Understanding how much money you need to buy a house can give you an idea of how much you should expect to save.
You’re probably excited about the thought of buying your first home? If so, you have every right to be.
But how much money do you need to buy a house? A calculator can help you determine that. But the average cost of buying a $300,000 is typically around $17,000.
In this article, we’ll go over the main costs of buying a house including the down payment, inspection cost, appraisal cost, closing cost, etc.
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How much money do you need to buy a house?
Out of Pocket Cost of buying a house
The five main out of pocket costs of buying a house are 1) the down payment; 2) inspection cost; 3) the appraisal cost; 4) earnest money and 5) closing costs. These out of pocket costs or upfront costs are money yo need to pay before you become the owner of the property.
In addition, some lenders also require you have some cash reserves to cover 2 to 3 months of the mortgage repayments.
Determining how much cash needed to buy a house depends on the type of loan you’re using.
Let’s suppose you’re buying a $300,000 house with an FHA loan.
An FHA loan requires a 3.5% of the home purchase price as a down payment as long as you have a 580 credit score. So, for the down payment alone, you will need $10,500.
Here’s a quick breakdown for how much cash needed to buy a $300,000 house:
Down payment: $10,500
Inspection cost: $300
Appraisal cost: $300
Closing cost: $6000
So, $ 17,100 is how much money you need to buy a house.
Whether you’re buying a house with a 20% down payment or 3.5% down payment, you can certainly find a loan with both the price and features to suit your needs as a first time home buyer. You can compare First Time Home Buyer home loans on the LendingTree website.
The down payment
The biggest cost of buying a house is obviously your down payment. But that depends on the type of loan you are looking for.
For example, a conventional loan requires a 20% down payment. You can pay less than that, but you will have to pay for a private mortgage insurance – which covers the lender in case you default on your loan.
A 20% down payment however can also mean that you’ll get a better interest rate, which also means you’ll save money on interest.
For an FHA loan, you only need 3.5% down payment as long as your credit score is 580.
FHA loans are very popular these days. Not only it’s easier to get qualified (low down payment and low credit score), but also your down payment can come from a friend, a relative or your employer.
Using our example above, you only need $10,500 for a down payment for a $300,000 house.
If you’re using a VA loan then you pay $0 down payment.
Check to see if you’re eligible for an FHA loan or VA loan
How much money do you need to buy a house also depends on other factors, such as whether you are a first time home buyer or not. Your state may have a range of programs that may contribute toward your down payment.
So visit your local government office to find out if you are eligible for any down payment assistance for first time home buyers.
Inspection cost
Another upfront cost of buying a home is the inspection cost.
It is highly recommended to perform inspection for your home for any defects so there are no surprises later on.
Inspections typically cost between $300 to $500, but it depends on the property and your local rates.
Compare home loans for first time home buyers with LendingTree
Appraisal cost
Before a lender can give you a loan to finance a house, they will want to know how much the house is worth. So appraisal means an estimate of the home’s value. A home’s appraisal usually costs between $300 to $500. A home appraisal will also determine what your property tax will likely be.
If you’re pay the home appraisal, it will be deducted from the closing cost. (see below).
Earnest money
Earnest money is a deposit you will have to pay upfront as soon as an offer is accepted, while you working on other aspects such as getting the home inspected, etc…
This deposit is part of the down payment, and it is usually between 1% to 3% of the final sale price. It is held by an escrow firm or attorney until the closing process is completed.
So if the sale is successful, that money is applied to your down payment. If it’s not, you get 100% of your money back.
Closing costs
The closing costs are fees by the lenders. They typically cost 2% to 5% of the final price. The costs include fees for homeowner’s insurance, title insurance, title insurance, property tax, HOA dues, private mortgage insurance.
It’s possible to lower these costs by comparing mortgage options.
Other costs of buying a home:
In addition to upfront costs, there are other recurring costs associated with buying a home. They include moving fees, repair costs, furniture, remodeling, etc. So consider these costs when making your budget to buy a house.
So how much money do you need to buy a house? The answer is it depends on the type of loans you’ re using. But if you’re buying a $300,000 house with an FHA loan, which requires a 3.5% down payment, $ 17,100 is how much money you need.
For more information about upfront costs of buying a house, check out this guide.
Read more cost of buying a house:
How Much House Can I Afford?
How Long Does It Take to Buy a House?
Buying a House for the First Time? Avoid these Mistakes
5 Signs You’re Not Ready to Buy a House
Work with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). So, find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post How Much Money Do You Need to Buy a House? appeared first on GrowthRapidly.
One of the good things of working for a company is that they create a retirement plan for you. As an employee, you don’t have to do anything else but to participate in the plan. However, when you’re self-employed or a small business owner, you’re responsible of setting up your own retirement plan.
When it comes to operating your own business, time is of the essence. However, even if you’re crazy busy, saving for retirement should be a priority. Indeed, a retirement account allows you to contribute pre-tax money, which lowers your taxable income.
Luckily, a financial advisor can help you save time and help you choose the right plan that is best for you. Below are four retirement saving options you can create as a self-employer individual.
1. Solo 401k
A solo 401k is for small businesses or sole proprietors who don’t have any employees other than a spouse working for the business. The solo 401k mirrors a typical 401k plan that most companies offer. The main difference is that you can contribute as an employee and employer.
In other words, because you’re both the boss and the worker, you get to contribute in each capacity. That in turn allows you to contribute a higher amount each year. However, your total yearly contributions cannot exceed $58,000 or $64,000 for individuals age 50 or older as of 2021. To set up a solo 401k, you have to get in touch with a financial institution.
2. SEP IRA
If you’re an independent contractor, self-employed, or has a small business with 25 employees or less you can set up a SEP (Simplified Employee Pension). It’s very easy to establish and don’t even require you to incorporate your business to qualify.
In a SEP IRA, the employer alone contributes to the fund, not the employees. You can contribute up to 25% of your annual salary or $58,000 in 2021, whichever is less.
3. Keogh Plan
Keogh plans are available to self-employed people, including sole proprietors who file Schedule C or a partnership whose members file Schedule E. This type of plan is preferable among those who have a high and stable income.
But the main advantage the Keogh has is the high maximum contribution you can make. In 2021, you can contribute up to $58,000. To set up, you will need to work with a financial institution such as Charles Schwab.Â
4. Simple IRA
The Simple IRA was created by the Small Business Protection Act to help those who work at small companies to save for retirement. The small business can offer the plan if it has 100 or fewer employees.
Both the employer and the employee can contribute up to $13,000 in 2021, plus an additional catch-up amount of $3,000 if you’re 50 or older. If a company offers a Simple IRA, it must match an employee’s contribution dollar for dollar, up to 3% of each participant’s annual salary or make a nonelective 2% contribution to all employees.
Where to Invest Your Keogh, SEP IRA, Solo 401k, Simple IRA
As a small business owner, there is always an investment program that suits your needs for your IRA, SEP, Keogh and solo 401k. Places such as banks, brokerage firms and mutual funds institutions such as Vanguard, Fidelity, Charles Schwab are great options. But before opening account, make sure you consider how much money you have, your appetite for risks, the annual fee, etc.
The Bottom Line
If you’re a small business owner or self employed, you should take advantage of the tax benefits offered by these plans mentioned above. Creating a retirement plan is important, because not only will you be able to grow your retirement savings faster but also no one is going to do it for you.Â
Related:
4 Simple Ways to Accelerate Your Retirement Savings
How to Retire at 50:10 Easy Steps to Consider
Tips on Retirement Planning
Retirement planning can be a major challenge, but you don’t have to go in it alone. Speak with a financial advisor who can help you come up with a unique plan based on your circumstances and situations. Use SmartAsset advisor matching tool to get matched with fiduciary financial advisors in just 5 minutes.
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The post How to Create Your Own Retirement Plan appeared first on GrowthRapidly.
Making a last will and testament is an important part of your estate plan and there are different types of wills to choose from. A nuncupative will, meaning a will thatâs oral rather than written, may be an option in certain circumstances. While state will laws typically require that a will be written, signed and witnessed to be considered legal, there are scenarios in which an oral will could be upheld as valid. Understanding how a nuncupative will works, as well as the pros and cons, can help with shaping your will-making plans if you have yet to create one.
A financial professional can offer advice on investing, retirement planning, financial planning and various other areas of finance. Find a financial advisor today.
Nuncupative Will, Defined
A nuncupative will simply means a will that isnât written. Instead, itâs delivered verbally by the person who intends to make the will.
Nuncupative wills are sometimes called deathbed wills since theyâre often created in end-of-life situations where a person is too ill or injured to physically draft a will. The person making the will, known as a testator, expresses wishes about the distribution of property and other assets to witnesses.
How Does an Oral Will Work?
Ordinarily, when creating a will youâd draft a written document identifying yourself as the will maker and spelling out how you want your assets to be distributed after you pass away. You could also use a will to name legal guardians for minor children if necessary and name an executor for your estate.
An oral will sidesteps all that and simply involves the person making the will expressing his or her wishes verbally to witnesses. There would be no written document unless one of the witnesses or someone else who is present chooses to copy down whatâs being said. The person making the will would have nothing to sign and neither would the witnesses.
Thereâs a reason oral wills are no longer used in most states: Without a written document thatâs been signed by the person making the will and properly witnessed, it can be very difficult to prove the will makerâs intentions about how assets should be distributed or who should be beneficiaries.
Are Nuncupative Wills Valid?
This type of will is no longer considered valid in most states. Instead, youâll need to draft a written will that follows your stateâs will-making guidelines. For example, most states require that the person making a will be at least 18 and of sound mind. The will also has to be witnessed by the required number of people who donât have a direct interest in the willâs contents. Depending on where you live, you may or may not need to have your will notarized.
There are a handful of states that still allow oral or verbal wills, however. But theyâre only considered valid under certain circumstances.
In North Carolina, for example, oral wills are only recognized if:
The person making the will believes death is imminent
The witnesses are asked to testify to the will
Both witnesses are present with the testator when the will is dictated
The testator states that what he or she is saying is intended to be a will
An oral statement is made to at least two competent witnesses
The testator then passes away
Even if those conditions are met, the heirs to the will would still have to bring a legal action to have it admitted to probate court. The witnesses would have to testify to what was said and even then, North Carolina still doesnât allow for the transfer of real estate through an oral will.
In New York, the guidelines are even narrower. New York State only allows nuncupative wills to be recognized as legal and valid when made by a member of the armed services during a time of war or armed conflict. The intentions of the person making the will has to be stated in front of two witnesses. State law automatically invalidates them one year after the person leaves military service if they donât pass away at the time the will was made.
How to Prepare a Will
Having a written will in place can help your loved ones avoid problematic scenarios about how to divide your property after you pass away. If you donât have a will in place yet, you risk dying intestate. There are a couple of ways you can create one.
The first is using an online will-making software. These programs can guide you through the will-making process and theyâre designed to be easy enough for anyone to use, even if youâre not an attorney. If you have a fairly simple estate then using an online will-making software could help you create a will at a reasonable cost.
On the other hand, if you have a more complex estate then you may want to get help with making a will from an estate planning attorney. An attorney can help ensure that your will is valid and that youâre distributing assets the way you want to without running into any legal snags.
Generally, when making a will you should be prepared to:
Name an executor for your estate
Name a guardian for children if necessary
Specify who or which organizations you want to inherit your assets
When making a will, itâs important to remember that some assets canât be included. For example, if you have any assets that already have a named beneficiary, such as a 401(k), individual retirement account or life insurance policy, those would go to the person youâve named.
And itâs also important to note that a will is just one part of the estate planning puzzle. If you have a more complex estate then you may also need to consider setting up a living trust. A trust allows you to transfer assets to the control of a trustee, who manages them on behalf of the trustâs beneficiaries. Trusts can be useful for minimizing estate taxes and creating a legacy of giving or wealth if thatâs part of your financial plan.
The Bottom Line
Nuncupative wills are rare and while some states do recognize them, they generally arenât valid in most circumstances. If you donât have a will in place, then creating one is something you may want to add to your financial to-do list. Even if you donât have a large estate or youâre unmarried with no children, having a will can still provide some reassurance about what will happen to your assets once you pass away.
Tips for Estate Planning
Consider talking to a financial advisor about will making and estate planning. If you donât have a financial advisor yet, finding one doesnât have to be complicated. SmartAssetâs financial advisor matching tool can help. By answering a few brief questions online you can get personalized recommendations for professional advisors in your local area. If youâre ready, get started now.
Along with a will and trust, there are other legal documents you might incorporate into your estate plan. An advance healthcare directive, for instance, can be used to spell out your wishes in case you become incapacitated. Power of attorney documents allow you to name someone who can make medical or financial decisions on your behalf when youâre unable to.
Perhaps counterintuitively, consumer credit card debt has fallen since the beginning of the COVID-19 crisis. Federal reserve data shows that the total amount of revolving consumer credit, which primarily consists of credit cards charges, fell below one trillion in April 2020 for the first time in close to two years. Data from Experian tells a similar story. Between the end of Q2 2019 and Q2 2020, the average credit card balance of borrowers fell by about 11% from $6,629 to $5,897.
Though average credit card debt is decreasing nationally, it remains high in some states and may increase during the holiday season. In this study, SmartAsset looked at states where residents tend to rely on credit the most. Using data from Experian and the Census Bureau, we ranked all 50 states and the District of Columbia based on five metrics relating to credit card debt. For details on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below.
This is the 2020 edition of our study on where residents most rely on credit. Read the 2019 version here.
Key Findings
Credit card debt is high in Southern states. Seven of the 10 states where residents rely most on credit are in the South: Oklahoma, Louisiana, Texas, South Carolina, Alabama, Georgia and Florida. In all seven states, average credit card debt exceeds $5,600 and makes up more than 10% of the median household income.
13 states saw one-year increases in average credit card debt. Though Experian data shows that national average credit card debt fell by 11.04% over the past year, certain states still saw increases. Average credit card debt increased by more than 3% in two states â Idaho and North Dakota â and rose by 1% or more in six additional states â Oklahoma, Hawaii, Mississippi, West Virginia, South Dakota and Iowa.
1. Oklahoma
Oklahoma ranks as the state where residents most rely on credit. Experian data shows that though average credit card debt fell in many places between the end of the second quarter in 2019 and 2020, it rose by 2.00% in Oklahoma, from about $5,800 to almost $6,000. With that rise, we estimate average credit card debt for Oklahoma residents makes up 10.96% of the median household income â the fourth-highest percentage for this metric in our study.
2. Louisiana
Though average credit card debt in Louisiana ranks toward the middle of the study at 24th, it makes up the second-highest percentage of median household income, at 11.25%. Additionally, credit card debt may build up in Louisiana, as the state has relatively high poverty and unemployment rates. Data from the Census and Bureau of Labor Statistics shows that Louisiana also has the second-highest poverty rate (14.3%) and 15th-highest September 2020 unemployment rate overall (8.1%).
3. Alaska (tie)
Average credit card debt in Alaska fell by close to 5% over the past year, but it is still the highest in our study, at close to $7,700. Additionally, Alaska ranks in the worst half of the study for two other metrics, average credit card debt as a percentage of income and September 2020 unemployment rate. Average credit card debt makes up 10.15% of the median household income (the 10th-worst rate for this metric overall). In September of this year, unemployment stood at 7.2% (the 23rd-worst in the study).
3. Nevada (tie)
Nevada ranks in the bottom half of the study for all five metrics we considered. It has the 11th-highest average credit card debt, the 22nd-worst one-year change in average credit card debt and the 17th-highest average credit card debt as a percentage of median household income. Census Bureau data from 2019 shows that Nevada has the 20th-worst poverty rate of all 50 states and the District of Columbia, at 8.7%. Moreover, in September 2020, the unemployment rate (12.6%) was the second-highest in the country, behind only that of Hawaii.
3. Texas (tie)
Texas ties with Alaska and Nevada as the No. 3 state in the country where residents rely most on credit. Though average credit card debt in Texas fell by almost 5% over the past year, it remains elevated compared to other states. Experian data shows that at the end of the second quarter in 2020, average credit card debt was $6,423 â the seventh-highest of any state. Additionally, Texasâ poverty rate is the ninth-highest in the study, at 10.5%.
6. New Mexico
Credit card debt in New Mexico is high relative to average incomes. We found that average credit card debt as a percentage of the median household income was third-highest in our study, at 10.98%. New Mexico residents may also struggle with credit card debt more, as unemployment and poverty rates are high. In 2019, the unemployment rate was 9.4% (eighth-highest in the study) and in September 2020, the poverty rate was 13.7% (the third-worst in the country).
7. South Carolina
South Carolina actually has the lowest September 2020 unemployment rate (5.1%) of any of the 10 states where residents most rely on credit. However, the state ranks relatively poorly on the other four metrics we considered. It has the 18th-highest average credit card debt, 14th-worst one-year change in average credit card debt, eighth-highest average credit card debt as a percentage of income and 11th-highest poverty rate.
8. Alabama
Using Experian and Census Bureau data, we found that average credit card debt for Alabama residents makes up almost 11% of the stateâs median household income. Additionally, Alabama has the sixth-highest 2019 poverty rate (11.2%) of all 50 states and the District of Columbia.
9. Georgia
At the end of the second quarter of 2020, average credit card debt in Georgia stood at roughly $6,200. This debt may affect residents more in Georgia, as debt makes up more than 10% of the median household income in the state. In addition, almost 10% of individuals fall below the federal poverty line.
10. Florida
Florida has the 12th-highest average credit card debt (about $6,100) and ninth-highest average credit card debt as a percentage of median household income (10.31%). In September 2020, the unemployment rate in Florida was the 20th highest in the country, at 7.6%.
Data and Methodology
To determine the states where residents rely most on credit, we compared all 50 states and the District of Columbia across five metrics:
Average credit card debt. Data comes from Experian and is for Q2 2020.
One-year change in average credit card debt. Data comes from Experian and is from Q2 2019 to Q2 2020.
Average credit card debt as a percentage of median household income. This is the average credit card debt (per borrower with credit card debt) divided by median household income. Data for average credit card debt comes from Experian and data on median household income comes from the Census Bureauâs 2019 1-year American Community Survey.
September 2020 unemployment rate. Data comes from the Bureau of Labor Statistics.
Poverty rate. This is the percentage of the population below the federal poverty level. Data comes from the Census Bureauâs 2019 1-year American Community Survey.
First, we ranked each state in every metric, giving a double weight to both of the average credit card debt metrics, a single weight to the change in average credit card debt metric and a half weight to September 2020 unemployment rate and poverty rate. We then found each stateâs average ranking and used the average to determine a final score. The state with the best average ranking received a score of 100. The state with the lowest average ranking received a score of 0.
Tips for Managing Credit Card Debt During the COVID-19 Downturn
Contact your credit card company. Many credit card companies are offering financial relief to their customers during the COVID-19 pandemic. The Consumer Financial Protection Bureau recommends that the best first steps in receiving relief are contacting your credit card company, telling them youâve been affected and asking questions about the relief packages they offer.
Create a plan to pay it off. Credit card debt can be incredibly stressful, especially during a recession when jobs are less secure and employment opportunities are more limited. Our credit card calculator is here to help. By adding your credit card details, you can calculate the total interest and time it will take you to pay off your debt.
Consider a financial advisor. A financial advisor can help you make smarter financial decisions to be in better control of your money and get previous debt under control. Finding the right financial advisor doesnât have to be hard. SmartAssetâs free tool matches you with financial advisors in your area in five minutes. If youâre ready to be matched with local advisors that will help you achieve your financial goals, get started now.
The job of an airline pilot has a certain glamour to it. However, unconventional working hours and plenty of time away from home can be a recipe for stress and burnout. This could be why airline and commercial pilots are compensated fairly well, earning a median annual salary of $115,670. That one number doesnât tell the whole story, though, as it varies depending on whom you fly for and where youâre based.
The Average Salary of a Pilot
According to the Bureau of Labor Statistics (BLS), the median salary of the group the BLS calls airline and commercial pilots was $115,670 per year in May 2018. The BLS also tracks the job outlook for the careers it studies, measuring how many jobs the career will add between 2016 and 2026. The BLS job outlook for Airline and Commercial Pilots is 4%, which is about as fast as the average across all careers. According to the BLS, the U.S. will add 4,400 airline and commercial pilots between 2016 and 2026.
Where Pilots Earn the Most
When it comes to tracking state- and city-level earnings data, the BLS looks at commercial pilots and âairline pilots, copilots and flight engineersâ separately. Letâs take a look at where commercial pilots earn the most.
The mean annual wage for commercial pilots is $96,530 per year. According to BLS data, the top-paying state for commercial pilots is Georgia, where commercial pilots earn a mean annual wage of $130,760. Other high-paying states for commercial pilots are Connecticut, New York, Florida and Maryland. The top-paying metro area for commercial pilots is Hilton Head Island-Bluffton-Beaufort, SC, where the annual mean wage for commercial pilots is $128,600. Other high-paying metro areas for commercial pilots are Savannah, GA; Seattle-Tacoma-Bellevue, WA; Bakersfield, CA; Fayetteville-Springdale-Rogers, AR-MO and Spartanburg, SC.
Now letâs take a look at where airline pilots, copilots, and flight engineers earn the most. The top-paying state in this field is Washington, with a mean annual wage of $237,150. Other high-paying states for this profession are Michigan, Nevada, Oregon and California. Of the metro areas for which the BLS has data, the top-paying metro area for airline pilots, copilots and flight engineers is San Francisco-Oakland-Hayward, CA, with a mean annual wage of $247,120. Other high-paying metro areas for this field are Seattle-Tacoma-Bellevue, WA; Las Vegas-Henderson-Paradise, NV; Denver-Aurora-Lakewood, CO; Tampa-St. Petersburg-Clearwater, FL and Chicago-Naperville-Elgin, IL-IN-WI.
Becoming a Pilot
Typically, itâs easier to become a commercial pilot than an airline pilot. Because of this, many airline pilots start their career as commercial pilots. To be a pilot of any kind, youâll need to have a commercial pilotâs license from the Federal Aviation Administration (FAA). To be an airline pilot, youâll need an additional document known as a Airline Transport Pilot (ATP) certificate. This is also issued by the FAA.
In terms of education, you will need a high school diploma and a commercial pilotâs license to become a commercial pilot. To become an airline pilot, you will likely need a bachelorâs degree, although it can be in any subject.
The typical path to becoming a commercial pilot is to complete an FAA-certified flight training program. These are held both at independent flight schools and through colleges and universities. Once youâve assembled enough flying hours, you can get a job as a commercial pilot.
Regional and major airlines typically require significantly more flight experience for new hires. This is another reason why many people start out as commercial pilots and then move on to working for an airline. According to the BLS, many commercial pilot jobs require a minimum of 500 flying hours, whereas entry-level airline jobs require somewhere around 1,500.
Bottom Line
Have you ever flown out of an airport and wondered what it would be like to be a pilot? With an average annual salary of $102,520, pilots earn a good living. Not just anyone can become a pilot, however. Commercial pilots must earn a commercial pilot certificate, while airline pilots, copilots and flight engineers must earn the Federal Air Transport certificate and rating for the specific aircraft type they fly. Being a pilot is also a dangerous job, so itâs not surprising that pilotsâ compensation is high.
Tips for Saving Responsibly
The median pilot salary is enough to live comfortably in most areas of the country, but itâs still important to make sure youâre saving some of that money for emergencies and retirement.
A financial advisor can be a big help in managing your money and choosing smart investments that grow your nest egg. Finding the right financial advisor that fits your needs doesnât have to be hard. SmartAssetâs free tool matches you with financial advisors in your area in 5 minutes. If youâre ready to be matched with local advisors that will help you achieve your financial goals, get started now.
You may need your CIT Bank routing number for several things from sending money to friends and family to direct deposit money.
This guide will help you find your CIT Bank routing number.
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What is a routing number?
A routing number is a 9-digit number that banks use to identify themselves. Think of it as an address that lets banks know where to send the money.
A routing number is often referred to as the ABA number or check routing number.
The American Bankers Association created the bank routing number in 1910 in order to process paper checks and allow banks and other financial institutions to send and receive funds from and to other financial institutions.
Unlike other banks such as Wells Fargo routing number and Citibank routing number, which have several routing numbers for different states, CIT Bank only has one routing number.
That is because CIT Bank is an online-only bank. So it does not matter where you live, you only need to know one routing number.
CIT Bank Routing Number:
The CIT Bank routing number is: 124084834.
As mentioned above, because CIT bank does not have local branches, you will only need to remember the number above to do your transactions, regardless of where you live.
So, for example, if you live in New York, your CIT Bank routing number is still 124084834.
You will need your CIT bank routing number for several reasons. For instance, you need it for:
To set up direct deposit
For ACH payments;
To transfer funds between accounts at different banks;
For bill payments;
To receive government benefits;
To receive tax refunds;
For wire transfers;
To have payments like paycheck deposited into your account
How to Find Your CIT Bank Routing Number?
There are several ways to find your CIT Bank routing number.
Your CIT Bank personal check.
For your CIT bank “eChecking” account, you can find your routing number at the bottom left hand corner of the personal check.
On this page:
In case you have missed it, we have listed the CIT Bank routing number earlier in this article. It is: 124084834.
Cit bank online:
Find your routing number online by going to their resources and FAQs page.
Call customer service:
Lastly, you can call customer service at 855-462-2652 to get your routing number. However, you will need to identify yourself to get your number.
Once you do so, a representative will be able to help you.
Routing Numbers for Domestic Wire Transfers
With your CIT Bank account, you are able to wire money to other bank accounts in the United States.
Other banks can also wire money to your account as well.
So, to get funds from a domestic wire, use this routing number: 124084834.
You will also need the following:
The recipient’s name as it appears on the account;
The address of the recipient including the city and state;
Account number of the recipient; and
The bank routing number.
One thing to be aware of, while CIT bank does not charge for incoming wires, they will charge you a $10 fee for outgoing fee unless you maintain a daily of $25,000 or more.
If you are a commercial, listing service, and institutional client, call CIT Bank at 877-748-0004 to get the correct routing number for wire transfers.
Routing Numbers for International Wire Transfers
CIT Bank does not have outbound international wire transfers at this time. But, you can receive an international transfer from another bank.
So, just provide the routing number 124084834 to whoever wants to send you an international wire transfer. Also CIT Bank does not have a SWIFT code, which is used for international transfers.
The Bottom Line
You will need your CIT Bank routing number to do several financial transactions. For example, you will need it to set up direct deposit, automatic payment, or wire transfer.
So it’s important to know what it is and to keep it handy.
However, if you don’t have an account with CIT Bank yet, make sure you check out their CIT Bank savings accounts and best CD rates.
Speak with the Right Financial Advisor
If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
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These days, it can take a long time to pay off a car loan. On average, car loans come with terms lasting for more than five years. Paying down a car loan isnât that different from paying down a mortgage. In both cases, a large percentage of your initial payments go toward paying interest. If you donât understand why, you might need a crash course on a concept called amortization.
Find out now: How much house can I afford?
Car Loan Amortization: The Basics
Amortization is just a fancy way of saying that youâre in the process of paying back the money you borrowed from your lender. In order to do that, youâre required to make a payment every month by a certain due date. With each payment, your money is split between paying off interest and paying off your principal balance (or the amount that your lender agreed to lend you).
What youâll soon discover is that your car payments â at least in the beginning â cover quite a bit of interest. Thatâs how amortization works. Over time, your lender will use a greater share of your car payments to reduce your principal loan balance (and a smaller percentage to pay for interest) until youâve completely paid off the vehicle you purchased.
Not all loans amortize. For example, applying for a credit card is akin to applying for a loan. While your credit card statement will include a minimum payment amount, thereâs no date set in advance for when that credit card debt has to be paid off.
With amortizing loans â like car loans and home loans â youâre expected to make payments on a regular basis according to something called an amortization schedule. Your lender determines in advance when your loan must be paid off, whether thatâs in five years or 30 years.
The Interest on Your Car Loan
Now letâs talk about interest. Youâre not going to be able to borrow money to finance a car purchase without paying a fee (interest). But thereâs a key difference between simple interest and compound interest.
When it comes to taking out a loan, simple interest is the amount of money thatâs charged on top of your principal. Compound interest, however, accounts for the fee that accrues on top of your principal balance and on any unpaid interest.
Related Article: How to Make Your First Car Purchase Happen
As of April 2016, 60-month new car loans have rates that are just above 3%, on average. Rates for used cars with 36-month terms are closer to 4%.
The majority of car loans have simple interest rates. As a borrower, thatâs good news. If your interest doesnât compound, you wonât have to turn as much money over to your lender. And the sooner you pay off your car loan, the less interest youâll pay overall. You can also speed up the process of eliminating your debt by making extra car payments (if thatâs affordable) and refinancing to a shorter loan term.
Car Loan Amortization Schedules
An amortization schedule is a table that specifies just how much of each loan payment will cover the interest owed and how much will cover the principal balance. If you agreed to pay back the money you borrowed to buy a car in five years, your auto loan amortization schedule will include all 60 payments that youâll need to make. Beside each payment, youâll likely see the total amount of paid interest and whatâs left of your car loanâs principal balance.
While the ratio of whatâs applied towards interest versus the principal will change as your final payment deadline draws nearer, your car payments will probably stay the same from month to month. To view your amortization schedule, you can use an online calculator thatâll do the math for you. But if youâre feeling ambitious, you can easily make an auto loan amortization schedule by creating an Excel spreadsheet.
To determine the percentage of your initial car payment thatâll pay for your interest, just multiply the principal balance by the periodic interest rate (your annual interest rate divided by 12). Then youâll calculate whatâs going toward the principal by subtracting the interest amount from the total payment amount.
For example, if you have a $25,000 five-year car loan with an annual interest rate of 3%, your first payment might be $449. Out of that payment, youâll pay $62.50 in interest and reduce your principal balance by $386.50 ($449 â $62.50). Now you only have a remaining balance of $24,613.50 to pay off, and you can continue your calculations until you get to the point where you donât owe your lender anything.
Related Article: The Best Cities for Electric Cars
Final Word
Auto loan amortization isnât nearly as complicated as it might sound. It requires car owners to make regular payments until their loans are paid off. Since lenders arenât required to hand out auto amortization schedules, it might be a good idea to ask for one or use a calculator before taking out a loan. That way, youâll know how your lender will break down your payments.
Update: Have more financial questions? SmartAsset can help. So many people reached out to us looking for tax and long-term financial planning help, we started our own matching service to help you find a financial advisor. The SmartAdvisor matching tool can help you find a person to work with to meet your needs. First youâll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.
How long does it take to buy a house? The answer is: it depends. You can buy a house in a matter of weeks or it can take you anywhere from 4 to 6 months. The question is how ready are you? It can take a long time, and that’s just learning about various mortgage options or improving your credit score.
So understanding the various factors involved in buying a house can give you an estimate of how long it will take you to buy the house
Check out now: 5 Signs You Are Not Ready To Buy A House
How long does it take to buy a house? A step-by-step guide.
It can take a homebuyer a few weeks to several months to complete the home buying process. But when determining how long it will take you to buy a house, you first have to find out if you will be pre-approved for a mortgage. There is no sense of shopping for a house to then realize you can’t afford it.
If you are interested in comparing the best mortgage rates through LendingTree click here. Itâs completely free.
I. How long does it take to get a pre-approved mortgage letter in order to buy a house?
If you’re serious about buying a house, it’s important to get pre-approved for a mortgage. So when it’s time to make an offer, the seller will know you’re serious. If you don’t have one handy, the seller will likely move to the next buyer.
Getting pre-approved for a mortgage in order to buy a house can take longer. That is because you have to make sure your financial situation is in shape. For example, your income-to-debt ratio, your down payment, and your credit score must be good. That’s exactly what a mortgage lender will look at.
Even when these things are in order, shopping and comparing mortgage rates and fees can take several weeks.
Let’s take a look on how long it will take you to get these things in shape before buying a house.
Click here to compare mortgage rates through LendingTree. Itâs completely FREE.
A. How good is your credit score?
A low credit score can make buying a house take longer, because it can take months to a year to improve a bad credit score.
A conventional loan will usually require a 640+ credit score.
In fact, your credit score is the number 1 item mortgage lenders look at to decide whether to offer you a mortgage. And if it is not where it’s supposed to be, you might get rejected.
Luckily for you there are other ways to get a loan with much lower credit score: FHA loans.
FHA loans only require a credit score of 580 with 3.5% down payment. You may get qualified with a 500 credit score, but you’ll have to come with a 10% down payment.
So before you get into the fun part of shopping for a mortgage or visiting homes, it’s best to know what your credit score is and take steps to improve it.
You can get a free credit score at Credit Sesame.
B. Fix errors on your credit report.
Fixing errors on your credit report in order to get pre-approved for a loan in order to buy a house can take 30 days.
According to Transunion, “most investigations are completed within 2 weeks, but some may take up 30 days.”
Again, we recommend you get a free credit report at Credit Sesame. A credit report will give you a detail analysis of your credit history, how much debt you owe, and how creditworthy you are, etc. If there are any errors or inaccuracies, fix them immediately so there’s no surprise when you’re actually applying for a mortgage.
The best way to do that is by filing a Transunion dispute or Equifax dispute.
C. Do you have a down payment for the house?
How long it will take you to buy a house will also depend on whether or not you already have money saved up for a down payment.
Unless you’re going to buy the house with outright cash, you’ll need a down payment. And saving for a down payment can take a long time. Depending on your income and expenses, saving for a down payment on a house can take years.
Assuming, for example, you want to buy a house that will cost you $450,000, and you’re using a conventional loan to finance the house. With a 20% down payment, you will need to come up with $90,000.
Let’s say again, because of other monthly expenses, you can only save $1500 a month for the down payment.
You see how long it will take you to save for a down payment to buy the house? 5 years. And that doesn’t even take into account other upfront costs of buying a house, such as closing cost.
While it’s possible to get a mortgage with a down payment as low as 3.5% of the home purchase price, it’s advisable to put at least 20% down. The reason is because you will avoid paying private mortgage insurance (PMI), which protects the lenders in case you default on your mortgage.
Home buyers with a down payment below 20% are usually charged with PMI.
Another reason for a larger down payment is that it reduces the cost of the mortgage, grows equity much faster, and saves you on interest over the life of the loan.
As you can see, it can take you as much as 5 years from the time you’re thinking about buying the house to the time you’re actually ready to start the process.
But once you have taken care the things above, buying a house can go a lot faster.
II. How long does it take to find a real estate agent?
Average time: 1 day to a month
Once you have been pre-approved for a mortgage, the next step is to find an experienced real estate agent. Finding a good real estate agent can take a day to a month. Websites such as Zillow and Redfin list real estate agents you can use.
III. Shopping for a home.
Average time: a few weeks to a few months
With the help of a real estate agent and your own due diligence, finding a home can can go faster or take longer depending on available homes, the season and your desired location.
But experts say on average it can take a minimum of three weeks to a few months.
IV. Making an offer, negotiation, and inspection.
Average time: 1 to 10 days
Once you have found the home of your dream, the next step is to make an offer. You and the seller can go back and forth negotiating the price.
Once your offer has been accepted, you and the seller sign something called a purchase agreement. Then, the next step is to hire a professional to inspect the home for defects. Depending on your state, a home inspection must be completed within 10 days. And if the inspection finds some defects in the house, that could delay the process.
V. How long does it take to close on a house?
Average time: 30 to 45 days.
Once the inspection is done, your lender will need to officially approve you for the loan. And depending on the lender, it can also affect how long it takes to buy a house. You may need to provide additional documents. But the lender will need to assess the home for its value. And depending on the program (whether it’s conventional loan or FHA loan) it can take anywhere from 30 to 45 days to close on a home.
Bottom line
When asking yourself this question: “how long does it take to buy a house?” The answer is : it depends. If you have your credit score, your down payment, your other finances under control, you can buy your house in two months or less. But if you have to save for a down payment, fix errors on your credit report, raise your credit score, the whole home buying process can take years.
Click here to compare mortgage rates through LendingTree. Itâs completely FREE
Still wondering how long it takes to buy a house? Read the following articles:
5 Signs You’re Not Ready To Buy A House
10 First Time Home Buyer Mistakes To Avoid
3 Signs You’re Not Ready to Refinance Your Mortgage
The Biggest Mistakes Millennials Make When Buying a House
7 Signs You’re Ready To Buy A House
Work with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). So, find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post How Long Does It Take To Buy A House? appeared first on GrowthRapidly.
For investors with short-term saving goals, short-term bonds can be appropriate investments for your money.
They are stable and they certainly provide a higher return than a money market fund.
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2. In just under one minute, the tool will match you with up to three financial advisors based on your need.
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However, even with the best short term bond funds, there’s also a risk of losing a percent or two in principal value if interest rates rise.
There are many options available to you, but your best option is to invest in taxable short-term bond funds, U.S. Treasury short-term bond funds and federally tax-free bond funds.
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What are short-term bonds?
Short-term bonds, or any bonds for that matter, are debts instruments that companies and the government issue. They typically mature in 1 to 3 years.
When you buy a bond, you are essentially lending money to the issuing company or government agency.
They are obligated to pay back the full purchase price at a particular time, which is called the “maturity date.”
Short-term bonds are low risk investments and you can have access to your money fairly quickly.
As with all bond funds, one of the risk of short term bond funds is that when interest rates rise, the prices of the bonds in the fund decrease.
But short term bond funds have a reduced risk of default, because the bond funds are backed by the full faith and credit of the U.S. government.
Moreover, because the term is short, you will earn less money on it than on an immediate-term or long term bond fund.
Nonetheless, they are still competitive and produce higher returns than money market funds, Certificate of Deposits (CDs), and banks savings accounts. And short-term bonds are more stable in value than stocks.
At a minimum, don’t buy a short-term bond fund if you’re saving for retirement or if you want to hold your money longer.
If you’re looking to invest your money for the long term and are still looking for safety, consider investing in Vanguard index funds.
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Short-term bonds: why do you need to invest in them?
You should invest in short-bonds if you intend to use the money in a few years or so. However, don’t push your emergency cash into bonds. That is what a bank savings account is for.
Also, you should not put too much of your long term investment money into bonds, either. If you have a long term goal for your money, it’s best to invest in mutual funds such as Vanguard mutual funds, real estate, or your own business.
Here are some situations where you should invest in short term bonds.
You want to stabilize your investment portfolio. If you have other aggressive investments, you may need to balance it out with short term bond funds. The reason is because short term bonds are safer comparing to stocks.
Buying a house.
Retirement. If you’re thinking of retiring in a few years, short-term bonds are appropriate.
Purchasing a car.
You’re a conservative investor. Not all investors can stomach the risk of losing all of their money due to the market volatility. So instead of investing in stocks, which falls on the riskier end of the securities spectrum, you should invest in short term bond funds.
Best short-term bond funds to consider:
Most people prefer to buy bonds through a broker such as Vanguard or Fidelity.
If you’re looking for the best short-term bond funds to buy now, consider these options:
Vanguard Short-Term Treasury Index Fund Admiral Shares (VSBSX)
Vanguard Limited-Term Tax Exempt Fund Investor Shares (VMLTX)
The Fidelity Short Term Bond Fund (FSHBX)
Vanguard Short-Term Tax-Exempt Fund Investor Share (VWSTX)
Vanguard Short-Term Investment Grade fund (VFSTX)
T. Rowe Price Short-Term Bond Fund (PRWBX)
Vanguard Short-Term Bond Index Fund (VBIRX)
Tax free short-term bonds
There are some short-term bond funds that are both state and federally tax free. But there are not too many out there.
However, the ones that are available are good investments. So, if you are in a low state bracket and in a high federal bracket, consider investing in these Vanguard bond funds.These are federally tax free bond funds:
Vanguard Limited-Term Tax Exempt Fund Investor Shares (VMLTX)
This Vanguard bond fund seeks to provide investors current income exempt from federal taxes. The fund invests in high-quality short-term municipal bonds.
This bond fund has a maturity of 2 years. So, if you are looking for a fund that provides modest income and is federal tax-exempt, the Vanguard Limited-Term Tax Exempt Fund is for you.
The fund has an expense ratio of 0.17% and a minimum investment of $3,000. This makes it one of the best short term bonds to buy.
Vanguard Short-Term Tax-Exempt Fund Investor Share (VWSTX)
Like the Vanguard Limited Short Term fund, this fund also provides investors with current income that is exempt from federal income taxes.
The majority of the fund invests in municipal bonds in the top three credit ratings categories. It also invests in medium grade quality bonds.
This fund too has an expense ratio of 0.17% and a minimum investment of $3,000, making it one of the best short term bond funds.
U.S Treasury Short-term Bond Funds: Vanguard Short-Term Treasury
If you’re interested in a bond fund that invests in U.S. Treasuries, then U.S.Treasury bond funds are a great choice for you. One of the best U.S.Treasury bond funds is the Vanguard Short-Term Treasury.
This bond fund seeks to track the performance of the Bloomberg Barclays US Treasury 1-3 Year Bond Index. The Vanguard Short-Term Treasury invests in fixed income securities with a maturity between 1 to 3 years.
This bond fund has an expense ratio of 0.07% and an initial minimum investment of $3,000. Currently, this short term bond fund has a 1-year yield of 4.51%, making it one of the best short term bond funds.
Of note, this fund is also available as an ETF, starting at the price of one share.
The Fidelity Short-Term Bond Fund (FSHBX)
The Fidelity Short Term Bond Fund is one of the best out there for those investors who want to preserve their capital. This fund was established in March of 1986 and seeks to provides investors with current income.
The fund managers invests in corporate bonds, U.S. Treasury bonds, and assets backed securities. Over the last 10 years, this bond fund has a yield of 1.98% and a 30-day yield of 1.98%. This Fidelity bond fund as an expense ratio of 0.45%. There is no minimum investment requirement.
Taxable short-term bond funds: Vanguard Short-Term Investment Grade fund (VFSTX)
If you are not in a high tax bracket, then you should consider investing in a taxable short term bond fund. One of the best out there is the Vanguard Short-Term Investment Grade fund.
This bond fund provides investors exposure to high and medium quality investment grade bonds, such as corporate bonds and US government bonds. This fund has an expense ratio of 0.20% and an initial minimum investment of $3,000, making it one of the best short term bond funds out there.
T. Rowe Price Short-Term Bond Fund (PRWBX)
The T. Rowe Price Short-Term Bond Fund invests in diversified portfolio of short term investment-grade corporate, government, asset and mortgage-backed securities. This bond fund also invests in some bank mortgages and foreign securities. This fund produce a higher return than a money market fund, but less return than a long-term bond fund. The T. Rowe Price Short-Term Bond Fund has a minimum investment requirement of $2500, making it one the most favorite short term bond funds out there.
Vanguard Short-Term Bond Index Fund (VBIRX)
The Vanguard Short-Term bond is a good choice for the conservative investor. It offers a low cost, diversified exposure to U.S. investment-grade bonds. This has fund has a maturity date between 1 to 5 years. Moreover, the fund invests about 70% in US government bonds and 30% in corporate bonds. The bond fund as an expense ratio of 0.07% and a minimum investment requirement of $3,000.
How to Invest in Short-Term Bonds
If you’re considering in investing in these or any of Vanguard bond funds, you need to do your due diligence.
First, think about what you need the bond fund in the first place. Is it to diversify your investment portfolio?
Are you a conservative investor who need a minimize risk at all cost? Or, do you want to invest in a short term bond fund because you need the money to use in a few years for a vacation, buying a house, or planning for a wedding?
Once, you have come up with answers to this question, the next step is to do your research about the best bond fund available to you.
Use this list to start. If it’s not enough, do your own research.
Look into how much the initial minimum investment is to buy a bond fund. Most Vanguard short term bond funds require a $3,000 minimum deposit.
Some Fidelity bond funds, however, have a 0$ minimum deposit requirement.
Next compare expense rations, performance for different funds to see if they match your investment goals. But you have to remember that past performance is not an indication of future performance.
Your final step is to open an account to buy your bond funds. If you choose Vanguard, you can do so at their website.
How do you make money with short-term bonds?
You can make money with short-term bonds the same ways you make money with a mutual fund (i.e., dividends, capital gains, and appreciation). But most of your returns in a bond fund comes from dividends.
The bottom line
In brief, short-term bonds are great investment choices if you have short term saving goals. You may be interested in buying these bonds because you expect to tap into your investment within a few years or so. Or, you want a more conservative investment portfolio.
Short term bonds produce higher yields than money market funds.
The only problem is that the share prices can fluctuate. So, if you don’t mind market volatility, you may wish to consider short-term bonds.
Speak with the Right Financial Advisor
If you have questions beyond short-term bonds, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
*TOP CIT BANK PROMOTIONS*
PROMOTIONAL LINK
OFFER
REVIEW
CIT Bank Money Market
1.00% APY
Review
CIT Bank Savings Builder
0.95% APY
Review
CIT Bank CDs
0.75% APY 1 Year CD Term
Review
CIT Bank No Penalty CD
0.75% APY
Review
The post 7 Best Short-Term Bonds Funds to Buy in 2020 appeared first on GrowthRapidly.
I love making things automatic. Whether it is bill-paying, direct deposit, prescription renewals, or investing, making things automatic makes life easier, and that is where our Betterment investing review comes in.
When it comes to retirement planning, an overwhelming number of online tools and websites promise to help you create a dynamic and profitable portfolio while minimizing fees.
This growing list of services includes robo-advisors, a class of financial websites that offer to manage your portfolio with minimal in-person interaction and a heavy reliance on the latest investing tools and software.
One of the most popular robo-advisors by far is Betterment. Conceptualized by its founders in 2008, Betterment has since grown to help its customers invest billions of dollars of their hard-earned dollars. This is an investment platform that puts your investing on cruise control, and even allows you to make money watching TV! You can open an account with no money at all, and get the benefit of professional, low-cost investment management that enables you to invest in thousands of securities with as little as a few hundred dollars.
It hasnât been easy. With other competitors like Wealthfront and Personal Capital always a few steps behind them, Betterment has struggled to find a way to stand out. Even with the competition, Betterment has emerged as one of the top online brokerage accounts and continues to grow its market share.
Open an account
0.25% to 0.40% annual management fee, depending on the plan
No trade, transfer or rebalancing fees
No minimum balance
Hands-off investing tailored to your goals and risk preference
About Betterment
Betterment is an online, automated investment manager that uses advanced algorithms and software to find the perfect investment strategy for your portfolio and individual needs.
The main difference between investing your money with a traditional financial advisor and Betterment is that there is minimal human interaction. Unless you email or call in, your communication with an individual advisor will be very minimal.
But, there is some good news to counteract the lack of individual service. Because of lower operating costs, Betterment is able to charge lower fees than traditional financial advisors. This can be huge for individuals who want to take a hands-off approach to their retirement accounts, yet donât want to pay top dollar for access to a top-tier financial advisor in their area.
Using complex investment software, Betterment allocates your investment portfolio based on your individual circumstances, investment time horizon, and thirst for risk.
In the meantime, they keep fees at a minimum by using ETFs (exchange-traded fund) that let you have a diversified portfolio, like mutual funds, but are tradeable much like stocks.
Since ETFs come with very low expense ratios, Betterment is able to pass those savings along to the consumer. Although the program already manages over $16 billion for their clients, they are still growing at a rapid pace.
Because the service is able and willing to deal with investors at all stages of wealth accumulation, it has become a go-to for both experienced and novice investors with various investing goals.
Further, Bettermentâs portfolio strategy isnât geared just for retirement savings; the service can also improve your returns on dollars you invest for short-term and medium-term goals like saving for college, taking an annual vacation, or building up a cash reserve.
How Betterment Works
Like post other robo-advisors, Betterment provides complete, automated investment management of your portfolio. When you sign up for the service, youâll complete a questionnaire that will determine your risk tolerance, investment goals, and time horizon. From that information, Betterment determines your portfolio will be designed as conservatives, aggressive, or some level in between.
Over time however, Betterment may adjust your portfolio to become gradually more conservative. For example, as you move closer to retirement, your asset allocation will be gradually shifted more heavily in favor of safe investments, like bonds.
Your portfolio will be constructed of exchange traded funds (ETFs), which are low-cost investment funds designed to track the performance of an underlying index. In this way, Betterment attempts to match the performance of the underlying indexes, rather than to outperform them. For this reason, investing with Betterment â and most other robo-advisors â is considered to be passive investing. (Active investing involves frequent trading of stocks and other securities in an attempt to outperform the market.)
Betterment also uses allocations based on broad investment categories. There are three in total:
Safety Net â These are funds allocated for near-term needs, such as an emergency fund.
Retirement â This will naturally be your long-term investment account and held in tax-sheltered IRAs.
General Investing â This allocation is dedicated to intermediate goals, maybe saving for the down payment on a house or even for your childrenâs education.
Given that each of the three broad goals has a different time horizon, the specific portfolio allocation in each will be a little bit different. For example, the Safety Net will be invested in cash type accounts for safety and liquidity.
Betterment Advantages And Disadvantages
Betterment Pros:
Thereâs no minimum investment required.
The low annual fee of 0.25% on the Digital plan can allow you to have a $20,000 account managed for just $50 per year, or a $100,000 account for just $250.
Tax-loss harvesting is available at all taxable accounts.
Betterment Premium provides unlimited access to certified financial planners, providing a service similar to traditional investment advisors, but at a fraction of the cost.
The No-fee Checking and Cash Reserve give you cash management options to go with your investing activities.
Betterment offers several portfolio options, including Smart Beta, Socially Responsible Investing, and the BlackRock Targeted Income Portfolio.
The use of value funds also adds the potential for your investment accounts to outperform the general market, since value stocks tend to be underpriced relative to their competitors.
Flexible Portfolio will give you some control over your investment allocations, which is a feature absent from most robo-advisors.
Betterment Cons:
Bettermentâs annual advisory fee is on the low end of the robo-advisor range. But there are some robo-advisors charging no fees at all.
Betterment doesnât offer alternative investments. These include natural resources and real estate, which are offered by some of their competitors.
External account syncing is available only with Betterment Premium.
The Betterment Investment Methodology
Like most other robo-advisors, Betterment manages your investment account using Modern Portfolio Theory, or MPT. The theory emphasizes proper allocations into various asset classes over individual security selection.
Your portfolio is divided between six stock asset allocations and eight bond asset allocations. Each allocation is represented by a single ETF thatâs tied to an index specific to that asset class. The single ETF will provide exposure to scores or even hundreds of securities in each asset class. That means collectively your investment will be spread across thousands of securities in the US and internationally.
The six stock asset allocations are as follows:
US Total Stock Market
US Value Stocks â Large Cap
US Value Stocks â Mid Cap
US Value Stocks â Small Cap
International Developed Market Stocks
International Emerging Markets Stocks
The eight bond asset allocations are as follows:
US High Quality Bonds
US Municipal Bonds (will be held in taxable investment accounts only)
US Inflation-Protected Bonds
US High-Yield Corporate Bonds
US Short-Term Treasury Bonds
US Short-Term Investment Grade Bonds
International Developed Market Bonds
International Emerging Markets Bonds
Tax-loss Harvesting
Since Betterment offers tax-loss harvesting with taxable investment accounts, most asset classes will have two or three very similar ETFs. This will enable Betterment to sell a losing position in one ETF to reduce capital gains in winning asset classes. Alternative ETFs are then purchased to replace the sold funds to maintain the target asset allocations in your account.
Tax-loss harvesting is becoming an increasingly popular investment strategy because it effectively defers capital gains taxes into future years. Itâs available only for taxable accounts, since tax-sheltered accounts have no immediate tax consequences.
How Betterment Compares
Here’s how Betterment compares to the previously mentioned companies, Wealthfront and Personal Capital.
Betterment
Wealthfront
Personal Capital
Minimum Initial Investment
$0
$500
$100,000
Advisor Fee
0.25% on Digital; 0.40% on Premium (account balance over $100k)
0.25% on all account balances
0.89% on most account balances; reduced fee on balances > $1 million
Live Advice
On Premium Plan only
No
Yes
Tax-Loss Harvesting
Yes, on all taxable accounts
Yes, on all taxable accounts
Yes, on all taxable accounts
401(k) Assistance
Yes, on Premium Plan only
No
Yes
Budgeting
No
No
Yes
Betterment Accounts and Options
For the first few years of Bettermentâs existence they offered a single investment account serving as a one-size-fits-all plan. But thatâs all changed. They still offer basic investment accounts, but they now give you a choice of multiple investment options.
Betterment Digital
This is Bettermentâs basic investment plan. There is no minimum initial investment required, nor is there a minimum ongoing balance requirement. Betterment charges a single fee of 0.25% on all account balances.
You can also add any other portfolio variations, except the Goldman Sachs Smart Beta portfolio, which has a $100,000 minimum account balance requirement.
Betterment Premium
Betterment Premium works similar to the Digital plan, but it delivers a higher level of service. The plan provides external account synching, giving Betterment a high altitude view of you your entire financial situation. External investment accounts can help in enabling Betterment to better coordinate your portfolio allocations with assets held in outside accounts. They can also make recommendations out to better manage those external accounts.
And perhaps the biggest advantage of the Premium plan is that it comes with unlimited access to Bettermentâs certified financial planners. In this way, Betterment is competing more directly with traditional investment advisors, but doing it with a robo-advisor component.
Youâll need a minimum of $100,000 to invest in the Premium plan, and the annual advisory fee is 0.40%. Thatâs just a fraction of the usual 1% to 2% typically charged by traditional investment advisory services.
Betterment Cash Reserve
The account pays a variable interest rate, currently set at 0.40% APY. Betterment doesnât actually hold these funds directly, but rather invest them through participating program banks.
Thereâs no fee for this account, and you can move money as often as you want. And for those with very high cash balances, the account is FDIC insured for up to $1 million through the program banks.
Betterment Socially Responsible Investing (SRI)
SRI portfolios are becoming increasingly popular in the robo-advisor space. It involves investing in companies that meet certain standards for social, environmental, and governance guidelines. Betterment indicates that the ETFs they use in their SRI portfolio have produced a 42% increase in their social responsibility scores.
SRI portfolios work with both the Digital and Premium plans, using a similar investment methodology. But they make certain modifications, holding ETFs based on SRI in place of the ETFs used in non-SRI portfolios.
SRI portfolios do not require a minimum balance and charge no additional fees. And like their Digital and Premium plans, taxable SRI investment accounts take advantage of tax-loss harvesting.
Betterment Flexible Portfolios
The key word in the name is âflexibleâ because the main feature is adding personal options to your portfolio allocations.
This is done by adjusting the individual asset class weights in your portfolio. For example, if you have a 7% allocation in emerging markets, you may choose to increase it to 10% if you believe that sector is likely to outperform others. But you can also decrease the allocation if it makes you feel uncomfortable.
Betterment Tax-Coordinated Portfolio
This is less of a formal portfolio and more of an investment strategy. It must be used in combination with a taxable investment account and a tax-sheltered retirement account. Betterment will then allocate investments based on their tax impact.
For example, income generating assets â that produce high dividend and interest income â are held in a tax-sheltered account. Investments likely to generate long-term capital gains are held in a taxable investment account, since you will be able to take advantage of lower long-term capital gains tax rates.
Goldman Sachs Smart Beta
This option is for more sophisticated investors, and requires a minimum account balance of $100,000. And since it is a high risk/high reward type of investing, it also requires a higher risk tolerance.
Betterment uses the same basic investment strategy as they do in other portfolios. But itâs an actively managed portfolio that will be adjusted in an attempt to outperform the general market. Securities will be bought and sold within the portfolio and can include either individual securities or Smart Beta ETFs.
The portfolio has many variations, including a wide range of allocations. Stocks are chosen based on four qualities: good value, strong momentum, high quality, and low volatility.
And like other portfolio variations Betterment offers, there is no additional fee for this option.
BlackRock Target Income Portfolio
Betterment recognizes that some investors are more interested in income than growth. This will particularly apply to retirees. The BlackRock Target Income Portfolio invests in portfolios based on your risk tolerance. This can mean low, moderate, high, or even aggressive.
Those categories may seem unusual for an income generating portfolio. But while the portfolio attempts to minimize risk of principal, it also recognizes that some investors are willing to add risk to their portfolio in exchange for higher returns.
A low-risk portfolio may have a higher allocation in US Treasury securities. An aggressive portfolio may center primarily on high-yield corporate bonds or even emerging-market bonds that have higher interest rates due to greater risk.
Betterment No-fee Checking
Provided by Betterment Financial LLC in partnership with NBKC Bank, this is a true no-fee checking account. Not only are there no monthly maintenance fees, but there are also no overdraft or other fees. Theyâll even reimburse all ATM fees and foreign transaction fees you incur. And thereâs not even a minimum balance requirement.
Youâll be provided with a Betterment Visa Debit Card with tap-to-pay technology, that you can use anywhere Visa is accepted. All account balances are FDIC insured for up to $250,000. And as you might expect from a company on the technological cutting edge, you can deposit checks into the account using your smartphone.
Check out our full Betterment checking review.
Betterment Key Features
Minimum initial investment: Betterment requires no funds to open an account. But you can begin funding your account with monthly deposits, like $100 per month. This method will make it easier to use dollar-cost averaging to gradually move into your portfolio positions.
Available account types: Joint and individual taxable investment accounts, as well as traditional, Roth, rollover and SEP IRAs. Betterment can also accommodate trusts and nonprofit accounts.
Portfolio rebalancing: Comes with all account types. Your portfolio will be rebalanced when your asset allocations significantly depart from their targets.
Automatic dividend reinvestment: Betterment will reinvest dividends received in your portfolio according to your target asset allocations.
Betterment Mobile App: You can access your Betterment account on your smartphone. The app is available for both iOS and Android devices.
Customer contact: Available by phone and email, Monday through Friday, from 9:00 am to 8:00 pm, Eastern time.
Account protection: All Betterment accounts are protected by SIPC insurance for up to $500,000 in cash and securities, including up to $250,000 in cash. SIPC covers losses due to broker failure, not those caused by market value declines.
Financial Advice packages: Betterment offers one-hour phone conferences with live financial advisors on various personal financial topics. Five topics are covered:
Getting Started package: This package gives new users the professional vote of confidence they need as a professional will assess their account setup. $199
Financial Checkup package: This package takes it a step further, providing the customer with a professional opinion on their portfolio and financial circumstances. $299
College Planning package: As its name implies, this package helps parents who are investing with the goal of paying for their childrenâs college education in the next 5-18 years. $299
Marriage Planning package: Merging finances can be tricky, so Betterment created this plan to help engaged couples and newlyweds to succeed as they unite their lives and assets. $299
Retirement Planning package: Your investment goals and strategies change as you near retirement. This particular package helps keep you on target to meet them. $299
Retirement Savings Calculator: Robo-advisors are popular choices for retirement accounts. For this reason, Betterment offers the Calculator to help you project your retirement needs. By entering basic information in the calculator (it will sync external accounts if you have a Premium account â including employer-sponsored retirement plans) it will let you know if you are on track to meet your goals or if you need to make adjustments.
How To Sign Up For A Betterment Account
The Betterment sign up process is one of the most user-friendly out there for any brokerage. It comes with easy-to-follow instructions and as streamlined registration process which users can navigate through in a matter of minutes.
First get the process started by clicking the button below.
Sign up for a Betterment Account
After the initial sign up process, users can expect a simple transaction as they transfer funds into the account, much like moving money from a checking to savings account.
When you begin the sign-up process, youâll be given a choice of four different investment goals:
I chose âInvest for retirementâ. It will ask your current age, your annual income, then give you a choice of accounts to use. That includes a traditional, Roth, or SEP IRA, or even an individual taxable account. I selected a traditional IRA.
Based on a 30-year-old with a $100,000 income, Betterment return the following recommendation:
You even have the option to have the specific asset allocations listed. After clicking âContinueâ, youâll be asked to provide your email address and create a password. Youâll then be taken to the application, which will ask for general information, including your name, address, phone number, and how you heard about Betterment.
Once your account has been set up, you can fund it immediately, by connecting your bank account, or by setting up recurring deposits.
You can also set up other accounts, such as âManage spending with Checkingâ or âInvest for a long-term goalâ.
Why You Should Open An Account With Betterment
While nearly anyone who invests could benefit from the online portfolio management and advising, this service is definitely geared to certain types of investors. In most cases, Betterment will work best for:
Hands-off investors who have some investing knowledge â Since it takes care of the heavy lifting for you, it works best for investors who want to take a hands-off approach to their investment portfolio. Passive investors can let Betterment handle the logistics while using online account management to keep a close eye on their accounts.
Novice investors who need help â Beginning investors who are just learning the ropes can turn to Betterment for online portfolio management with low fees. The many online tools and user-friendly interface make it easy for beginners to get a grasp on basic financial concepts and investing strategies.
Robo-advisors are growing in popularity and could easily replace in-person advisors in the near future. With lower fees and advanced software that can maximize results, online investing is certainly gaining an edge.
Whether Betterment is right for you depends on your individual needs and investing goals. If youâre a hands-off investor who wants to grow your retirement funds without paying a lot of fees, then Betterment might be ideal. Additionally, beginning investors can benefit handsomely from the online tools and investing education offered through the Betterment website.
If you think Betterment investing might be exactly what your portfolio needs, sign up for a new account today.
However, if you determine that you would be better served by a more hands-on approach, check out the other online brokerage account options. Being a certified financial planner, I have had a chance to work with several of these platforms and have done the following reviews:
Motif Investing Review
Lending Club Review
Ally Invest Review
The post Betterment Investing Review: Make Investing Automatic appeared first on Good Financial Cents®.
Making a last will and testament is an important part of your estate plan and there are different types of wills to choose from. A nuncupative will, meaning a will thatâs oral rather than written, may be an option in certain circumstances. While state will laws typically require that a will be written, signed and witnessed to be considered legal, there are scenarios in which an oral will could be upheld as valid. Understanding how a nuncupative will works, as well as the pros and cons, can help with shaping your will-making plans if you have yet to create one.
Nuncupative wills are rare and while some states do recognize them, they generally arenât valid in most circumstances. If you donât have a will in place, then creating one is something you may want to add to your financial to-do list. Even if you donât have a large estate or youâre unmarried with no children, having a will can still provide some reassurance about what will happen to your assets once you pass away.
