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Loyal3 Is Shutting Down

Prioritize Your Finances to wind up with a suitcase of money
You won’t be maximizing your money with Loyal3 any more.

Back in 2015, I learned about a relatively new investing platform that allowed users to invest in increments as low as $10 per purchase. Additionally, you could buy partial shares, which made the opportunity even more attractive. This platform was Loyal3.  This actually got me to start investing. Unfortunately, after having used this online brokerage for about two years, I got an email that Loyal3 is shutting down.

Loyal3 Is Shutting Down

This email that I received from the company was a bit of a surprise, but not too big of one. The company did not charge any fees, claiming to make money from marketing the stock of the 60 or so companies that it provided for investors as well as the interest from holding onto cash that was not yet invested in an interest-bearing money market fund.

Loyal3 is shutting down.
Loyal3 is shutting down.

This did not seem like the most sustainable of business models, but because Loyal3 was a member of SIPC, I figured at the time that my investments were safe. I enjoyed the chance to build my investment holdings in small increments over time.

Many in the investing community advocate buying stock in increments of $1,000 or more because of fees that hurt long-term returns. This can make it difficult for small-time investors to begin the process of investing. It can also make diversification a very slow process. With Loyal3, I had as many as eight holdings at one time, built up with purchases that ranged between $10 and $200 for any single transaction.

This was a pretty cool deal.

But now it’s done.

What To Do Now?

Now that Loyal3 is shutting down, what is the small-time investor to do? There are some investing options that might work. RobinHood is one that comes to mind. I’ve not used this platform, but I’ve read about it. RobinHood requires investors to buy full shares, which makes the minimum investment a bit higher.

The email from Loyal3 indicated that those who choose to leave their holdings alone would automatically have them transferred to a new brokerage called FolioFirst. This new brokerage, according to the email, is just for Loyal3 clients. The offerings for FolioFirst accounts will grow to around 200 companies and funds, which is good. Then comes the bad news.

There are still free trades( at least up to 2,000 a month), but the new outfit is going to start charging a $5 monthly fee per account. The minimum investment will now go up to $25 from $10. $5 a month might not sound like much, but it would add up to $60 a year.

Let’s say that a new investor has $50 a month to invest. This fee would mean that the investor would go from paying $0 with Loyal3 to paying $60 with the new FolioFirst platform. That’s a fee that would take up 10 percent of the total investments for the first year. Admittedly, the fee would go down over time as more money gets invested, but it would slow down the growth process quite a bit.

Investors with Loyal3 also have the option of instigating an account transfer to the brokerage of their choice. Option 3 involves selling all shares and then cashing them out.

What Am I Doing?

After getting the email that Loyal3 is shutting down, I decided that I’d opt for the third option. My account has some modest gains. I figured that my $100 in gains would cost me about $20 in taxes at most. Not too bad.

Furthermore, I also took into account the fact that I’m investing for dividend income. With the current size of my account, I’d have to pay about 4 percent of its value in account fees over the next year. That’s more than the roughly 3 percent yield that I’m earning on my holdings.

I’m planning to take the proceeds and invest them into my IRA account with TradeKing. This will provide a positive tax effect because I’ll be able to cut my current-year income by the amount I invest and then save 15 percent of the investment in deferred taxes.

I am planning to make one major purchase or two smaller purchases with the proceeds. This will not have me as diversified as I was, but it will cost me a max of $9.90 in trading fees, which is much less than the $60 I’d lose when looking at the monthly fees that FolioFirst would charge.

I can also buy REITs, telecoms, and utilities that pay higher dividend yields, so my overall dividend income for the next 12 months will probably go up with the purchases.

Conclusion

Loyal3 is shutting down. This is sad in one regard. Small-time investors who are getting started will have one less option when it comes to making small purchases and not having to pay major fees.

I’m cashing out and cutting my current-year taxes by putting the proceeds into a traditional IRA. I should also see a bit of a bump in my annual dividend income as a result.

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How To Prioritize Your Finances

The following contribution comes to us from Dave Chen.

How to Prioritize Your Finances

Your finances are a crucial part of your life. Without them, you would not have a place to live, you would not be able to afford to drive your vehicle, and so on. Your finances need to be properly managed to ensure that you do not wind up in a huge debt hole without a way to climb out. Below, we will provide you with some tips and steps to prioritize your finances.

Of course, you want to make sure that you ALWAYS pay your obligations first because you need a place to live, and sacrificing this to put money into your savings account does not make much sense. Okay, let’s take a look at the tips now.

Prioritize Your Finances to wind up with a suitcase of money
Prioritize your finances, and you could wind up with a suitcase of money. Image via Pixabay.

1. Pay Off High-interest Debt

The first priority is for you to pay down your highest interest debt and also any dangerous debt that you may have. You need to tackle these first  because they will hurt you and stick with you if you do not. Many people do not know what debts to consider as dangerous debt. These debts include those with high interest rates, tax liens, debts in collection, and so on.

Pay-day loans, credit cards, high-interest car loans, and high-interest personal loans need to be paid off immediately. The longer you wait to pay them off, the worse off you will be. You will accumulate interest on this debt at a rapid rate, and the sooner you pay it off, the better – you will save thousands.

Pay off credit card debt to get finances in order
Pay off high-interest debt to get your finances in order. Image via Pixabay.

2. Save For Retirement

You want to retire at some point, right? If so, you need to think about your future and start to save for retirement. The longer you wait, the more money you will need to put away. For example, if you do not start saving for retirement until you are 40, you may have to put away half of your salary to be able to have a nice nest egg when you retire.

Your retirement account will ultimately determine whether or not you will live in poverty when you retire. The less you save, the more government help you will need, and the longer you will have to work.

To help you determine how much money you should save, if you were to save $500 per month for a period of 20 years and earn 10 percent on the money, you would save about $380,000 for retirement.

3. Create an Emergency Fund

What would you do right now if the roof on your home caved in? What about if your vehicle’s engine blew? These are things that you need to think about and consider. Many people do not have any type of emergency fund set up, and this means that they have to forgo some of the things they need because of it.

An emergency fund will cover three to six months of all of your living expenses in case the worst situation ever happens. For many people, this means more than $10,000. You should start putting extra money into this account and leave it there. Even if you save one or two percent of your income yearly, you could easily reach a target of $500 per year or so.

4. Go Over Your Expenses

If you already live paycheck to paycheck, the only way that you will be able to have room to save would be to sit down and think about your expenses and then look at them from an unbiased view. If you have a cable bill at $200 and your car insurance is another $200, you may want to cut back on the cable and talk to your agent about a better rate.

You need to explore areas where you may be paying too much and then try to lower the cost. In addition, you should eliminate any expenses that you do not need. On top of this, there are ways to make extra money that can help handle these extra expenses.

Start to Prioritize Your Finances Today

If you are ready to get your financial future into focus, now is the time to do it. We have helped you above by letting you know what we think you need to prioritize first when it comes to your finances. You should focus on the highest interest loans you have because these loans can throw you into a crazy whirlwind of debt, especially if you only make the minimum monthly payments each month. Quite often, this may be private student loans taken out to pay for college. Even more often, these rates can be much higher than federal options.

From there, you should then focus on your retirement, your savings account, and setting goals for yourself. Now is the time for you get a head start and get on the right financial track by starting to prioritize your finances.

— Dave Chen is young professional working in the engineering field. On the side, he skiing, hiking, and writing about all things personal finance at MillenialPersonalFinance.com.

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Top 8 Ideas To Stay On Top Of Personal Finances In 2017

The following was contributed by Amy Nickson:

Many people ignore their personal financial health because they know fixing the problem is not an easy task. However, many people don’t even know where to start. Most of them ignore the idea of staying top of their personal finances, but instead of ignoring, you must take care of your personal finances to see good results in the coming year.

If you’re not sure where to start, this article may help you. Read carefully:

1. Keep Your Household Budget in Order

Once you create a budget system according to your financial ability, you can manage emergencies, save money for the future, and make some additional expenditures. A budget also teaches you how to overcome bad financial habits as well. Once you start following a suitable budget, you’ll be able to know the amount you spend and the amount you save. Thus, you can seek to save more after meeting your daily necessities.

Be Sure to Balance Your Budget
Be sure to balance your budget

2. Take Advantage of Free Budgeting Tools and Apps to Create Your Budget

Budgeting is not as scary as many people think. Many budgeting tools and apps are available online. If budgeting sounds dull, then install a free budgeting app on your smartphone and start using it. Soon you can see the positive results in your personal financial health.

3. Save More Money Than the Previous Year

Saving money is the only way to stay top of your finances throughout the year. If you have saved 15% of your income as of now, then try to increase your savings percentage in this year. Set aside 20% of your monthly income to save more than before. Don’t use the savings account for day to day purchases. Allow the money to grow and keep saving for a longer time. Thus, you will be able to build up a solid financial cushion.

4. Manage Your Debts to Stay on Top of Your Personal Finances

If you are carrying high-interest credit card debts, then you can consider a balance transfer to a credit card that offers low-interest rates. Try to find out a credit card that doesn’t charge a balance transfer fee. Don’t miss any monthly payment to avoid charges.

You may not be able to pay off all of your personal debts (credit cards debts, student loan debts) within few months, but you should start making extra payments towards your debts to pay them off as early as you can. Save money every month to make some extra payments toward your highest-interest debts.

For example,

If you’re planning a splurge of $100 this weekend, then use the money to make extra debt payments instead of splurging on something you don’t need.

This way strategy will be more beneficial in the long run by allowing you to be a debt-free person.

5. Start Funding a Retirement Account

If you don’t have a retirement fund yet, then open an account and start funding. If your workplace has a 401 (k) plan or an IRA, then take advantage of them to get the tax benefit as well. Remember, there is no particular time or age to invest money for your retirement years. The earlier you think about your retirement, the sooner you secure your financial future. Try to put money into a retirement account as soon as possible to take advantage of compounding.

6. Ask for a Raise

If you’re working hard and performing well in your workplace, then this is the right time to ask for a raise. Approach to your employer to attempt to get paid according to your capability. You can also consider a side hustle to boost your income. Go online to get a sample of ideas.

7. Financial Trouble? Seek Professional Help

Knowing the exact solution for each personal financial problem is not possible for most people. To get proper guidance and solutions, seek professional help. A financial advisor can help suggest the right option that helps you make the right decision.

For example:

Consider professional help before investing money, making a will, and taking out a loan.

8. Utilize the Internet and Subscribe to Coupons

Couponing is one of the most effective ways to save money in your daily life. It helps to save money on groceries and other household expenses. If you have a smartphone and an Internet connection, then you can sign up with many manufacturers’ websites to find branded coupons. Many companies offer coupons on a regular basis on the Internet so you must keep eyes open to grab some great deals on regular purchases.

Finally, setting financial goals is important, but set realistic and achievable goals. Don’t imagine yourself as a multimillionaire at the beginning of your personal financial career. There is no such shortcut to becoming rich. You must earn money and save money with determination. Research well and read more to invest your money for the best return. Thus, you can ensure your personal financial health in future.

Author’s Bio: Amy Nickson is a web enthusiast. She works for Oak View Law Group, a leading consumer and bankruptcy law firm based in CA and operational across US. She loves social media, as it gives her endless opportunities to reach out to a larger audience in a more unbiased way.

Image Credit: stevepb via pixabay

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Book Review–Your Money Map

A few months ago, I was in a Christian bookstore and I decided to check out the personal finance section. Some of the books appeared to be from health and wealth guys who encourage you to “sow some seed” to benefit their ministries. I’m not into that by any stretch. I then happened upon a book titled Your Money Map: A Proven 7-Step Guide to True Financial Freedom. The author of the book was Howard Dayton, and it was published in 2006. The publisher was Moody Publishers, which is pretty far removed from the health and wealth scene. I then decided to pick up the book to see if it was the same as Dave Ramsey’s Total Money Makeover, which has seven baby steps. It did not.

Rather than just giving seven “baby steps” that are singular in purpose and that have to be followed in order religiously, this book shows more of a lifetime journey that a person might take. Both Ramsey and Dayton argue that financial freedom is a process that could take quite a bit of time.

Your Money Map is distinctively Christian in its outlook. Therefore, those who operate from a more secular viewpoint might be more interested in other personal finance books. This book follows a couple that Dayton counseled regarding personal finance and the advice that he gave them through each step of the way.

The book starts out by arguing that all wealth comes as a stewardship from God. Therefore, it’s important to ensure that we are effective stewards with the money that we’re entrusted with. Dayton argues that one of the first steps that anyone should take when getting their personal finances in order is to begin charitable giving toward religious purposes. This is one of the areas that nonreligious people might disagree with Dayton, but starting to give is part of Destination 1 on the money map that’s included in the chapters of the book, as well as the schematic money map at the very end of the book.

Other goals involved in reaching Destination 1 include the obligatory budget and $1,000 emergency fund. These two steps seem to be pretty standard among the community of personal finance gurus. Both are pretty good ideas. Budgeting ensures that you can avoid spending more than you bring in. If you spend more than your income each month, you’ll wind up with a negative net worth if you’re not already there. If you spend less on a monthly basis, you’ll build up a solid net worth over time. It’s pretty simple, actually. Also, stashing $1,000 allows you to pay for any unexpected expenses that might come up–like the busted radiator I had to replace a couple of months ago. Definitely not cool, but necessary. Learning to handle money God’s way is a little outside the realm of personal finance gurus who are not tied to Christianity or another religion.

Steps 2 and 3 on the money map are where Dayton is a bit different than some of the other personal finance books and websites that I’ve read. Most of these other books emphasize paying off debt at the expense of savings. Your Money Map argues that people should build up a larger emergency fund (for one, and then three, months of expenses) while simultaneously paying down credit card debt and all other consumer debts. This blended approach is refreshing to me, because cash flow is important. Having more money available at any given time can help people avoid building up additional debt should an unexpected job loss or other catastrophe occur.

Earning money in pajamas can help you achieve financial freedom.

A possible destination after reaching Step 7on Your Money Map.

Step 4 is related to saving up funds for major outlays like a home or retirement (childrens’ education is optional here). Dayton recommends saving up a substantial down payment for a home so that a downturn in the local housing market does not get a buyer upside-down on his or her mortgage. This is generally sound advice (although I didn’t follow it personally because renting in the markets I’ve lived in has been more expensive than buying–I took advantage of loans with low down payment requirements).

Steps 5 and 6 deal with actually buying the house, paying it off early, and investing additional money outside of retirement accounts, working toward the multiple goals at the same time. Step 7 is financial freedom. The goal of financial freedom is retiring and actually having something to leave as a legacy, be it through an inheritance to your children or some nice gifts to organizations that you feel strongly about. Retirement also means that you have more time to give to endeavors that you feel really, really passionately about.

The story of Matt Mitchell, the car salesman that Dayton counsels, is woven throughout the book. Dayton himself has basically donated his time as a personal finance coach for decades, so he discusses how he walked his pupil through the steps toward financial freedom. I liked how this book showed that you can focus upon more than one thing at a time because compounding is an important and powerful aspect of investing. This is actually not as common in personal finance advice as you might think. Those who start with just saving a few bucks regularly early in life will actually be better off than those who save up more of their income later in life.

I also liked the argument for having a single earner for many couples. After paying for child care and additional clothing, food, and transportation expenses, Dayton shows how one working wife earned an effective wage of $0.64 per hour on $18,000 of gross earnings over the course of a year. Many people don’t look at it this way, but it’s the rationale we used when my wife decided to stay at home with the kids. Low real earnings like this are also all too common. Overall, Your Money Map did a good job of showing how disciplined people can achieve financial independence over time.  If you’d like to check out this book and read it for yourself, I’d encourage you to scroll up and click the link near the top of the page

Disclaimer: If you decide to sign up for various programs or buy products from my referral links, I may receive compensation. You can get the same great benefits from just going to the websites themselves, but I definitely appreciate your support. It’s one of the ways I’m able to earn money in pajamas while helping others do the same. 

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Taking the Long View of Personal Finance

Do you want the bad news first, or would you rather have the good news? I’ll start with the bad news. Most people in the United States live for today. The average American is deep in debt, and this debt can really lead to many difficulties in life.  A person’s savings rate is the leading indicator for future wealth. This indicator reached an all-time high of 17 percent of income back in 1975, but by July 2005, the rate was at an all-time low of less than 2 percent. Today, the savings rate for the average American has reached 5.7 percent, which is three times what it was just a decade ago.  The good news is that there are some pretty easy steps to take to improve your personal savings rate and shore up your finances.

The reason for this increase is probably related to what happened between 2005 and today–the Great Recession.  People were shaken by the sudden crash of the economy. While a savings rate of between 5 and 10 percent might seem impressive given where it’s come from just a few years ago, it’s still not all that great. The popular site Mr. Money Mustache has a pretty amazing article on “The Shockingly Simple Math Behind Early Retirement” that looks at how the savings rate can determine how long a person has to work.  A person who saves 5 percent a year will have to work about 66 years to be able to retire comfortably. Fewer teenagers are working today, so this means that a 20-something who starts to work today will need to work until about age 90 before they can let someone else take over their job.

This math presupposes that there is no pension waiting on a worker and that the doomsday scenarios of Social Security that claim it will pay nothing at sometime in the not-too-distant future will come frighteningly to fruition.  This means that the savings rate of American workers is woefully short of what it needs to be. Even the record savings rate in the post-1959 world that was noted above will require quite a bit of work. A 17 percent savings rate means that a worker can retire right around the “traditional” retirement age after working approximately 40 years, again assuming that there is no pension or Social Security payment coming. Needless to say, this is not a terribly comforting situation.

These numbers are why it’s important to take a long view when it comes to personal finance.  Those who fail to plan actually plan to fail, so getting some goals together is a good idea. I don’t know about you, but having to work until 90 would mean that I’d probably be dead before I can afford to quit working on a full-time basis.  That does not seem like a terribly enjoyable path to take. The time to start planning for retirement was 10 years ago. However, if you didn’t put in the effort to plan 10 years ago, the second best time is now.

This is where earning money in pajamas proves to be a great idea. If your main gig barely pays the bills, there are exactly two ways to save money (outside of having a long, lost extremely rich uncle give you a massive inheritance or hitting the lottery, which is a losing proposition because the house always has to win). These first of these two realistic methods is cutting expenses. With the number of high-paying jobs not being what most Americans might wish, keeping expenses down is definitely an important step to take to ensure that you can build wealth over time.

The second option for saving more money involves finding other avenues to make money. With the advent of the Interwebs, the opportunities for making more money are quite extensive. Here are 11 such options that I’ve shared before for making extra moolah online .  Few jobs require employees to work every waking hour, so most workers will have several hours each week to earn more money. The best part about utilizing the Internet means of making money is that you don’t have to leave the house. You can literally sit around in your pajamas on a Saturday afternoon and make a bit of money while watching football. If you have a connection to the Internet, there is absolutely no reason why you shouldn’t attempt to make more money. The link above has some great ways that I’ve been able to make money. I’ve used a few to make more than $1,000.

It’s important to take the long view of personal finance when thinking about making money online because it’s easy to get discouraged. A few hundred dollars a year might not seem like much, but your future self will appreciate that your current self decided to save some money for the future. I’ve noted before that saving just a dollar a day between the ages of 16 and the “normal” retirement age of 65 will yield an account of around $286,000 if an 8 percent return can be realized.  The power of a simple dollar can be quite amazing.  If you can raise this amount to $2 a day in additional income that you can save, you’ll have around half a million by retirement. Only $4 a day will lead to a cool million by 65 if you can start at 16. Discipline is important through all of this, and it’s important to stay in the market.

Those who are able to engage in both of the strategies listed above can super-charge their trek toward retirement. Cutting $4 in spending each day and then making just $4 extra per day and then saving the $8 would lead to nearly $3000 in savings after just a year and nearly $2 million over a 50-year period if you were able to earn an 8-percent return. Those who do not have 50 years to play with can still make some major progress with just a few small tweaks. Even if you’re only looking at 20 years until needing the money, you’ll still be way ahead of what you would have should you never have started to begin with. The time to start making some money in pajamas is now. The sooner you do, the sooner you can start saving and taking advantage of the compounding process.  Thinking of the long terms is the only way to make this happen, however, so be sure to get started today.

Disclaimer: I can receive compensation if you sign up for some of the programs that I’ve reviewed using one of my referral links. I definitely appreciate the support, but in the interest of full disclosure, you can still get the the same benefits without using my link. 

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