How Much Is the Monthly Payment on a $10,000 Personal Loan?
Here’s the Single Best Strategy for Investing in CDs
By: Maurie Backman |
Updated
– First published on Jan. 9, 2024
There’s a reason putting money into a CD versus a savings account can be beneficial. CDs require a commitment that you’ll keep your money in the bank for a specific period of time. As such, CD rates tend to be higher than savings account rates.Also, when you keep money in a savings account, the interest rate there can change with market conditions. When you put money into a CD, the rate you lock in is the rate you’re guaranteed for your CD’s entire term.So, let’s say you open a 2-year CD paying 4.5% interest. Let’s say you also keep some money in a regular savings account paying 4%. A year from now, your savings account might only be paying 2%, and new 2-year CDs might only be paying 2.25%. But because you locked in a CD for a duration of two years, you’re guaranteed 4.5% interest for another 12 months as long as you leave your money where it is.That said, if you’re going to put money into CDs, you’ll want to do two things:Make sure your bank is FDIC-insured so you’re protected from losses in the event of a bank failure.Ladder your CDs so you have money coming due at various intervals, as doing so could help you avoid early-withdrawal penalties.It pays to ladder your CDsFiguring out whether your bank is FDIC-insured is easy. First of all, your bank will usually indicate whether it’s FDIC-insured on its website. And if not, you can look up your bank here.Laddering your CDs requires a bit more time and strategy. But it’s really not a difficult thing to do.With a CD ladder, all you’re doing is splitting your money into different CDs with different maturity dates. That way, you have money coming due at varying intervals.Why is this important? You might think you’re okay to tie up, say, $10,000 in CDs because you don’t need that money for something specific. But what if a major home repair comes up that depletes your emergency fund and still leaves you in need of cash?In that case, if you have to wait another year for your $10,000 to free up, you might end up resorting to debt. But if a portion of that money is about to become available, you may not land in such a jam.To this end, what you may want to do is take the total amount of money you’re looking to put into a CD and split it into four. And then, open CDs of varying terms.If you have $10,000, that might go as follows:You open a $2,500 CD with a six-month termYou open a second $2,500 CD with a nine-month termYou open a third $2,500 CD with a 12-month termYou open a fourth $2,500 CD with an 18-month termThis way, you have CDs coming due at different times, giving you an opportunity to access your money.And you may not even need that money for an emergency. You may simply want some cash to join friends on an exciting trip, or you may decide you’d like to invest in conjunction with certain market conditions. If your money isn’t all tied up, those options may be available to you.Do your best to avoid a penaltyOnce you open a CD, it is possible to access your money prior to its maturity date. However, doing so usually means facing a costly penalty, the amount of which will depend on your bank and its policies.At Capital One, for example, you’ll lose three months of interest as a penalty if you cash out a CD with a term of 12 months or less prior to maturity. For any CD with a term longer than 12 months, that penalty is six months of interest.That interest income is money you really don’t want to lose. But if you’re careful in how you set up your CD ladder, you can certainly lower your risk.
Does Your Income Make You Upper Class, Middle Class, or Lower Class?
By: Christy Bieber |
Updated
– First published on Sept. 5, 2023
Incomes vary widely across the United States, with some people making many times the amount that others earn. If you’ve ever wondered how your personal finances stack up, and what “class” your income officially puts you in, here’s what you need to know.What income do you need to be upper, middle, or lower class?Based on 2021 data, here’s what you would need to earn in order to be in each class:Lower class: This is defined as the bottom 20% of earners. Those in the lower class have an income at or below $28,007.Lower middle class: This is defined as individuals in the 20th to 40th percentile of household income. Earnings among this group are between $28,008 and $55,000Middle class: The middle class is officially those whose earnings put them in the 40th to 60th percentile of household income. The income range is $55,001 to $89,744.Upper middle class: Anyone with earnings in the 60th to 80th percentile would be considered upper middle class. Those in the upper middle class have incomes between $89,745 and $149,131.Upper class: Finally, the upper class is the top 20% of earners and they have incomes of $149,132 or higher.Take a look at these numbers and see where you fall based on your own earnings. And remember, this is a snapshot in time — your earnings can change throughout your life, and so can your class designation.Will your success be determined by your income and class?It’s probably not a surprise that those in the upper classes or in the upper middle class do have a higher net worth than those in the lower class or the lower middle class. But the disparity is greater than you might think. While the median net worth of those with incomes of $149,132 or higher is $805,400, the median net worth of those in the lower class is just $12,000.Your income impacts how easy it is for you to build wealth. If you make more money, it is easier to save it and invest it in a brokerage account where it can work for you. If you make less money, then you may struggle even to cover the necessities out of your checking account, much less to buy valuable assets that help you grow richer over time.But that doesn’t mean people who don’t make a lot of money can’t be a financial success. A lot depends on what you do with the money you actually have, including how much you spend and how much you save.There are plenty of people who make over $100,000 a year who live paycheck to paycheck, and plenty of people with incomes that put them squarely in the lower or lower middle class who have diligently saved and grown quite wealthy over many years.Here’s how you can improve your standingDon’t be discouraged if you aren’t in the class you hope to be. For one thing, you have opportunities to increase your income by taking the following steps:Learning new job skills: You could obtain a certification, take part in a management training program at work, or take some classes to develop skills that may help you get promoted (such as computer training courses or public speaking classes), depending on your industry.Take on a side hustle: The average side hustle brings in $483 per month, which is a good amount of extra money that could make a meaningful difference in your income.Work some extra hours: If your company allows you to work overtime, take advantage of it, as many people are paid time and a half for overtime hours.Negotiate your salary: According to Pew Research, when workers negotiated for higher pay, 28% said they received the extra money they asked for and 38% indicated they were given more than originally offered but less than their ask. Whether you are getting a new job or staying at your current job but feel you’re underpaid, it doesn’t hurt to make a request for more money — especially if you can find salary data to back up the fact that others in your industry are paid more.And even if your earnings never put you in the top 20% of earners, you can still have a rich life and end up with the financial security you deserve — especially if you prioritize saving as much as you can for as long as you can.
My Brother Won a Car on The Price Is Right. Here’s What It Cost Him
By: Maurie Backman |
Updated
– First published on Dec. 6, 2023
When my brother got tickets to be in the audience of The Price Is Right, he figured it would simply be an entertaining way to spend a day off. He didn’t imagine his name would actually be called during the show’s opening round.But lo and behold, my brother was one of the first four contestants asked to come on down and participate in the iconic show that has you guessing at prices of various consumer goods. And as luck would have it, my brother was able to out-bid his competitors and move on for a chance at a new car — a car he won through savvy guessing, but also, a nice amount of luck.My brother was ecstatic to have won such an awesome and valuable prize. But that prize wound up being a bit of a mixed bag.Taking the money and runningMy brother won a Hyundai Elantra with an estimated value of $25,415. He was happy to have won the car, but there was a problem — he already had a vehicle and didn’t need a second one. And he certainly didn’t want to have to bear the cost of auto insurance for a vehicle to largely just sit in his driveway.Thankfully, my brother was able to work something out with the dealership. Instead of keeping the Elantra, he was able to use the roughly $25,000 credit he got to buy a used car from them and then sell it back for $21,000, which he took as cash. This route was worth it for him because sales tax and registration for a new Elantra would’ve been about $4,000. And now, my brother has a pile of cash he can add to his savings account instead of a car he doesn’t actually need.Gearing up for a giant tax billMy brother won two prizes on The Price Is Right — a grill package worth about $1,400 and the Hyundai Elantra. All told, it’s more than $26,000 in winnings.But now, my brother is going to be looking at a pretty hefty tax bill on his prizes. And it doesn’t matter that he took cash for the car. He’s looking at paying that tax either way.The exact amount will hinge on his total tax situation. What’ll probably happen is that my brother will receive a tax form from the game show summarizing the value of his winnings, and he’ll need to work with his accountant to figure out what it will cost him.As a very basic example, let’s say you win $20,000 on a game show and fall into the 24% tax bracket based on your income. You might, in that case, end up having to pay as much as $4,800 on your winnings. If that $20,000 is a cash prize, you could simply reserve some of it for your tax bill. But what if you win a $20,000 vacation package, or $20,000 in furniture? It’s not like you can send the IRS a dining room chair or a loveseat and call things even.So be very careful when you’re looking at taking home any sort of game show prize. You may even want to meet with an accountant before applying to be on a game show to get some advice.The good news is that my brother stands to gain something financially either way. But imagine you were to receive a $26,000 bonus from work. That’s a great thing. But you’ll likely end up losing a large chunk of that $26,000 when you account for the portion you owe the IRS.All told, my brother is grateful for his experience and now has a really fun story to tell. But if you’re planning to audition for a game show in the hopes of walking away with a huge amount of cash or a set of prizes, do know that winnings like that are considered taxable income. And it might take the input of a very seasoned accountant to help you reconcile your tax bill after coming away with that sort of haul.
3 Reasons Not to Shop at Aldi Despite the Low Prices
By: Maurie Backman |
Updated
– First published on Jan. 8, 2024
At the start of 2023, one of the financial resolutions I made was to spend less money on groceries. As someone who was already in the habit of buying staples in bulk (thanks, Costco), that was a pretty challenging thing. But then a friend of mine introduced me to Aldi, and suddenly, I found myself in a position of being able to save money on food at a time when grocery prices were still pretty high across the board (kudos, inflation).I did a fair amount of shopping at Aldi during the first half of 2023. But I’ll admit that as the year wore on, I found myself visiting the store less frequently.It’s true that shopping at Aldi has the potential to result in a fair amount of savings. But here’s why you may not want to shop there despite the low prices.1. You have picky eaters at homeSome people have pickier children than others. But my kids are pretty choosy about the food they’re willing to eat. So when I brought home cheap granola bars from Aldi at one point last year, my kids downright refused to touch them because they weren’t familiar with the brand. As such, instead of saving a few dollars on granola bars, I wasted a few dollars.Aldi says itself that more than 90% of its products are exclusive brands, which means they’re not the brands you see advertised all over the place. If you’re not picky about brands, then by all means, stock up at Aldi. But if you have a household of picky eaters, you might unfortunately end up throwing your money away to some degree.2. You have limited time to shop for groceriesAnother hiccup I ran into last year during my Aldi shopping was not being able to find staple items consistently. Some weeks, for example, there would be no white bread. Other weeks, the store was out of cucumbers or strawberries.If you have a busy schedule and limited time to shop, you may find Aldi to be a frustrating experience. You might have to make multiple trips in the same week to get everything you need. And if that’s something you just don’t have time for, then it could pay to do your grocery shopping elsewhere.3. Your closest Aldi is far awayI happen to have an Aldi within 15 minutes of where I live. And as a bonus, it’s right near Costco. So I don’t have to spend extra on gas to get there if I want to pop in, since I typically go to Costco once a week.But if the nearest Aldi to your home is a 30-minute drive or more, you may want to do your shopping at a store that’s closer. Driving that long on a regular basis may not be feasible. What you save on groceries, you might end up spending on gas.There are personal finance benefits to shopping at Aldi, and I haven’t given up on the store completely. I’ll still stop in on occasion if I’m doing a Costco run to see what produce is in stock, because believe it or not, in my experience, Aldi’s prices are often more competitive than Costco’s in that category. But if the above factors apply to you, you may not want to make Aldi your go-to store anytime soon.
