For current homeowners with a fixed-rate mortgage set at a previous higher level, the existing mortgage rate stays put,” Lewis says.
If you’re a prospective homebuyer shopping around for a fixed-rate mortgage, the news of what happens to mortgage rates when the Fed cuts rates may be different.
For prospective homebuyers: If the Fed cuts its interest rate and the 10-year Treasury yield is similarly tracking, the rates on fixed-rate mortgages could drop, “and you could lock in interest at a lower fixed rate than before.”
The federal funds rate does not directly impact the rates on this type of home loan, so a Fed rate cut doesn’t guarantee that lenders will start offering lower mortgage rates. However, the 10-year Treasury yield does tend to influence fixed-rate mortgages, and this yield often moves in the same direction as the federal funds rate.
If the Fed cuts its interest rate and the 10-year Treasury yield is similarly tracking, the rates on fixed-rate mortgages could drop, “and you could lock in interest at a lower fixed rate than before,” Lewis says. It’s also possible that rates on fixed mortgages will not fall following a Fed rate cut.
How an adjustable-rate mortgage follows the Fed
An adjustable-rate mortgage (commonly referred to as an ARM) is a home loan with an interest rate that can fluctuate periodically—also known as variable rate. There is often a fixed period of time during which the initial rate stays the same, and then it adjusts on a regular interval. (For instance, with a 5/1 ARM, the initial rate stays locked in for five years and then adjusts each year thereafter.)
So back to the burning question: If the Fed cuts rates, what happens to mortgage rates? The rates on an ARM typically track with the index that the loan uses, e.g., the prime rate, which is in turn influenced by the federal funds rate.
“If the Fed drops its rate during the adjustment period, you could see your interest rate go down and, in turn, see lower monthly payments,” says Emily Stroud, financial advisor and founder of Stroud Financial Management.
Since ARMs are often adjusted annually after the fixed period, you may not feel the impact of the Fed rate cut until your ARM’s next annual loan adjustment. For instance, if there is one (or more) rate cuts during the course of a year, the savings from the rate reduction(s) would hit all at once at the time of your reset.
If the Fed cuts rates, what happens to mortgage rates for prospective homebuyers considering an ARM? An even lower rate could be in your future—at least for a specific period of time.
“If you’re looking for a shorter-term mortgage, say a 5/1 ARM, you could save considerably on interest,” Stroud says. That’s because the introductory rate of an ARM is usually lower than the rate of a fixed-rate mortgage, Stroud explains. Add that benefit to lower rates fueled by a Fed rate cut and an ARM could be enticing if it supports your financial goals and plans.
“If the Fed drops its rate during the adjustment period, you could see your interest rate go down and, in turn, see lower monthly payments.”
Benefits of other variable-rate loans following a rate cut
If you have a Fed rate cut and mortgage rates on your mind and are a borrower with other types of variable-rate loans, you could be impacted following a Fed rate cut. Borrowers with variable-rate home equity lines of credit (HELOCs) and adjustable-rate Federal Housing Administration loans (FHA ARMs), for example, may end up ahead of the curve when the Fed cuts its rate, according to Lewis:
A HELOC is typically a “second mortgage” that provides you access to cash for goals like debt consolidation or home improvement and is a revolving line of credit, using your home as collateral. A Fed rate cut could result in lower rates for variable-rate HELOCs that track with the prime rate. If you are an existing homeowner with a HELOC, you could see your monthly payments drop following a Fed rate cut.
An FHA ARM is an ARM insured by the federal government. If you’re wondering about a Fed rate cut and mortgage rates, know that this type of mortgage behaves much like a conventional variable-rate loan when the Fed cuts it rate, Lewis says. Existing homeowners with an FHA ARM could see a rate drop, and prospective homebuyers could also benefit from lower rates following a Fed rate cut.
Refinancing: A silver lining for fixed rates
When it comes to a Fed rate cut and mortgage rates, refinancing to a lower rate could be an option if you have an existing fixed-rate loan. The process of refinancing replaces an existing loan with a new one that pays off your old loan’s debt. You then make payments on your new loan, so the goal is to refinance at a time when you can get better terms.
“If someone buys a home one year and a Fed rate cut results in a mortgage rate reduction, for example, it presents a real refinance opportunity for homeowners,” Lewis says. “Just a small percentage point reduction could possibly trim a few hundred bucks from your monthly payments.”
Before a refinancing decision is made based on a Fed rate cut and mortgage rates, you should consider any upfront costs and fees associated with refinancing to ensure they don’t offset any potential savings.
Managing your finances as a homeowner
You might be expecting some savings in your future now that you’re armed with information on what happens to mortgage rates when the Fed cuts rates. Whether you’re a homebuyer and financing your new home is going to cost you less with a lower interest rate, or you’re an existing homeowner with an ARM that may come with lower monthly payments, Stroud suggests to use any uncovered savings wisely.
“Invest that cash back into your property, pay down your home equity debt or borrow with it,” she says.
While news of a Fed rate cut may entice you to analyze how your mortgage will be impacted, remember there are many factors that help to determine your mortgage rate, including your credit score, home price, loan amount and down payment. The Fed’s actions are only one piece of a larger equation.
Even though the Fed’s rate decisions may dominate headlines immediately following a rate cut, your home is a long-term investment and one you’ll likely maintain for years. To best prepare for what happens to mortgage rates when the Fed cuts rates is to always manage your home finances responsibly and be sure to make choices that will lead you down the right path based on your financial goals.
*This should not be considered tax or investment advice. Please consult a financial planner or tax advisor if you have questions.