Should I Invest in Stocks?

The U.S. Stock Market is at an all-time high, and many are wondering how much longer this can be sustained.  People are asking themselves if it is still worth investing in stocks at this high.  The simple answer is: YES!

Below is a chart of the S&P 500, which covers the broad range of the stock market.  The chart below illustrates performance from 1950 until the end of last year.

Image result for s&p 500 chart
Should I Invest in Stocks?

As you can see based on the chart, there are rises and falls, some of which are quite big.  If you look at the chart as a whole, you can ultimately say that U.S. stocks have increased in value over time.  Here are three reasons why one should consider investing in stocks.

Should I Invest in Stocks? Reason 1:

U.S. stocks have outperformed almost every other investible asset over the past 100 years, especially government and corporate bonds.  People often think of bonds as a safer alternative to investing in stocks, but what they really mean by “safer” is less volatile.  Yes, stocks can fluctuate with higher highs and lower lows in a given period of time, but over the long-run they will outperform bonds.

Should I Invest in Stocks?  Reason 2:

Stocks are the easiest and safest way to build wealth.  What I mean by this is that continual investment in stocks will yield higher and higher returns over time if you let your returns compound.  Compounding interest is a great thing when it comes to building wealth and all it takes is two simple steps:

Step 1: Continued investment and reinvestment

Step 2: Time

By continually putting money into your stock investment on a consistent basis and allowing your returns to reinvest, after a period of time you will be able to build a substantial amount of wealth.  And again, since stocks outperform other investments over the long-term, you are compounding a greater percentage each year.

Should I Invest in Stocks?  Reason 3:

Because Warren Buffett says so!  At the time of this post, Buffett’s net worth is estimated to be in excess of $75 billion USD.  It has been said that he is the greatest investor the world has ever seen.  How did Warren and others like him make their great fortunes?  Through investments in stocks.  Warren has constantly invested in companies throughout his time via stock purchases in what he calls “value investments”, which is a simple way to say in companies he believes to be cheap in valuation.  Buffett has gone so far as to say that even upon his passing he would like the remainder of his fortune to be placed in a low-cost index fund that mirrors the S&P 500.  The greatest investor ever believed and still believes in the power of stocks.

Hopefully by now you have been convinced that investing in stocks is the right thing to do, but how do I get started?  Simple, to begin investing in stocks I would recommend investing in a mutual fund that covers a wide range of the U.S. Stock Market.  Investment firms such as Vanguard and Fidelity offer these sorts of funds that will allow you to get exposure to the broad range of the U.S. Stock Market and begin reaping the rewards.

Does Everyone Need An EIN?

If you’re trying to start a new company, then you are probably wondering how you go about making everything legal in the eyes of the government. While the process can be time-consuming, it all boils down to filing paperwork. One of the most important parts of starting a new business is getting an IRS tax ID application so that you can make sure that you won’t get into trouble with Uncle Sam.

Perhaps you’ve heard of the different tax IDs, such as SSN (social security number), ITIN (individual tax ID number), or EIN (employer ID number). Since you’re starting a new business, you may think that you need an EIN, but is that always the case?

Continue reading

2017: Starting a Roth IRA

We are now well into the new year, but it is never too late to get your finances off to the right start.  Budgeting should have been and still should be your number one goal for the year.  If you haven’t started a budget, you should.  If you have started a budget, then great, keep it up!  At budgetandinvest.com we talk also about investing and the right ways to do it.  One of the best ways to invest your money is by starting a Roth IRA.  This retirement vehicle has many benefits, the main being that your gains and distributions are tax-free when you take your withdrawals.  How do I start a Roth IRA?  I’m about to show you how.

Image result for roth ira
Starting a Roth IRA

Step 1: Determine if starting a Roth IRA is right for you.  There are a few rules you have to remember when starting.  For example, you can only contribute a maximum of $5500 per year unless you are 50 years of age or older, then you can contribute $6500.  Also, there are income limits to consider.  If you are a single tax filer who makes $300,000 a year, you can’t participate in a Roth IRA.  Additionally, the money you contribute must remain until you are 59 1/2 years old, except for a few exceptions.  For a full list of rules visit: 2017 Roth IRA.

Step 2: Once you have determined that starting a Roth IRA is right for you, the next step is opening up one online.  It is easy to do and requires about ten minutes of your time.  I’d recommend opening it up through one of the following sites:

Vanguard

TD Ameritrade

Fidelity

Step 3: After you have opened your Roth IRA, it is important for you to contribute additional money to it on an ongoing basis.  This allows you to take advantage of Dollar Cost Averaging (DCA).  Ideally you would like to max out your Roth IRA contribution every year if you are able to.  Also, contributing a set amount on a constant basis will allow you to invest your dollars during stock market highs and lows.

Step 4: Stick to a plan, be patient, and watch it grow.  Building a large Roth IRA doesn’t take a stroke of luck or perfect financial acumen, it simply boils down to a few key steps.  Open up a Roth IRA, contribute to it on an ongoing basis (the maximum is preferred), allow your dividends to reinvest, and don’t touch your money.

Whether you have a company 401k, a pension or 403b, a Roth IRA is a great complement to any individual’s retirement plan.  The tax-free income that it can provide in retirement will allow you to offset many of the taxes you will be forced to pay with ordinary retirement accounts and social security.  Don’t hesitate in opening one, the best time to start is now!

Budget Smart, Invest Wise

 

4 Free Online Budgeting Courses to Take Advantage of

As the years progress people keeping finding themselves more and more in debt to creditors. There are some online resources who have deemed this as a major problem. In their efforts to help people better understand money management there are multiple websites that now offer free budgeting courses. If you’re currently struggling with your debt load be sure to act on these courses below.




Continue reading

What is the Starting Credit Score?

Image result for starting credit score
Starting Credit Score

Having a credit score can have many benefits.  Wait, having a good or great credit score can have many benefits.  As we go through life, credit becomes an essential tool for an individual to progress through society.  You can use credit to purchase everyday items, a car or a house.  Without credit, some of the essential purchases we rely on to carry us through our lives every day would be unavailable, such as a car for transportation to and from work.  Having a credit score and a good one at that can allow you to get the best deal on large purchases and also helps create a financially responsible person.  But just how does one get a starting credit score, and where do you begin?  I will lay out some of the easiest way to start down the path of a good credit score.

Step 1 to getting a starting credit score:

The first thing you need to do to get a starting credit score is simply to get credit.  The easiest way to do this that I recommend is by opening up a $0 annual fee credit card.  Your monthly limit won’t be all that much, most likely less than $1000.  Commit to making a couple easy purchases on it every month and paying it off at its due date.  For example, a couple tanks of gas or a visit to the grocery store is all it takes to start building your credit.  It is vital to pay off the full amount after a month’s time before the card’s due date

Step 2 to getting a starting credit score:

The second step to building a starting credit score is to continue purchases with your credit card and meet the monthly payment date, along with exploring an additional option of building your score.  If you rent an apartment, sometimes the apartment complex allows you to report your on-time payments to credit agencies.  Additionally, if you have student loans you are paying back, this also will show up on one’s credit report.  Time is a big factor in your credit score.  It usually takes at least six months for you to build your first credit score.  Image result for credit score rangeIf you make on-time payments in full, you can expect a score anywhere in the range of 675 to 740.

Step 3 to getting a starting credit score:

By step 3, you should already have shown a positive pattern to creditors through making payments on a timely manner.  The most important part of this step is just to be patient.  Building a good or great credit score takes time.  Two of the bigger factors that impact your credit score are the length of time you have had credit and the number of accounts you have that required credit.  Chances are as you start building your credit both of these factors won’t be too much in your favor.

In summary, there are many benefits to building a good credit score, but it all boils down to a few simple factors.  Firstly, you need to begin building credit through a $0 annual fee credit card, student loan repayment, etc.  Secondly, you MUST make your full payments and make them ON TIME.  Finally, you need to be patient.  It takes time to build a great credit score, but if you budget correctly and make sure not to spend above your income level then a great score will eventually come.