Budgeting

The Indian Budget 2018 – Personal finance highlights you shouldn’t miss

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If you are pretty aware of the Indian Budget 2018, you will know that it was one of give and take. However, keeping the taxpayer in the forefront, it was more of ‘take’ than ‘give’. On one side, Arun Jaitley brought into effect the standard deduction once again and offered few new reasons to cheer to the seniors and also increased the total take-home pay of women who are employed in the workforce.

At the same time, he took away all the travel and medical allowances for the entire salaried employees and instead introduced capital gains tax on equity for the long term and even increased the cess which people had to pay on income tax. Here are few personal finance takeaways that you should learn from Modi government’s latest budget and implement them before the upcoming year.

#1: There’s no change in the slab of income tax for the individuals

Due to the fact that the Indian government had made different sorts of positive changes to the rate of personal income tax which are applicable to the people since the last 3 years, Arun Jaitley left the entire income tax slab unchanged this year. Hence the impact on people is NIL.

#2: Income tax cess increased to 4%

Budget 2018 was said to increase the cess on the income tax, straight from 3-4% and this in turn increased the tax that is payable by all categories of tax payers. This hike will have an impact on all different sections of the taxpayers. Due to this hike, the tax liability of the income bracket with highest tax will increase to Rs. 2625. For the middle income tax payers, their liability will soar up by Rs. 1125 and the marginal increase for the lowest bracket will be Rs. 125.

#3: Reintroduction of standard deduction

Budget 2018 has provided a new standard deduction of Rs. 40,000 from salary income to the employees. If you don’t know what standard deductions mean, it is a flat amount which is deducted from the income before tax calculations on the income. This was a part of the Income Tax Act till the finance minister, P. Chidambaram. This standard deduction will just benefit the non-salaried people and the pensioners.

#4: Transport and medical allowance knocked off from salary

As the Budget 2018 offers yet again the standard deduction of Rs. 40,000 from salary income to the employees, it even takes away annual transport allowance of around 19,200 Rs and medical reimbursement of 15,000 Rs. Once again, the salaried employees will certainly be at a disadvantage. Individuals with income of more than 5 lakh would shell off more tax after the standard deduction. This will have a neutral impact on the pensioners.

Therefore, when you’re a resident of India and you don’t know how to adjust your personal finances in accordance with the Budget 2018, you should definitely take into account the above mentioned factors. Stay on top of your finances and make sure you don’t take any wrong steps which boomerang your decisions in the long run.


Women also need to plan their financial roadmap – Resolve on this Women’s Day

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There’s no denying the fact that all women should have a pre-fixed goal based fiscal roadmap in place, irrespective of their work status or their marital status. Women were actually more involved in handling day to day finances and their family budgets. But as times keep changing, there is also a demanding role that needs to be played by women in settling down with some long term financial goals. Their children’s education, retirement, saving for family are few among the many long term goals that you need to set. When there is a family which sets all the goals together, the members tend to feel invested in making decisions and hence they save towards achieving the same goal.

There are several facts that women should be aware of before drawing a financial road map for themselves. What are they? If you don’t know what they are, here are few things that you should take into account.

It is important to participate in family finances

Traditionally, it has been seen that women were always less involved in the fiscal aspects and in making investment decisions. Due to this, they have always had very restrained knowledge on the different investment areas and on the overall fiscal situation of the family. It is vital for the women to stay aware of all the documents, investments and loans that are not only in their name but also in their family member’s name. When they try to stay involved in such family matters, they get a keen understanding of the different financial instruments.

Financial literacy should be worked on

Usually it is nothing but the lack of knowledge which leads to so many women taking a backseat as long as your finances are concerned. Due to the lack of knowledge, they hesitate to learn more regarding financial products since they rely on men who can instead take the lead in such areas. Hence you should read magazines, newspapers and online content on finances so that you can get a definite understanding on finances and remain updated on the developments that are going on at the current moment. You can choose an advisor who can help you in enhancing your knowledge on financial products.

You have to be prepared for different emergency breaks

Being a woman, you have to be careful about saving enough money in your bank account, so much so that you can go without money for at least 6 months. The spouse also has to contribute equally to maintain this emergency fund. Experts always suggest that women should always have an emergency account and they should always be prepared in order to tackle them. Hence, it is vital to have spare cash at hand at any given moment.

Prepare for retirement

Women should be more cautious about their retirement time since they tend to have a longer lifespan when compared to men. Hence, throughout their lifespan, they should remain fiscally healthy. As it is more likely that women may face more financial hardships, they should work towards crossing all obstacles and financial hardships so that they could live longer and lead a happy life.

Therefore, being a woman who is thinking of celebrating this Woman’s Day in the most worthwhile way, you should take into account the above mentioned ways of understanding household finances and everything about it.


Are you someone who is on a credit diet?

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Since it’s almost February end, it’s that time of the year when majority of us are striving hard to meet out New Year resolutions which range from curbing intake of carbs and calories, losing weight, restraining intake of alcohol, eliminating all sorts of toxic relations and emerging into being a better person altogether. The list of ‘fresh starts’ will continue and most often it is seen that the resolutions last for just a month and then they fizzle like ever year and we all sleepwalk into our old bad habits. Till the next New Year arrives, we again wish to make the same resolutions and follow the same fate.

The credit gurus advise people on sliding onto a credit diet. One of the most vital things for your well-being is financial health. Majority of the consumers, as per National Credit Regulator’s Credit Bureau Monitor, around 10 million people are credit overweight and they should immediately go on a credit diet. If you thought ‘credit diet’ to be a quick-fix diet, you’re wrong as this is rather a change to lifestyle which requires discipline. For few consumers who are credit overweight, weight loss (Credit) might occur quickly whereas few others may take time.

Factors which lead to unhealthy credit lifestyle of a consumer

What are the few factors which contribute to the unhealthy credit lifestyle of the consumers which lead to so much debt in the nation? Here are few:

  • Instant gratification: People nowadays are not ready to for wait for a certain period of time for buying something that they have been dreaming of. Even when they don’t have enough savings, they immediately buy with their credit cards which lead to the vicious cycle of debt.
  • Not enough knowledge: People are extremely ignorant about what credit is, what its cost is, the fees, the interest rates, the penalties for non-payment and late payment. This ignorance leads to making poor financial decisions in the future.
  • Over indulgence: They tend to take out credit or respond to the advertisements of the credit card companies. Even when they have credit cards already, they have the habit of taking on more cards without any reason.
  • Peer pressure: There are many who feel the pressure of matching up with their peers regarding credit maintenance. When their peers take on new line of credit, they too feel the pressure of taking on so that they could brag about them in family or friendly gatherings.
  • Unforeseen situations: If you lose a job or there are sudden expenses for which the consumers don’t have any provision, then they take resort to credit.
    Keeping up with the credit diet plan
  • Shun unnecessary offers: You will get many ‘pre-approved’ and ‘you qualify for’ offers which if you fall for will lead you to debt. If you don’t want unplanned monthly instalments, don’t fall for such offers.
  • Clean your credit record: It’s vital for you to pay off your unsecured debt on time and also in full amount. If you make late payments or you tend to skip payments, this information will reach the credit bureaus and hence will hurt your score.
  • Have a debt payment plan: You need to start off with paying back the debt which has the highest interest rate. As the debt is paid off, make sure you close the account.
  • Stop binge spending: Just because your friends took a new credit card doesn’t mean that you too have to get more credit without any reason. Stay away from impulsive credit.

Therefore, now that you know the ins and outs of going on a credit diet plan, follow them in order to adjust your lifestyle accordingly and stay on top of your finances.


5 ways to raise capital funds for a start-up

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Starting a business involves a number challenges for a young entrepreneur. One of the toughest challenges involves capital funding as you come across very few investors in the market. It’s not impossible to find an investor, but you may resort to a few alternative options in order to enjoy the financial success. Identifying the right source for capital funding often leads an entrepreneur through some misconceptions.

One of the most common misconceptions pertaining to capital accumulation is about acquiring debt from unreliable sources. Business owners are scared of jeopardizing their financial situation when the loan interests reflect a sharp rate hike. If you haven’t been careful initially, you must brace yourself for the worst. It really helps when you come across a few quality resources that can prepare you in advance.

Few good tips on capital funding to help a business flourish in no time:

1. Check out your wallet at the beginning.

All of your retirement, home equity, and savings accounts need to be tapped. Till the time you invest your own hard-earned money, you can’t expect others to put your money at stake. Investors possessing profound knowledge tend to support founders that have more confidence in their activities. Most investors prefer to go with entrepreneurs that have more than just “sweat” to spare in times of need.

2. Resort to bootstrapping.

In your attempt to stretch the financial resources of your business, you must consider each dime as if it’s a dollar. You’ll learn to manage your finances better when you continue to make necessary payments in time. Meet all of your business expenses out of your revenue every month as you proceed. You might fall short of cash during the initial phases. However, your path to raise capital gets more flexible when you start bootstrapping for securing a good validation in the market.

3. Consider funds that are not dilutive.

Solicitations and grants are not always the best option for a start-up business. But you ought to check them out before you turn down such offers. You’ll only need to bear a much lower rate of interest when you opt for loans or grants just to ensure a fast growth of your business. Such sources of capital accumulation often provide your startup with huge sums of money. That’s why you ought to plan your strategies and operate freely.



4. Acquire capital based on milestones.

Falling short of capital is equally bad to that of accumulating excess capital. You won’t need to give up on equity be it about reaching milestones or meeting your capital requirements.

5. Develop your line of credit.

Bankers tend to vet you when their lending competitors have already done so. They are more likely to return your calls when you adopt the right funding strategy. Sourcing funds through the initial stages don’t draw any silver bullet. Keep yourself from committing a suicide by laying more emphasis on bootstrapping and by following the right funding strategies.

The need to accumulate a huge amount of capital up-front for achieving quick success constitutes a popular entrepreneurial misconception. A move like this could ruin the prospect of dropping a successful anchor right at the beginning. Follow the tips mentioned above if you don’t want to give up equity early on. There’s no need for you to raise more of investment capital unnecessarily.


How to improve your financial situation and lead a life free of worries

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Financial security is not about setting yourself free from debt. It’s actually about enjoying the freedom of making your own financial decisions. You must listen to your inner voice instead of letting your decisions be influenced by the balance shown in your bank account. This article throws much light upon the vital aspects of personal finance, especially for those that wonder how to secure financial freedom.

1. Draw a family budget

Budgeting is truly important for every individual, but you often tend to forget it. This is an important aspect of personal finance as you often tend to spend more than what you earn every month. You’re bound to meet with a financial crunch sooner or later if you continue to overspend now.

You must plan your expenses in advance if you really want to restrict yourself from overspending. Budgeting is a very important step that you ought to consider at this juncture. Budgeting helps you to make a list of all your expenses and identify those that you can’t do without. This way you can actually set aside a specific amount towards each of your expenses.

You shouldn’t be spending more than what you have in your account. You’ll need to cut back on your overspending habit once you draw a budget.



2. Pay off all dues

Paying off dues early on holds the key to your financial success. Your entire financial situation gets better when you start paying off your debts. Carrying your debt burden to the future often keeps you from pursuing your long-term future goals. You’ll move one step closer to your financial freedom when you consider paying off debt as a top priority in life. Both the snowball method and the avalanche method are very effective in meeting your dues. You’ll need to compare various repayment methods and pick the best one for yourself. You may curb certain unnecessary expenses and use your extra savings towards loan repayment. It’s certainly going to be a small sacrifice for achieving financial freedom regardless of whether you’re keeping yourself from dining out or from visiting a theatre. You must try to earn more if you really wish to expedite the repayment process.

3. Save for your golden years

It has become a natural practice to carry your debt till retirement. It poses a serious barrier towards your plans for enjoying the golden years. Some of our living expenses aren’t covered by the time we retire. This happens since all of us don’t have the same potential to earn our livelihood. The variance of our income leaves an impact on our savings and financial planning for the future. Your financial freedom depends a lot on how much you’re able to save for your retirement. The balance that you have in your bank account gets compounded every year depending on your annual saving potential. It enables you to achieve a better financial position and enjoy the rest of your life after retirement.
Adopting a few extra monetary measures will certainly help you manage your financial situation, pay off dues, and save more. You may consult with your creditors about filing bankruptcy, settling debts, and choosing repayment plans. It will certainly help in improving your overall financial situation within a short span of time.


Wise money moves that you should make by the time you’re 50

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Are you someone who has always been delaying your money matters? If answered yes, now is the right time to take control over your personal finances. With the upcoming New Year, it is important to be careful with your finances so that you don’t spend another year drowning in debt and in getting harassing calls from your creditors and lenders. If you wish to set the next 50 years of your life right and you want to spend a financially sound life, here are few steps that you can take.

  • Accelerate the speed of paying off debt

When you work during the last few years before retiring from work, would you like to deal with heaps of high interest debt? Definitely not! In order to stay away from your current debt load during the time of retirement, you should start paying off your debt from now. Debt means anything from mortgages, car loans, credit cards with bigger credit card balances and personal loans which you have been carrying for a long time now. You will definitely hear from retirees that living without a mortgage is definitely monetarily liberating and hence you should work hard to make timely payments.

  • Take a close and careful look at your life insurance

Do you still don’t have adequate coverage on your life insurance policy? Or do you think you’re underinsured? If answered yes, as per recommendations from The American Council of Life Insurers recommend having sufficient life insurance coverage that is of 7-10 times your salary. Henceforth, if you’re someone who is earning $50,000 in a year, you would want a policy which could pay around $350,000 and $500,000 to your beneficiaries. People find out that by the time they reach the age of 50, the appropriate term insurance may be expiring and the life insurance requirements will increase.



  • Diversify your investments

This is that phase of life, you wouldn’t wish to make financial mistakes and investment blunders as they can derail your game plan for retirement. This is why you should ensure that you don’t invest your entire savings in only one investment account. In case you have investment, review your coverage or hire a financial advisor who can help you diversify your portfolio. Start adjusting your investment risk before you reach 50 years and this is how you can maintain the growth in the coming years.

  • Set up a trust or will

You must have delayed creating a will for too long a time constantly telling yourself that you don’t need to hurry about it. But hey, this is the best time now to update or create your will. You can either hire a lawyer or pay him for creating a will or you can leverage an online software or use forms bought from store which comprise of will that are pre-printed.

Therefore now that you know the different steps that you should take in order to spend a hassle-free retirement, what are you waiting for? Start taking immediate action and secure your long-term future.


Coping When Your Earnings Take A Sudden Tumble

The idea that your earnings can take a sudden tumble can be a stressful one, but it’s something that can happen to almost anybody. It can be especially alarming if you don’t already have a firm hold over your finances and have been living paycheck to paycheck. Maybe you’re actually on maternity leave and your drop in income has come from that, or maybe you’re ill, or maybe you’ve simply had to take a pay cut. Whatever the reason, knowing how to cope when this happens to you is crucial.

Here’s how you can cope when your earnings take a sudden tumble:

Start Budgeting ASAP

The first thing you need to do is start budgeting, if this isn’t something you do already. Many people simply make sure they have enough for their bills, and then spend the rest on whatever they like. However, there’s a flaw to this. If you’re not dividing the money you have left into separate pots too, then you might realize you can’t afford something when it’s too late. For example, you should allocate a bit to eating out, a little to toiletries, and so on and so forth. If you spend everything you have left over in your favorite clothes shop, you’re going to be upset when you realize you can’t afford the family meal that has been planned for months the week after. Budgeting is smart and doesn’t mean you have to scrimp and save every single thing you earn.

Find Ways To Destress

Losing earnings can be stressful, so find ways you can destress. Spend more time doing the things you enjoy, take part in some yoga, maybe even meditate. Don’t let this stress get the better of you. Use this time as a learning curve to change your mindset, start talking positively, and your situation might just improve. Even if it doesn’t, you’ll feel happier. Here are a few ways you can feel less stressed:

Deep breathing – try the 7/11 breathing technique.
Yoga.
Meditation.
Baths with salts.
Aromatherapy.

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Figure Out Where You Can Start Reducing Your Expenses

There are more than likely ways you can begin reducing your expenses if you look closely enough. How much you reduce can depend on the amount you’re losing out on. For example, when was the last time you looked at new utility bill suppliers? You could be losing money if you haven’t checked for a while. You can work on saving energy in the home, and even downsize your car. The average person tends to spend $2000 on average on eating out per year too, so see if there’s a way you can cut back on this.

See If You’re Entitled To Compensation

If you’re losing income due to an accident that wasn’t your fault, you may be able to claim compensation. However, you’ll need to discuss your circumstances with a professional company like Crossen Kooi Law Firm first. Compensation may not be available for everybody, but it may be available for those who are injured, or those who have unfairly lost their jobs.

Get All The Help You Can

Help is out there, so don’t suffer from this change in lifestyle alone. Get the help that you can. See if you can speak to a financial advisor for free and use the advice that they give you. See if you’re entitled to any government benefits – this can vary depending on where you are in the world. Food banks can be find in a multitude of places, so if you need them, don’t be too proud to go along. They will be able to help you, especially if it’s an emergency.

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Let Your Loved Ones Know What’s Going On

You might be too proud to tell your loved ones what’s going on, but you should find a way to tell them. Most of the time, they will want to help. At the very least, they’ll want to be sure you’re ok. Sometimes, having somebody to talk things through with can make all the difference.



See If There’s A Way You Can Earn Extra Income At Home

The more sources of income you have, the less you have to worry if one of them is struggling or you even lose one. This can take time, but you’ll be glad you did it in the future. Start by selling things you don’t need or use. Walk around your home and imagine that everything has a price tag attached to it. If you haven’t used something in a few months, chances are, you’re safe to sell it!

How about starting something on the side? People can usually do this with nothing but a laptop and the internet these days. Of course you may need to teach yourself a few new skills using YouTube and other resources, but it isn’t impossible to replace the income you’re losing if you’re determined. All you need is a can-do attitude and a willingness to learn.

Avoid Get Rich Schemes At All Costs

When you’re losing income and you’re feeling desperate, it can be tempting to look at get rich quick schemes to make money. However, you should avoid these at all costs. Anything that seems too good to be true probably is. Avoid pyramid schemes. If you’re not sure what they are, research them. Ever noticed how people will brag about how much money they’re earning on social media and then try to recruit people as part of their team, claiming they can earn an uncapped amount of money? Those are the things you need to be wary of. It’s not impossible to make money doing it, but it isn’t as easy as they make out – they’re probably not making as much as they make out either.

Coping when your earnings take a sudden tumble can be tough, but don’t fret. You can get back on your feet when you start using the tips outlined here. Stressing out about your situation will only make things worse. Find somebody to confide in and look after yourself. Thanks for reading!


Bitcoin reaches a milestone of $15,000 – What’s in store for this cryptocurrency?

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It was on 7th December, 2017 that the value of Bitcoin surpassed the threshold of $15,000 for the first ever time thereby making yet a new milestone it its rapid movement. As per what reports have to suggest, this particular cryptocurrency has went through a staggering rise in value, rising from $3500 during the middle of September, 2017 to its present rise which is a meteoric rise. During the beginning of this year, a single Bitcoin was worth an amount less than $800.

People are guessing as to what would happen in the near future of the value of this cryptocurrency. It has been a long time since when Bitcoin has stopped being used as a currency for buying things, perhaps because of the fact that its value has been soaring higher and higher with time. Hence the question among the financial speculators is that, ‘is it a bubble?’ If answered yes, then when is this going to burst?

There are some traders who think that we’re almost getting close and hence they’re trying to short Bitcoin or make wild guesses or bets that the value is certainly going to decrease in the near future. One of the experts has said that this is one of the biggest opportunities for shorting. There are lot of people and zealotry who feel that this is the biggest ever thing that is going to occur ever in the history of mankind. At the same time, there are lots of people who think that this is nothing but a bubble or a Ponzi scheme. Well, both can’t be accurate with their predictions.

Though the usual trend for the valuation of Bitcoin is just up, the cryptocurrency has always remained excessively volatile. For instance, in the month of November, the value of Bitcoin plummeted by 20% within less than half an hour, thereby falling from $11,000 to $9000. If you’re a true believer, you will think that these are nothing but temporary blips but at the same time, there are few sceptics who caution the fact that any kind of plunge could become permanent. Similarly, after crossing the threshold of $15,000, it’s value soon after dipped down to around $14,800.



Energy costs are yet another issue which has been brought forth by the staggeringly high valuation of Bitcoin. In order to sustain the Bitcoin network, it takes huge amounts of power and it has been estimated that this particular cryptocurrency consumes as much electricity as does the whole of Denmark. Whether or not this prediction will rise or fall in the near future is tough to predict but now Bitcoin is just used as a specific asset class and this is more unsustainable.

Amidst all this, the financial experts are striving hard to make out some sense out of this entire phenomenon. People who use other currencies find out utility in a static value but this can’t be found in the world of Bitcoins. The only question in this game is how high will the scores go?


How to Make Your Foreign Financial Investments

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start making investments

As you first start making investments, you’re likely to focus your efforts at home. Perhaps you’re thinking of buying an investment property in your hometown, or you’ve bought some stocks for some up-and-coming businesses based in your country. However, as you start to expand and diversify your investment property, it’s worth considering putting some of your money into more global investment options. Spreading your money, so some of it is invested overseas could be an excellent tactic to ensure you have a diverse portfolio and you don’t put too much stock into how well the economy at home is performing. There are various ways you can invest your money both at home and away.



Why Invest Your Money Abroad?

When you have so many investment options at home, you might wonder why you should bother investing overseas. However, don’t dismiss the idea of foreign investments too soon. They could be just what your investment portfolio needs to make it more balanced and less risky. There are often times when foreign stock markets will perform better than at home, which could make you regret not paying attention. Foreign investments could save you when your investments at home aren’t doing as well as you hoped they would. Having a global outlook can do you a lot of good.

Peer-to-peer Lending

If you want an interesting way to get involved with investing abroad that doesn’t have to cost you a lot, you could consider peer-to-peer lending. It can allow you to put very little money into an investment project, and you can slowly start building up some profits. You might be lending your money to individuals, businesses or even property developers. Some options will involve opening an account to put your money into, which will then go to whichever borrowers the P2P lending provider chooses. Others services will give you the option of deciding where your money goes.

Property Investment

Property is a popular choice for people who want to invest their money abroad. You can often find more affordable investment property if you look in other countries, instead of just sticking to what you can find at home. If you decide to invest in overseas property, you might rent it out long-term to local tenants, or you could decide to manage your property as accommodation for tourists and visitors. Looking overseas for properties gives you the opportunity to identify the very best markets. You can find the ones that are about to start growing but still offer excellent deals.

 

Exchange traded funds or mutual funds also give you a great option for investing in foreign markets. You can find international funds for broad investment across many countries or more focused regional funds for areas such as Asia or Europe. You can also focus on one country or on a specific sector if you want another way to diversify your investments. You’ll need to think about your investment goals to decide what’s best for you.


3 of My Favorite Investments to Make Right Now

Three of my favorite investments not only offer solid returns but good opportunities to diversify your stocks and bonds portfolio

It’s the new year and for many people, that means taking a new look at your investments. What worked last year might not work in 2018 and there’s always the annual rebalancing to consider.

Jonny posted a great lead in to some popular investment options for 2018 including gold, real estate, diamonds and public debt.

I think he’s spot on with many of these. Gold had its best year since 2010 last year and is already up strongly this year on higher expectations for inflation. One of the largest diamonds ever found was recently unearthed which could spark investor sentiment for the precious stones.

I’ve recently been looking through my own investments, shifting from an overpriced stock market into some of my favorite strategies.

Three of the investments in my portfolio might be ones you haven’t heard of yet but it’s these alternative investing ideas that might just boost your portfolio the most this year.

Real Estate Investing without the Headaches

I started my career in real estate as a commercial property analyst and have managed my own portfolio of rental properties. I love the idea of turning an under-used building into a cash machine.

Real estate is a great diversifier for a portfolio of stocks and bonds. Property prices generally rise along with inflation and the tax deduction from depreciation is one of the best you’ll find in investing.

Real estate investing isn’t without it’s downsides though, something I found out the hard way in my early 20s. Real estate investing is not the passive income resource you are led to believe from so many websites and infomercials!

Unless you can afford to hire a property manager, expect a part-time job of maintenance and tenant headaches with just a few properties. It’s also very difficult for individual investors to buy enough properties for diversification within real estate. Most investors hold just one property type and in one market, leaving them dangerously exposed to problems with that type of property or in their region.

Enter real estate crowdfunding.

Developers and large investors apply to raise funds for their real estate projects on crowdfunding platforms. The platforms scrutinize deals for developer history and property-specific factors before allowing the investment to go live on the site.

Investors can then choose to invest in individual properties, usually from $1,000 in each, in either a debt or equity investment.

There are a few reasons I’ve started investing in real estate crowdfunding:

• The low investment requirement per property means I can diversify easily across property types and regions. Investing in multi-family, office, storage and warehouse properties across the country helps to diversify my residential rental portfolio.
• I have none of the management hassles of direct ownership when I invest through a crowd platform. I get professional management of the property through the project owner, usually an experienced developer or investor.
• I can plan my returns more accurately through a mix of debt and equity investments. Returns on debt investments are fixed while equity investments tend to average around a small range.

Real estate crowdfunding isn’t without its risks but they’re all manageable. Each platform has its own staff that conducts due diligence on each deal but I still inspect offer documents before investing in any property. Most platforms are fairly small so it helps to invest on several to get access to a wider range of deals.

P2P Lending Investment: The 21st Century Debt Investing

Investing in peer loans has been around since 2008 but has only just begun to gain popularity. Investors still seem unsure of the new asset class.

Investing in loans is nothing new and you probably already have some money in them but don’t know it. Banks typically sell off their loans to insurance companies, pension funds and anyone looking for consistent returns. The bank gets money to make more loans and the investor gets a stable cash flow.

To sell their loans, banks would sell hundreds of loans together through a broker that would then sell them to investors. Of course, the bank and broker each took a cut of the profits.

The only difference with peer lending investing is that the website connects borrowers and investors directly. Borrowers fill out an application and investors decide in which loans they want to invest, usually for as little as $50 each.

Peer loans are another good diversifier to a portfolio of stocks and bonds. They offer the fixed-rate and relative safety of bonds while delivering much higher returns than most fixed-income investments.

I have been investing in peer loans for several years now and have averaged just under a 10% return on loans to safe borrowers. Higher returns are possible, but it means investing in loans to riskier borrowers.

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Some investors are afraid that peer lending returns will crash along with stocks in the next recession. It’s true that defaults on loans will increase but not to the extent people fear. I limit my loan investing to very safe borrowers, people with high credit scores and stable finances. It’s possible some of these will default on loans in a recession but I think the majority will want to protect their credit rather than risk it all by defaulting on a small loan.

Some of the criteria I use to pick safe borrowers and loans includes:

• Borrowers with mortgages – this not only means some financial stability but they also have a house from which they can draw equity to repay the loan if times get tough.
• Borrowers with debt-to-income less than 25% – means they aren’t already burdened by too much debt.
• Borrowers with monthly income over $4,000 – this means they likely have a good job and might run less risk of struggling to make ends meet in a recession.
• Loans less than $15,000 – peer loans are available up to $40,000 on most platforms but I want to invest in smaller loans. I want it to be relatively easier for borrowers to pay off their debt instead of defaulting.

Making a Social Change with Your Investments

My final favorite investment isn’t necessarily a new type of investing but just a new way of thinking about your investments.

Socially-responsible investing (SRI) has been around for decades but never got much attention from individual investors. There are two ways you can invest, through a negative screen or a positive screen.

• Negative screens mean you avoid investing in any company that doesn’t comply with your values. This usually means companies involved in weapons manufacturing, tobacco, gambling and sometimes fossil fuels.
• Positive screening means you look for companies that have been good stewards of the environment or social causes in which to invest.

Socially-responsible investing has gained popularity as a way for investors to use their investments to force important social change as well as to make money. Individual investors may not create much pressure on a company but the effect of platforms like Swell Investing and exchange traded funds can force real change.

There is some evidence that SRI investing can produce returns over a market-wide strategy. Investing in companies that meet higher ethical and social standards may help to avoid legal costs that come with lower norms. Companies in weapons manufacturing, tobacco and gambling are often the subject of expensive lawsuits that can erode profits.

Investing isn’t only about the individual investments but about how you invest. Putting your money to work in several different assets and strategies like real estate crowdfunding, p2p loans and socially-responsible companies can help diversify your returns. Each of these investments offer an opportunity to diversify your portfolio and seek solid returns.

Joseph Hogue worked as an equity analyst and an economist before realizing being rich is no substitute for being happy. He now runs five websites in the personal finance and crowdfunding niche, makes more money than he ever did at a 9-to-5 job and loves building his work from home business.


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