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3 Common Mistakes Savers Make When They Invest in Target-Date Funds

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Target-date funds (TDFs) are one of the most popular investment options offered by employers because they provide employees an all-in-one portfolio within their retirement plans. To show how popular they are, more than 70% of all 401(k)s provide TDFs, and approximately 50% of participants own them. However, most employees don’t even know what target-date funds are or how they work.

So why the fuss about target-date funds? Although popular, many participants are misusing them and hurting themselves in the long run.

What a Target-Date Fund does:

A TDF is simply an investment fund that owns a bunch of index-style mutual funds. Because TDFs include funds with broad exposure to different types of assets, they allow novice investors to access countless stocks and bonds. For example, the Vanguard 500 Index Fund tracks the S&P 500, which gives investors access to 500 different stocks. A TDF may contain several funds similar to the Vanguard one.

According to a recent study by Aon Hewitt, retirement savers who choose to invest in a single TDF and no other funds had higher investment returns by over 2%. In addition, those participating in TDFs outperformed people who manually managed their retirement investments by a whopping 3%.

Here are some reasons they have been misused, how to overcome them, and why you only need one in your portfolio.

Choosing the wrong year

The name “target-date fund” means exactly what it sounds like. You choose a fund based on the year or “target date” that you plan to retire. TDFs are offered in five-year increments — 2035, 2040, 2045, 2050, and so on. Your goal is to pick a TDF associated with a date that is closest to when you expect to retire.

For example, if you’re 25 years old today and plan to retire at age 65, you would opt for a 2055 TDF option.

Why does the year matter so much? Because the closer you get to retirement, the more conservative your investments should become. This is important, because you have less and less time to bounce back from setbacks as you get closer to retirement. The way TDFs work, they tend to be more heavily invested in risky assets like stocks in your early working years.

“As the investor ages and moves closer to their intended retirement date, a target-date fund will reduce the overall investment risk,” explains John Croke, a certified financial adviser with Vanguard. This process is known as the glide path.

Choosing more than one TDF

Since TDFs are pretty straightforward, many people mistakenly think that they need to split their retirement savings among more than one TDF in order to be truly “diversified.” But the whole point of a TDF is that you only need to invest in one — it is automatically diversified among many assets for you.

“TDFs are designed as ‘all-in-one’ solutions that provide automatic diversification across multiple asset classes,” Croke says. “Owning more than one TDF is not advised or necessary.”

You shouldn’t treat your TDF as if you were a day trader trading stocks either. It’s better to invest in your TDF and keep your funds there rather than to jump in and out trying to time the market.

Paying too much in fees

Compared to traditional mutual funds, TDFs are especially appealing because they charge such low fees. In the world of investing, fees come in many different forms, but the important fee to watch out for is called the “expense ratio.” This is the amount your fund manager charges you for the ability to own that fund. Expense ratios can be as low as a fraction of a percentage or as high as several percentage points. It may not sound like much of a difference, but even a difference of one or two points can mean losing tens of thousands if not hundreds of thousands of dollars over the decades until you retire.

Also, participating in more than one fund just subjects you to more fees that are unnecessary. Why pay more when you don’t have to?

The final word

All in all, TDFs provide an easy, diversified, and low-cost means to invest for retirement. All you need to do is choose one that matches the year you plan to retire, make tax-deferred payments from your paycheck into the fund, and allow your account to grow with history proving that time is on your side when it comes to the markets.

Eric Patrick
Eric Patrick |

Eric Patrick is a writer at MagnifyMoney. You can email Eric here

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The Most Expensive Zip Codes for Renters

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When it comes to saving money on rent, ZIP code is everything.

Using data from rental market research firm Yardi Matrix, rental listing service RentCafe analyzed how the cost of renting differs by ZIP code in 125 major U.S. metro areas.

The top 10 most expensive ZIP codes are located in just two cities — New York and San Francisco. In fact, Manhattan and San Francisco took all but one of the top 20 spots in the RentCafe ranking. New York City alone is home to 27 of the top 100 most expensive ZIP codes.

The priciest pads are located in Manhattan’s Battery Park City (10282), where renters pay an average $5,924 per month, making it the most expensive ZIP code in the country.

Right behind Battery Park were the Lenox Hill area (average rent: $4,898) and apartments on the Upper West Side near Lincoln Square (average rent: $4,892), which took the No. 2 and No. 3 slots on the most expensive list.

San Francisco had two in the top 10: ritzy neighborhoods Presidio and Main Post (94129), where average rental prices stand at $4,762, and the city’s South Beach area (94105) pulled in ninth at $4,380.

According to the ranking, Boston was the third most expensive city for renters. There, renters can expect to pay $4,227 to live in the city’s most expensive ZIP code, the Back Bay neighborhood (02199).

MagnifyMoney looked at RentCafe’s findings to figure out which cities had the most expensive ZIP codes. Here’s how they stacked up:

U.S. Cities With the Most Expensive ZIP Codes for Renters

RankingCityStateMost Expensive ZIP CodeAverage Rent
1ManhattanNY10282$5,924
2San FranciscoCA94129$4,762
3BostonMA02199$4,227
4Palo AltoCA94301$3,718
5Menlo ParkCA94025$3,657
6BrooklynNY11201$3,622
7Los AngelesCA90401$3,477
8Santa MonicaCA90405$3,423
9DurhamNH03824$3,381
10Playa VistaCA90094$3,367

How to save on rent

Always comparison shop.

Comparison shopping is one of the most important things you can do to save money on your next move. Comparing prices in and around the area you want to live is one way to make sure you pay a fair price for your new space.

Back in the day, comparing prices on apartment would have involved calling several different management companies to compare quotes. Even then, you might have missed a good deal. With today’s technology you can (and should) easily search for and compare rent prices all over the world with interactive maps on sites like RentCafe, Apartment Finder, or Cozy.

Fly South for lower rent

Renters looking to pay as little as possible should look toward states like Kansas or Alabama. Two Wichita, Kan., ZIP codes (67213 and 67211) priced around $400 per month, while apartments in Decatur, Ala. (35601) will run renters on average $458 per month. So, for what you’d pay for one month of rent in Manhattan, you could rent a place in Kansas for a whole year.

Below are the top ten cities with the least expensive rental listings based on Yardi Matrix data.

U.S. Cities With the Least Expensive ZIP Codes for Renters

RankingCityStateLeast Expensive ZIP CodeAverage Rent
1WichitaKS67213$407
2DecaturAL35601$458
3MemphisTn38106$464
4ColumbusGA31903$482
5Fort WayneIN46809$495
6HuntsvilleAL35810$503
7LouisvilleTN37777$507
8Gravel RidgeAR72076$508
9West MemphisAR72301$508
10AthensAL35611$510
Brittney Laryea
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Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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What Trump’s Budget Means for Public Service Loan Forgiveness

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Confirming the fears of many, President Donald Trump’s recently proposed federal budget calls for the defunding of the Public Service Loan Forgiveness program. While those currently enrolled in the program would not be affected, anyone taking out loans after July 1, 2018, would not be eligible.

Proponents of the program, designed to attract candidates to the public sector by forgiving student loans after 120 consecutive payments, fear this cut would incentivize teachers, lawyers, nurses, and other professionals to seek out careers in the private sector where the salaries are significantly higher. Opponents say the program is too costly, and the proposed cuts would save taxpayers billions.

What Does This Mean?

Adam Minsky, a Boston, Mass.-based attorney who specializes in student loans and consumer issues, cautioned that President Trump’s budget proposal is just that — a proposal.

The president can propose a budget, but it’s up to Congress to finalize and ratify it. The Republicans currently have a majority in both the House of Representatives and the Senate, and the federal budget only needs to have a simple majority for it to pass. Still, that would require about eight Democrats to vote yay, something they’re unlikely to do unless the final draft takes a more bipartisan turn.

The process of getting a budget approved through Congress is a long road. Each chamber of Congress has to approve the bill internally, then the bill goes to a committee that looks at both the Senate and House of Representatives bills to reconcile any differences. Finally, the bill is sent to both houses of Congress for a final vote.

Budget proposals rarely make it through Congress unaltered. Trump’s proposal is more like a polite nudge from the executive branch, not a firm decree.

Budget talks will continue throughout the summer and fall, and it’s not clear when a final proposal will be announced.

What Is the Public Service Loan Forgiveness Program?

Started in 2007, the Public Service Loan Forgiveness program allows borrowers who took out federal student loans to have their loans forgiven after 120 consecutive payments (10 years), as long as they served in a government or nonprofit role while all those payments were made. Graduates who utilize the program are on a mandated income-based repayment plan, so their payments are often much lower than they would be on the standard plan.

Careers such as law, nursing, social work, teaching, law enforcement, firefighting, and the military would all be affected by this shift. Many who choose to enter these professions have the option of working for the private sector where salaries are higher, but choose the public route because of this program. Not having the PSLF program could mean a dearth of candidates entering these fields.

“You have people making major life decisions based on the existence of this and other programs,” Minsky said.

The program incentivizes people to work in the public sector where salaries are lower and the demand is greater. If people don’t have a reason to take a lower-paying job, some experts worry that the gap between the rural and urban communities and other low-income areas will continue to increase.

Who Is Affected by This?

Only borrowers who take out federal student loans after July 1, 2018, would be affected by this change, and anyone who took out loans before this would be grandfathered in. The first crop of students who will have their loans forgiven will be this fall. Currently, over half a million people are enrolled in the PSLF program.

What’s the Problem?

The problem with Trump’s proposal is that the Public Service Loan Forgiveness program is a federal law. A budget proposal can’t change the law, but it can defund the program. That’s where the legal confusion arises.

“That’s the million dollar question,” Minsky said. “How can you have a program that is legally allowed to exist without funding it?”

He anticipates that if a budget passes defunding the PSLF program, several lawsuits would immediately come about.

“The way they’re going about doing it is problematic from a legal point of view,” Minsky said.

What Can People Do?

If you oppose the president’s proposal, you should contact your local representatives to tell them how you feel. Each citizen has one House representative and two Senators. Minsky recommends calling, writing a letter, and setting up a meeting with their spokesperson.

When you call, “you want to identify yourself as a constituent and as a voter,” he said.

If you have coworkers who would also be affected by this, try to rally them to take action. Ask your boss if the organization you work for can take a public stand on these issues. Post about it on social media and encourage your friends to reach out to their elected officials. Strong public opinion could sway politicians to listen to the people and not include this proposal in their own budget.

Zina Kumok
Zina Kumok |

Zina Kumok is a writer at MagnifyMoney. You can email Zina here

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More Rich People Are Choosing to Rent Than Ever Before — Here’s Why

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Renting a home or condo has become a status symbol for some wealthy Americans.

Karen Rodriguez, an Atlanta, Ga., real estate agent, says people frequently contact her who are interested in condos renting for $10,000 to $15,000 a month in properties such as the Ritz-Carlton Residences, which have floors of condos above upscale hotel rooms.

“I do see a lot of high-net-worth renters,” says Rodriguez, with Berkshire Hathaway HomeServices Georgia Properties. “They have the disposable income to pay top dollar.”

Renter households increased by 9 million during 2005-2015, reaching nearly 43 million in 2015, according to the State of the Nation’s Housing report, an annual study by Harvard University’s Joint Center for Housing Studies that analyzes U.S. Census Bureau data. Of those, 1.6 million renter households earn $100,000 or more, representing 11% of all renters.

“Indeed, renter households earning $100,000 or more have been the fastest-growing segment over the past three years,” the report stated.

Here are four reasons why high earners are choosing to rent.

They’re frustrated with market trends.

stock market numbers and graph

Rob Austin, a biotech account manager in the Los Angeles area with a household income of over $350,000, rents a 1,700-square-foot townhome with his wife and two children.

In the last 10 years, 1.2 million households that earn $150,000 became renters, up from 551,000 in 2005. Using data from the U.S. Census Bureau’s 2015 American Community Survey, RentCafe.com reported in late 2016 that “wealthy households” that earn more than $150,000 annually increased by 217%, compared to an 82% rise in homeowners in the same income bracket.

The $150,000-and-up dollar amount served as the benchmark for “wealthy” renters because that’s the top of the bracket used in the American Community Survey to identify renters and homeowners.

Even when they had their second child in 2016, Austin says they were more steadfast to keep renting the two-bedroom, two-and-a-half bath townhome instead of buying. Prices are increasing so much that they’re “priced beyond perfection,” he says.

“It’s gotten worse,” he says. “Everything is mispriced at this point.”z

They want the next best thing.

Some buyers’ mindset is, “I don’t love it, so I’m just going to go rent a house,” says Atlanta, Ga., real estate agent Ben Hirsh.

Some may be bored with what’s on the market and are holding out for a home or condo with even more extravagant features or amenities. “They’re not happy with what’s out there,” says Rodriguez, also founder of Group Kora Real Estate Group, which sells new and luxury condos.

If they’re in a location or price range that’s hot, they could get more for their home if they sell now. Some wealthy homeowners take advantage of the resale market by going ahead and selling a home or condo and biding their time while renting. For example, if they’re sold on news about ultraluxe condos that have been announced, but are not under construction, they don’t mind renting in the interim.

“People think there’s more coming,” Rodriguez says.

Some clients have so much wealth that they’re willing to pay for the entire year up front for an unfurnished condo, she adds. Investors also have noticed the market trends and are buying condos for $1 million to $2 million with the intention to rent them out.

They don’t want a long-term commitment.

retirement retire millionaire happy couple on the beach

Some wealthy homeowners are ready to sell their million-dollar estates for a lock-it-and-leave-it lifestyle, but aren’t sold on townhome or condo living.

Instead, they’re willing to spend what can amount to the down payment on a starter home for monthly rent to experience the luxury condo lifestyle with privacy and ritzy amenities, like 24/7 room service and spa access.

“They want to test out a high-rise,” Rodriguez says. “They are people who definitely can afford to buy.”

A 2016 report by the National Association of Realtors identified the top 10 markets in the U.S. with the highest share of renters qualified to buy. The study analyzed household income, areas with job growth above the national average, and qualifying income levels (a 3% down payment in each metro area’s median home price in 2015) in about 100 of the largest U.S. metro areas. The markets that are above the national level (28%) were:

  • Toledo, Ohio (46%)
  • Little Rock, Ark. (46%)
  • Dayton, Ohio (44%)
  • Lakeland, Fla. (41%)
  • St. Louis, Mo. (41%)
  • Columbia, S.C. (41%)
  • Atlanta, Ga. (40%)
  • Columbus, Ohio (38%)
  • Tampa, Fla. (38%)
  • Ogden, Utah (38%)

The short-term mentality also may be the nature of the industry that brings people to a city. Some prospective renters whom Rodriguez meets are planning to live in Georgia for a couple of years because of work, such as jobs in the growing entertainment sector. Films such as the “Avengers” and TV shows such as “The Walking Dead” shoot in metro Atlanta.

They don’t want to live out of a suitcase in a hotel and have the income to afford high-priced rentals, joining political figures and international executives who also are among those making the same choice, Rodriguez says.

They want cash in the bank.

Townhomes sell for about $800,000 in Austin’s neighborhood in California. To make a 20% down payment, he’d have to shell out $160,000 up front.

“Why would I want to tie up $160,000 in cash in an asset that most likely is not going to go up a lot more — and more than likely has topped and has nowhere to go but down in the next cycle?” Austin asks.

Austin says he’s not wavering from his decision, although he’s “taking heat” from friends since he has the income to purchase a home.

“We’re bucking the trend by saying, ‘No thanks, we don’t want to play (the real estate market),’” he says. “We’ll just wait.”

Lori Johnston
Lori Johnston |

Lori Johnston is a writer at MagnifyMoney. You can email Lori here

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President Trump’s Education Budget Leaked — And Student Loan Borrowers Won’t be Happy

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More details from President Donald Trump’s long-awaited education budget leaked to the Washington Post on Wednesday. The proposed plan would slash $10.6 billion from federal education initiatives, including after-school programs, public service loan forgiveness, and grants for low-income college students, according to the Post.

Here’s what we know so far:

This May Be the End of Public Service Loan Forgiveness

Trump has long promised to dramatically scale back the role of government in education, a plan heartily supported by Betsy Devos, the embattled Education Secretary appointed by the president earlier this year.

Among the programs on the chopping block is the Public Service Loan Forgiveness initiative. Implemented in 2007, the PSLF sought to reward student loan borrowers who took jobs in nonprofits or the public sector by allowing them to discharge their federal student loan debt after 10 years of on-time payments.

Over half a million students were enrolled in the program, and the first cohort would have been eligible for loan forgiveness this October.

Now, the future of the initiative is uncertain. There are no details on whether eligible students will be grandfathered into the program, as has been the case when previous student loan assistance programs were phased out. A Department of Education representative didn’t immediately return a request for comment.

Disgruntled college graduates took to social media Thursday to cry foul.

Changes are Coming to Income-Driven Repayment Plans

As it stands there are five different income-driven repayment plans available to student loan borrowers. The proposed budget calls for one single IDR plan, which could potentially be good news for borrowers.

Typically, under the current IDR plans, borrowers are eligible to have their loans forgiven after 20 years of on-time payments, and their monthly payments are capped at 10% of their income. Trump’s new budget would decrease the payment period from 20 to 15 years but would increase the payment cap to 12.5% of income, the Post reports.

But advanced degree earners wouldn’t be so lucky. Trump’s plan would not only raise the income cap for borrowers who earned advanced degrees, it would lengthen the repayment period. IDR plan payments would be maxed at 12.5% of their income, up from 10%, and they would have to pay for 30 years rather than 25.

Low-Income College Students Could Lose Child Care Services

Update: The official White House budget was released May 23 and does not seem to include this rumored budget cut.

Trump’s budget would slash the entire $15 million budget for CCAMPIS, a federal grant program that funds on-campus child care services for low-income parents. Dozens of campuses received grants under the program.

$700 Million Cut from Perkins Loans

While Pell Grant funding remains untouched under the proposed budget, the plan would slash more than $700 million in funding from Perkins loans, according to the Post. Perkins loans are low-interest federal student loans for low-income undergraduate and graduate students.

Federal Work-Study Programs Scaled Back

The Federal Work-Study program offers part-time jobs to college students who prove financial need. Their earnings help cover their education expenses. Under the proposed budget, the program would lose $490 million, or about half its budget.

What’s next?

We wait. The final proposed budget is still set to be released May 23, and the particulars could still change. After that, it will have to pass muster with lawmakers in Congress. To write a letter to your representatives,  contact them here. 

 

Mandi Woodruff
Mandi Woodruff |

Mandi Woodruff is a writer at MagnifyMoney. You can email Mandi at mandi@magnifymoney.com

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This Family Spent $6,000 to Save Their Home and Still Wound Up Facing Foreclosure

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Lageshia Moore of Far Rockaway, N.Y. says her family spent $6,000 in hopes it would save them from foreclosure. “Some people might say, ‘OK, just get a new house.’ But it wasn’t that simple,” says Moore.

When Lageshia Moore and her husband found their home in 2006, they thought it would be a perfect place to raise their family. The $549,000 Far Rockaway, N.Y., duplex even had future income potential if they could find a reliable tenant and rent out one half of the house.

In order to purchase the property and avoid primary mortgage insurance, the couple took out two mortgages to cover the costs.

Like millions of Americans who purchased homes at the peak of the housing bubble, their timing could not have been worse. Moore, a teacher, left her job in 2007. It soon became impossible to meet their $4,000 total monthly mortgage payments. By the summer of 2008, they were deep in default, and the recession sent their home value plummeting.

They were officially underwater on their house, and the family was living solely on Moore’s husband’s income as a driver. Eventually, they were notified that their lenders had begun the foreclosure process.

“Some people might say, ‘OK, just get a new house.’ But it wasn’t that simple,” Moore said. “This was the house where we were raising our family. My husband is very proud and homeownership means a lot to him — so we weren’t going to just let it go.”

Instead, Moore and her husband did what many families facing foreclosure do: They began looking desperately for “foreclosure relief” companies, law firms, and groups who promised help. A nonprofit connected them to a court-appointed attorney, but it didn’t stop the foreclosure process. So they turned to companies that advertised foreclosure relief on radio stations and online.

Over the course of six years, the family handed over thousands to a handful of relief groups they thought could stop the foreclosure. “We were desperate, and we thought, ‘OK, we’ll hand over this money to someone and they’ll just fix it,’” Moore said.

One of those foreclosure relief companies was Florida-based Homeowners Helpline, LLC. In 2015 the family gave the company a total of $6,000: an initial $2,000 down payment, and then $1,000 in four monthly installments. By that time Moore had found a new job, but the family hadn’t paid the full mortgage amount in years.

Moore shared the contract with MagnifyMoney, in which Homeowners Helpline says it will “perform a mortgage loan review and audit,” including actions like sending a cease-and-desist letter and a “Qualified Written Request” for information about the account to the family’s lenders.

Here’s what Moore says happened: Homeowners Helpline connected her family with a New York City lawyer who “kept asking for endless paperwork, month after month after month,” and who eventually stopped answering their calls, she claims. They finally got in touch with him just before the house was set to go up for auction, she said, and he told them the efforts to stop the auction had failed.

“We were horrified,” Moore said.

Homeowners Helpline told MagnifyMoney a different story. Sharon Valentine, a processor at Homeowners Helpline who worked on Moore’s husband’s case, said the family was slow to hand over needed paperwork and “unrealistic about their expectations.”

Crucially, Valentine said, the family didn’t tell Homeowners Helpline the house was actively in foreclosure until they mentioned the auction. “And then it was like, ‘Wait, what?’” Valentine said. The company would have taken different actions had they known about the foreclosure proceedings, she added.

“We can’t help you effectively if you don’t give us all of the information and the paperwork,” Valentine said. “In general, some clients come in and they hear their friend was able to get a 2% [mortgage] rate or cut their payments in half, and it’s like, ‘Well, that’s a very different situation.’ We try to help educate, but sometimes you can’t change that expectation.”

The Best Help is Free

But there is a free resource to educate panicked homeowners about expectations and provide foreclosure assistance — as well as help them avoid scam companies that will steal their money. NeighborWorks America runs LoanScamAlert.org, which aims to be a one-stop shop for people with questions about or problems with their mortgages.

The Loan Modification Scam Alert Campaign launched in 2009, when Congress asked NeighborWorks America to educate and help homeowners. LoanScamAlert.org offers resources including information about how to spot and report scams, and lists of trusted authorities who can help. Its main goal: Drive people to call the Homeowner’s HOPE Hotline, at 888-995-HOPE (4673), which is staffed 24 hours a day by counselors who work at agencies approved by the U.S. Department of Housing and Urban Development (HUD).

“We provide them with a single, trusted resource,” said Barbara Floyd Jones, senior manager of national homeownership programs at NeighborWorks America. “It gets confusing when you see companies with all of these similar names advertising on the radio or TV, and then you have to research them. We want to let people know they don’t have to pay a penny for assistance.”

Anyone — regardless of income or other factors — can contact the counselor network to receive free advice and help. Homeowners aren’t always aware of the myriad government-affiliated groups that can provide assistance, or of the federal and state programs created to speed loan refinances and modifications, Floyd Jones said.

“We can never promise that everyone will be able to save their home; there are a variety of circumstances,” Floyd Jones said. “But we can promise a trusted counselor will listen, take a look at your paperwork if you want, and tell you all of your options.”

In fact, if a homeowner grants permission, the counselor can contact the mortgage lender directly to discuss options to stop the foreclosure, modify the terms of the loan, or otherwise make a deal. If need be, homeowners will also be connected with vetted legal assistance — although Floyd Jones noted not every situation requires a lawyer.

True to LoanScamAlert.org’s name, the hotline counselors also take complaints about mortgage-related scams: third-party companies that take the money and run, or slip in paperwork that unwittingly gets homeowners to sign over the deed to the house.

The Federal Trade Commission received nearly 7,700 complaints about “Mortgage Foreclosure Relief and Debt Management” services in 2016 — down from almost 13,000 in 2014, but still a significant figure.

“Stopping phony mortgage relief operations continues to be a priority” for the FTC, said spokesman Frank Dorman.

Both the FTC and LoanScamAlert.org offer tips to avoid scams — and to make sure you’re taking advantage of all federal and state programs that could help.

Red Flags:

  • They ask you to pay before any services are rendered.
  • Pressure to pay a fee before action is taken, sign confusing paperwork, or hire a lawyer off the bat. As with any scam, fraudulent mortgage relief services rely on high pressure to push vulnerable homeowners into taking action. Companies shouldn’t ask for “processing fees” or “service fees” early in the process, Floyd Jones said, as early foreclosure-stoppage efforts don’t cost anything. Be wary of signing any document, as you could unwittingly surrender the home’s title or deed to a scammer.
  • They make promises they can’t keep. 

    Promises or guarantees they’ll save your home from foreclosure — or even claims like “97% success rate!” No one can guarantee results.

  • They say they’re affiliated with the U.S. government. 

    Companies that claim to have an affiliation with a government agency. Some scammers may claim to be associated with the government, charging fees to get you “qualified” for government mortgage modification programs like Hardest Hit Fund. You don’t have to pay for these government programs — and lenders, particularly big banks like Wells Fargo and Bank of America, may be able to offer you their own modification options directly.

  • They want you to send your mortgage payments to them.

    Companies that tell you to start paying your mortgage directly to them, rather than your lender. They may promise to pass the money along, but they could pocket it and disappear.Companies that ask you to pay them through unconventional methods: Western Union/wire transfers, prepaid Visa cards, etc., instead of a check. They’re trying to get your money in a way that’s hard to trace.

As for Lageshia Moore and her husband, the family ultimately filed for bankruptcy — a move that can stop the foreclosure process, but only temporarily — and are now working with a law firm on a loan modification she hopes will reduce their payments to a manageable monthly sum. In giving advice to others, she reiterates the simplest but most important tip: “Just do your research.”

“You’re panicked, but you have to do your due diligence,” she added. “Really sit down and weigh the pros and cons: foreclosure, short sale, etc. What does this process or contract really mean? It’s an emotional time, but you have to try to keep the emotion out of it. That’s what I would tell myself.”

What to Do if You’re Facing Foreclosure:

  • Call a HUD-certified counselor at 1-888-995-HOPE. You’ll get advice and help for free, and while counselors can’t ever promise to save a home, they’ll be happy to take a look at any paperwork or information about your case, contact your lender about options if you grant permission, and connect you with vetted legal assistance if need be.
  • If you’re not facing foreclosure yet, but you’re worried that you’re about to run into trouble, contact your mortgage lender’s loss litigation department. They may be willing to work with you. Your lender can also tell you whether you’ll qualify for government programs.
  • Overall, don’t let desperation stop you from taking the time to research any potential actions, including signing on with a relief company. Explore the company’s background and track record. Check online for reviews from other homeowners — and be sure to look up phone numbers too. Many scam companies simply shut down, reopen under a new name, and retain the same phone number.
Julianne Pepitone
Julianne Pepitone |

Julianne Pepitone is a writer at MagnifyMoney. You can email Julianne here

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How Weight Loss Helped This Couple Pay Down $22,000 of Debt

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Photo courtesy of Brian LeBlanc

About two years ago, Brian LeBlanc was fed up. The 30-year-old policy analyst from Alberta, Canada, had struggled with his weight for years. At the time, he weighed 240 pounds and had trouble finding clothes that fit. He decided it was time to change his lifestyle for good.

LeBlanc started running and cutting back on fast food and soft drinks. He ordered smaller portions at restaurants and avoided convenience-store foods. About a year into his weight-loss mission, his wife Erin, 31, joined him in his efforts.

“The biggest change we made was buying a kitchen food scale and measuring everything we eat,” Brian says. “Creating that habit was really powerful.”

Over the last two years, the couple has shed a total of 170 pounds.

But losing weight, they soon realized, came with an unexpected fringe benefit — saving thousands of dollars per year. Often, people complain that it’s expensive to be healthy — gym memberships and fresh produce don’t come cheap, after all. But the LeBlancs found the opposite to be true.

Erin, who is a payroll specialist, also managed their household budget. She began noticing a difference in how little money they were wasting on fast food and unused grocery items.

Photo courtesy of Brian LeBlanc

“Before, we always had the best intentions of going to the grocery store and buying all the healthy foods. But we never ate them,” she says. “We ended up throwing out a lot of healthy food, vegetables, and fruits.”

Before their lifestyle change, Brian and Erin would often eat out for dinner, spending as much as $80 per week, and they would often go out with friends, spending about $275 a month. Now, Brian says if they grab fast food, they choose a smaller portion. Last month, they only spent $22 on fast food.

What’s changed the most is how they shop for groceries, what they buy, and how they cook. Brian likes to prep all his meals on Sunday so his lunches during the week are consistent and portion-controlled. They also buy only enough fresh produce to last them a couple of days to prevent wasting food.

Shedding pounds — and student loan debt

Photo courtesy of Brian LeBlanc

Two years after the start of their weight-loss journey, they took a look at their bank statements to see how their spending has changed. By giving up eating out and drinking alcohol frequently, they now spend $600 less a month than they used to, even though they’ve had to buy new wardrobes and gym memberships.

With their newfound savings, the LeBlancs managed to pay off Brian’s $22,000 in student loans 13 years early. Even with the $600 they were now saving, they had to cut back significantly on their budget to come up with the $900-$1,000 they strived to put toward his loans each month. They stopped meeting friends for drinks after work, and Erin took on a part-time job to bring in extra cash. When they needed new wardrobes because their old clothing no longer fit, they frequented thrift shops instead of the mall.

When they made the final payment after two years, it was a relief to say the least.

Now the Canadian couple is saving for a vacation home in Phoenix, Ariz., which they hope to buy in the next few years, and they’re planning to tackle Erin’s student loans next. They’re happy with their weight and lives in general, but don’t take their journey for granted.

“There were times we questioned our sanity and we thought we cannot do this anymore,” says Erin. But they would always rally together in the end.

“There are things that are worth struggling for and worth putting in the effort,” Brian says. “Hands down, your health is one of those things.”

How Getting Healthy Can Help Financially

Spending less on food isn’t the only way your budget can improve alongside your health. Read below to see how a little weight loss can tip the scales when it comes to your finances.

  • Spend less on medical bills. Health care costs have skyrocketed in the last two decades, but they’ve impacted overweight and obese individuals more. A report from the Agency for Healthcare Research and Quality stated that between 2001 and 2006, costs increased 25% for those of normal weight — but 36.3% for those overweight, and a whopping 81.8% for obese people. The less you weigh, the less you’ll pay for monthly health insurance premiums and other expenses.
  • Buy cheaper clothes. Designers frequently charge more for plus-size clothing than smaller sizes. Some people claim retailers add a “fat tax” on clothes because there are fewer options for anyone over a size 12. It might not be fair, but it’s the way things are.
  • Save on life insurance. Your health is a huge factor for life insurance rates. Annual premiums for a healthy person can cost $300 less than for someone who is overweight.
  • Cut transportation costs. Biking or walking to get around is not only a cheap way to exercise — it’s a cheap way to travel. You’ll be saving on a gym membership and limiting gasoline costs in one fell swoop. Bonus points if you go the whole way and sell or downgrade your vehicle.
Zina Kumok
Zina Kumok |

Zina Kumok is a writer at MagnifyMoney. You can email Zina here

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Featured, News

5 Lies Your Car Mechanic Might Tell You

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By Kelsey Green

Whether you’re getting an oil change, having your tires rotated, or facing a more complicated repair, like replacing the alternator, it’s possible your visit to the auto repair shop will end up being more expensive than you anticipated.

Automobile maintenance costs an average $792 per year, according to the AAA’s 2016 “Your Driving Costs” study, and you don’t need mechanics padding their bills with unnecessary repairs and charges.

Most technicians genuinely want to help, says Lauren Fix, who is known as “The Car Coach” and is the spokesperson for the nonprofit Car Care Council. But there are times when you should question what the mechanic tells you.

Here are five common lies and ways to combat them.

1. “You can use any kind of oil in your car.”

Technicians often say you can use any oil in your car despite what your service schedule or car manual states.

“Run the oil that your service schedule tells you,” Fix says. “Running the wrong oil in your engine can void your warranty.”

If your car needs synthetic oil, which is for turbocharged, supercharged engines, or high-performance vehicles, make sure your technician uses that kind.

2. “You need to fix this now before it’s a problem.”

Sometimes a technician may exaggerate a problem because he wants to talk you into paying for a repair you may not need at that time.

Check your service schedule before saying yes, because it’s the “Bible for your car,” Fix says. If you’ve lost your service schedule or you bought a used car, check out carcare.org for a customizable service schedule specifically for your vehicle. This will act as your guide.

You can save more than $1,200 a year in repairs if you follow your service schedule and are proactive with any problems, the Car Care Council states.

Fix also warns that sometimes a technician will exaggerate to make you understand that there is actually a problem with your car. Ask for a second opinion if you’re unsure.

“Even if he finds a new problem with your car while working on a problem you have already discussed, you have to assume that it is possible,” Fix says.

3. “That damage didn’t happen here.”

Sometimes it’s just a small scratch or ding. Accidents happen, even by people who are paid to repair your car.

A California shop tried to cover up severe damage to Michelle and Albert Delao’s automobile after it fell several feet from a lift in 2015, the couple says. Employees didn’t tell the Delaos what happened to their car, instead saying that the shop was waiting on a part. The store offered to pay for a rental car while their vehicle was being worked on.

When they finally got their car, Michelle says she immediately knew something was wrong.

“I could tell from little things about the way the car was driving,” she says. “It was wobbly, and we could hear glass in the passenger window, which was weird, because we never had a glass or window problem before.”

To try to resolve the problems, they purchased a new set of tires to stop the wobbling. But they got a call a month later from a technician at the shop, they say. The couple learned that the car fell several feet onto its side, piercing the bottom and shattering the front passenger window, along with other damage to the car’s body. When the technicians could not get the car off the lift, a tow truck was called to pull the vehicle down, causing more damage, they say.

When she called the manager and store to ask about the incident, Michelle says both denied anything happened until she showed the owner the pictures from the technician.

After finding out the true extent of the damage, the Delaos took their car to the dealership, which confirmed all the damage at over $20,000, totaling their car. The couple has filed a lawsuit against the auto repair shop.

The incident has given the couple a severe distrust of technicians, Michelle says.

“It’s just sad, really,” Albert says. “It’s like when people need to go to the doctor. We have to have our car. We don’t know anything about it. We’re not mechanics.”

4. “This part cost more than we anticipated.”

An easy way for technicians to make more money is by overcharging for a part or repair. If you’re not sure how much a repair will cost, get multiple quotes in writing.

“Never do anything without getting a quote in writing,” Fix says. “That is how you know someone knows what they’re talking about and will uphold that when you get it in writing.”

If you don’t like to go in blind, you can get a general idea of what a repair or part will cost with research.

“Education and information are power,” Fix says.

Fix suggests RepairPal.com, which helps people not well versed in car mechanics be more prepared for when someone gives them a quote. You can type in your car’s mechanical issue to research the problem and the reliable cost for the part and labor for your area.

5. “The cheap tires will be just fine.”

When it comes time for new tires, technicians may try to talk you into buying the cheapest brands. Don’t listen, Fix says.

“When people come in saying they need to replace tires, they need to use the same tire brand and size,” she says. “The size and brands of the tires impacts your handling, traction, and safety for your car.”

Tires recommended by Consumer Reports, for example, range from $64 to $121.

Tips for finding a reliable car mechanic

  • Go to a certified technician. Look for signs that state the shops are certified by the Automotive Service Association (ASA) or the National Institute for Automotive Service Excellence (ASE). “Find a master technician when you can,” Fix says. “They are the best in the business.”
  • Ask your friends and family. Personal experience is the best way to find a reliable technician, so ask the people you trust.
  • Check with a dealer. Along with specializing in your car, they can also help with recalls or possibly help find you a new technician if your warranty has expired.
  • If your vehicle is safe to drive, take it to another mechanic for a second opinion.
  • If your check engine light comes on, head to your local auto parts store, not a mechanic. Their equipment will find the issue, which empowers you with information before you schedule your car for service.
MagnifyMoney
MagnifyMoney |

MagnifyMoney is a writer at MagnifyMoney. You can email MagnifyMoney at info@magnifymoney.com

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Featured, News, Tax

File Taxes Jointly or Separately: What to Do When You’re Married with Student Loans

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Married couples with student loans must make a difficult decision when they file their tax returns. They can choose to file jointly, which often leads to a lower tax bill. Or they can file separately, which may result in a higher tax bill, but smaller student loan payments. So which decision will save the most money?

First, let’s discuss the difference between the two filing statuses available to married couples.

Married filing jointly

Married couples always have the option to file jointly. In most cases, this filing status results in a lower tax bill. The IRS strongly encourages couples to file joint returns by extending several tax breaks to joint filers, including a larger standard deduction and higher income thresholds for certain taxes and deductions.

Married filing separately

Because married couples are not required to file jointly, they can choose to file separately, where each spouse is taxed separately on the income he or she earned. However, this filing status typically results in a higher tax rate and the loss of certain deductions and credits. However, if one or both of the spouses have student loans with income-based repayment plans, filing separately could be beneficial if it results in lower student loan payments.

For help figuring out which filing status is better for married couples with student loans, we reached out to Mark Kantrowitz, publisher and Vice President of Strategy at Cappex.com. Kantrowitz knows quite a bit about student loans and taxes. He’s testified before Congress and federal and state agencies on several occasions, including testimony before the Senate Banking Committee that led to the passage of the Ensuring Continued Access to Student Loans Act of 2008. He’s also written 11 books, including four bestsellers about scholarships, the FAFSA, and student financial aid.

Two Advantages to Filing Taxes Jointly:

  • Most education benefits are available only if married taxpayers file a joint return. This can affect the American opportunity tax credit, the lifetime learning credit, the tuition and fees deduction (which Congress let expire as of January 1, 2017, but is still available for 2016 returns), and the student loan interest deduction.
  • Couples taking the maximum student loan interest deduction of $2,500 in a 25% tax bracket would save $625 in taxes. But this “above the line” deduction also reduces Adjusted Gross Income (AGI), which could yield additional tax benefits (e.g., greater benefits for deductions that are phased out based on AGI, lower thresholds for certain itemized deductions such as medical expenses, and miscellaneous itemized deductions).

However, there is a potential downside to filing jointly for couples with student loans.

Income-driven repayment plans use your income to determine your minimum monthly payment. Generally, your payment amount under an income-based repayment plan is a percentage of your discretionary income (the difference between your AGI and 150% of the poverty guideline amount for your state of residence and family size, divided by 12).

  • If you are a new borrower on or after July 1, 2014, payments are generally limited to 10% of your discretionary income but never more than the 10-year Standard Repayment Plan amount.
  • If you are not a new borrower on or after July 1, 2014, payments are generally limited to 15% of your discretionary income, but never more than the 10-year Standard Repayment Plan amount.

Because filing jointly will increase your discretionary income if your spouse is also earning money, your required student loan payment will typically increase as well. In some cases, the difference is negligible; in others, this can add up to a pretty significant cost difference.

“Calculating the trade-offs of income-driven repayment plans versus the student loan interest deduction and other benefits is challenging,” Kantrowitz says, “in part because the monthly payment under income-driven repayment depends on the borrower’s future income trajectory and inflation, not just the inclusion/exclusion of spousal income.”

Fortunately, some tools can help you run the numbers.

An example: Meet Joe and Sally

Here’s a simple scenario that shows how a change in filing status can save on taxes but cost more on student loans:

  • Joe and Sally are married with no children.
  • They live in Florida (no state income tax).
  • Joe is making $35,000 per year and has $15,000 of student loan debt with a 6.8% interest rate.
  • Sally is making $75,000 per year and has $60,000 of student loan debt with a 6.8% interest rate.

First, we can estimate Joe and Sally’s tax liability for filing jointly versus separately. TurboTax’s TaxCaster tool makes this pretty easy. Here’s what we get when run their numbers using 2016 tax rates:

  • Filing jointly, Joe and Sally would owe $13,249 in federal taxes.
  • Filing separately, they would owe $15,178.

So they would save just over $1,900 in federal taxes by filing jointly. But how would filing jointly affect their student loan payments?

We can use a student loan repayment estimator like the one provided by the office of Federal Student Aid to find out. Here’s what we get when we run the numbers and choose the Income-Based Repayment option, assuming they are new borrowers on or after July 1, 2014:

  • Filing jointly, Joe’s minimum required monthly student loan payment under a standard repayment plan would be $143, and Sally’s would be $571, for a total of $714 per month.
  • Filing separately, Joe’s minimum required monthly student loan payment would be $141, and Sally’s would be $474, for a total of $615 per month.

Over the course of a year, Joe and Sally would only save $1,188 on their student loan payments by filing separately. Even with the additional loan payments they would have to make, filing jointly would save them $712 more than filing separately.

What’s best for your situation?

Every situation is different. The simple example above comes out in favor of filing jointly, but you will need to run your own numbers to figure out what is right for you. Here are additional tips to help you figure it out:

  1. Know how much you owe. Make a list of all loan balances, interest rates, and the type of each student loan you have. You can find your federal student loans on the National Student Loan Data System. You can find information on your private student loans by looking at a recent statement.
  2. Estimate your student loan payment options. Using a student loan repayment estimator like the one mentioned above, determine your required payments when filing separately versus jointly.
  3. Calculate your tax liability. Use a tool like TurboTax’s TaxCaster or 1040.com’s Free Tax Calculator to calculate your federal and state tax liability when filing separately versus jointly.
  4. Be aware of long-term consequences. Filing separately might result in lower monthly payments today but more interest paid over time. If you make it to the 20- or 25-year forgiveness point, that could have tax implications down the line. Kantrowitz points out that “forgiveness is taxable under current law, causing a smaller tax debt to substitute for education debt. The main exception is borrowers who will qualify for public student loan forgiveness, which occurs after 10 years and is tax-free under current law.” Keep those long-term consequences in mind as you make a decision.
  5. Consider steps to lower your AGI. Your eligibility for income-driven student loan repayment plans depends on your AGI, which is essentially your total income minus certain deductions. You can reduce this number, and potentially lower both your tax bill and your required student loan payment, by doing things like contributing to a 401(k), IRA, or Health Savings Account.
  6. Keep the big picture in mind. These decisions are just one part of your overall financial situation. Keep your eyes on your big long-term goals and make your decision based on what helps you reach those goals fastest.

Other unique situations

There are a few unique situations that make deciding whether to file jointly or separately a little more complicated. Do any of these situations apply to you?

Divorce and legal separation

Sometimes, determining marital status to file tax returns isn’t cut and dried. What happens when you and your spouse are separated or going through a divorce at year end? In this case, your filing status depends on your marital status on the last day of the tax year.

You are considered married if you are separated but haven’t obtained a final decree of divorce or separate maintenance agreement by the last day of the tax year. In this case, you can choose to file married filing jointly or married filing separately.

You and your spouse are considered unmarried for the entire year if you obtained a final decree of divorce or are legally separated under a separate maintenance agreement by the last day of the tax year. You must follow your state tax law to determine if you are divorced or legally separated. In this case, your filing status would be single or head of household.

Pay as You Earn repayment plans

Pay as You Earn (PAYE) is a repayment plan with monthly payments that are limited to 10% of your discretionary income. To qualify and to continue to make income-based payments under this plan, you must have a partial financial hardship and have borrowed your first federal student loan after October 1, 2007. Kantrowitz says the PAYE plan bases repayment on the combined income of married couples, regardless of tax filing status.

Unpaid taxes, child support, or defaulted federal student loans

If you or your spouse have unpaid back taxes, child support, or defaulted federal student loans, joint income tax refunds may be diverted to pay for those items through the Treasury Offset Program. “Spouses can appeal to retain their share of the federal income tax refund,” Kantrowitz says, “but it is simpler if they file separate returns.”

Janet Berry-Johnson
Janet Berry-Johnson |

Janet Berry-Johnson is a writer at MagnifyMoney. You can email Janet here

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Featured, Small Business

Confessions of a Side Hustler: How Full-Time Workers Keep Their Side Gigs a Secret

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Many Americans are juggling extra gigs on top of their regular nine-to-five. According the Bureau of Labor Statistics, about 7.5 million Americans held more than one job in 2016. The figure rose by more than 300,0000 workers from the previous year, due in part to years of stagnant wages, a competitive labor market and the growth of the gig-economy. Of the multiple job holders, more than half, or 4.1 million, split their time between a full-time and part-time gig.

Having a side gig waiting tables after work is one thing. It’s when workers decide to turn their side hustle into a full-time business that things can get complicated.

For budding entrepreneurs, it can make sense to continue working full time until their new venture business is up and running. A full-time job provides a certain level of stability — like a consistent salary, health care, and other benefits.

Knowing when and if to disclose your new business with your employer is the hard part. For that reason, some entrepreneurs choose to keep their secret side hustle just that — a secret.

Some experts say an employer should know if you have any business interests outside of your daily work responsibilities. Others argue what you do on your free time is none of your employer’s business so long as you aren’t using company time or resources.

“Some employers really encourage their employees to work on side businesses because it stimulates creativity,” says Jill Jacinto, a millennial career expert at Manhattan-based career consultancy firm WORKS. On the other hand, she adds, some employers “might feel you are neglecting your current job or getting ready to make a move elsewhere.”

Beyond feeling ostracized by fellow workers or their employers, there are also potential legal conflicts or consequences to worry about, says Bruce Eckfeldt, founder of Eckfeldt & Associates, a business coaching and management training firm based in New York City and a master coach for career-assistance company, The Muse.

“Before you invest a bunch of time in your startup, make sure that your current employment agreement isn’t going to be a problem,” he says. If you happen to be launching a business in the same field as your current employer, there may be restrictions outlined in your contract that could come back to bite you.

In addition, you should do your very best to separate your new business from your day job as best you can. Separating your time and focus is a little more obvious — don’t work on your startup at your job — but you may also need to create some physical boundaries too.

“Build a solid wall between the work you do for you employer and for your startup. Separate email address, file repositories, maybe even computers and profiles if you’re really careful,” says Eckfeldt. He says this adds a physical level of separation between your day job and your startup. It also protects you against any claims you have used work time or resources on your startup. Doing so is common for many starting out, but generally considered unprofessional, and could breach the terms of your employment contract.

We interviewed several full-time workers who are secretly juggling side businesses along with their 9-to-5. We asked about their motivations, how they keep their other job under wraps, and the toll it has taken on their professional lives. To protect their identities (and their livelihoods), we have changed several of their names.

Here’s what it’s really like to live a double work life.

“I sell live crickets on the side.”

By day, Jason*, 32, is a project manager for a paint and flooring company in York, Pa.

After work, he puts on a much different hat as a pet food distributor. But he doesn’t sell Kibble ‘n Bits. His website, The Critter Depot, sells live crickets, which pet owners purchase in bulk to feed pets like snakes and large reptiles. Jason also operates a couponing blog under a pseudonym “Jason” and picks up Craigslist gigs in his free time.

“I like to get income from many sources, so I side-hustle,” Jason tells MagnifyMoney.

The husband and soon-to-be father of three says his ultimate goal is to retire as soon as possible. He plans to keep taking on extra work as long as he can manage it. He calls his full-time job “the bedrock” of his retirement plan.

“The full-time job, that’s the bedrock. That’s the foundation. If I had to sacrifice the other three [businesses], I would make sure I kept my full-time job,” says Jason. “Even if my side hustles got to the point where they were pulling in six figures alone, I wouldn’t get rid of my full-time job.”

On why he doesn’t tell his employer about his other income streams, Jason says he doesn’t want to blur the lines between his different businesses.

He’s careful to focus only on office work during office hours, and on his businesses when he’s at home. He doesn’t want to risk losing any trust at work.

“I don’t want [my boss] to think maybe I’m too zoned in on my side projects and not zoned in enough on my at-office projects,” he says.

For him, keeping his job in addition to the side income streams is all about keeping his family afloat.

“If I were a bachelor, I’d say you’ve got to put every ounce of your time into it. But the father in me says you’ve got to be level-headed because it’s not just you that’s relying on [your income], your whole family is relying on it.”

“I’m a travel agent when I’m not working on Wall Street.”

While Fred*, 45, was working at an investment firm in New York City, he developed an idea for a travel business. In 2009, he launched YLime, a concierge service that helps organize group trips for Americans looking to book travel to various countries for annual Carnival celebrations. Recently, he expanded his offerings to include travel packages to some African countries and wine tours on Long Island, N.Y.

His reasons for keeping his side business under wraps are simple: his workplace frowns upon employees having outside income.

“I’ve been on Wall Street for about 20 years now, and there is a certain culture in here. If they see you doing something else, it limits your growth,” he says. “They are not going to consider you for those positions because they assume you’ve already checked out to a certain extent.”

Although he says his company isn’t a conflict of interest for his position, he would be concerned if his higher-ups knew about YLime.

“Depending on your relationship with some people in the firm, some people may try to use that information against you,” Fred says.

“My bosses found out about my secret trucking business from a local news reporter.”

After a management shake-up at the Las Vegas gaming company where she had worked for a decade, 41-year-old project manager Marcella Williams thought her days were numbered.

Fearing she might lose her job, she decided to use her project management skills to open her own business on the side as a backup.

She launched CDL Focus, a truck rental and shipping company, in mid-2015. She rents two semi-trucks, primarily to people looking to obtain a commercial driver’s license. They can use her trucks to practice driving or to take the licensing test without going through an employer to gain access to a truck. Williams employs a driver for the other part of her business, which focuses on shipping.

She spent nearly $130,000 of her own savings and salary to bootstrap the business. In its early days, she admits it was hard to focus 100% on her day job while trying to get CDL Focus off the ground.

“The truth is, I probably spent a lot more time especially in the beginning working on the business than on my job,” says Williams. She gave her full-time job assignments priority and would shift her focus once her regular duties were completed, she says.

Williams recalls a time a potential truck client called her in the middle of a meeting with her supervisor.

“I’ve been in a meeting with my boss and my phone is ringing off the hook and he’s like, ‘do you need to get that?’” she says. In those cases, Williams says she tries to take the call after hours or send an prewritten reply so that she can respond later.

“You want to run your business and stay on top of it, but when you have a one- to two-hour conference call or meeting, you have to decide: are you going to screw over the person who is paying you?” she says.

After almost two years in operation, Williams caught the attention of a local reporter who wrote about her new venture. It wasn’t long before her employers found out.

The same day, her supervisor asked her into his office to be sure she wasn’t going to quit.

Now, she says, “[my co-workers] ask me ‘how is your trucking company going?’ in the middle of cubicle land.”

“I flip houses and sell bounce castles, and my employers have no idea.”

Austin, Texas-based Dennis* says he hasn’t quite mastered the ability to focus on his full-time job and ignore his side business until after work hours. The 31-year-old works as a logistics manager for a large technology company. About a year and a half ago, he and his wife took their savings and launched a real estate investing business.

Dennis and his wife buy, renovate, and resell homes. They learned the basics of house-flipping from a well-known investor in Austin. “Our first year we did 13 transactions,” says Dennis.

Excluding education and other startup costs, Dennis and his wife got into the market with $1,000 in direct mail advertising and about $15,000 spent fixing up their first property. They now earn between $20,000 and $50,000 on each home they flip. The couple says they brought in about $65,000 in 2016.

In 2016, Dennis also launched a pair of e-commerce stores, which sell bounce houses for children and clothing and accessories.

“I work on all three [projects] while I’m at my day job so it is hard, especially trying to keep everything a secret and not having co-workers see what I am truly working on,” Dennis says. “I know that I am not fulfilling my primary duties at my full-time job to the fullest extent of my abilities.”

To make things easier, the couple has hired a call center to take and record all calls from the real estate business, which are then addressed after Dennis comes home from work. He says he will do the same for the e-commerce stores as business grows.

His ultimate goal is to build up enough passive income to replace his corporate income. For now, he keeps his job for financial security, while he grows his e-commerce portfolio and his and his wife’s real estate business.

“The salary and stock incentives that we have right now are kind of hard to walk away from unless I had sufficient passive income that would replace what I have now,” he reasons. He has given himself two years to grow his businesses into self-sustaining operations. At that point, his stock in the company will be fully vested, and he can consider leaving for good.

“I’ve been blessed. I have a good education, and I’ve always had a good job, but ultimately my main goal in life is to be independent and not have to do the corporate grind,” he says.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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