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Strategies to Save

How to Build Wealth at Any Stage in Your Career

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Your individual financial wealth, or net worth, is built over a lifetime. Financial situations vary widely at birth, and as you go through life, your situation changes. A host of factors can alter your “wealth.” Your income may rise, or it may fall. You may start a new career; you may change careers. You may experience setbacks, large and small.

You can read plenty about what you should do, but real-life wealth-building strategies rarely goes according to plan. So we asked several people at various stages in their lives to share how they cultivated their personal wealth — including the setbacks, regrets and breakthroughs they experienced along the way.

Building wealth when you’re just starting your career

When Meredith Dean, 25, was getting ready to move from Georgia to New York City to start her first post-grad job, she was terrified.

“I was told by everyone that it was going to be super expensive and it was not going to be feasible,”’ said Dean, who at the time had just graduated from The University of Georgia with a bachelor’s in Journalism.

She immediately focused on keeping her expenses in check: She sold her car and used the savings to kickstart her life in New York. She also made sure she wasn’t spending more than 40 percent of her salary on housing. Dean lived in a tiny three-bedroom apartment with no kitchen and two roommates. It was close enough to walk to work, and when she had to travel anywhere else, she used public transportation.

But keeping her costs low was only the first step to building wealth at the start of her career.

Wealth-building strategy

Dean’s advice for those in their first years out of school: monetize a hobby you love.

Just a few months into her new job, Dean started a business that builds online portfolios for students and recent grads trying to land their first jobs. She got the idea for it after making a website for her then-boss and created the company, The Dean’s List, in the hours after her 9-to-5.

“I thought, ‘Man, I’m doing this for a lot of people and I’m loving this. Why don’t I start doing this for students?’” said Dean. After the idea struck, she pulled an all-nighter to create a website for her new company and never looked back. Today, Dean serves one or two clients a week through The Dean’s List, in addition to her full-time work.

“I now have these extra funds that I can rely on in case there is an emergency or if there is a trip I really want to go on,” said Dean. “It’s really nice to feel comfortable at 25 and not have any debt.”

Top tips

Start early

For Dean, a crucial component to building wealth at the beginning of her career was not starting in a hole: She started working as a restaurant hostess in her hometown of Milton, Ga., at age 15, and around the same time, she learned she could have almost all of her college tuition paid for if she graduated high school with at least a 3.0 GPA under Georgia’s Zell Miller Scholarship program. Primarily because of that scholarship, Dean didn’t have any debt when she completed her undergraduate degree in 2014.

Don’t quit your day job

Although Dean started her own company, she kept a full-time position. And she really lives the ideal that having multiple income streams is crucial to building wealth — at one point, she even picked up a third job.

Surround yourself by people who support your goals

While living in New York, Dean attended a Jeffersonian dinner at another recent UGA graduate’s place. At a Jeffersonian dinner, all guests must stay on one topic for the entire dinner — and it just so happened on that night the conversation topic was personal finance and women in finance.

“I learned so much from that dinner,” said Dean. Not only did she pick up a little newfound knowledge on everything from saving to investing, she also connected with a supportive group of friends.

“Surround yourself with the right people that push you forward, that motivate and inspire you,” Dean said. “That’s going to help you build wealth.”

Lessons learned

“I just really wish I would have taken a personal finance course,” said Dean, when asked about her biggest wealth-building regret.

She’d been saving in her retirement account and had an emergency fund. But after two years exclusively using her debit card, Dean hadn’t learned much about building credit. She didn’t get her first credit card until she left New York for her current home, Charlotte, N.C., in 2016.

Once in Charlotte, she found she needed a car. “I had no established credit to get a car, so my dad had to cosign for it,” Dean said.

She ended up educating herself about personal finance, but recommended college students take at least one personal finance course before they graduate, as long as they can afford to take the course (or if their school even offers one).

Building wealth early on in your career

Building wealth when you’re just starting your career

Although Jimmy Chan, 35, and his partner, Sue, 36, landed good jobs and bought a house together shortly after they earned undergraduate degrees in 2008, they still weren’t the best with money.

“We had to borrow money just to furnish our new home because we didn’t have extra savings,” said Chan. At the time, Chan, a computer engineer, was paying down his student loans on an entry level IT salary. Having to borrow money for furniture completely wiped them out, he said. But, it was the wake-up call they needed to avoid getting into any more debt.

The Montreal couple managed to pay off the IKEA debt, and Chan repaid his C$10,000 in student loan debt in his 20s. Still, they didn’t really start getting their financial lives in order until a few months shy of Chan’s 30th birthday.

Wealth-building strategy

Chan and his partner took the approach of starting with small goals and sticking to them. To kickstart their wealth-building, they found ways to live more frugally with the goal of living below their means. They cooked at home, packed lunches and avoided taking on more debt. They worked their way up to setting aside 20 percent of their income, on average, Chan said.

“Once we started to make small adjustments and were seeing results we were motivated,” said Chan. “It may take you 3 months, or 6 months, until you gain that confidence. Once you achieve [your] goal you can say, ‘Wow, we did it again.’”

That strategy allowed the couple to max out their retirement contributions, pay down their mortgage faster and launch Chan’s photography business, Pixelicious, which he operates in addition to his day job in IT.

“You work, you earn money, you save and you invest and you just keep on that cycle,” said Chan. “The payoff is that it gives us options. If we wanted to go on a vacation we would just go because we were able to save diligently.”

Top tips

Start now, start small

Chan’s two pieces of advice for people building wealth early in their careers are

  1. Start small with what you can handle.
  2. Make the most of the time you have to invest and earn compound interest on their savings.

Chan said he’s seen an increase of about 30 percent in his salary since he started his first job, so most of the wealth he and his partner have established has been through staying ambitious and disciplined.

Avoid paying interest on debt

After the IKEA loan, the couple avoided debt.

“We made a priority very early on that besides the mortgage we did not want any outstanding debt,” said Chan. “We have kept it a priority as long as I can remember.”

Keep multiple income streams

In 2015, the couple said they used some $20,000 of their savings (non-retirement, non-emergency fund savings) to launch Chan’s professional photography business. Chan operates the business in his free time, outside of his job in IT. Today, the business is profitable and has increased the household’s income by about 10 to 15 percent, Chan told MagnifyMoney.

“The business venture is a cherry on top,” said Chan. “It helps us to diversify our income streams.” He adds that the business’s income gives the couple more options and helps avoid financial stress overall.

Work together

Chan said the one of the most impactful parts of his wealth-building journey has been being on the same page with his partner.

“Every financial decision was decided as a team,” said Chan. “We both contribute. It doesn’t matter if one earns more than the other one.”

With the exception of his student loans, the couple has tackled their debts and savings goals together. When it came to Chan’s business, Chan said, Sue was supportive and they made the decision to invest the money together. They would both delay taking a vacation and instead put the money toward the business.

“Be honest and upfront about your financial goals from the get go and work together to realize your dreams,” said Chan.

Lessons learned

Chan said that there was a point when he thought money was the most important thing in the world — and then he lost money in the stock market.

“I’ve made mistakes. I’ve put money in places, in stocks, where I should not have been,” said Chan. “I lost a few thousand bucks in a stock that crashed I thought it was the end of the world. We started arguing. We started fighting.”

Chan told MagnifyMoney that he, like everyone else, is destined to make mistakes or lose some money along the way. But he said that he’s learned that money is only one aspect of your life and that it’s not the most important component, even as you’re working to build wealth — your relationships are. He added that you should accept your mistakes and come back even stronger.

Wealth-building in the middle of your career

Wealth-building in the middle of your career

Shortly after he graduated from Pepperdine University with a bachelor’s in business, Terence Michael began his career as a film producer in Los Angeles. It was the early 1990s.

Michael, now 49, worked for three months with other producers, then launched his own production company. He said it took several years to get his first couple of films going, and the income was inconsistent. He often stayed at his parents’ house and did odd jobs to scrape by.

Eventually at 29, after producing a few successful films, Michael bought a house. He fixed it up and sold it two years later, and he took a break from producing at age 31 to continue this pattern of real-estate investing. Even as he returned to producing a few years later, he kept the real-estate side hustle going. A couple of decades into his career, his resume includes highlights like “Duck Dynasty” (executive producer) and “Planet Primetime” (executive producer), as well as his own film and TV company, 100 Percent Terry Cloth. On top of that, he’s continued to build wealth through a host of real estate and investing activities.

Wealth-building strategy

Michael said his greatest wealth building strategy has been making the most out of what he calls “proximity potential” — combining the things he knows with the worlds or business industries he knows. He coined the term in his book “Produce Yourself.”

Instead of paying fees to brokers and agents to buy and sell houses, Michael got a mortgage broker’s license after his first few sales. He sat at a Starbucks and took courses online until he earned his real estate broker’s license.

With the license under his belt, he could act independently as a self-employed broker representing clients and form an independent mortgage company. Knowing that people in the entertainment industry may receive income sporadically, and understanding the difficulty that presents when getting a mortgage, Michael focused his business on helping that population.

Top tips

Make money off of what you own

“You can find some financial independence by having a good job, but you’re never going to have real wealth unless you have ownership vehicles,” said Michael.“I don’t know if anyone in history has ever created financial wealth [just] by working for someone else, with just a paycheck.”

In addition to running his production company, Michael:

  • works as a showrunner on other production projects;
  • brokers mortgages;
  • is a superhost on Airbnb;
  • hosts the “Produce Yourself” podcast;
  • coaches entrepreneurs and young couples on how to invest and grow their money

Michael said having his side hustle in real estate allowed him the financial stability to pursue his main purpose and passion, film and TV.

“Whenever I’m developing, raising money, and trying to sell, it’s nice to have all of these other streams flowing,” said Michael.

Lend and receive

Michael saves for retirement, but puts any extra funds into online platforms that lend money to other people and businesses.

He started off with investments in peer-to-peer lending platforms like LendingClub and Prosper. Then, he realized he could do the same with real estate and have his money secured by an asset, so he invested heavier on platforms like Ground Floor, Patch of Land and Yield Street.

“That I would call my savings, because if you keep laddering in eventually after a year, year and a half, it starts laddering it out,” said Michael.

Teach what you know

Michael wrote his book, “Produce Yourself,” in 2017 and started a podcast with that same title later that year. He said he decided to write the book after friends and colleagues asked him about his side hustles, multiple streams of income and how he did it all while working in Hollywood — and the book and podcast led to yet another income stream.

Lessons learned

Although Michael’s never lived “a story where [he] was in the gutter and crying for help,” he still attributes his success to a network of family and friends: “I know that whatever risk I take, I won’t go hungry and I will have someplace to sleep.”

Having a support system is important, but so is understanding what you’re getting into. Michael said he has experienced things like bad tenants and investments that have fallen through. It happens all the time, but having multiple investments going at once makes it easier to weather.

Building wealth when you’re making a career change

Building wealth when you’re making a career change

In 2017, police officer Adam Doran in Kansas City, Mo., wanted to make a career change. A few years prior, he had found himself deep in debt, facing foreclosure and trying to cover fixed expenses that exceeded his income by about $1,100 each month. On top of that, the recently divorced Doran had a 5-year-old daughter to care for.

“I can’t adequately describe the anxiety of that situation, but it was incredibly stressful,” said Doran.

That was about six years ago. Last year, having bounced back from that low place and growing increasingly tired of police work, Doran put together a six-week finance class at his church. It went so well, he said, people were asking him if he would be their financial adviser and his wife suggested a career change. Doran has since obtained his life and health insurance licenses and has started working towards certification in financial advising. He retired from his policing career in January 2018.

Of course, making a career switch can be very difficult. Doran was going from a steady job in law enforcement to becoming an entrepreneur, all while trying to continue paying down his debt and building wealth.

Wealth-building strategy

Though Doran is only a few months into his new career, he has attributed his stability during this time of change to strict discipline. After his divorce, his faith played a significant role in his ability to move forward, Doran told MagnifyMoney.

“I prayed a lot,” he said. “And I made a renewed commitment to giving 10 percent of my gross income back to God.”

His decision to tithe (give 10% of his income to church) and save money consistently became the foundation of his financial recovery. Maintaining that discipline helped Doran learn that finances are mainly behavioral, he told MagnifyMoney.

“The kind of person that has the discipline to faithfully give and save a percentage of their money, consistently without fail, regardless of the circumstances, is bound to encounter success financially,” Doran said.

Top tips

Diversify your income

While leaving the police force meant Doran was leaving behind a steady paycheck, it wasn’t his only stream of income. Doran fully owns a rental property and has multiple assets growing in value, he told MagnifyMoney. So when he decided to make a professional shift, he wasn’t betting his entire financial future on the new career.

Stay the course

When it came time to transition into his new line of work, Doran focused on staying the course. He’s continued to pay off his debts to free up more and more of his income. His investments in real estate also supply him with passive income streams.

“It was pretty cool that I had monthly checks coming in from rents on rental properties and payments on private loans,” said Doran.

His properties and business also allow him to take tax deductions he didn’t have before, so he gets more money back from the government at tax time.

Read and network

Doran looked to books and mentors to learn about personal finance and investing. He went online, searched LinkedIn and attended in-person investor gatherings to meet people who had spent years in the field he was just starting to get to know.

“I also did my best to connect with those who had gray hair, because I figured they would, and they did, have success and failure stories and experiences I could learn from,” said Doran.

He read books like “Think and Grow Rich,” “Conversations with Millionaires” and “How Successful People Think” to change his mindset about money and help him make decisions that could grow his business.

Lessons learned

So far, he hasn’t learned any of the tough lessons that are sure to come with his career change, but Doran has plenty of other things in his past that have helped him better approach his finances. He’s said that he wouldn’t change anything about his recovery and wealth-building process, but has expressed regret over the bad decisions that got him into the situation.

“I wish I hadn’t borrowed money on vehicles or gotten into a house that was too expensive for me. But, I suppose that was all part of the process of living and growing that I was supposed to go through to help me become who I am today,” he said.

Building wealth in retirement

Building wealth in retirement

Markus Horner, 69, of Sachse, Texas, ran his residential maintenance business for just over 25 years before a knee injury forced him to retire at 67. During his working years, Horner struggled to save much money for retirement.

“I was able to contribute a little bit but not a whole lot,” said Horner about his retirement nest-egg. “I wasn’t making enough to be able to do that back then, but now I can.”

That’s because just before he retired two years ago, one of the customers he was installing a front door for introduced him to swing trading: short-term trading on the stock market.

Wealth-building strategy

Horner said the money he used to start his swing trading business is money he had saved up over a long period of time while working as a maintenance man. Swing trading is a short-term trading method one can use on stocks and options. Swing traders look for stocks with short-term price momentum, and they hold assets for two days to two weeks before they sell.

Now, in addition to Social Security and the income he receives as a disabled veteran, Horner is able to use income from swing trading to help support his family, fund his hobbies and pad his retirement savings.

“It’s not for everybody, but it’s something I find very, very interesting,” said Horner about the business.

He said he uses some of the extra funds to cover bills here and there, but the majority goes to his savings, helping his daughter pay for graduate school and to an expensive, longtime hobby: building hot rods.

“Hopefully I will make enough that when I do pass away — whenever that occurs, hoping its a number of years from now — there will be enough money that my wife will be able to live comfortably,” Horner said — although, he noted that the family doesn’t necessarily need his income, since his wife, Lourdes, 59, still works as an opthamologist.

“She makes enough there that we could live off of her income if we chose to,” said Horner; his wife also has a pension and ample retirement savings in a 401(k) and Social Security she can tap into when she retires. “But I like to work and make my own money so I will have something to help me build my hot rods.”

Top tips

Don’t limit yourself

Those looking for additional income to help them through their retirement years shouldn’t feel limited in their search. Horner advises they look for something they like to do that they find interesting.

“I did not know that swing trading even existed until two years go,” said Horner. “Look around, don’t limit yourself to just one or two or even three things.”

Set up a savings account

Horner said it’s “absolutely critical” for those strapped for cash in retirement to set up a savings account if they haven’t already, and they should automate the savings.

That’s something he and his wife did in the years just before he retired. They set up an automatic transfer to their savings account for every Friday, and increased the amount over time as their incomes rose. They started out saving $25, Horner said, and now, they are saving about $200 every Friday.

“We are at a point where we can do that and not struggle. But we couldn’t do that in the beginning,” said Horner.

That’s why he suggests people start small, and gradually learn to live with less. After about five years, the couple had saved more than $10,000, Horner told Magnifymoney.

“And that’s the money I used to start my trading account. $10,000. That’s how I got started,” said Horner.

Lessons learned

Horner said his biggest financial regret is not having been able to put money into a retirement account during his younger working years.

Although he said he wish he’d learned about swing trading earlier, it was probably good timing, as it wouldn’t have been something he thinks his younger self could have done.

“Being a swing trader requires tremendous patience. I did not have the patience 30 years ago that I have now,” said Horner. “If you don’t have the willingness to be patient, you will actually lose money by being impatient.”

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Brittney Laryea
Brittney Laryea |

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

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Zelle Is Big Banks’ Response to Venmo — Here’s How it Stacks Up

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Perhaps you’ve heard of Venmo, a PayPal-owned social payments platform that caught like wildfire among millennials, and serves as a popular way for people to split the bill. The digital peer-to-peer (P2P) payment service is ubiquitous to the point of being a verb — “Venmo me” — but that’s not stopping the big banks from making a play for the market.

In 2017, the banks responded with Zelle, a P2P transaction platform that can process payments between accounts at different banks within minutes, for free. When using apps like Venmo, PayPal and Square Cash, consumers may have to wait up to two or three days to access deposits in their bank accounts or pay a fee for instant access.

What is Zelle?

Zelle is a peer-to-peer payment service created by Early Warning Services, a company owned by Bank of America, BB&T, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank and Wells Fargo. Zelle users can send, receive or request money directly to and from friends’ and family members’ bank accounts using only an email address or phone number, even if the other party has an account with a different bank. Zelle claims to process payments between accounts at different banks within minutes, for free.

As of this writing, Zelle partners with more than 65 banks and is accessible to more than 85 million U.S. consumers through its partners’ mobile banking applications. If your bank isn’t partnered with Zelle, you can still create an account using the Zelle app to send, receive and request money much like other P2P payment services.

Zelle, formerly known as ClearXchange, has grown rapidly since it’s rebranding and rollout to banking applications in 2017. It’s now a serious competitor in the P2P space. Early Warning reported the payments company processed $75 billion in payments in 2017. Meanwhile, its main competitor, Venmo, processed more than $40 billion in payments on its free mobile app in the 12-month period ending March 31, 2018. Early Warning said Zelle processed more than $25 billion in the first quarter of 2018, and Venmo processed $12 billion in the same period.

Is Zelle safe to use?

Zelle is advertised as a service for sending money to friends, family and people you know personally. The company does not offer a protection program for purchases or sales made through its platform, and neither do its participating financial institutions.

If you initiate the transfer, you are not covered for fraud by Zelle or your bank. For example, if you send someone money for event tickets using Zelle and it turns out the tickets are fake, there is no recourse against the person via Zelle or your bank, and you will lose your money like this woman did.

However, consumers are not liable for “unauthorized activity,” like if someone else uses Zelle to hack into your bank account. Zelle provides fraud protections as required by the Federal Reserve’s Regulation E.

How to avoid the biggest risks of using Zelle

Know the recipient personally
Sending money on Zelle is akin to handing cash to someone. To avoid losing your money to a fraudster, ensure you are only sending money to people you know and trust.

Confirm the recipient’s information
Zelle transactions cannot be disputed or reversed, so you want to double-check with the recipient that you’re using the correct email address or phone number. If you initiate a transaction to the wrong person, Zelle has no obligation to help you get your money back.

Enroll with only one bank
To avoid delays in sending and receiving funds using Zelle, make sure the email and/or phone number you want to use is only enrolled at one bank or credit union, and that it matches what the bank has on file.

If the same phone number and/or email is registered with your Zelle profile at more than one institution, you may run into issues sending and receiving payments using this service. Money sent to you using the phone number or email address you provide friends and family may be sent to the wrong bank account or to an old Zelle account. The funds may also get held up until you sort out the mix-up.

If you were previously enrolled in ClearXchange or the Zelle app before your bank integrated Zelle into its banking app, you may already have an active Zelle account using your phone number and/or email. If you want to enroll in Zelle with your bank, you’ll first need to contact customer support team and deactivate your old account there.

How does Zelle work?

Zelle plays up its ease of use: Because it’s integrated into mobile banking apps, customers of banks using Zelle can use a single app to schedule bill pay, make deposits and complete fee-free P2P transactions. That means users don’t have to download an extra app to use Zelle on a mobile device, unlike stand-alone apps like Venmo and PayPal. Zelle does, however, have a stand-alone app, if you’d prefer to use that.

Zelle withdraws money directly from the sender’s bank account and deposits it directly into the recipient’s bank account. Users can send, request or receive money using an enrolled email address or mobile phone number.

How to send money with Zelle

On your mobile banking app
Zelle works a little differently on each of its partners’ mobile banking apps, but the main steps to send money are the same.

You’ll first select a recipient from (either from your contacts list or by adding them manually) and whether you’re sending money to them using their phone number or email address. Then, you enter the amount you want to send. At that point, you may have the option to set a sending date and add an optional note. Then, hit send. Your recipient should get a notification and see the funds in their bank account within minutes.

Here are some examples of how this service has been integrated into mobile banking:

Send money on Chase mobile app

Source: JPMorgan Chase

Send money on Bank of America mobile app

Source: Bank of America

Split expenses with Zelle on Bank of America mobile app

Source: Bank of America

Sending money on the Zelle app

To reach customers whose banks aren’t part of the Zelle network, Early Warning partnered with Mastercard and Visa to make a Zelle app that allows transfers to those at nonparticipating banks and just about everyone with a U.S.-based debit card. However, at least one person involved in a Zelle transaction must have access to it through their bank or credit union.

Sending money on the Zelle app is similar to using other P2P apps like Venmo.

  1. Select someone to send money.
  2. Enter the amount of money you want to send and hit “review.”
  3. Confirm the amount you’re sending, and enter an optional message to the recipient.
  4. Hit send. The transaction is recorded and the recipient will get a notification that you’ve sent them money.
Source: iTunes

How to receive money with Zelle

When someone sends you money using Zelle, the funds should show up in your bank account within a few minutes, unless it’s your first time using this service.

If you’re not already enrolled with Zelle, you should get an email or text saying someone sent you money using Zelle. You’ll then need to follow the enrollment instructions to get set up with the service. After you’re enrolled, it may take up to three days to receive the money in the bank account associated with your profile.

How long does it take to send and receive money with Zelle?

Zelle transfers money directly between U.S. bank accounts. Transfers occur typically within minutes, unless the recipient is not already enrolled in Zelle. If the recipient is not yet enrolled, it may take up to three business days for the money to become available in their bank account.

Is there a limit to how much money you can send and receive with Zelle?

There are no limits to the amount of money you can receive, but there may be limits on how much money you can send, depending on your bank and the type of account you’re using. Zelle recommends you contact your bank or credit union to learn about any sending limits.

For example, Chase caps transfers from personal checking accounts at $2,000 per transaction, and customers can send up to $2,000 a day and $16,000 in a calendar month. However, customers sending money from a Chase Private Client or Private Banking client account can send up to $5,000 per day and $40,000 per calendar month.

If your institution doesn’t offer Zelle and you use the Zelle app, Zelle bases your weekly send limit on your track record using the app.

Are there any fees to use Zelle?

There are no fees to use the service. The company recommended you confirm with your bank or credit union that there are no additional fees.

Are there any other limitations to Zelle?

No credit card transactions: You won’t be able to send money using a credit card at all; you can for a 3% fee on Venmo.

No international transfers: As of this writing, Zelle’s system doesn’t support international payments. The service only works with U.S.-based bank accounts, so you won’t be able to send money directly to family abroad. However, if you are traveling and have access to your bank account overseas, you can receive transfers made to your U.S.-based bank account.

Zelle vs. other person-to-person payment systems

By leveraging its network of bank partnerships, Zelle claimed consumers should be able to make transactions between different institutions within minutes. However, if your recipient does not have access to Zelle through their bank or credit union, or their partnered bank does not yet support real-time payments, Zelle loses its advantage. Transactions would then take between one and three days to complete, no better than the likes of PayPal or Venmo.

When you send money to a friend using Venmo, they instantly receive that amount as their Venmo balance, but then need to initiate a bank transfer to access the funds. The same goes for PayPal and Square Cash. With Popmoney, a service that sends money directly between bank accounts, there’s no need to initiate a deposit, but it takes a couple of days for the transactions to clear. With these services, it can take one to three days for a deposit to become available in your bank account.

What you need to know about instant transfers

Though Zelle touts transaction speed as one of its greatest strengths. While the instant transfer feature made the company stand out when it first rolled out in 2017, its competitors weren’t far behind. The Cash App, by Square, Inc. offers instant access to transferred funds for a 1.5% fee of the deposit amount, PayPal and Venmo both offer instant transfers for $0.25 per transfer.

What also made Zelle stand from the crowd was its free instant transfers. But now Google Pay offers that, too. Money sent using a debit card or Google Pay balance is transferred instantly to the person’s debit account — if it’s set as their default payment method — for free.

There are several ways you can can send money to friends, family members or the person you picked up your coffee table from on Craigslist. They range from social media options like Snapcash or Facebook Messenger, to full-fledged mobile and web apps like the PayPal app or Google Wallet.

Here’s how some of the big players in the P2P payments space to compare with Zelle:

FeatureZelleVenmoPayPalSquare CashPopmoneyGoogle Pay SendFacebook Messenger
Who you can send money toAnyone whose bank offers Zelle (85 million consumers) or anyone who is set up with the Zelle appAnyone with a Venmo accountAnyone with a PayPal account (237 million customer accounts)Anyone with a Square accountAnyone at any of nearly 2,500 financial institutionsAnyone; no need to have a Google account or the Google Pay Send appAnyone with a Facebook account who is 18+ years old
Time it takes deposit to become available in recipient’s bank accountMinutes, unless the recipient’s bank doesn’t support instant transfers or isn’t a partnered institution1 to 3 business days after transferring from Venmo account to bank.

Instant transfers for a fee of $0.25 per transaction.

Transfers made before 7 p.m. EST typically arrive the following business day. Transfers made after 7 p.m. EST or on weekends or holidays will typically arrive on the second business day.

Instant transfers are available for a fee of $0.25 per transaction.

Up to 3 business days.

Instant deposits are available for a fee of 1.5% of the deposit amount.

Up to 3 business daysMoney received transfers automatically to your default payment method

Funds are available typically within minutes if a debit card is set as your default payment method

Transfers to a bank account may take up to three business days

Up to 5 business days
Has a stand-alone appYes. In addition, this service is integrated directly into existing bank mobile apps.YesYesYesNo. PopMoney is integrated into existing mobile banking appsYesYes
Has a web versionYesYesYesYesYesYesYes
FeesNoneFree to send money from a bank account or debit card

3% fee to send money from a credit card

$0.25 to make an instant transfer

Free when you send funds via a bank account

2.9% plus 30 cents (U.S.) of the amount you send using a debit or credit card

$0.25 to make an instant transfer

Free to send money from a bank account or debit card.

3% fee to send money from a credit card

Free to receive money or pay a request
$0.95 to send or request funds
NoneNone
Accepts credit card transactionsNoYesYesYesNoNoNo
Transaction limitsNone, but your bank may impose transfer limitsSend up to $2,999.99 per 7 days after identity verification; no receiving limit.

Cash out up to up to $19,999.99 per week after identity verification.

Send and receive up to $10,000 per transactionSend up to $2,500 a week after identity verification; receive more than $1,000 per 30 days after identity verificationDaily transaction limit for a debit card: $500

Daily transaction limit for a bank account: $2,000

30-day transaction limit for a debit card: $1,000

30-day transaction limit for a bank account: $5,000

Send up to $9,999 per transaction or up to $50,000 in 5 days

If you live in Florida, you can send up to $3,000 every 24 hours

Unclear. The terms and FAQs say nothing about limits, and Facebook did not respond to our request for information. A community forum post from 2016 says you can send up to $9,999 within 30 days
Supports international transfersNoNoYes – Fees for sending in other currencies varyNoNoNoNo
Lets you store funds on an in-app accountNoYesYesYesNoYesNo
Fraud protectionNone if you, the consumer, initiated the transfer.

You are covered if someone makes an unauthorized transaction on your Zelle account if reported within 4 days after learning of the unauthorized transaction.

Venmo does not offer buyer or seller protection.

You are covered if someone uses your Venmo account to make an unauthorized transactions if reported within 60 days.

Yes: Paypal offers purchase protection to buyers and sellers of goods and services for claims reported within 180 days

Paypal covers unauthorized transactions if reported within 60 days

Paypal does not provide protections for personal transactions sending money to “friends and family.”

Sellers protection only

Square is not responsible for any unauthorized access or use of the services on your square account

Varies by stateNo protection for authorized transactions.

Google Pay offers fraud protection for all verified unauthorized transactions if reported within 120 days of the transaction date

Facebook is not liable for payments you send via Messenger

Facebook provides protection for unauthorized transactions on your account if you submit a claim within 30 days

What banks use Zelle?

Zelle partners with the following banks and credit unions, as of this writing:

  • Ally
  • America First Credit Union
  • Bank of America
  • Bank of Central Florida
  • Bank of Hawaii
  • Bank of the West
  • Bank of York
  • Bank7
  • BB&T
  • BBVA Compass
  • BECU
  • BNY Mellon
  • Capital One
  • Chase
  • Citi
  • Citizens Bank
  • City National Bank
  • Collins State Bank
  • Comerica Bank
  • ConnectOne Bank
  • Dollar Bank
  • FCB Bank
  • Fifth Third Bank
  • First National Bank
  • First National Bank in Creston
  • First National Bank of Central Texas
  • First Tech
  • First Tennessee Bank
  • FirstBank
  • Franklin Synergy Bank
  • Frost Bank
  • Guadalupe National Bank
  • Homestreet Bank
  • Huntington Bank
  • KeyBank
  • M&T Bank
  • MB Financial
  • MidwestOne Bank
  • Morgan Stanley
  • Navy Federal Credit Union
  • Northwest Bank
  • PNC
  • Provident Bank
  • Quontic Bank
  • Regions Bank
  • Renasant
  • SchoolsFirst FCU
  • Seacoast National Bank
  • Star One Credit Union
  • Stockman Bank of Montana
  • SunTrust
  • Surrey Bank & Trust
  • TBK Bank, SSB
  • TD Bank
  • The First Citizens National Bank of Upper Sandusky
  • U.S. Bank
  • United Bank
  • United Community Bank
  • USAA
  • Wells Fargo

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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

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News

It Will Soon Be Free to Freeze Your Credit Report

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Eight months after it happened, Congress tangibly responded to the major data breach at Equifax that exposed the sensitive information of more than 146 million consumers. On May 24, President Donald Trump signed into law a bipartisan bill that makes freezing a credit report free for everyone in the U.S. and simultaneously fulfilled his early-term promise to “do a big number” on Dodd-Frank.

The provision for free credit freezes was included in the larger Economic Growth, Regulatory Relief, and Consumer Protection Act, which effectively rolls back major parts of the Obama-era Dodd-Frank Act.

What’s changing?

The new law affects a wide variety of consumer finance issues, but as far as credit freezes go, it makes placing, lifting and permanently removing a freeze on your credit report free, no matter where you live.

Before the law, each state had its own laws regulating the prices consumers pay to the big three reporting agencies — Experian, Equifax and TransUnion — to freeze and unfreeze credit reports. Previously, only three states (Indiana, Maine and South Carolina) allowed any resident to freeze or unfreeze their credit reports for free.

In addition, the new law requires credit reporting agencies to fulfill a request to freeze, thaw or permanently lift a freeze within one business day if the request is placed online or over the phone, and three business days if the request was made via snail mail. These new provisions will go into effect four months after they became law.

What’s a credit freeze again?

A credit freeze is a consumer protection tool that restricts access to your credit report. It can be used to prevent fraudsters from using your information to commit financial identity fraud.

Placing a freeze on your credit report prevents creditors from seeing your file when you or someone else applies for new credit, so no one will be able to open a new credit account in your name without your knowledge. If you want to apply for credit, you’ll need to lift, or thaw, the freeze.

A credit freeze doesn’t completely prevent identity theft, as it only pertains to transactions that involve credit report requests. The freeze doesn’t impact your credit score, restrict your existing creditors’ access to your credit report or stop you from receiving prescreened credit offers (lenders generally pre-qualify new consumers using a soft pull).

How to freeze your credit report:

You can freeze your credit report online, or by phone or mail with all three major credit reporting bureaus. You must go through a separate process with each credit bureau. We explain the steps in detail here, but here are the basics:

Each credit bureau allows you to request a credit freeze online, by phone or by mail.

Online

Equifax

Experian

TransUnion

Phone

Equifax: 1-800-685-1111 (1-800-349-9960 for New York residents)

Experian: 1-888-EXPERIAN (1-888-397-3742). Press 2.

TransUnion: 1-888-909-8872

Mail

Send a letter to each credit bureau by certified mail requesting the freeze. Here are the addresses.

Equifax: Equifax Security Freeze/P.O. Box 105788/Atlanta, GA 30348

Experian: Experian Security Freeze/P.O. Box 9554/Allen, TX 75013

TransUnion: TransUnion LLC/P.O. Box 2000/Chester, PA 19016

There are mobile options, too.

TransUnion offers a free TrueIdentity mobile app for those enrolled in its free True Identity service that provides the ability to lock and unlock credit reports instantly. And, in the aftermath of the data breach, Equifax released its free Lock & Alert app, which allows consumers to freeze and thaw their credit reports with a swipe. Experian has a free credit freeze app, IdentityWorks, to lock and unlock your credit report, but only for people with memberships to Experian IdentityWorks Premium or Experian CreditWorks? Premium, which charge fees.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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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News

I’m Always the Broke Friend in My Group — Here’s What I Do to Cope

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

 

iStock

At some point or another most of us have had — or will have to —  miss out on dinners, nights out and events with our peers simply because we can’t afford to participate. In other words, we’ve all been the “broke” friend.

Whitney Griffin said she’s used to being the broke friend in her social circles. Griffin, 32, is college educated —  she earned a bachelor’s in art from Florida State University in 2009 — yet has never earned more than $19,000 in a given year. It’s not for lack of trying, she told MagnifyMoney, however, she purposefully chose a career path that is fulfilling yet not exactly lucrative.

“There’s something to be said for enjoying your life,” said Griffin, who lives in Asheville, N.C. and has worked various jobs in both art and business. “I’ve chosen jobs that I’ve enjoyed more so than I would make money at.”

It’s when she runs into friends who have more cash to burn that she’s reminded of the financial consequences of her professional decisions.

“When people say ‘oh you should visit Ireland’ or ‘you should take this cruise,’ I’m just sitting there in my head thinking, ‘I should really get health insurance.’”

Financial inequities can be difficult to deal with at any age, as evidenced by Michael Little. Little, a 71-year-old retiree in West Linn, Ore., told MagnifyMoney in his early days of marriage and starting a family, he realized how different his lifestyle was compared with friends who earned more and did not have children.

At a time when everyone’s lifestyles are made public on social media, it can be even more difficult to stay on a path of frugality when it feels as if your peers are doing exactly the opposite.

MagnifyMoney spoke to Little, Griffin and other self-professed “broke friends” to compile a list of strategies and tips they use to cope.

Stick to your values

Little, now retired from a career as a software developer and systems analyst, lived frugally from the start.

“I grew up pretty poor in Indiana,” Little said. “We had a roof, we had good food. I never felt any less than any of my friends. That influenced me — that you could enjoy yourself and be frugal when you have to.”

As a teenager, he hung with a group of friends he described as more well-to-do.

“They [would] just go out and do stuff, and I didn’t have any money,” he said. “I would say I’m not really hungry and go out and get a soft drink or something like that. I was a little uncomfortable with it as a kid.”

When he married his wife Debbie at 30, they had children right away and a lot of expenses. He was in school and again didn’t have as much money as his peers who didn’t have children.

“I learned a lot of financial discipline from my wife,” said Little. “She’s really good about saying ‘well, I can’t afford that.’”

Make the most of what you can get for free

Hunter Jamison, 19, said a scholarship is the only way he’s able to attend New York University, which can cost up to $72,900 per year, according to The College Board.

He learned to find ways to socialize with peers who have more disposable income than he does.

When a friend suggests they grab a bite to eat, he doesn’t waste an opportunity to use his prepaid campus meal plan.

“If someone wants to meet up and has the meal plan, I’d be like ‘hey do you just want to go to the dining hall,’” he said. “If they don’t, I suggest we cook something because it’s a lot cheaper to buy groceries and cook than to always eat out.”

He also takes advantage of school events where there will be free food and discounts all over the city for NYU students like free access to some museums.

Be the planner

When Heidi McBain, a licensed professional counselor in Flower Mound, Texas, was in graduate school, she had to make her dollars stretch. She decided to take the lead, planning ways to spend time with her friends so they wouldn’t have a chance to propose a super expensive activity.

She said she often suggested they do something outside, like bike riding or hanging out at the beach. If she wanted to have friends over, she’d cook at home or invite them to bring a dish and make it a potluck.

“I was in a very expensive area and I didn’t have any money but I’m also pretty extroverted so I like to be around people,” said McBain. “I had to be really creative in how I would spend time with people.”

Look for free or inexpensive family outings

Little and his wife would look for things to do around town that were free or inexpensive for their family. They had picnics instead of going out to eat at a restaurant and went to the movies on Tuesday afternoons as opposed to Saturday nights.

“Every vacation I ever went on as a kid … we went camping,” said Little. He did the same with his children and continues to pass his love for the outdoors down generations.

He often took his family on camping trips to the mountains. There, his children could get filthy playing in the sand and enjoy roasted marshmallows.

“Tomorrow, I’m taking my grandson up on the mountains and we are going to take him sledding.

It’ll cost me the price of a tank of gas and some snack food,” said Little in an interview with MagnifyMoney.

Don’t fall into the ‘drinks’ trap

“One of the easiest ways to kind of blow through money is dining out” and meeting up with friends at bars, said Griffin. “It’s really easy to blow through a tab without noticing.”

So she limits herself to having only one drink — and not finishing it so she’s not obligated to get the next round — and the cheapest thing on the menu. She says it’s often a salad or something else inexpensive.

While in graduate school, McBain realized if she signed up to be the designated driver, she wouldn’t have to deal with pressure to spend money on drinks.

“If I didn’t have money, I would always drive,” said McBain. “People always love having a DD, so that worked out really well.”

Going out? Eat and drink ahead of time

When Griffin wants to go out to eat or out on the town with her friends, she plans to eat and drink a bit ahead of time, so she doesn’t spend as much money when she’s out.

“If I’m really wanting to go out and party, then I’ll bring my flask on the side,” she told MagnifyMoney. “I tend to pack my lunch box every day that I go to work anyway, so I have no problem filling up on snacks.”

Focus on the bigger picture — your goals

You may need to sacrifice going out to dinner once or twice to join your friends at another time at an event or on a vacation, and that’s OK.

“It’s about choices,” said McBain. “People get invited to stuff all of the time, regardless of how much money you have, it’s about being really choosy.”

During her graduate school days, she would cook at home or pack her lunches to save money so if something big came up, she could still go.

“If there was a new restaurant and everybody was going, I had saved money very rarely eating out so that I would have it for the bigger things,” said McBain.

Find your frugal tribe

“Find friends that are sympathetic to your situation,” said Jamison. In any environment, there definitely are people that are frugal like you.”

He said this makes it so that not spending money doesn’t mean you’re not socializing.

“There are definitely a lot of people — even if they have money — that don’t spend money left and right,” said Jamison.

You can even make frugality social. For example, Griffin suggests hosting clothing swaps when you need new wardrobe pieces in the name of environmental conservation. Everyone would clean out their closets before the event. During the event, the clothing is displayed and people can browse and take what they want, with no money involved.

There are also many online Facebook groups, like Frugal Homemaking and Living and Frugal Family Life where affordable-minded folks get together to share tips and support one another.

Be frank with friends who don’t understand your situation

There will always be that friend who just doesn’t understand when you have to constantly turn them down.

“I had one friend and he was one that didn’t get it,” Little told MagnifyMoney. “He came from a family with a lot of money.”

He would invite Little and his wife to go on couple’s vacations and out to $200 dinners.

If Little balked, his friend would respond with something like, “You guys have really nice jobs you should have the money.” But he was putting his money into retirement, something he knew his friend didn’t need to do because he inherited close to a million dollars. After an invite to Costa Rica, Little finally broke it to his friend.

“I told him if I’d inherited $700,000, a new car and a condo in Florida and had no kids, I would retire today,” Little said. “I think it finally woke him up.”

It can be frustrating to feel like you’re always playing the “sorry, I’m broke” card, but it shouldn’t be an issue for your real friends.

“If you have a good friendship, you should be able to say ‘I really would like to go but I just don’t have the funds to do that,’” said McBain.

“People need to give themselves permission when friendships change to not have to feel like they need to stick with it,” she added.  “Really, the heart of most friendships is spending time together.”

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Brittney Laryea
Brittney Laryea |

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

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The Best Cities to Be Young and Broke

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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When you’re young and just starting out your career, choosing where to live can truly make or break your finances.

Young people today already have to manage a host of financial stressors, like student loan debt and rising housing costs, with the usual demands of early adulthood, like starting their first retirement fund and learning to balance work and play.

When you couple these competing responsibilities with a location that only contributes more financial obstacles, you could be setting yourself up for failure.

On the other hand, some cities are affordable enough to give even the lowest earners a fighting chance at a decent quality of life.

With this in mind, MagnifyMoney decided to take a look at some of the biggest cities in the U.S. and determine which cities are the best places to be young and broke today.

We started by analyzing more than 100 U.S. cities to find the most favorable and affordable places for people between the ages of 18 and 24. Among other data points, we not only looked at obvious expenses like housing and food, but also unemployment rates, income taxes and the rate of young adults who are living in poverty.

Key findings: The top 10 cities for the young and broke

Of the 10 best places to make the most of a tight budget, five were in the Midwest —  Madison, Wis., Grand Rapids, Mich., and Dayton, Ohio.

Although Midwestern cities did not score highest on all of the features analyzed, when they were put up against what young adults said matters to them the most, low rents and short commute times pushed these places ahead.

“It’s not that these cities necessarily scored the highest on all the features we analyzed, but when we weighted those features according to what the young adults we surveyed said mattered the most, the lower-than-typical rents and price combined with modest commute times to bring Midwestern cities to the top of the list,” said MagnifyMoney Senior Research Analyst Kali McFadden.

#1 Madison, Wis.

Overall score: 73.2/100

It stands to reason that a renowned university town would be a draw for the young and broke, but Madison stands apart, thanks to a relatively low cost of living (median rent is $950, and goods run almost 5% cheaper than the rest of the country) and a fairly robust public transportation system.

About 4% of the population use public transportation, which may not seem like a lot, but that’s enough to rank 21 among the cities reviewed. Moreover, the average commute is just over 21 minutes.

Only two other cities (Provo, Utah and Springfield, Mass.) have a higher proportion of young adults, yet no other big city has more young people who either attended or graduated from college (70%), and the city ranks in the top 10 for lowest youth unemployment.

The bad news is that there are more young adults living in poverty in Madison than other city analyzed, but this may have to do with how college students and their families file their taxes.  When considering what city features young people in our survey said they care most about, Madison still places 1st, with an overall score of 73.2.

#2 Grand Rapids, Mich.

Overall score: 72.4/100

With an overall score of 72.4, Grand Rapids misses 1st place by a hair. Grand Rapids shines in many of the same ways that Madison does, such as the price of goods, relative to the rest of the country (almost 5% less), average commute time (just over 21 minutes) and low youth unemployment rates (6.7%).

Grand Rapids is also full of young, educated citizens, with over 10% of the population between the ages of 18 and 24, and 59% of those young people either college graduates or on their way.  Most young people are local, with fewer than 5% newly arrived from out of state.

Fewer than 2% of people use public transportation, which is pretty middle-of-the-pack, and statewide and income taxes are lower than most, ranking 42nd and 44th out of the 107 big cities.  Grand Rapids exceeds Madison in a few areas, such as median rent at $812, fewer young people in poverty and over twice as many pizza joints per capita.

The other Midwest cities that made the top ten were Des Moines, Iowa (6) and Akron, Ohio (8).

#3 Dayton, Ohio

Overall score: 72.2/100

It turns out that Ohio is a great place to be young and broke. Statewide, income and sales taxes are low, ranking 23rd and 33rd among the 107 big cities we reviewed, and Dayton’s modest median rent ($761) and low cost of goods (over 4% cheaper than the national average) add to Dayton’s affordability.

Of the 10% of Dayton’s young population who are between the ages of 18 and 24, 63% have or are working toward an undergraduate degree (13th highest).  Average commute times also compare favorably with the rest of the nation, coming in at just under 23 minutes.  Dayton does fall short in the areas of youth unemployment (11%) and youth living in poverty, ranking in the bottom half of all cities we reviewed.

#4 Syracuse, N.Y.

Overall score: 71.4/100

Our first city outside of the Midwest is another university town in the northern reaches. With a score of 71.4, Syracuse compares very favorably with the rest of the country in average commute times (21 minutes), statewide sales tax (4th lowest), and percentage of the population between the ages of 18 and 24 (11%).

As one would expect for a college town, a lot of young adults are newly arrived from out of state or country (11%), and Syracuse ranks 11 out of 107 for number of young people who attend or have graduated from college (64%).

Rents are low at $790, as is youth unemployment (8%), but as seen with the other top cities on our list, a lot of young people live below the poverty line (26%).

#5 Durham, N.C.

Overall score: 70.9/100

Durham-Chapel Hill is home to two large schools, Duke University and University of North Carolina, which helps explain why over 11% of the population is between the ages of 18 and 24.

It also helps to explain why 68% of those young adults either have or are pursuing a college degree (the 3rd largest proportion in our study), and why 11% of them arrived in the last year from another state or country. Durham is also relatively affordable, with a middle-of-the-pack median rent of $947 and prices almost 4.5% lower than the national average.

Commute times are also middle of the pack at under 25 minutes, but almost 5% of the population use public transportation.  Again, 5% may not sound like a lot, but it’s actually the 15th highest among cities with populations over half a million. Some 30% of young people live below the poverty line, although that may be because so many college students don’t have much, if any, income.

It’s not all roses in the Midwest

Ironically, the best five cities for the young and broke also have a high rate of young adults living in poverty, comparatively. As we said, the reason these cities have an edge is that they tended to rank well in the factors that young people said mattered most to them, like rent costs and commute times.

Top-ranked Madison, Wis., for example, also boasts the highest rate of young adults living in poverty in Madison than any other city analyzed. Similarly, in Durham, N.C (5), 30% of young people live below the poverty line.

However, this doesn’t necessarily mean these cities are rife with homeless young adults. One explanation could be that these cities are home to several colleges and with a high volume of college students in the population, it’s easy to see how it could appear that young adults aren’t earning much.

“These two things are likely connected, as college students often have little or no income, but that doesn’t mean they’re not being supported through family assistance or loans,” McFadden said.

On the plus side, college towns are affordable

The list also boasts a number of college towns like the aforementioned Madison, Wis. (1) and Grand Rapids, Mich. (2). Rounding out the top five were college towns outside of the Midwest, Syracuse, N.Y. (4) and Durham, N.C. (5). The results suggest college towns may be more affordable destinations for young people who want to keep their expenses relatively low.

The 10 Worst Cities to Be Young and Broke

Methodology: What do young people want in a city?

To find city features most appealing to young people without a ton of disposable income, MagnifyMoney asked 100 young people (ages 18-24) to rank the importance of 12 city features that factor into quality of life for the young and broke. The responses were weighted according to which were the most important to the youth surveyed.

Here are the most important city features, according to this survey:

  1. Median rent
  2. Price of goods compared with the national average
  3. Average commute times
  4. Unemployment rate for young people
  5. Statewide income tax rates
  6. Statewide sales tax (we note that local sales tax may be higher)
  7. Percentage of the young adult population who live in poverty, by federal standards
  8. Percentage of the population between the ages of 18 and 24
  9. Percentage of young adults who have either completed or are pursuing a college degree
  10. Percentage of the population who use public transportation
  11. Percentage of young adults who moved from another state or another country in the previous year, and
  12. Availability of cheap food, as expressed in the number of pizza parlors per 100,000 residents.

Once we know what to look for, our team weighted the features of 107 metro areas with populations over 500,000 against what young people said they wanted most in the city.

Based on this information, the cities were then scored, for a highest potential score of 100 and a lowest potential score of zero to find the best places for broke young adults.

References

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Brittney Laryea
Brittney Laryea |

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

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Reviews

10 Best Apps for Splitting the Check, Group Trips and Rent in 2018

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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We’ve all been there: The group decides to “evenly” split the dinner bill, and you’re stuck paying for someone else’s steak and margaritas even though you only had water and an appetizer. There are plenty of ways for you and your supper pals to send or request money using peer-to-peer payment apps such as Venmo or Apple Pay Cash, but few of these help you with the math.

We’ve rounded up the best apps for splitting bills, from rent to dinners out, so you only pay what you owe — resentment avoided, friendships saved. For each category, we give you our top pick, plus a runner-up or two.

For group dinners: Tab

Tab, free on iOS and Android, makes paying for dinner easy. Take a picture of an itemized receipt and select which items are yours. If your fellow diners have Tab, share a code with them so they can join the bill and select what they paid for, too. Shared that appetizer? Multiple people can select the same items. The tax and tip are calculated for you. Venmo is integrated into the app for easy payment, or you can record that you made a cash payment to settle your portion of the bill.

Source: iTunes

Divvy ($1.99) — Like Tab, take a picture of your receipt and Divvy automatically splits the tip and tax proportionately. Thanks to a drag-and-drop feature, you never have to type in anything. The simplicity just might make the app worth paying for.

Source: iTunes

Plates by Splitwise (Free) — Splitwise (more on it in a minute) created Plates by Splitwise specifically for splitting the tab at group dinners. Drag items to an individual’s plate or split shared items among multiple people. The app splits the tip and tax and offers multiple tipping percentage options. It even has a “split the rest” feature that lets you save time if you only want to allocate a few dishes and split the remaining bill between the group. Unlike some other bill-splitting options, this app limits group splitting to 10 people.

Source: iTunes

For splitting the check: Splitwise

With Splitwise, free on iOS and Google Play, keep a running tab of who owes money without having to send over the cash right away. Settle requests at the end of the month — or anytime — with a PayPal or Venmo transfer. You can even bill an entire group, splitting costs evenly among its members. The app sends reminders to all parties when it’s time to pay up.

Source: iTunes

Settle Up ($1.99) — Even though this app, available on iOS and Android, isn’t free, it keeps a running tab of money owed in multiple currencies, a nice perk for frequent overseas travelers. It supports 20 different languages and works offline, which may come in handy if wi-fi is spotty in exotic locales.

Source: iTunes

For group trips: Splittr

Splittr is designed to ease the stress of splitting costs during group vacations. The app is free on iOS and Android; you don’t need to be registered to use it, although you will need to download it. Add expenses as you go and Splittr tells you who should pay next — maybe it’s your turn to pick up the dinner tab — and keeps track of how much each person owes and to whom. Manage multiple groups at once, including your roommates back home and your group trip to Dubai. All major currencies are covered and expenses can be split unevenly, if needed.

Source: iTunes

TriCount (Free) — Although this app, available on iOS and Android, has many of the same features as Splittr, you don’t need to download TriCount to participate. Once one person creates a Tricount account, they can share the link with friends for everyone to see group expenses. Friends who have the link can add their own expenses or see your updates. At the end of the day or week, TriCount lets you know what everyone owes to settle the tab.

Source: iTunes

Trip Splitter ($1.99) — Trip Splitter isn’t free, but it offers some nice perks similar apps do not: Add an unlimited number of participants and multiple trips; send an email with a detailed list of spending to all participants; and view your spending by geography, in case you want to see where you were when you paid for someone’s dinner bill.

Source: iTunes

For roommates: Zently

Last, but not least, when it comes to splitting bills is sharing costs with someone who lives under your same roof. Keep in touch with your landlord, pay rent and split costs with roommates using Zently, a free app for iOS and Android. It can connect to your credit or debit card and find bills you need to split with roommates. Round up your roomies’ money and send it to the landlord free with an electronic transfer, assuming everyone is using the app. If so, you can also use Zently to submit and track repair requests.

Source: iTunes

RentShare (Free) — Like Zently, RentShare only works if everyone is using the app for sending or receiving payments, but that’s about all these apps have in common. With RentShare, set the amount each roommate pays and each person takes care of paying their share directly to the landlord. The app can help work around issues with roommates who aren’t always on time with their half of the rent or utility bill. Users can pay with a credit or debit card or by bank account. You can set up autopay and monthly reminders to help make sure you pay your rent on time.

Source: iTunes

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

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Strategies to Save

How to Save at Disney: Families Who Go Every Year Give Their Best Tips

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Going on a family vacation to “the most magical place on earth” costs a pretty penny for families, and the price has gone up yet again. This year, Disney increased the price of admission into its U.S. theme parks by about 9% on average. Forbes reports that Disney increased prices “to help regulate crowd sizes throughout the year in hopes of reducing the wait at the parks,” which are the most highly attended theme parks in the world.

They are also among the most expensive theme parks to visit in the U.S. A five-day trip for a family of four could easily cost $4,000, including park admission, lodging and food — and that’s without any travel costs or extras, like souvenirs.

In contrast, American vacationers planned to spend an average of $2,936 on their summer trips, according to our 2017 survey. But the high costs don’t keep the Disney faithful away, and many Disney enthusiasts have devised savings strategies when making the trip to Disney World in Orlando every year. We spoke to some of these families to get their best savings tips with us for anyone planning a Disney World vacation.

Top savings strategies

  • Use points to book flights or use a rewards credit card
  • Book your next stay before you leave or keep an eye out for hotel promotions
  • Wait to buy souvenirs
  • Split meals or find other ways to save on food
  • Use discounted gift cards

Christine & John Meade

Long Island, N.Y., couple Christine Meade, 35, and her husband John, 38, have already taken their 18-month-old son, Mason, to Disney World twice and have plans to take their next trip for his second birthday. Christine has visited Disney World every year — sometimes twice a year — since 2005.

“Before we had [Mason] we loved going. It’s a lot more than just a kid vacation,” says Christine, adding that there are “so many things to do” at Disney World. “It’s just an escape from everyday life. Now that we have the baby its almost like a natural thing to take him.”

“Now it’s like a different kind of fun. Watching him enjoy all of these things and experience all of these things is a different kind of experience,” says Christine.

Saving with Swagbucks

The trips aren’t cheap for Christine, who works as a waitress, and John, an installation technician with a home security company. Christine says the family now spends a little more than $3,000 for the entire vacation — travel and food included. Mason is still younger than 3 years old, so he doesn’t need a child pass.

Now with a toddler to budget for, Christine has been trying out apps that help her save money, like Ibotta, and earning money through side gigs like mystery shopping. She credits websites like Swagbucks, among others, and says she finds them helpful towards earning some extra income.

“I’m always making the extra money with going to Disney in mind,” says Christine.

Since November 2017, when she began using the app, the couple has earned more than $2,000 between their Swagbucks accounts. You can redeem Swagbucks for prizes, PayPal cash or Mastercard gift cards that you can use just about anywhere. This year, the couple may have enough money from Swagbucks to cover all the costs of their trip, except airfare to Orlando.

Use points on flights

But, they likely won’t pay for flights either, because they’ve earned plenty of points using their JetBlue Card**. They got the card about two years ago and earned enough points to entirely cover their last two round-trip tickets to Orlando.

To make sure the rewards program is worthwhile, Christine generally pays off the card’s balance weekly to avoid interest charges. She also tracks flight prices to make sure the couple makes the most of their points.

Book with a bounceback offer

The couple books their next Disney vacation before they leave the Disney hotel. Their proactiveness generally earns them a discount, called a bounceback offer. On their last trip in November 2017, they booked the day they were checking out and saved 25% on their room for their next vacation, Christine tells MagnifyMoney.

The bounceback promotions fluctuate. Sometimes it’s a different discount, or a free dining plan, which the couple has received in the past. If it’s not offered to them, the couple says there is sometimes a pamphlet left in the hotel room with information about a bounce back offer or you can dial x8844 from your hotel room to find out about the bounceback offer.

Split a Memory Maker

A final tip: Christine tells MagnifyMoney they may also search Facebook for another family going to Disney World around the same time and agree to split the cost of a Disney Memory Maker. The Memory Maker costs $169 for the length of your trip and gives you unlimited downloads of all your Disney PhotoPass photos and video taken by Disney’s photographers.

Other savings

The couple finds additional savings by using perks that come with staying at a Disney hotel, like free transport to and from the airport, extra FastPasses (for shorter wait times at the parks), MagicBands (radio-frequency enabled bracelets that serves as your park pass, hotel key and more) and extended park hours, called Magic Hours. They also have a Disney® Premier Visa® Card* that grants entry to opportunities to meet and take photos with Disney or Star Wars characters and 10% off some merchandise and dining purchases, in addition to other savings.

Cora & Benson Helton

Cora Helton, 33, and her husband Benson, 30, of Columbus, Ohio, have gone to Disney World at least once a year since 2014.

In 2017 they went four times, and three times in 2016, and in 2018, Cora says she thinks they’ll go twice because Benson has to do some continuing education for his work as a web developer. They say they love Disney in part because has so much to offer adults.

“You are in what we call the Disney bubble,” says Cora, a voice-over artist. “You’re not checking your Facebook, you’re not watching the news, all of this turmoil and political upheaval. You are completely in this magical world of Disney.”

Use discounted Disney gift cards

She says her main savings hack is the “gift card hack,” where she purchases Disney gift cards at a discount to pay for her trip.

“You can plan your whole trip in advance and pay it all off with gift cards,” says Cora.

Several retailers sell discounted Disney gift cards. At Sam’s Club, for example, Disney gift cards valued at $500 are often sold at a discount. Target, too offers a 5% discount on Disney gift cards for its REDcard holders.

“The better option is to get them at my local grocery store, Kroger, because they have a fuel perks program,” says Cora.

Shopping with a Kroger Plus Card, Kroger’s free membership program, you earn 1 fuel point for every dollar you spend. Sometimes Kroger does a special where they offer four times the fuel points per purchase — that’s when Cora stocks up on gift cards.

Buying a $500 gift card, Cora says she can earn 2,000 fuel points, which earns her $2 off per gallon of gas, up to 35 gallons. She goes a step further to maximize her savings by making the purchase with a 3% cash back credit card; she calculates her savings at $85 with this method.

Try a Disney travel agent

The Coras also use a Disney travel agent to make the most of their trip. It generally won’t cost you any additional fee to book a Disney vacation through a certified Disney travel agent, as Disney compensates them for their work.

“It saves money because they know all of the best bargains,” says Cora. “They know when the best deals will drop; they can be up at midnight when the FastPasses become available.”

Having another set of eyes looking out for deals can be helpful as FastPasses, dining reservations and discount resort rooms go fast.

“You can tell them tell them what you want to do in advance and they do all of the hard work and you don’t have to do anything,” says Cora.

Become an annual passholder

The Heltons have annual passes, which they say helps them save money.

There are two tiers of annual passes for access to Walt Disney World’s four main parks: the Disney Platinum Pass ($849 per person) and the Disney Platinum Plus Pass ($949 per person). The Platinum Pass offers a 20% discount on some dining and merchandise purchases. It also rolls in things like a park hopper pass, which allows you to go visit multiple parks in a day, and rolls in Disney photopass downloads.

“Do the math on how much value it would be for the number of times you would go a year and the amount the discount will save you,” advises Cora.

Plan and split meals

Cora recommends choosing your restaurants carefully at Disney World and sharing meals when you can. She tells MagnifyMoney there are a couple of different places in the park that they know are inexpensive and can feed them both.

Cora says she and Benson go through the entire menus of their restaurant options while they are at the park and choose what they’d like before they decide to go. You can start even farther ahead — during your planning. You can preview Disney World dining options online and you can filter the restaurants by park. Disney also provides each restaurant’s menu online and you can filter this search by price-per-person for an easier time budgeting for food.

Andrea & Brian Tucker

Baltimore residents Andrea Tucker, 48, and her husband, Brian, 49, go to Disney World once a year with their two daughters, ages 12 and 13.

Their whole family adheres to a gluten-free diet, and Disney is one of the easiest places for them to vacation with their dietary restrictions. Andrea, a health educator and the owner of Baltimore Gluten Free, is strictly gluten free for an autoimmune disease. Her youngest daughter has Celiac Disease, an autoimmune disease that causes the body to attack the small intestine after ingesting gluten.

“We go to Disney so frequently because it is the safest place for us to go to eat and it really is a true vacation because of that,” says Andrea. “They are just really great with dietary restrictions and lots of dining options everywhere.”

Use a rewards card to save

Andrea says her family finds their main savings through cashback earned using their Disney® Premier Visa® Card* on all of their purchases throughout the year. She says it helped them to save more than $1,000 on their last trip.

The card charges a $49 annual fee. It earns 2% cash back on purchases made at gas stations, grocery stores, restaurants and most Disney locations, and 1% back on all other purchases. An introductory bonus offers a $200 statement credit after the cardholder spends $500 within the first three months of opening the card.

Book Disney hotel rooms on promotion

Their family likes to stay at the three Disney resort locations closest to the theme parks, which are slightly more expensive than Disney’s other options, so Andrea is always on the lookout for a hotel room promotion.

“We wait for that sale to come up. It requires a bit of checking and vigilance to get those rooms when they go on sale because when it does, it goes fast,” says Andrea. “It’s important to be ready to act on it because there are only a limited number or rooms and people are waiting on it.”

You can find Disney’s current hotel rates and discounts on the company’s website. Andrea says that ideally she looks for a 30% room discount and generally sees discounts crop up in the early spring, for example. As of this writing, Disney is offering 20% to 25% discounts.

Save on food and drink where you can

Because they splurge on dining at Disney, the family cuts spending on food in a handful of other ways throughout the day.

They cut spending on one meal a day by getting groceries and eating breakfast in their hotel room. Andrea says they use a delivery service to order food ahead of time and have it delivered to their room, and they get staple items like cheese sticks, milk, yogurt, bananas, water and things they can heat up in a microwave in their hotel room.

The family also brings a free carry-on bag on their flight filled with their favorite snacks to eat throughout the trip. They bring water bottles to fill up at the parks to drink throughout the day.

Wait until the last day to buy souvenirs

One lesson the family learned on their first trip to Disney World: Only buy souvenirs after you’ve seen all of your options.

“Especially when my kids were younger, you’d go, ‘Oh my gosh, this is so cool,’” says Andrea, who says they wasted some money on souvenirs early on. The next day, they’d inevitably see something they wanted more than what they’d already purchased.

Now, they buy souvenirs only after visiting all of the parks. They use a park hopper pass so they can visit the same park multiple times.

“We kind of just remind everybody before the trip that it’s going to be exciting and so many cool things and we have time to look around and think about the best options,” says Andrea.

Bottom line

These tips can help you save some money on your trip if you use them, but at the end of the day, it’s your vacation. Getting a good sense of what you want from your trip before you book will help you save overall.

For example, none of these families would consider staying off-site, in a hotel near the park but not a Disney Resort hotel, although it’s an easy savings option.

“We have stayed off property in the past. You do save, but it’s just not the same,” says Christine.
“I like the magic of staying on property. You walk into that world of Disney, it’s fun and happy and everyone is in a good mood.”

But if staying on Disney property isn’t important to you, you can save — and use your savings on things you’d personally value more.

The lowest rates for a standard room for two adults at one of Disney’s value stay resorts from Aug. 5 to 11, 2018 are, as of this writing, selling at $120.53 a night, on a 20% discount promotion. That’s a premium to pay for the full Disney experience, even at a discount, compared to a room that costs less $100 a night at a nearby hotel with a free shuttle to the Disney theme parks and free breakfast, which the Disney resorts do not provide.

Ticket prices also vary by day and theme park, so if it’s not important to you to go during peak times (which you can see when buying tickets online), visit all of the parks or upgrade to park hopper passes, you can save there, too. When it comes to saving at Disney, all about setting your priorities and doing research in advance.

*The information related to the Disney® Premier Visa® Card has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card.

**The information related to the JetBlue Card has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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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News

5 Things to Look at the Next Time You Log Into Your 401(k) Account

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Source: iStock

You’re a hard-working millennial in your 20s or 30s and you have an employer-sponsored retirement plan going, so you are saving for retirement. Well done!

Imagine this common scenario: Just after orientation with your human resources department, you decided to log into that fancy retirement account. But, after you set your contribution, the rest of the stuff was … overwhelming. Terms like “employer match” and “target-date fund” didn’t fully make sense to you. So, you may have made a mental note to Google them and said you’d get back to it, eventually.

Well, eventually has finally arrived. It’s great to have some kind of retirement game plan going — especially when you’re just getting started in your career — but to make the most of the money you’re stashing away for your gray days, you’ll need to fully comprehend what’s going on with your investments.

What to look at when you log into your retirement account

Everyone reading this may see something different when they log into their retirement account, and that’s totally okay, as these tips generally apply to all retirement accounts accessible to customers via an online portal.

“Every provider has a different website and some of them are very easy to navigate and some of them you kind of have to dig around a lot,” said Crystal Rau, a certified financial planner with Beyond Balanced Financial in Midland, Texas.

You may immediately see a landing page with all of your information and an easy-to-adjust contribution scale. Or, it may be like navigating a labyrinth.

Your contribution rate

First thing’s first, see what you’re working with. Check your contribution rate so that you’re clear on what’s being put into the account in the first place.

Your contribution rate is the percentage of your salary that goes toward your retirement account. The more you contribute, the more you will (hopefully) have in retirement, but you’ll have less money per paycheck to play with today.

It’s important to know how much money you are currently contributing so you can set it to match your savings goals or make adjustments as necessary.

How much you should be contributing: 10% … or more.

General rule-of-thumb advice is to aim to put 10% of your income toward retirement. But you can be more aggressive than that. Rau says you should aim to put 15% to 20% of your income into the retirement account, especially when you are young.

“If you learn to live on less in the beginning, as your salary grows over the years, you’re going to be used to living with that percentage gone already because you’re used to saving it,” explained Rau.

Justin Harvey, founder of Quantifi Planning, a Philadelphia-based financial planning company says “Ten percent is a good savings rate … but if you can save 20%, 30%, I’d say do it because the more you can save and the quicker you can do it, the quicker you won’t be beholden to an employer.”

The best strategy for maximizing your retirement account, he suggests, is to pick a number as high as you can stand that would allow you to still pay your bills every month.

Your employer match

Always look to see if your employer will match the amount you place into your retirement account.

“I always say as a general rule of thumb try to max out at least what the employer will match,” said Reshell Smith, a certified financial planner for AMES Financial Solutions, a virtual financial planning company based in Orlando, Fla. “Anytime you have an employer match and you are not getting it, that’s like leaving free money on the table.”

If an employer match is not shown on the website, Smith recommends checking your monthly statement for the information, or simply asking the person in charge of benefits in your company’s human resources department.

To make sure you don’t leave any free money on the table, use the matching point as a gauge to set your contribution level. Make sure you are at least contributing the amount you’d need to take full advantage of the match.

For example, some companies may match something like 50% of your contribution up to 5% of what you contribute from your salary. So in that case, you would want to set your contribution at 5%, to get the entire employer match.

“Those are free dollars that are essentially equivalent to earning 100% in the stock market. As you know you, can’t really buy a stock and guarantee a 100% return,” said Harvey.

After that’s accomplished, work upward in your budget from the match point to see how much more you could be putting toward your golden days.

Investor or asset allocation quiz

Sometimes, your provider’s website will offer employee resources like a risk tolerance or asset allocation quiz, says Rau. You can take the provider’s quiz or others provided online like this one from Vanguard, or read this guide from Principal to get an idea of how your cash should be distributed among different types of investments available to you. This is also known as your asset allocation

Source: Sample asset allocation quiz from Principal

How risky should I be?

Your risk tolerance in investing refers to the degree of variability in investment returns you are able to withstand. Younger investors generally have a higher risk tolerance level because they have more time to absorb volatility in the market, so they may be more aggressive investors, whereas older investors may want to practice more conservative investing to protect their retirement funds.

But, that’s generally speaking. Depending on your personality, investment experience, time horizon and financial situation you may be more or less risky of an investor. Choose allocations based on what’s best for your needs.

Your investment or asset allocation

If you see a pie chart or some other chart with categories, take a look at it. It may give you an idea of your current asset allocation. The allocations you see will likely be a mix of equity (or stock) and fixed assets (bonds and cash). The pie chart won’t get into much detail beyond the general labels, but it will show a general breakdown of where your assets are sitting at the moment.

“Look at your pie chart or your breakdown and just make sure the allocation is appropriate for your risk [tolerance] level,” said Smith.

Why should you care about your asset allocation?

Your asset allocation is a window into how aggressive or how conservative you are being with your investments. If you’re heavily invested in stocks and you’re nearing retirement, you’re probably taking on too much risk and should shift more of your savings into conservative investments like bonds. If you’re young, however, you’ve got decades ahead of you to take risks and it’s typically advised that younger workers take an aggressive, stock-heavy approach to their allocation.

If you’ve never touched your retirement account, but you’re contributing, you may be surprised to find your funds may not be growing as you believed they were.

“More than likely, the contributions are going to default to a money market account, which is basically like a savings account,” said Rau. “There’s zero growth and so not taking action and choosing investments, you’re basically just putting your money in a glorified savings account.”

In some cases, retirement funds will automatically put you into a target-date fund, which is actually a nice way to start investing, especially if you’re not confident in choosing your own asset allocation yet.

A target-date fund is a mutual fund comprised of mixed investments you choose based on your age or the year you intend to retire. If you’re not familiar with investing or how to choose investments, a target-date fund may be a good option for you.

“The target-date funds are the easiest because the investments are chosen for you. They are rebalanced for you so that is the easiest way,” said Smith.

As you age, the fund’s assets will automatically be rebalanced to become more and more conservative.

Not sure what your ideal mix of stocks versus bonds is? Take your age and subtract it from 100 (or 110 if you’re more aggressive). The bigger number is how much you should allocate to stocks. The smaller is how much you should allocate to bonds.

If you take the asset allocation quiz, you may have a better understanding of the right mix of investments for you.

Fees on your investments

Investing isn’t free, because there are massive investment firms behind them pulling the strings. Some do more pulling than others, and they charge for that extra management. On the other hand, passively managed funds can be much less expensive.

The different investment options you’ll see in your 401(k) plan page each should come with information about fees. The key fee to look at is your expense ratio — the annual fee funds charge their shareholders to operate the mutual fund.

“Anyone that has a computer they should get into a website like Yahoo! Finance and type in that fund name and one of the first thing that pops up is an expense ratio,” says Rau. “Anything over 1% is more on the expensive side. Really expensive would be over 1.5%.”

Rau says the expense ratio isn’t the most important thing for new investors to pay attention to, but it’s something new investors should be aware of since it could cut into their overall return.

If you pay a 1% annual fee on your return and your fund averages 7% a year, for example, you would technically earn only a 6% return overall, instead of 7% because you’re having to account for those fees. She recommends choosing a fund with an expense ratio below 1%, closer to 0.7 or 0.8%.

You can get much lower fees that even that by choosing low-cost mutual funds, which aren’t actively managed by an investment firm and are much less fee-heavy.

Do an annual checkup

Don’t let this be the last time you check your retirement account until you either retire or leave your current employer. Check up on your funds at least once a year to see how it’s performing and consider rebalancing your allocations.

“If you’re in anything other than a target date fund whatever allocation that you set I would revisit it once or twice a year and rebalance back to that original allocation that you had,” said Rau.

For example, she added, “Over six months to a year if your stocks performed really well, your new allocation may be 90% stocks and maybe 10% bonds.”

Rau advises revisiting your account once or twice a year so that you’re not taking on more risk than you originally intended.

But, avoid rebalancing too much.

“There is an illusion that when you are trading stuff you’re going to increase your performance, which is false, says Harvey. “The stock market is going to do what it’s going to do. Look at it periodically, check your quarterly statements, if you’ve got a good strategy stick to the strategy.”

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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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Here’s the Right Way to Close Your Expensive Rewards Credit Card

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Springtime is almost like the second coming of the new year — the weather is warmer, resolutions are renewed with new vigor and every other article is sharing advice with you about decluttering your life. Purging unneeded or expensive credit cards is common advice when spring cleaning your finances. Some credit cards, like rewards cards, involve a little more care and tact than closing any old regular credit card.

Rewards credit cards are, generally speaking, the most expensive credit cards to keep open, so they may be on your purge list if you’re not using them enough to make the associated costs worth it.

As a recent MagnifyMoney study found, the sign-up bonuses many reward cards offer come at a steep cost to consumers. The average annual fee on a card with a bonus offer is $120, up 62% from 2008. However, in the lenders’ defense, they’ve also bulked up rewards offerings on new credit cards in the time. A separate 2017 MagnifyMoney study found, since 2010, what banks spend to support credit card rewards has more than doubled, from $10.6 billion to $22.6 billion.

If you’re ready to ditch your rewards card, you’ll want to make sure it’s done with your best interest in mind — a minimal loss of rewards and a minimal change to your credit score. Here are a few tips on the right way to close a rewards card when the cost isn’t worth the benefit.

When it makes sense to cancel a rewards credit card

When the rewards stop being worth the fee. Generally speaking, you should do a cost-benefit analysis in any situation to determine if keeping a credit card open is worth the fees associated if it charges any.

Todd Ossenfort, chief operating officer of Rapid City, S.D.-based Pioneer Credit Counseling, says to cancel the rewards card if it’s not getting used and you don’t take advantage of the rewards they offer. Most rewards cards charge a fee, so check to see if you’re paying one before you ditch your bank.

If you like earning rewards, sans the annual fee, there are rewards cards that don’t charge an annual fee but offer lucrative cash back rewards like the Citi® Double Cash Card – 18 month BT offer, which offers 1% cash back when you buy and 1% cash back as you pay for those purchases or the Uber Visa Card which rewards spending in certain categories. The Uber cards award cardholders 4% back on dining, 3% back on hotel and airfare, 2% back for online purchases, and 1% on everything else.

If rewards are reduced or terms are changed by the issuer. Another thing that may alert you to close a rewards card is changing terms that may reduce the overall benefit of keeping the card open.

“Look for things like a sharp increase in the card’s interest rate, cutting back on benefits like auto insurance or trip protection or downgrades of ways you can earn points and miles,” says Benet J. Wilson, associate credit cards editor for CompareCards.com, another LendingTree-owned site.

Remember, companies generally reserve the right to alter the card’s terms at any point.

“Credit card holders always have boilerplate language that covers them if or when they decide to change benefits, but when it happens, it should always serve as a warning flag,” says Wilson.

Follow these tips to close a rewards card the right way

Closing a rewards credit card can be a bit more nuanced than closing any regular old credit card. Here are a few tips you can use to make sure the process is smooth sailing.

Reach out to the bank before they charge your annual fee

Plan to close the card a few months ahead of the date the annual fee will be charged to the account. Otherwise, you may find yourself paying for another year of rewards you may not benefit from.

“Be proactive and call the creditor,” says Ossenfort. “Don’t put the card in the drawer and forget about it until they charge the annual fee and then try to cancel. More than likely they will cancel the card and still have you pay the fee.”

Still carrying a fee? Pay it down or transfer the balance to a new card

You’ll need to zero out any balance on the account before you’ll be permitted to close the card. To do this, you’ll need to pay any balance in full or have it transferred to another card.

If you transfer, you’ll ideally want to move the balance to a card that won’t charge you a higher interest rate on the balance you transfer. Here are some balance transfer options to consider in case you need to use one.

Use your rewards before you lose them

Use up any existing rewards you’ve accumulated on the card before you close the account if you can — after all, you’ve earned them.

You may decide to cash out any cash back rewards to your bank account or choose to apply them to your statement credit. If you can apply rewards to purchase gift cards or other items in a marketplace, that may also be an option. If you have a partner who is enrolled in the same rewards program with the bank, you may have the option to transfer your points to your partner’s account before you close the card.

If the card is co-branded with an airline, hotel or another company, like Uber, and you’ve accumulated miles or points in an associated account, those will likely stay available to you to use after closing until the miles or points expire. However, if it’s a bank, like Chase or Capital One, you’ll generally lose the points if you close the account and have no other cards linked to the program.

One big thing to watch out for here is not incurring extra debt in the process, says Ossenfort.

“I wouldn’t recommend using 5,000 points towards any trip if it’s going to cost you another $1,000 just because [you don’t want to lose the points],” says Ossenfort.

Prepare for a drop in your credit score for 30-90 days

A common warning you’ll get if you talk about closing a credit card is that it can hurt your credit. Sometimes, that ding to your score could be worth the temporary pain if it means saving you money in the long run.

Closing a credit card could reduce your overall available credit limit, resulting in an increase in your utilization ratio — a factor that contributes to about 30% of your credit score. The ratio is your total used credit in relation to your total available credit. The higher your utilization ratio, the more it can negatively affect your FICO score.

Don’t close a card and think that it will help your credit score, because it doesn’t,” at least in the short term, says Wilson. “By closing an old or unused card, you are essentially wiping away some of your available credit and thereby increasing your credit [utilization ratio].”

She recommends you check the total balances on all your credit cards and run the numbers before you decide to close one down. Use a credit score simulator tool like this one from Credit Karma or this one from Chase (for Chase customers) to estimate the damage to your score if you close a certain card.

The age of the card is also a major factor to consider, as closing a credit card with a long history or could drop your score by a few points. The effect could be more severe if your other cards are significantly younger than the card you’re looking to close. You can see the possible impact, again, by using one of the credit score simulator tools we linked to above.

“If it’s the oldest credit line and it’s closed your credit score will take a hit,” says Ossenfort. However, he says most can expect the dip to be minor and temporary, about 30 to 90 days.

Consider downgrading the card rather than closing it to avoid credit score damage

You may be able to preserve your rewards — and your credit limit — and simply ask your credit issuer you can downgrade to a card that doesn’t charge as high of an annual fee. If you can’t afford the $450 annual fee on the Chase Sapphire Reserve®, for example, you may choose to downgrade to the Chase Sapphire Preferred® Card, that charges a lower $0 Intro for the First Year, then $95.

Monitor the card for at least two months to avoid fees after closing

After you cancel the rewards card, Oliver recommends you keep an eye on the account for about two months, in case any fees are charged to the account after closing.

“A fee may have come between the closing of the billing cycle and when you closed the account,” says Oliver. This may be in the form of an interest charge for purchases made during your last month the card was open. You may have paid the balance down, but the interest won’t be charged to the card until the next billing cycle.

Part of that due diligence is getting it in writing that you’ve closed the account, in case you aren’t aware of any fees charged and it shows up later in collections.

You can ask the representative to send you an email or letter to your address confirming the account has been closed. If issues arise later, its best to try to resolve them directly with the creditor, says Oliver. But if that doesn’t work, you’ll already have the account closing in writing so that you can file a stronger dispute.

Unlink bills and autopay accounts

You don’t run into any hiccups with your bills, so you want to make sure the newly-canceled card account is no longer linked to any current bills.

Follow up on any of the accounts or bills the card was linked to and unlink the canceled card. While you’re there, don’t forget to update your billing information to a new card or alternative payment option.

Be firm with sales representatives if they try to keep your business

The Federal Reserve reports that total outstanding revolving consumer debt stands at $1.03 trillion as of January 2018.

“That’s a lot of money on the table, and companies are understandably reluctant to lose it,” says Wilson.

If you’ve considered other credit options with the same card issuer ahead of time, prepare yourself by researching your options to know what’s available.

“They will try anything, including raising your credit limit, waiving annual fees and offering bonus points/miles to get you to stay,” says Wilson. She adds you may use the opportunity to negotiate better terms for your credit card — if they can’t make it worth your while, go ahead and walk away.

If the salesperson is particularly aggressive, advises Wilson, be firm and persistent. If they are particularly pushy, ask to speak with a supervisor. If they refuse, end the call, then call back and immediately ask to speak to a supervisor.

“It may take some persistence, but it can be done,” says Wilson.

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Brittney Laryea
Brittney Laryea |

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

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