Category: Finance

If you’re planning a trip overseas, one of the most important things you need to figure out is how you’re going to pay for things in the local currency. While you can always use your credit card, it’s a good idea to have some cash on hand for small purchases or emergencies. But before you can do that, you’ll need to convert your currency into the local currency. Here’s a beginner’s guide to converting currency. 

Figure Out the Exchange Rate 

The first thing you need to do is figure out the current exchange rate between your currency and the local currency. You can do this by looking up the rate online, using a currency converter app on your phone, or by visiting a bank or currency exchange kiosk. It’s important to remember that exchange rates can fluctuate rapidly, so make sure you’re getting the most up-to-date rate possible. 

Calculate How Much You Need 

Once you know the exchange rate, you can calculate how much money you’ll need to convert. It’s a good idea to make a list of all the things you’ll need to pay for on your trip, including food, lodging, transportation, and activities. Then, using the current exchange rate, calculate how much each item will cost in the local currency. 

Decide Where to Convert Your Currency 

There are a few different options when it comes to converting your currency. One option is to use an ATM once you arrive at your destination. This can be a convenient option, as it allows you to withdraw money as you need it, and you’ll usually get a good exchange rate. However, you’ll need to make sure your bank doesn’t charge high fees for international withdrawals. Another option is to exchange your currency before you leave home. You can do this at your bank or at a currency exchange kiosk. While this can be a convenient option, you’ll usually get a lower exchange rate than you would at an ATM. 

Be Aware of the Fees 

No matter where you choose to convert your currency, be aware of any fees that may be involved. This can include fees for using an ATM, fees for exchanging currency at a bank or kiosk, and fees for using a credit card in a foreign country. Make sure you understand these fees before you leave home, so you can budget accordingly. 

Keep Your Money Safe 

Once you have your local currency, it’s important to keep it safe. Don’t carry all your money with you at once – instead, leave some in a safe place in your hotel room, and only take what you need for the day. Consider using a money belt or a secure wallet to keep your cash and credit cards safe. 

In conclusion, converting currency can seem daunting if you’re not familiar with the process, but with a little bit of research and planning, it’s actually quite simple. By figuring out the exchange rate, calculating how much you need, deciding where to convert your currency, being aware of fees, and keeping your money safe, you’ll be able to navigate the currency exchange process with ease. With these tips in mind, you’ll be ready to enjoy your trip without worrying about how to pay for things in the local currency.

“Interest” is money someone earns by letting someone else use their money. In the case of compound interest, you’re letting that person also use the money your money made by allowing them to keep it for a while longer. 

The right strategy can be a very lucrative way to earn passive income.

1. Compound Interest Can Work in Reverse

Compound interest isn’t always a good thing—for you. If you have credit card debt, student loan, mortgage, or personal loan that doesn’t have a 0% interest rate, you’re using the lender’s money and racking up compound interest in their favor. 

Trying to earn compound interest on investments while simultaneously paying it, is robbing Peter to pay Paul. 

To get the most out of compound interest, plan to pay off as much debt as possible first.

2. Know Your Numbers

Compound interest can be steady and reliable. But you need to know what you’re signing up for by understanding the values for these terms:

• Starting Principal. Your initial investment
• Interest rate. The percentage you earn
• Compound frequency. How often it compounds 
• Duration. How long you leave the money to grow
• Additional Deposits. Will you be adding another $10 every paycheck?

Now you can do the math to determine how much your investment will grow. 

The formula is: A = P(1 + r/n)^nt

But for the rest of us, use a compound interest calculator.

3. Make Sure You’re Getting Compound Interest

Compound interest is interest on the principal + previously earned interest. Simple interest is interest on the principal only. 

The magic of compound interest is that you’re earning more money on your earnings, and again, and again.

To ensure this,

1. Make sure you’re in an account that offers compound interest.
2. Ensure your account is set up to reinvest interest rather than moving into a cash account, sending it to your savings account, etc. 

Savings accounts, CDs, interest-bearing checking accounts, money markets, 401K money markets, and bonds have compound interest. Most of these earn minimal interest; in the case of bonds, it only compounds 2X a year.

But as the Federal Reserve raises the interest rate, the rates tied to it go up. You can often lock higher rates for a period if you think the rate might go down.

4. Give It Time

Generally speaking, the longer you’re willing to “tie your money up”, the higher the interest rate and the better the compounding terms will be.

Short-term investments last around 1-3 years. Long-term investments last as long as 20 or even 50 years in the case of retirement accounts. They are the way to go if you can afford to have money that you don’t touch for a long time. In these accounts, your money can as much as double every 5-10 years.

5. Consider Your Risk Tolerance

Generally, the more risk you’re willing to take, the higher your investment’s earning potential. At higher risk levels, they don’t call earnings “interest”. They might call it dividends. But this is just another form interest takes.

The best short-term, low-risk options are:

• Certificates of Deposit
• Treasury bills
• High-yield saving accounts
• High-yield money markets

Shop around to get the best rate and compounding frequency. Don’t expect outrageous growth, but these are good for starters.

The best medium-risk, long-term investments for beginners or those who don’t want to watch their investments constantly include:

• Mutual funds 
• Real Estate Investment Trusts (REIT)

Some more advanced, high-risk, and ideally long-term options include:

• Individual stocks Exchanged-Traded Funds (ETFs)
• Buying real estate
• Crowd-funding real estate
• Fine art
• Non-Fungible Tokens (NFTs)
• Crypto

Some of these are risky, and you can lose money rather than make it. But they can help you make compound interest work for you.

There are three massive loans that most people take out in a lifetime. First, you have the home loan, and then the student loan (if you’re in the United States). Then, there’s the car loan, which you’ll end up going through multiple of in most cases throughout your life. Whether you’re heading into your first car loan or your seventh, here are five things you need to know before getting that loan.

1. Trading In

With each passing year, there are more and more people that are trading in their cars due to the ease of convenience. That’s because online companies that manage purchases, trade-ins, and sales have made the car-buying process hassle-free. If you currently have a car, no matter what type of condition it’s in, you’ll be able to trade it in.

Many people have switched to trading in their cars online, while there are still plenty that take their cars directly to the dealer. Of course, there are going to be varying prices for how much that you can get for your trade-in, but a good rule of thumb is to use the Kelly Blue Book to see what your car’s value is. From there, you can use your trade-in to make a big dent in your new car’s purchase price.

2. Down Payment

Trading in your car is the most common and convenient way to make a down payment on your new car instead of coming up with a large sum of cash. Naturally, the larger the down payment the better. It’s important to know how much you can afford for a down payment, and never spend more than you’re able to afford just to bring down your monthly payments by a dollar or two per month.

That’s one of the biggest mistakes that people make when entering into a car loan, as down payments don’t really make a big difference on the loan rates until you start talking increments that are several hundred dollars in most cases. Also, don’t take out another loan just to make a down payment on a car, because then you’re burying two holes.

3. Interest Rate

The absolute biggest thing that’s going to affect how much you pay for your new car is the interest rate. See what you’re approved for before you even start shopping, that way you know how much you can spend. If you’re receiving an offer for an incredibly low-interest rate, you may be able to get a better and newer car than you first expected.

To bring in new customers that clearly have good credit, a lot of dealerships will offer 0% APR or even a cash rebate. You’ll be able to shop around and see what kind of rebate you can get, and the higher rebates equal lower monthly payments. People with poor credit may still be able to afford monthly payments on high-interest rates, but the type of car they’ll be able to get will be much older or have higher mileage.

4. Loan Length

There are plenty of potential car owners that are able to afford a brand-new car every two or three years and can take on those shorter-term car loans while being able to keep up with the high monthly payments. If you’re one of those people that’s willing to commit to a vehicle for several years, though, you might want to take a longer loan.

This is especially true for lower-interest loans as the monthly payments overall will be incredibly low on a new vehicle. That will allow you to save your income for other expenditures rather than worrying about whether or not you can even afford the car in the first place. The typical car loan lasts for 60 months (five years).

5. Type of Car

Now that you have your interest rate, know how much you can trade-in and put down for a down payment, and figured out your monthly payments, it’s time to decide what type of car you want. Each person has different needs, and a lot depends on the climate, commute to work, and size of the family.

Take all of these into consideration, as you don’t want to buy a two-seater if you have several young children while a larger SUV is sitting there at the same price and mileage. Typically, people will know what they’re looking for before the process even begins.

Costco is one of those places that’s almost universally beloved by those that shop in its stores. Those that go for the first time typically end up becoming members because they see the amazing deals that are offered to customers compared to some of the other large chain superstores. Costco customers save a lot of money with each trip, but is everyone saving as much as they can?

It turns out that there is more to Costco than meets the eye, and simply shopping there (while saving you a lot of money) doesn’t get you the maximum benefit. If you want to reap the full benefits of your Costco membership, follow these five tips to help keep some more money in your wallet.

Get The Top Membership

Every standard Gold Star membership with Costco allows you to shop in their warehouses and online, and you get a pair of membership cards to share with a loved one. It costs $60 per year, which is a great deal, and most people go with this option. For double the price, though, you can opt for the Executive card, and it will save you a lot more than the extra $60 that you spend over the year of membership.

That’s because the Executive card also gives you discounts for Costco services like roadside assistance, auto insurance, travel, and more. As if that weren’t enough, there’s a 2% annual reward for Executive members that are capped off at $1,000. That means that for an extra $60, you can get a $1,000 reward back depending on how much you spend at Costco.

Share With a Friend

When you get a Costco membership, that means that you get two cards, with both of them applying to your single household. However, that doesn’t mean that you can’t share your Costco membership with a friend. If you have a close friend that goes shopping with you, you can save by getting just one membership and bringing the friend as a guest on each trip.

This is a great way for young people that are living with roommates to split the costs of groceries, including bulk items. Obviously, a person living by themself isn’t going to need a lot of bulk items, but when you have someone to split with and pay for half, it makes much more sense as you get to save a lot of money.

Top Off Your Tank

When a lot of us stop off at a local gas station, we do so without the full intent of filling our gas tanks to the very brim. Instead, we put in an increment of $5, or whatever we feel will get us home. When you’re taking advantage of Costco gas, though, it makes sense to fill up whenever you’re making a trip to the store.

Costco gas is on average much cheaper than the national average, which is why you see such long lines at the pumps. Costco gas is only available for members, and people save hundreds, if not thousands, topping off their tanks at Costco every week.

Stick To The Sides

When you make a list of things that your house absolutely needs, you’ll notice while walking through Costco that almost none of them are in the center of the store. Instead, that’s where most of the clothing items, televisions, gaming consoles, and other neat stuff is located.

If you’re looking for items such as toilet paper, frozen foods, cupboard stuffers, and other essential items, those are going to be on the sides of the store and in the back. Of course, that doesn’t mean that you shouldn’t take advantage of the $1.50 hot dog combo or the deliciously cheap rotisserie chicken if you’re getting a bit on the hungry side.

Kirkland Only

Every major store like Walmart or Kroger has its own store brand for most products, and Costco is included in that list. While those other store brands seem to fall short of the name brands, that’s not the case for Costco’s Kirkland brand.

Those who shop Kirkland brand are almost always unable to tell the difference between its products and the name brands, too. The biggest benefit to sticking with Kirkland brands is that they come around 20 percent cheaper on average.

While paying your rent or mortgage is the first bill that comes to mind because it’s all due at once, people might not realize just how much they’re spending on groceries. One of the main reasons for this is that people tend to go grocery shopping once per week at the bare minimum, with some heading to the store every day or two.

These trips can add up quickly, though, and when you’re crunching numbers at the end of the month you’ll be astonished at just how much you’re spending. People on the lower end of the income spectrum are spending nearly one-third of their monthly pay on groceries, with the suggested amount being 10 to 15 percent. If you’re looking to save money on your grocery bills without compromising, here are the five best ways to save you money and make sure you and your family are eating healthy, quality meals.

Don’t Be Wasteful

Making use of all the odds and ends of your grocery items is a useful method to save you money on your meals and feel good about your positive impact on the environment. If you buy meat, try buying it whole and butchering it yourself. 

Save the bones to make and freeze your own stock to use in dishes and freeze any meat you’re not going to use right away. You can repurpose leftover foods as well, like making bread crumbs out of leftover bread. Make sure everything is sealed airtight to keep it fresher for longer. 

Buy Items in Bulk and Freeze Them

Along with using every edible part of the food item, preserving and storing food is another helpful tip for saving money on your grocery bill. Buy meat, vegetables, fruits, and even bread in bulk. 

You can freeze those food items to use at a later date, either defrosted or still frozen. Buying items you use often and know you can preserve will ensure you have what you need when you need them and save you money in the long run. Be sure to package everything in airtight containers with the date, because even frozen items can go bad over time. 

Use Coupons

Couponing is a fantastic way to save money on groceries. It can be intimidating at first, but once you get the hang of it, the savings add up over time. There are sites online, emails you can sign up for, magazines, grocery store flyers, and coupon booklets that offer coupons for a variety of different products. 

Be sure to read the fine print and expiration date to ensure you’re properly using the coupon and save time at the checkout. Find and use as many coupons for items you often use or want to try. Any amount of money saved by using coupons is a success. 

Buy Store Brand

Oftentimes store brand groceries aren’t much different in quality than name-brand items. Store brand foods are given a bad rap, but typically the food items taste just as good, or almost as good as the store brand item. 

The price difference between the brands can be substantial, especially over time. You don’t have to replace all of your groceries with the store brand, but if there are a few select foods you’re happy to substitute then it’s worth a shot to save some money without giving up quality. 

Make Your Own Food

Making, or even growing, your own food from scratch is a practice that is making a steady comeback in recent years. With groceries prices skyrocketing and certain items unavailable, it can be a struggle on your wallet and meal choices. 

Growing your own vegetables and herbs can be done easily with a little bit of research and practice. Making homemade items from scratch like bread, sauces, jams, butter, stock, and even cheese, will not only taste fresher, but save you a significant amount of money on groceries over time. You can preserve and freeze items to maintain freshness. 

The world of finance comes easy to some people, but for many, it can be a completely foreign concept. If you’re one of the millions of people that’s trying to learn more about finances so that you can understand the market while also helping out your own bank accounts, there are certain things to know. Here are five of the most important concepts in finance to familiarize yourself with so that you can get a better general understanding.

1. Inflation

Prices go up every year, whether or not wages do, and this is the result of inflation. Inflation varies by year and can be to the point where certain things can become unaffordable for a lot of people. Grocery and gas prices are the most obvious victims of inflation, though mortgage and rent prices are the ones that have the biggest impact on the general population.

Inflation can be a good thing for the economy and personal finances if it’s incredibly slow and steady. When this occurs, wages tend to grow with inflation, but inflation rates increasing too quickly has a negative impact on businesses and employees. The worst case of inflation that the world has ever seen came from Hungary in the early 20th century.

2. Bull/Bear Market

You may have heard about bull and bear markets or even seen the multiple statues of the two animals fighting each other. These animals represent the stock market, both good and bad, but why these particular animals? The bull represents a thriving economy where unemployment drops while securities and wages increase.

The reason for this is because when a bull attacks, it uses its horns in an upward thrust. As for the bear, he attacks with a downward swiping motion. You’ll hear about rising interest rates and increased unemployment during a bear market as people start to sell off a lot of their stocks.

3. Debt-To-Income Ratio

While credit scores are often considered to be the most important part of getting a large loan like a mortgage, many don’t realize that their debt-to-income ratio is just as important. Your DTI ratio is a comparison of how much you earn each month compared to how much you have in monthly payments.

All of your monthly bills are taken into consideration when calculating DTI. Your rent or house payment will be the biggest one, followed by loan and credit card payments. This can include student loans and car payments. Other debts are taken into consideration, including court-appointed payments like alimony or child support, but your monthly utility bills are not included.

4. Interest

Interest is one of those things that can be very confusing to beginners as there are a lot of different forms of interest. From interest paid on loans to interest accrued from savings, there is a lot of interest in, well, interest. Two of the major forms of interest are simple interest and compound interest.

Simple interest doesn’t have a lot of frills attached to it, hence the name. Simple interest has a fixed percentage that accrues from a balance each month. Compound interest, on the other hand, is calculated using both initial principal and previously accumulated interest. It isn’t as complicated as it sounds, though, thankfully.

5. Net Worth

The world has a fascination with finding out someone’s net worth. After all, almost every one of us has looked up a celebrity or businessperson’s net worth on Google. While it’s almost impossible to get a 100% accurate net worth for someone that’s worth millions, we can at least get a good idea.

For individuals, finding out their net worth is much easier. It’s a bit more in-depth than the debt-to-income ratio but uses many of the same statistics. All assets are taken into consideration when determining net worth, including companies owned, real estate, and anything else that’s tangible. Then, all of the liabilities are subtracted including all loan balances. It’s estimated that more than 10 percent of Americans have a negative net worth.

We’ve all come to a crossroads in our lives where we have to make an important financial decision that could impact us for years to come. Whether it’s selling a home, buying a new car, investing in the stock market, or anything else, you don’t want to make an impulse decision when possibly hundreds of thousands of dollars are in play.

It’s important to step back for a second before any big financial decision. Before signing your name onto anything that will put you on the hook for years to come, here are five things that you need to remember first. 

5. Do You Need It?

There are a few things that people need in life: food, water, clothing, and shelter. Only one of these is typically a major financial decision (though clothes can be pretty pricey), and that’s shelter. When looking at homes, make sure you’re looking for something within your means. 

Do you need two spare bathrooms? The same can even be applied to those other necessities. Not every meal needs to be five courses, and not every piece of clothing needs to be a designer brand.

4. Check Your Savings

Savings accounts are offered for a reason, and that’s for making a big financial transaction. Every time that you get paid, make sure some of that is going into your savings account after the bills are paid rather than to your checking account. Over time, your savings account will grow and create a nice little fund for these big decisions.

Savings accounts also accrue interest, with larger accounts earning higher percentage yields. When thinking about a major financial decision, always look to your savings account first. If there’s enough in there where you can pull the trigger on a decision and still have plenty left, it will make your life much easier.

3. Compare Prices

The first offer that you’ll get for something major like a home or car may not be the best offer that you can get. In fact, more often than not, the first offer may end up being the worst. Always make sure to shop around before making a final decision, and see if you can haggle on the price of a big-ticket item. 

Cars and homes especially are able to be talked down into a more buyer-friendly price. When sellers are competing against each other, then the buyer ends up the victor in the end, so don’t jump at the first offer.

2. Assess Your Career

There was once a time when someone would go to work for a company right out of high school or college and remain with that company up until retirement. Those days are long gone, though, with people bouncing around from company to company for more money (and for good reason). 

Before making a big financial decision, ask yourself where you’re going to be in a few years’ time. Do you see yourself in the same position, same company, or even the same city? These are all important to think about.

1. Consider Your Standing Debt

A lot of people assume that just because they can easily make their monthly payments on existing debt like credit cards or car payments they’ll be able to take on another major financial transaction. However, taking on even more debt can have adverse effects. For starters, your credit score will likely decline sharply if you take on another major debt, while your monthly payments may end up being more than you think.

It will be hard to keep up with interest on several different loans, so the best thing to do before making a major financial decision is to make sure your debt is mostly free and clear beforehand. For example, those that have a lot of credit but aren’t using any of it are going to get a much more friendly rate on major financing like a mortgage.

We all hear about how a country’s currency “is weaker than it was” or “stronger than ever,” but what do those terms really mean? After all, a dollar is a dollar, a Euro is a Euro, etc. However, you could have the exact same amount of money during a recession as you do during a peak in the economy, but that same amount would have different “strengths” depending on the overall economy. Let’s take a look at what currency strength means, and how it applies to your life in both day-to-day and the big picture.

Understanding Purchasing Power

To break it down into its simplest example, let’s say you have one unit of currency. In this case, we’ll use the US Dollar. If you walk into a store with exactly $1 and there’s a pack of bubble gum that you want to buy, the price of that gum will determine your purchasing power. If the gum is marked as being $0.50 (half a dollar), then you can purchase two of them. This makes the dollar very strong in the economy since you can buy more with what you have.

On the other hand, the gum may be marked at $1.25, meaning that you can’t buy any of it. This is what’s known as purchasing power, and a strong currency means that it has a higher purchasing power. Purchasing power is commonly measured by the Consumer Price Index (CPI) so that people can see, in real-time, the purchasing power of the money that they have.

Inflation’s Role in Currency Strength

With inflation, prices of products can increase dramatically and in an instant. There have been many cases in which a currency’s strength has been demoralized by inflation around the world. It happened to Germany’s economy following World War I, Hungary after World War II, and in more modern times with Yugoslavia and Venezuela. 

Most developed countries don’t have to face an inflation rate that crashes the economy, but it does happen from time to time. Many will remember the global recession in the mid-to-late 2000s that made housing prices next to nothing. Since the amounts of currency don’t change, that means that a single unit can lose or gain value depending on inflation. If inflation stagnates and wages exceed the inflation rate, then the currency’s strength and purchasing power will rise.

International Trade Impact

Just because one unit of currency may be able to purchase a lot in your home country doesn’t make that particular currency strong on a global scale. If a currency’s strength on an international scale isn’t high, then it won’t be accepted in international trade. 

The Reserve plays a big part in currency strength, and there have been instances of weaker currencies losing their high rating with Standard & Poor. Countries like Japan, the United States, Great Britain, etc., do a lot of currency trade, so it’s important for these companies to keep their currency strong. 

Credit Rating

Speaking of Standard & Poor, each country is given a credit rating based on its currency’s strength and ability to pay back money borrowed from other countries. The highest grade given out by S&P is an AAA score, running down to a BBB level for currencies that are still likely to be invested in. 

Anything below that, though, is a speculative non-investment grade. This ranges from BB to D. D is the lowest rating (besides NR for Not Rated), which means that the country has defaulted several times, has a low currency strength, and can’t be trusted for future loans.

To sum it up, having a strong currency is vital for any country’s economy. This is why you’ll often hear politicians talking about needing a strong dollar, yen, pound, etc. If they aren’t strong, it can lead to a nationwide recession that leaves millions scrambling for options on a day-to-day basis.