Watch TV Online For Free: The Complete Guide

I initially “cut the cord” to save myself money.

At the time, it did save me a lot. I traded in a $70/month cable subscription for a $10 Netflix subscription.

Then all the other streaming services came out. HBO Now, Prime, Hulu, Disney+, Showtime, and all the rest. When I add them all up, I get right back to $70/month.

Are there options to watch TV for free and still save money?

You do have options to watch TV for free. We looked into it and put together a complete guide on how to do it.

The True Cost of Watching TV Online

Watching TV online through a pay streaming service subscription is a popular choice for people after they cut the cord.

Streaming services deliver what’s almost an à la carte way of watching television. You can select a service that has the channels you want, eliminating channels you never watch (and their costs).

However, there are some significant expenses with streaming services. They’re not quite as costly as cable or satellite TV, but they’re closer than the marketers want you to believe.

• Internet service: When you stream, you will need to pay a monthly charge for a high speed Internet connection. (Perhaps you already do this.) Depending on where you live and the speed you want, this can cost $40 to $100 per month. You’ll want a minimum speed of 5 Mbps for streaming HD quality video. And if you are streaming to more than one TV at a time, they each need 5 Mbps access. So for two simultaneous streams, your total Internet speed would need to be a minimum of 10 Mbps. For 4K quality video, you need a minimum of 25 Mbps. Higher Internet speeds cost more per month.
• Streaming subscriptions: Streaming subscriptions vary in price. They can be as low as $5/month. For streaming services with popular cable channels that offer live programming like ESPN, Sling, Hulu Live, and AT&T TV Now, you’ll pay $25 to $100 per month.

Even if you only get two subscriptions, you’ll end up paying about $25/month plus your internet bill. On average, you’re looking at $100/month for a decent internet connection and two subscriptions. If you want 3-4 subscriptions, expect to pay $150/month all-in.

Is it Really Possible to Watch TV For Free?

For those who want to watch TV online for free, many options exist. Mind you, not all of them are legal, especially the peer-to-peer sites. If you watch copyrighted material illegally on a website, you could be subject to receiving a copyright infringement letter from your ISP.

Fortunately, multiple free TV options exist that are legal. Keep in mind that they don’t give you the same level of service of a pay TV subscription.

Here are some of the drawbacks of going with free online TV versus a pay TV subscription.

• Commercials: Many free TV sites force you watch commercials, and you cannot skip them like you can with a DVR. At best, you can mute until it’s over.
• Quality: Finding HD video quality on a free online TV streaming service is hit and miss. Finding 4K quality video is rare. And if your Internet signal is not consistent, you’ll have constant pauses and skips in your shows or a drop in video quality, which is frustrating. If you must have high quality video with your TV shows, free online TV may not be for you.
• Newer shows: Free services don’t typically have the latest episodes of shows like you’ll find with pay streaming services and cable or satellite TV subscriptions.
• Time spent searching: Finding a specific show can be a bit of a challenge with free TV online services. You may end up using several different services to find all of the shows you want.
• Sports: Sports fans will not be happy with legal free online TV options. They have almost no live sports events.

Those who don’t mind putting in a bit of work to find the shows they want will be better candidates for free online TV. If you like your TV watching options well-structured and set up for ease of use, a cable or streaming subscription is worth the expense.

7 Options for Watching TV Online for Free

1. Borrow Someone Else’s Account

If you have a family member or friend who’s willing to let you have the account information for their Netflix, Hulu Live, or streaming service account, you can watch TV online for free. Most of these services allow two or three people to access the same account at one time.

2. Use a Free Streaming Service

Streaming services that are free for users typically are ad-supported, so you’ll have to watch quite a few commercials. These services are available through a smart TV app or a website. They don’t have very many newer shows, like paid streaming services do. But there are some shows on these services that you will not find elsewhere.

• Crackle: The Crackle web site offers access to several dozen TV shows and hundreds of movies. You do have to create an account but it’s a free process. It has very popular older shows like The Facts of Life or Roseanne. It even has some original programming.
• Internet Archive: With Internet Archive’s free TV section, you can choose to watch some old TV shows, along with classic commercials. There are replays of some live news shows for important events, such as 9/11. It definitely has things you won’t see anywhere else.
• Pluto: Pluto TV is about the closest thing to live TV that you’ll find for free. It offers free on demand and live shows, and you’ll select them through a series of “networks” on Pluto’s channel guide. All you’ll be missing is the remote in your hand to scroll through channels.
• Popcornflix: With Popcornflix, you can see quite a few 1990s children’s shows, which is fun for those seeking some nostalgia. It also has many different TV shows and movies across other genres, including some foreign films and documentaries.
• Retrovision: If you really like old television shows and movies, Retrovision is made for you. You’ll find quite a few shows and movies from the 1930s, 1940s, and 1950s here, as well as a few newer ones.
• Snagfilms: The site’s name may not be all that great, but Snagfilms gives you thousands of movies and older TV shows. Its claim to fame, though, is a large number of documentaries.
• Tubi: Tubi offers mainly movies for free, along with some TV shows, in an ad-supported format. With a free account, you can create a list of your favorite shows and movies, or you can resume a movie you stopped watching earlier.

3. Visit a Network Website

The major broadcast networks (FOX, ABC, et cetera) and some cable networks allow you to stream the latest versions of current shows for a week or so after the show originally airs. You also will find episode recaps and special clips about the shows at the network web site.

You will have to watch commercials, but this is a great way to stay up to date on current shows, all for free.

4. Watch Digital Media Through Your Library

If you still have a library card, don’t throw it away. You may be able to use it with hoopla, which is a digital media service. Public libraries allow you to use hoopla to borrow digital media for a limited amount of time.

You can watch TV shows and movies online for free this way, all by checking them out using your local library card. Items like audiobooks are also available.

5. Sign Up for Free Trials

Most pay subscription streaming services give you a free trial period between 7 and 30 days where you can try the entire service for free. You may have to provide a credit card number to sign up for the free trial, and you have to remember to cancel the service before the trial expires or the service will charge your card.

You can only use this free trial trick once per email address. It is extra work, especially for short trials. But it is an option.

6. Check With Your Cellular Carrier

Sometimes, a cellular carrier will give its customers access to digital media, including some TV shows and movies. For example, Verizon is currently giving its customers free access to the Disney+ streaming service for up to a year.

7. Visit the Websites for Your Local Broadcasters

Your local broadcast channel websites won’t show movies and TV shows. However, you can access local news stories, weather broadcasts, and sports highlights through these websites. You also sometimes can stream the local newscast each night.

Budget TV Online – Cheap But Not Free

Say you don’t mind spending a little money for TV, as long as you receive a better quality than the free TV options. You have some choices here too.

• On demand shows: Services like Netflix and Amazon Prime do not have popular cable channels like AMC or ESPN for live TV. However, they have thousands of on demand titles, as well as some original programming. They cost $8 to $15 per month.
• Focused streaming services: Services like Disney+ and CBS All Access give you the ability to watch shows from a particular provider for a low price per month of around $5 to $12. Of course, these costs add up quickly if you have more than one service.
• Over-the-air networks: You probably have several channels available to you through an over-the-air broadcast signal. These local networks broadcast major network programming, as well as local news programs. Purchase an easy-to-set-up HD antenna for $25 to $75, and you can pull in these signals for free, including some sports.
• Digital rentals: Through services like VUDU the Google Play Store, you can rent movies and TV shows digitally for a reasonable price.

Cutting the Cord Successfully

When you want to watch TV online for free, you have quite a few options. Best of all, quite a few of them are legal.

You may need to be fairly creative to figure out just how to watch the shows you want. And you may need to use more than one free TV service. But when you remember you’re paying $0 for your TV bill, you won’t mind doing a little bit of extra work.

For those who truly love their TV and love saving money, watching TV online for free is tough to beat.

Watch TV Online For Free: The Complete Guide is a post from: I Will Teach You To Be Rich.

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How to Build Credit

Having good credit is one of the BIG wins of living a rich life.

Without good credit, everything gets harder. You might find it tough, if not impossible, to buy a car, finance a home, or get credit cards with the perks you want.

Of course, everyone has to start somewhere. We all have to build our credit from scratch. And if your credit score is low, you probably want to know how to go about rebuilding it.

We’ll show you exactly how to build your credit.

Credit Building Factors

If you’re new to the world of credit, the whole credit scoring industry can seem like a bit of a mystery. Learning more about it and what factors go into your score can be a big help.

While there are many different credit scoring models, 90 percent of lenders use the FICO model. So we can safely ignore the other models and focus on the factors that contribute to your FICO score:

1. Payment History – 35% of your credit score

Your payment history makes up 35 percent of your score, making it the most important factor in your credit score. Basically, do you pay your loans on time and how consistently have you been doing it for how long?

Unfortunately, even a single missed payment can cause your credit score to take a hit. And a couple of 30-day late payments will wreak havoc on your score. This is why you should do everything you can to pay your bills by the due date. Get your mortgages, car loans, and credit cards on time even when cash is tight.

2. Credit Utilization – 30% of your credit score

Your credit utilization is the ratio of how much available credit you have versus how much you’re currently using. For example, if you have a credit card with a $5,000 limit and carry a $2000 balance, your credit utilization is 40 percent.

Generally, you should aim to keep your credit utilization below 30 percent. If it gets any higher, potential creditors might see you as a bigger credit risk and decline to extend you new credit. They might also charge you a higher interest rate to offset their risk.

This is why it’s a good practice to call your banks and ask to get your credit card limit raised every 6 months. Over time, you’ll have a much higher credit limit and your utilization will gradually drop (assuming you don’t increase credit card spending). You can also reduce your utilization by making multiple payments to your credit cards every month to avoid going over 30%. This is particularly helpful in the early days when credit card limits are pretty low.

3. Credit History – 15% of your credit score

Your credit history is simply how long you’ve been using credit. If you’re a young adult who has never used a credit card, you probably don’t have any credit history to speak of.

Because this factor makes up 15 percent of your score, you should avoid closing the oldest credit card that you have. In most cases, it’s better to leave a dormant account open. Otherwise, you shorten your credit history, which can lower your score. You also want to open a credit card as soon as possible in order to start your credit history.

4. Credit Mix – 10% of your credit score

Potential creditors like to see some variety in your credit report, which is why they look at your credit mix. This factor makes up 10 percent of your score, and it’s a measure of the diversity among your accounts.

For example, if you owe thousands in student loans but don’t own a car and have never used credit cards, your lack of credit diversity could hurt your score.

5. New Credit – 10% of your credit score

New credit, which makes up 10 percent of your score, is the amount of new credit you’ve acquired within 12 months. After 12 months have passed, an account no longer counts as “new credit” on your credit report.

For example, if you recently shopped around for credit cards and filled out half a dozen applications, this can make it appear like you’re desperate for additional funds to pay your bills.

Building Credit From Scratch vs. Rebuilding Bad Credit

Building credit from scratch is generally easier and more straightforward than rehabilitating a bad credit score.

The reason is that credit newbies have a clean slate, which can make it easier for them to get approved for credit products designed for people who are just starting out. By contrast, folks with bad scores have already shown creditors they can’t necessarily be trusted with credit.

Of course, everyone makes mistakes. Fortunately, creditors know this. If you have bad credit, it’s definitely possible to rebuild it. However, you’ll need to clean up past mistakes as much as possible while using various strategies to establish new credit habits that can boost your score.

Building Credit With Credit Cards

The easiest way to build credit is by opening a credit card. Getting a card and using it responsibly not only makes you visible to potential lenders, it shows them you can be trusted to pay your bills.

However, it’s a catch-22 of sorts that you usually need credit to get credit. So how do you open a credit card when you don’t have a credit history, or when your credit score is on the low side?

Fortunately, you have a couple of options. You can either go through your bank or open a secured credit card.

1. Ask Your Bank

First, consider opening a credit card through your bank. This option typically only works if you’ve banked with the same institution for an extended period of time. Some banks offer credit cards with low credit limits for people who need to build credit from scratch.

2. Open a Secured Credit Card

A second option is a secured credit card. This is a type of credit card that requires you to put a certain amount of money down as a guarantee against default. In most cases, the down payment is the same as your credit limit.

Once you have your secured card, you can charge purchases to it the same as any other credit card. The idea is to pay off your balance on time each month. In exchange, the credit card company will report your on-time payments to the credit bureaus. Many secured credit cards also offer you the option to upgrade to a regular, unsecured card after a certain period of time. We have a full list of cards for building credit here.

Building Credit With Loans

If you have trouble getting a credit card or you just prefer not to use one, you can try taking out a loan to help build your credit. Here are four types of loans to consider.

1. Student Loans

As the cost of college continues to rise, the majority of graduating seniors can’t afford to pay cash for a university education. Instead, most end up taking out a student loan to finance their degree.

Once your loans go into repayment, they can actually help you establish your credit. However, keep in mind that your payment history makes up 35 percent of your credit score. To prevent your credit score from dropping, avoid missing any payments or sending a payment late.

2. Car Loans

A new set of wheels can help you get around and help you improve your credit. As with college, few people can pay cash for a car. If you need to finance your vehicle, make sure you can afford the monthly payments on your loan. That way, you won’t damage your credit score by making late payments.

3. Mortgage

A mortgage can be a great way to build credit and raise a struggling score. However, it might be hard to qualify if you lack credit or have bad credit.

Out of all the options for building credit, use a mortgage as a last resort. For most people, a mortgage is the single largest loan that they’ll take on. This is where a great credit score pays off, a better interest rate will easily save us tens of thousands of dollars. You want a great credit score before you apply for a mortgage, not after.

4. Credit Builder Loan

Another option is a credit builder loan. Like secured credit cards, credit builder loans are usually marketed toward people with no credit or bad credit.

Once the bank or other lending institution approves you for the loan, it deposits the loan dollars in a savings account. From there, you make on-time monthly payments toward the deposited amount, which the lender reports to the credit bureaus. Once you have paid off the balance in the savings account, you receive the money.

Many credit builder loans charge interest, but this is a relatively small price to pay for the opportunity to build your credit.

Building Credit Through Someone Else With Excellent Credit

If you don’t have any credit of your own, why not borrow someone else’s good credit? You can accomplish this by asking them to add you to one of their accounts as an authorized user, or by asking them to co-sign for you.

1. Authorized Credit Card User

If you know someone with a good credit score, ask if they’re willing to add you to their account as an authorized user. This is the best hack to improving your credit score quickly. Take advantage of it if you can.

For example, if they’ve had the same credit card for 25 years and they always pay their bill on time, it’s worth asking if they will make you an authorized user on the account

If you do this, however, ask the credit card company if it reports authorized user activity to the credit bureaus. Otherwise, you won’t get credit for making timely payments.

2. Co-signer

You can also “borrow” someone else’s credit by asking them to co-sign a loan for you. This is a much riskier prospect for your friend or relative, as they will be on the hook for the balance of the loan if you stop making payments.

Other Ways to Build Credit

Other ways to build credit include having your rent payments reported to the credit bureaus and using a utility account to establish a positive payment history.

1. Rent

While most landlords don’t report rent payments to the credit bureaus, they might agree to it if you ask them. If not, you can also sign up for an app that reports your rent payments to the bureaus on your behalf. These services charge a fee, but it can pay off down the road when your credit score improves.

2. Utilities

If all else fails, you might be able to use a utility account to establish a credit history and a good score. For example, some mobile phone providers report users’ payment histories to the credit bureaus. If you have no credit to speak of, signing a phone contract could help get you on the credit map.

The True Cost of Bad Credit and How to Avoid It

Besides making it difficult to qualify for a car loan, buy a house, or open a new credit card, a bad score might even affect your job prospects.

Some employers check an applicant’s credit score before they offer a position. This is particularly true in jobs where workers must deal with financial matters. Companies want to know an applicant is mature and responsible, and checking credit scores is one way to find out.

Fortunately, bad credit isn’t the end of the world, as there are plenty of steps you can take to boost your score. Whether you’re just starting out in the credit world or you need to rehab your score, start by getting a copy of your credit report. You can get your report from all three major credit bureaus for free by visiting annualcreditreport.com.

How to Build Credit is a post from: I Will Teach You To Be Rich.

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The True Cost of a Speeding Ticket

Thousands of motorists view speed limits as more of a suggestion and not an actual law.

But driving just a few miles over could lead to a loss of money, driving privileges, and even human life.

Driving at excessive speeds, or even a few miles above the posted speed limit, seems like a victimless crime. Especially on desolate roads, late at night when traffic is minimal, and on highways with miles of empty lanes on the horizon.

But did you know that for more than two decades, speeding is to blame for approximately one-third of all motor vehicle fatalities?

In 2018, the National Highway Traffic Safety Administration reported 9,378 driver fatalities due to speeding-related accidents.

The act of speeding doesn’t just carry with it the potential for catastrophe.

Being pulled over for exceeding the speed limit carries hefty monetary fines – depending on the state – and will mean a substantial increase in your car insurance rates.

The true cost of a speeding ticket goes beyond a monetary figure. Consider the following factors before revving up your engine on the open road.

The Average Cost of a Speeding Ticket

The average cost of a speeding ticket in the United States is $150.

Depending on how fast you’re going and what state you’re in, the average cost can vary quite a bit.

Three factors impact the cost of the ticket:

• The state you’re in
• How fast you’re going
• Points against your license

If you speed at all, you should expect to get a ticket sooner or later. An estimated 1-in-6 Americans get slapped with a speeding ticket every year, equating to about 41 million people ticketed each year. With such a huge variance in ticket costs, it’s worth looking up the cost of a speeding ticket where you live. You’ll want to be prepared ahead of time. This is a great site for looking up the traffic laws in your state.

Speeding Ticket Costs by State

There’s a huge variance in cost between different states.

Nevada can charge heavy-footed motorists close to $1,000, even for first-time speeders. I lived in Nevada for two years and had no idea that tickets were this expensive. Now I’m really glad I never got pulled over while I was there. And I’ll definitely avoid speeding the next time I drive through there.

Alaska tickets are also pretty high with an average speeding ticket fine of $300 for first-time offenders.

On the other end of the spectrum, Oklahoa has a starting ticket fine of $20.

One state gets you $20, the other gets you $1000.

International tickets can get even more extreme.The unverified world record for the most expensive speeding ticket ever didn’t happen on U.S. soil.

In 2010, a 37-year-old man in a brand new Mercedes-Benz SLR hit 186 mph on a highway in Switzerland. His hefty fine in Euros converts to just under $1 million

Speeding Ticket Costs By Speed

The second major factor in the cost of your ticket will be the speed you were going.

Lower speeds equals a smaller fine, higher speeds give bigger fines.

Take Colorado for example. Here’s the different ticket costs at different speeds:

• 1-4 mph = $36
• 5-9 mph = $80
• 10-19 mph = $151
• 20-24 mph = $232
• 25+ mph = $100-300 and 10-90 days of jail time

The higher the speed, the heftier the fees get.

It’s safe to assume that a speeding ticket will cost you about $100-200 assuming you’re not speeding at an extreme level. Then I’d check the costs of your state in case they happen to be much higher or lower.

The Cost of Points on Your License

Driving over the limit doesn’t just ding your wallet.

Speeding tickets deduct valuable points off your driving record. Rack up too many points, and you could lose your license for a significant chunk of time and get hit with even higher fines.

For instance, driving five to ten miles per hour over the limit usually results in a deduction of two points in most states.

A speeding violation of over 15 miles per hour over could be worth three points.

These points have the potential of staying on a driving record for up to 10 years, depending on the state.

Since point systems vary by location, it’s in a person’s best interest to consult this website for information on specific states.

Even if you’re not worried about the cost of an individual ticket, definitely look into the number of points that your state allows before serious penalties kick in. And if you’re close to the point limit, I’d follow the speed limit exactly until some of the points fall off your record.

Other Expensive Traffic Violations

Racking up the speeding tickets is a surefire way to make money peel rubber out of your checking account, but other moving violations are just as costly.

Across the nation, one type of ticket stands out: the DUI.

DUI fines are no joke, you usually lose your license, and could even get jail time. While there is some variance between states, they all have substantial penalties.

Arizona, for example, will suspend a license for a year if found guilty of driving intoxicated or under the influence of drugs.

Take a moment and think about the real cost of losing your license. Would you lose your job? Could you support your family? If you depend on your car in your day-to-day, losing a license could result in substantial costs.

Use an Uber or Lyft, get a regular taxi, walk home, whatever it takes. Just don’t drive after having any drinks. Not only is it incredibly dangerous to yourself and everyone around you, a DUI will impact your finances severely.

Reckless driving is another motor vehicle infraction that carries heavy monetary penalties. It’s defined as “a mental state in which the driver displays a wanton disregard for the rules of the road; the driver misjudges common driving procedures, often causing wrecks, accidents and other damages.”

Reckless driving charges can easily be tacked onto the standard speeding ticket depending on the driving conditions and often carry at least one day in jail on the first offense.

According to WalletHub, the average reckless driving ticket is $845.

Oregon tops the list at approximately $6,250 for the first offense. Kentucky, Mississippi, and New Mexico are among the lowest penalties for reckless driving at around $100 in each state.

A recent addition to the list of expensive violations is distracted driving. Texting while driving now carries sizable fines and will also result in an insurance increase.

Driving without a valid license and running a red light may seem like harmless infraction, but both violations carry significant fines.

The Real Cost: Car Insurance Rate Increases

The true cost of a speeding ticket is often felt long after paying the initial fine and any court fees.

Just one speeding ticket could cause insurance rates to skyrocket, especially for drivers under 25 years old.

While every insurance company adheres to specific procedures for dealing with speeding violations, being pulled over and ticketed for speeding means a driver is a higher risk for insurance companies.

A traffic violation means a higher possibility for future violations. To compensate for that extra risk, they’ll raise your premiums.

A handful of insurance companies will forgive first-time offenses and some won’t increase rates so long as the motorist isn’t guilty of driving more than 15 miles over the posted speed limit.

This Traffic Ticket Calculator will give you a rough idea of what to expect by entering the details of your ticket including the specific violation, the state, and your current yearly premium.

For example, a speeding ticket between 1-15 MPH in New Jersey, with a yearly insurance premium of $1700, calculates out to an addition $289 per year.

Once again, price increases vary depending on the state, but other factors an insurance company will consider before charging the new rate include how fast a person was traveling and previous violations.

I’d expect your annual premium to go up by a few hundred dollars if you get a speeding ticket.

If your driving record is littered with speeding tickets affecting your premium and purse, the insurance company Allstate suggests shopping around for a company with lower rates or enrolling in defensive driving courses. And if you really want to get your costs back down, avoid speedings and wait for your previous tickets to fall off your record.

The Total Cost

Extensive fines, higher insurance rates, loss of license, jail time, and even death are all possible from speeding.

On average, expect to pay $100-200 for the ticket fine and another couple of hundred dollars in insurance premiums. Some states and insurance companies will charge you less, some charge you more. Check to see how your state ranks to get a more accurate estimate.

And watch those points on your license. Once they add up, the penalties become much more severe.

The True Cost of a Speeding Ticket is a post from: I Will Teach You To Be Rich.

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How to Buy Stocks

When investing for your retirement, the single biggest risk is not making enough money by the time you retire.

Stocks are the key piece to getting our money growing fast enough. Without them, we’ll have a really hard time retiring comfortably.

So what’s the best way to buy them?

We can buy stocks directly. Or we can buy a “basket” of stocks through an index fund.

Our Approach on Investing in The Stock Market

For the majority of investors, index funds are the best way to go.

Index funds invest in a basket of US, international stocks, bonds, or other type of investment. You can pick and choose the type of investment that you want your index fund to focus on. For example, an index fund of the US stock market will invest broadly across all public US companies. The goal of the fund isn’t to beat market performance, the goal is to match the performance of the market as closely as possible. Since the market grows at an average of about 8% per year, the growth rate adds up nicely over time.

Index funds have several major advantages compared to building portfolios yourself:

• They help you save on costs, index funds charge very low fees compared to active funds that try to beat the market.
• Not only are they cheaper, they usually beat returns of actively managed funds. It’s one of the few cases where you get a better return while paying less.
• They are less risky since they’re diversified across an entire market instead of a handful of companies.

Nobody knows where the market is going. I recommend putting 90% of your investments in index funds or life-cycle funds. Only after doing that should you think about investing the remaining 10% of your money in individual stocks.

I fully support allocating up to 10% of your portfolio on individual stocks. I do it myself and it’s a great way to scratch that “investment itch.” Just keep it limited to a small portion of your portfolio that you can afford to lose.

Now let’s get into how to buy stocks.

Set Up a Stock Brokerage Account

You will be buying stocks through an online broker. There are dozens of them offering all kinds of services. You need someone dependable and low-cost.

We recommend TD Ameritrade. They are a self-serving broker and have a simple and intuitive interface, which is great for beginners. They are also commission-free.

Opening an account with TD Ameritrade is quick and easy, you can do it in just six steps.

Step 1: Go to TD Ameritrade’s website.

Step 2: Click on the ‘Open New Account’ button.

Step 3: You need an Individual Brokerage account to invest in stocks. So, start your application for it.

Step 4: Fill in the required information, which includes your personal, financial details, and your employer’s information.

Step 5: After filling the form, you need to review your application before submitting it. The folks at TD Ameritrade will then take a couple of days to go through your information.

Step 6: Once your account is approved, you can start investing in stocks. Unlike some other brokerages, TD Ameritrade does not require you to make a minimum deposit to begin.

Whether you’re buying index funds or individual stocks, the process is the same.

Now that you have set up a brokerage account, you are all set to buy your first stock. Which brings us to…

Consider The Stock You Want to Buy and Why

It’s easy to feel overwhelmed before buying your first stock. You may be thinking: There are so many stocks! Which one should I buy?

I’m not going to supercoat this, picking the right stock is brutally difficult.

Back in 2017, I bought a few shares of Tesla. I happened to buy it right at the top of $360. It then dropped, bouncing around and eventually going as low as $190. Finally, after 2.5 years, it’s up to $430. And it’s still not matching the performance of the overall market. My index funds have drastically outperformed my stock picks.

In all my reading on investment strategy, I’ve come across a few adages that I’ve found helpful:

• For an investment to succeed, the market needs to think you’re wrong today but end up agreeing with you in the future.
• Even with outperforming stocks, it’s incredibly difficult to hold on during the dips. Take my Tesla example, it would have been easy for me to bow out and sell when it dipped below $200. Periods like this happen to every stock. Even megawinners like Amazon and Netflix had periods where they looked awful.
• A cheap stock is not always good, and an expensive stock is not always bad. It’s whether the company is worth the price.
• As Warren Buffet teaches, you have an unlimited number of “at-bats.” You can wait as long as you want before finding a deal that’s truly in your sweet spot. Keep waiting until it comes along.

Right now, I’m still developing my own philosophy on investing. I’ve gone ahead and set a rule for myself: I can only invest $1000 into a company and I can’t add or sell beyond the initial purchase. This keeps me from making emotional decisions or overreacting to news. Instead, I make my bet and begin tracking the performance of the company to see how my analysis plays out.

Again, if you’re not sure which stock to buy, find a broad US index fund at your brokerage company. 90% of your portfolio should be in index funds anyway and there’s nothing wrong with making it 100%.

If you want to play things conservatively, do a simple 60/40 portfolio. This is a classic and it’s super simple.

Another option is to use the age rule. Subtract your age from 100 and put that percentage into stocks, the rest into bonds. You will have to adjust your allocation year-to-year but it’s still a simple way to invest more heavily in stocks as you’re younger and then shift into bonds as you get closer to retirement.

Place Your Order

When you know which stocks you want to buy, head over to TD Ameritrade’s website, login to your account, and place an order using the following steps.

Step 1: Go to the “Trade” tab and then click on “Buy/Sell” under Stocks and ETFs. Here, you have to fill three things. First, under Action, select “Buy”. Second, under Symbol, type in the symbol of the stock you want to buy. If you don’t know it, you can use the symbol lookup option on the same page. Third, type in the number of shares you want to buy.

Step 2: Select “Market” under Order Type. By using this option, you will buy the stock at the available price when you confirm the order. A market order ensures your order gets executed. Alternatively, if you want to buy the stock at a specific price, use a “Limit” order and put in the price at which you want to buy it. Your order will get executed only if the stock reaches your price.

Step 3: Under “Time-in-force”, you can go with the Day option, which means that your order will be valid till the end of that day.

Step 4: Click on the Review Button.

Step 5: Check the details you have filled in and then click on “Place Order”.

Step 6: To confirm if your order went through, go to the “Trade” tab and select “Order Status”.

You Bought Your Stock: Now What?

The biggest one is looking at the stock price every day. It’s a recipe for needless anxiety. I don’t do it, and neither should you. Most of the time,  everyday price movement is just noise. I’ve gone through periods of my life where I checked my investments on a weekly basis. For me, it was a sign that I wasn’t enjoying my job and used my investments as a distraction. Once I improved the quality of my day-to-day, the urge to check my investments disappeared. Now I check them once a quarter at most. If you’re checking your portfolio regularly, it could be a sign that there’s a larger issue in your life that needs to get resolved.

The second mistake is selling your stocks at the slightest fall. ALL stocks go down at some point. So, trust your judgment and don’t keep buying and selling. The easiest way to avoid this is to stop checking your stocks so often. The less you look, the less of a chance you’ll see a loss and be inclined to sell.

When To Sell A Stock?

There are four valid reasons for selling your stocks:

1. You have achieved your personal finance goals. Once you hit the number that you need to retire, move the bulk of your portfolio into safer investments like bonds and CDs. Take the win and focus on capital preservation. Keeping capital is a very different skillset to growing capital. This becomes especially important if you get a large windfall and hit your retirement number earlier than normal.
2. You need the money. I understand that things may go south and you need money for an emergency. First use the funds from your emergency savings. Sell your stocks ONLY if that doesn’t cover the expense. It should be your last resort and never do this for a purchase that can be delayed.
3. Performance has been weak and it’s time to get out. This one is really difficult to judge accurately, all of us have a tendency to jump out at the worst possible moment. Even though we lose money, we all tend to buy high and sell low. Check your biases and ask yourself if weak performance in your picks is truly permanent. This shouldn’t be the case with index funds, every market goes through cycles. It’s only something to worry about with individual stocks. That said, sometimes we make a bad pick and it’s time to take the loss.
4. It’s time for re-allocation. When a market has a fantastic set of gains in a year, it’ll become a larger portion of your portfolio than you intended. You might set a target to have 80% investments in stocks but it could become 90% through appreciation. You’ll get superior returns by selling some of your stock wins and re-investing that into bonds. This keeps your portfolio in line with your goals while helping you sell high and buy low.

To sell a stock, follow the same procedure as you did when you bought it, but instead of “Buy”, select “Sell” under action.

What You Need To Know About Taxes On Stocks

You will have to pay taxes on the profits you make with stocks. This is called a capital gains tax. If you sell a stock within a year of buying it, you will have to pay a short-term capital gains tax. It is equal to your normal income tax rate.

If you sell a stock after having held it for more than a year, you will have to pay a long-term capital gains tax. It is 0% if your individual annual income is less than $39,375, 15% of your profits if your income is under $434,550, and 20% if its more than that. These tax brackets go up by a bit if you are married and file joint taxes of if you’re the head of household.

Keep in mind that these are marginal tax rates. The higher tax rates only apply to income in that bracket, not the entire taxable amount. So you pay 0% in taxes on your first $39,375 regardless of how much you earned, then 15% after that until $434,550. Then 20% on anything above that.

How to Buy Stocks is a post from: I Will Teach You To Be Rich.

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3 Tips to Help You Thrift

Thrift shopping has become the trendy activity of every social media star’s dreams. And rightfully so. I mean, why not buy more unique clothes at a much lower price? Seems like the right decision to me! When it comes to thrifting there are a variety of ways to go about it. And despite what you [...]

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16 Valuable Tax Deductions and How They Work

Before you file your taxes, uses these deductions to save hundreds, possibly thousands, of dollars.

Every deduction is perfectly legal and encouraged by the IRS.

In fact, you’re leaving money on the table by not taking them. Most of these deductions don’t require much work either.

Getting the deductions that the IRS wants to give you will be some of the most valuable time that you spend this year.

Below, we’ve included the 16 tax reductions that we use ourselves.

What is a tax deduction?

Tax deductions lower your taxable income, which in turn reduces the amount of tax you’ll owe. There are generally four broad categories of tax deductions on a tax return: standard, itemized, above-the-line, and business. We’ve included the most popular deductions from each category below.

Standard deduction

The standard deduction is a set dollar amount you can subtract from your adjusted gross income (AGI). Your standard deduction depends on your filing status. For 2019, the available standard deductions are:

• Single: $12,200
• Married Filing Jointly: $24,400
• Married Filing Separately: $12,200
• Head of Household: $18,350

If you are age 65 or older or blind, you can claim an additional standard deduction of $1,300 ($1,650 if your filing status is Single or Head of Household).

You enter your available standard deduction on Line 9 of Form 1040.

Itemized deductions

When you file your tax return, you have the option of claiming the standard deduction or itemizing deductions – whichever results in a bigger tax benefit.  Itemized deductions are a list of specific types of expenses allowed by the IRS.

To claim itemized deductions, you need to keep track of what you spend in each category  throughout the year. You’ll also want to keep records to document your deductions, such as receipts, bank statements, medical bills, or acknowledgment letters from charities.

If you opt to itemize deductions rather than claim the standard deduction, you’ll need to attach Schedule A to your Form 1040.

Here are the main itemized deductions:

Medical expenses

You can deduct out-of-pocket medical expenses that exceed 7.5% of your AGI in 2019.

State and local taxes

IRS rules allow you to deduct a variety of state and local taxes including:

• State and local income taxes OR general sales tax if you live in a state without an income tax
• Real estate taxes
• Personal property taxes, such as those paid with a vehicle registration

The deduction for all state and local taxes is capped at $10,000.

Home mortgage interest

You can deduct interest paid on home mortgage debt of up to $750,000. To qualify for the deduction, the funds must have been used to “buy, build, or substantially improve” your home.

Gifts to charity

You can claim a deduction for cash or property donated to a tax-exempt organization.

Casualty and theft losses

You can deduct losses from a federally declared disaster.

Above-the-line deductions

Above-the-line deductions get their name because they appear above the line for AGI on Form 1040. These deductions are valuable because you don’t need to itemize to claim them.

Above-the-line deductions include:

Educator expenses

K-12 teachers can deduct up to $250 of unreimbursed job expenses, such as professional development courses, equipment, and materials used in the classroom. If you are married, file a joint return with your spouse, and you are both eligible educators, each spouse can claim the $250 deduction.

Health savings account contributions

If you contribute to a health savings account (HSA), you may be able to deduct your contributions. For 2019, you can contribute up to $3,500 for self-only coverage and $7,000 for family coverage. If you’re age 55 or older, you can contribute an additional $1,000 as a catch-up contribution.

Keep in mind, any contributions paid through payroll deductions are already excluded from income on your W-2. You can’t claim an additional deduction for these contributions.

Self-employment taxes

If you are self-employed, you can deduct 50% of your self-employment taxes as an above-the-line deduction.

Self-employed retirement account contributions

Self-employed taxpayers can also deduct contributions made to a retirement plan, such as a SEP-IRA or SIMPLE plan.

Self-employed health insurance premiums

If you are self-employed and pay for your own health insurance, you may be able to deduct the premiums you pay for medical, dental, and qualified long-term care insurance.

You cannot claim the deduction if you are eligible to participate in an employer-sponsored health insurance plan. For example, if you have access to health insurance through your spouse’s employer, you can’t deduct your health insurance premiums, even if you choose not to participate in your spouse’s plan.

Alimony payments

If you pay alimony to a former spouse, you may be able to deduct your alimony payments. To qualify, the payments have to be required by a divorce or separation agreement dated prior to 2018. For dated 2018 and later, alimony is not deductible.

If your payments include both alimony and child support, only the alimony portion is deductible.

IRA contributions

For 2019, you can contribute up to $6,000 to an IRA. Taxpayers age 50 or older can also make an additional $1,000 catch-up contribution.

That contribution may be deductible, depending on whether you have access to an employer-sponsored retirement plan and your income. With no retirement plan at work, you can deduct your entire contribution, regardless of your income.

If you or your spouse have a retirement plan at work, contributions are phased out at higher income levels. Your contribution starts to phase out when your modified AGI exceeds $64,000 if single, or $103,000 if married filing jointly.

Student loan interest

If you paid interest on a student loan, you can deduct up to $2,500 of interest paid. However, the deduction starts to phase out for higher-income taxpayers. Single taxpayers qualify for the full deduction if their modified AGI is $65,000 or less. For married taxpayers filing jointly, the deduction starts to phase out once their modified AGI reaches $135,000.

You claim all of the above-the-line deductions on Schedule 1 attached to your Form 1040.

Business deductions

If you own a business, you can deduct “ordinary and necessary” business expenses. Ordinary expenses are things that other business owners in your industry typically purchase. Necessary means the cost is required for your business success.

The tax deductions applicable to your business depend on what type of business you are in.

Common business deductions include:

• Advertising
• Bank fees
• Business meals
• Credit card fees
• Depreciation
• Dues and memberships
• Employee benefits
• Insurance
• Interest
• Legal and professional fees
• Office expenses
• Rent or lease payments
• Repairs and maintenance
• Salaries and wages
• Subscriptions
• Supplies
• Taxes and licenses
• Telephone
• Training and professional development
• Travel
• Utilities
• Vehicle expenses

Sole proprietors and owners of single-member LLCs deduct these expenses on Schedule C attached to their Form 1040. Partnerships and multi-member LLCs claim these expenses on Form 1065.

In addition to the above, business owners may be able to take advantage of the following tax deductions.

Home office deduction

If you use part of your home for business, you may be able to deduct a portion of your housing expenses, including mortgage interest or rent, homeowner’s insurance, utilities, and repairs.

There are two ways to deduct home office expenses.

• Simplified method. This method gives you a deduction of $5 per square foot of the home used for business, up to a maximum of 300 square feet.
• Regular method. This method requires you to calculate the percentage of your home’s square footage devoted to business and multiply that percentage by your actual housing expenses. For example, if your home office occupies 10% of your square footage, you can deduct 10% of your mortgage interest or rent, homeowner’s insurance, and other costs.

There are two basic requirements to qualify for the home office deduction:

1. Regular and exclusive use. Your home office doesn’t have to be a separate room to be eligible for the home office deduction. A desk in the corner of your bedroom or living room will suffice. But the space must be used regularly and exclusively for business. For example, if you use your dining room as a desk, but also use that room for family meals, you can’t claim the home office deduction for that room.
2. Principal place of business. If your primary place of business is a location outside of your home, but you occasionally work from your home office, you can’t claim the home office deduction. Your home has to be your principal place of business. You can occasionally work elsewhere – such as a coworking space, coffee shop, or client’s location.

Qualified business income deduction

The qualified business income (QBI) deduction gives some business owners a deduction worth up to 20% of their business’ net income. The QBI deduction is only available to pass-through businesses, such as sole proprietorships, partnerships, LLCs, and S corporations.

However, the QBI deduction isn’t available to everyone, nor is it simple to calculate. To qualify for the full deduction, your taxable income must be below $157,500 if you’re single or $315,000 if you’re married and file jointly.

If your taxable income is above those thresholds, your deduction will be limited if your business is a “specified service trade or business.” To learn more, check out the IRS’s FAQ on the Qualified Business Income Deduction or talk to a tax professional.

Have a professional review your deductions

When doing your taxes, have an accountant file your taxes for you. If your income and expenses are very simple, you can skip this part. But as soon as things get even a little complicated, get help.

Every deduction has tons of exceptions, phase out rules, and document requirements. You’ll want a professional to guide you through everything. They typically charge $200-300 to file your taxes each year.

16 Valuable Tax Deductions and How They Work is a post from: I Will Teach You To Be Rich.

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The Year Compass: Close 2019, Plan 2020

Ready to tackle major personal and financial goals in 2020? I’ve been doing The Year Compass for five (5!!) years, and it’s been life-changing. If you haven’t heard of it before, you’re going to love it. The Year Compass has been the best way to work through and appreciate my accomplishments of the year that’s [...]

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Here Are Our Most-Read Posts of 2019!

Happy Holidays & Merry Christmas! If you’re on vacation and looking to cozy up with a cup of coffee or cocoa and get financially inspired for 2020, we’ve got a treat for you. The Top 10 Posts on Money After Graduation for 2019 We published over 100 posts this year, but there were a few [...]

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Best Budget Apps and Personal Finance Tools

Good budget apps track your spending for you.

And the best budget apps track your spending while helping you develop key habits for financial success.

Gone are the days of collecting receipts and manually entering expenses into a spreadsheet. With a budgeting app, you’ll be able to automatically record your income and expenses — and easily review it when you want to.

But with so many out there, which one do you choose?

We want to help. That’s why we curated this list of our 5 favorite budgeting apps.

The Best 5 Tools For Budgeting

• Tiller Money
• You Need a Budget
• Personal Capital
• Albert
• Mint

Tiller Money – Best for spreadsheet lovers

Price: $4.92/month or $59/year. Comes with a 30-day free trial

Available on: Google Sheets or Microsoft Excel

Tiller Money is a fantastic budgeting app — that’s not really an app in the first place.

Here’s how it works: You connect the secure Tiller Money software with the different bank accounts you want to track. Then you can link up your bank information with a Google Sheet or Excel template that Tiller provides and contains all of your budgeting information.

It provides a great look at your finances as a whole from transactions, to expenses, to income. The template they provide also gives you an easy way to see if you’re on track with your budget — as well as how much money is left in certain categories.

One downside is that you have to manually categorize your transactions — but it’s still a great app that’ll give you fantastic insights into your expenses.

We love it so much that we did a deep dive on Tiller Money in our article on how to build a budget.

You Need a Budget (YNAB) – Best for personal finance junkies

Source: YNAB

Price: $84/year or $11.99/month. Comes with a 34 day free trial. Students can get the app free for an additional 12 months.

Available on:

• iOS
• Android
• Web browser

YNAB is a robust budget app that works on a straightforward premise: before you get your paycheck each month, you assign every single dollar a “job” or what you want to spend it on.

That way, when you get your paycheck, there’s no guesswork for where your money is going. It might seem very simple — but YNAB allows for very granular control (if you want it). You’ll be able to jump in and customize your budget to your exact preference. This is what makes it a favorite for personal finance junkies who really like to get hands on with their money matters.

The interface is straightforward and easy-to-use. A small downside is that it doesn’t include as many features as some of the other apps on this list such as the ability to look at investment portfolios. If you’re looking for a good way to start a solid budget though, this is your app.

Personal Capital – Best for investors

Source: PC World

Price: Free

Available on: 

• iOS
• Android
• Web browser

Personal Capital gives investors the tools they need to keep track of each of their investment portfolios in one place. Their dashboard aggregates your investment data into easy-to-grasp graphs and charts. At a glance, you’ll be able to get a good picture of your earnings and losses without having to log into all of your different broker sites.

There’s also an investment management service that allows you to invest into a company — but that comes with a fee.

Overall, it’s a lot more investment heavy than a lot of the other apps on this list. As such, I’d recommend it for investment junkies — though you could still get a lot out of it if you want to keep track of your spending.

Albert – Best for automation lovers

Source: Albert

Price: Free

Available on: iOS

Albert is the “set it, and forget it” budgeting app. Not only does it give you all of your money data from your linked banks, but it also automatically creates a budget for you based on your spending and expenses.

That’s right. It creates a budget for you. That means you don’t have to worry about deciding on how much to spend on things like going out and groceries. The app also uses an algorithm that figures out how much you can save each month, and includes a tool that automatically saves that amount for you on the app.

It’s fantastic for anyone who likes a hands off approach to budgeting. So if you’re looking for more granular control, you might want to look elsewhere.

Mint – Best for beginners

Source: Business Insider

Price: Free

Available on: 

• iOS
• Android
• Web browser

With more than 20 million customers, Mint is one of the most (if not the most) popular budgeting apps out there — and with good reason.

It’s intuitive platform and dashboard gives even the least money savvy users an understandable look at their finances. Once connected with your banks, the app automatically organizes your spending into common categories (groceries, entertainment, etc). You can add your own categories for further customization.

The app also allows you to set up budgets and alerts so you know when you’re close to maxing out a budget. Great for keeping on track with your spending goals.

Overall, a very good budgeting app for beginners.

How To Choose The Best Budgeting App For You

While all these budgeting apps are great, let’s be honest: You’re going to want to download just one or two of them.

(That is, of course, unless you’re a huge personal finance nerd who loves to keep track of their spending. If that’s the case, you’re on the right website.)

When it comes to choosing the best budgeting app for you, there are a few questions you should ask yourself:

What are my goals?

This is a very important question to ask no matter what budgeting app you ultimately choose.

Knowing your personal finance goals is the first step for financial success. And it can also help you choose the best app.

For example, maybe you want to simply save a little more each month — without having to worry about looking at spreadsheets or a bunch of data each week. If that’s the case, Albert is the app for you.

But if you’re finance savvy person who wants to improve their investments earnings by 10% this year, Personal Capital is going to be more your speed.

If you need help coming up with a good personal finance goal, check out our article on how to create a SMART objective (aka the best kind of goal setting out there).

How hands on do I want to be?

When it comes to personal finance, people typically either want to be as involved as possible or be hands off.

Luckily, you can be as involved with your personal finances as you want with the right budgeting app.

Want to be able to go in and look at different data sets for your budget to optimize it? Tiller Money, YNAB, or Personal Capital would be good for you.

Want to take a more back seat approach? Mint or Albert could be good for you.

Decide now how hands on you want to be with your budget. There’s no right or wrong answer here.

Am I in debt?

Before you choose an app, it’s a good idea to take a look at the current state of your finances and answer one important question: Am I in debt?

Debt is the most common roadblock to people living a Rich Life. That’s why it’s so important that you work on getting out of debt before you can even think of doing things like saving for huge purchases.

Those in debt want to choose a budgeting app that’ll help them lessen or get out of their debt entirely. Apps like Albert, YNAB, and Mint can help you do just that.

They’ll give you a snapshot of your spending as well as show you how you’re paying it down each month.

For more, be sure to check out our article on how to get out of debt fast.

Find the right budget system

Choosing a budget app is great — but it’s nothing without the right finance systems along with it.

What’s a finance system? It’s a plan of action to help you build the habits you need to accomplish your goals like getting out of debt, earning more, and saving for the things you love.

And there are a lot of different ways you can approach budgeting. To help you choose good tactics for your financial system, here are a few of our best resources on the topic:

• Budget help: How to build a bulletproof budget
• How to save money with minimal pain
• How to save $1000 a month
• How to make more money: A beginner’s guide

When coupled with a budget app, your financial system will lay the foundation for your financial future — and your Rich Life.

Best Budget Apps and Personal Finance Tools is a post from: I Will Teach You To Be Rich.

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Everything You Need to Know About Capital Gains Tax

Reducing taxes can be a ton of work.

While loopholes do exist, they usually take too much time and effort.

Capital gains are one of the huge exceptions.

Knowing just a few key facts about capital gains could cut your tax rate in half on the money you make from selling an asset.

These rules are simple to remember, easy to implement, applicable to most people, and have a huge impact on your taxes. That’s everything you could possibly want from a tax reduction strategy.

But what are capital gains anyway?

Capital gains are the profits from selling capital assets, such as stocks or other personal property. In some cases, they’re taxed at a lower rate than ordinary income, but not all capital gains are treated equally.

What is the Capital Gains Tax and How It Works

The IRS considers almost everything you own, except for property used in a business, to be a capital asset. Every asset has a “basis,” which is essentially what you paid for it, plus any money you put into improving it.

When you sell a capital asset, the difference between the proceeds of the sale and the basis is either a capital gain or a capital loss. If the sales price is higher than your basis, it’s a capital gain. If the sales price is lower than your basis, it’s a capital loss.

A Complete List of Everything That Qualifies for Capital Gains

You might think of stocks, bonds, and other investments when you’re talking about capital gains taxes. But nearly everything you own, either for personal or investment purposes, is considered a capital asset. Here’s a list of the types of property that may qualify for capital gains:

• Your home
• Personal use items, such as household furnishings
• Stocks, bonds, and other investments
• Jewelry
• Collectibles such as coins, stamp collections, antiques, and artwork
• Cars

2019-2020 Capital Gains Tax Rates

When you sell a capital asset, the gain or loss is classified as either short-term or long-term, depending on how long you owned it before selling it. In most cases, if you owned the asset for more than one year, it’s a long-term capital gain or loss. If you held it for one year or less, the gain or loss is short-term.

Long-term capital gains tax rates

Generally, long-term capital gains are taxed at a lower rate than ordinary income. The rate depends on your filing status and your total taxable capital gains. Here are the long-term capital gains tax rates for 2019.

Tax Rate	Single	Married Filing Jointly	Head of Household
0%	$0	$0	$0
15%	$39,375	$78,750	$52,750
20%	$434,550	$488,850	$461,700

 

So if you’re single and you have taxable capital gains of $40,000, you’d pay 15% in taxes. But if you had taxable capital gains of $500,000, you’d pay 20%.

Still, these are much better rates than short-term capital gains.

Short-term capital gains tax rates

Short-term capital gains are taxed at the same rate as your ordinary income. The rate you pay depends on your filing status and total taxable income. Here are the ordinary income tax brackets for 2019.

Tax Rate	Single	Married Filing Jointly	Head of Household
10%	$0	$0	$0
12%	$9,700	$19,400	$13,850
22%	$39,475	$78,950	$52,850
24%	$84,200	$168,400	$84,200
32%	$160,725	$321,450	$160,700
35%	$204,100	$408,200	$204,100
37%	$510,300	$612,350	$510,300

 

This means that you have a strong incentive to wait for long-term capital gains to kick in before selling an asset. You could cut your taxes in half just by hitting the one-year mark.

How to Calculate Capital Gains Tax

When calculating your capital gains, the most important thing to keep in mind is that the capital gains tax rate doesn’t apply on an item-by-item basis. It applies to your overall net capital gains.

To illustrate, say you had the following stock transactions in 2019:

• Stock A: Long-term capital loss of $3,000
• Stock B: Long-term capital gain of $6,000
• Stock C: Short-term capital loss of $4,000
• Stock D: Short-term capital loss of $2,000

To calculate your net short-term gain or loss, you first need to net your long-term gains and losses and your short-term gains and losses.

• Long-term: Stock A + Stock B = ($3,000) + 6,000 = $3,000
• Short term: Stock C + Stock D = ($4,000) + 2,000 = ($2,000)

Now, you have a long-term gain of $3,000 and a short-term loss of $2,000. When you combine the two, you get, a net capital gain of $1,000.

Assuming these are your only capital gains in 2019, using the long-term capital gain tax brackets above, you see that you’ll pay 0% on that gain.

On the other hand, if you had a short-term gain AND a long-term gain, the long-term rate would apply to the long-term gain portion and your ordinary tax rate would apply to the short-term gain.

Tips for Paying Less Taxes

With such huge differences in tax rates on different types of capital gains, we can save a lot of money by making sure our gains fall into the right tax bucket. The best part about this is that it’s largely under our control. We can choose when to see assets and realize gains.

Here are a few strategies you should consider:

Hold capital gain property for at least one year

Since long-term capital gains are taxed at a lower rate than short-term capital gains, try to hold off on selling until you’re past the one-year mark. The clock starts ticking on the day after you acquire the asset, up to and including the day you sell it.

This is one one the easiest rules to follow and has an enormous impact. If you only use one tip from this list, make it this one.

Defer income and accelerate deductions

If you’re planning on selling an asset that will generate a sizeable short-term capital gain and can’t wait until it would be a long-term capital gain, try to reduce your overall taxable income.

One way to do that is to defer income until next year. For example, if you’re self-employed, you could delay sending invoices to clients until January to ensure that you won’t receive payment until next year.

You can also reduce your taxable income by accelerating deductions into this year. For example, if you usually contribute $5,000 per year to your favorite charity, you could make two or three years’ worth of donations this year instead.

Harvest capital losses

If you own some investments that aren’t performing well and have poor prospects for future growth, you might want to consider selling them and using the loss to offset your capital gains.

For example, say you have $15,000 in capital gains for the year, but you also have a stock in your portfolio that is down by $5,000. If you sold that loser stock, you could use the $5,000 loss to partially offset your gains. Then you’d only owe taxes on $5,000 of capital gains instead of $10,000.

When you’re looking for losses to harvest, focus on short-term losses. These provide a greater benefit because the loss is first used to offset short-term gains, which are subject to a higher tax rate.

If you decide to sell some investments to generate losses, watch out for the wash-sale rule. This rule disallows the tax-write off if you buy the same or a “substantially identical” security within 30 days before or after the date of sale.

What You Need to Know About Capital Gains Tax

There are a few other rules you might need to know when it comes to calculating capital gains tax.

High-income taxpayers might pay more

High-income taxpayers may also have to pay the Net Investment Income Tax (NIIT), which applies an additional 3.8% tax on all investment income, including capital gains.

NIIT applies if your income is above $200,000 for single or head of household taxpayers, or $250,000 for married couples filing jointly.

Losses from the sale of personal property aren’t deductible

As mentioned previously, nearly everything you own, even your car and personal effects, can be considered capital gain property. But that doesn’t mean selling cars or furniture at a loss will get you a tax write-off.

Losses from the sale of personal-use property, including your home and car, aren’t deductible.

Special rules for selling your home

Losses on the sale of your home aren’t deductible, but gains might be taxable. Fortunately, the IRS allows taxpayers to exclude up to $250,000 ($500,000 if married filing jointly) of gain on the sale of their main home.

To qualify, you must’ve owned and used the home as your primary residence for at least two of the last five years.

Inherited property is always long term

If you inherit capital gain property, you don’t have to worry about holding it for more than a year. No matter how long you actually own it, inherited property is always treated as a long-term gain or loss.

Special rates apply to collectibles

If you sell collectibles (such as coins or art) at a profit, those capital gains are taxed at a maximum rate of 28%.

Limits on capital losses

Don’t go overboard with tax loss harvesting. If your total capital losses are higher than your capital gains, you can only use $3,000 of those losses to offset other types of taxable income. You can carry any unused losses forward and deduct them in subsequent years.

Keep good records

Whether you sell property at a loss or a gain, after a few months or a few years, it’s important to keep good records. Track what you bought and sold, when the transactions took place, and how much you paid or received. That way, you’ll have all of the information you need to report capital gains on your tax return.

Everything You Need to Know About Capital Gains Tax is a post from: I Will Teach You To Be Rich.

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I Earned $20,000 with Side-Hustles to Pay for College

It goes without saying that getting through college or university without taking on any debt can be a challenge. After all, student loan debt has surpassed $1.5 trillion. Rising tuition prices combined with the general cost of living can quickly add up to a final and hefty price tag once you’ve graduated. However, I am [...]

The post I Earned $20,000 with Side-Hustles to Pay for College appeared first on Money After Graduation.

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When to follow the rules — and when to break them

Last night's recipe from HelloFresh was Bulgogi Pork Tenderloin. As always, the instructions were clear and easy to follow. As always, it took me about twice as long to prep things as the recipe card said they would.

I chopped the vegetables, boiled the rice, seared the meat, made the sauce. But when I reached the final step — “finish and serve” — I hit a wall of sorts.

“Ugh,” I said to Kim, who was playing with our three cats and one dog simultaneously. “The recipe calls for a tablespoon of butter in the rice. I hate adding butter to rice. It makes it gummy and gross. But HelloFresh always wants me to do it.”

“I like butter in my rice,” Kim said, throwing a bacon ball for the dog while kicking a catnip toy for the cats. “But if you don't like it, don't add it.”

I sighed. Of course, she was right: Just don't add the butter! Such an obvious solution, right? Yes — and no.

You see, I am fundamentally a Rule Follower. When I'm cooking, I follow the recipe exactly. When I'm building an IKEA desk for my new office, I follow the instructions exactly. On the road, I generally stick to the speed limit (which sometimes drives Kim nuts). I used to take pride that never once did I cheat on my homework or tests in high school and college — and I never helped anyone else cheat either.

As I said: I am, fundamentally, a Rule Follower.

This has been true when it comes to managing my money too. Since beginning my quest to become the CFO of my own life fifteen years ago, I've surrendered to wiser minds than mine. I tend to heed the time-tested “rules of money”, rules like:

• When average people like me are wondering how to invest, the best answer is usually “set up automatic contributions to an index fund”.
• When setting up a budget, it's more important to pay attention to the Big Picture than it is to fret over details. Follow the balanced money formula and you should do okay.
• When you want to get out of debt, use the debt snowball method. If possible, pay high-interest debts first. Many folks (including me) have more success, though, if they pay off low-balance debts first. And still others use a debt snowball approach in which they start by tackling the debts with the greatest emotional weight.
• If you're going to use them, know how to use credit cards wisely. If you're unable to use credit without digging yourself into debt, then throw away the “shovel”.
• And so on.

Following these rules has proved profitable. These “rules” are rules for a reason. Because they work. They allow folks to get out of debt and build wealth. Crazy, right?

Here's the thing, though. As effective as these financial rules have been for me, as much as I like strictly following a recipe, I've also come to realize that sometimes it makes sense to (gasp!) break the rules.

The challenge, then, is determining when to follow the rules — and when to break them.

Chesterton's Fence

Some people chafe at rules. They instinctively want to rebel against them. My old friend Sparky, for instance, never met a rule he didn't want to break. It was just part of who he was.

From my experience, though, rules generally exist for a reason. They're not arbitrary creations meant to frustrate and hamstring people. Rules are an attempt to create order and help life run more smoothly. Sometimes, though, people and institutions evolve. Old rules that once proved useful become outdated and ought to be discarded. But it's dangerous to mindlessly break rules (or to discard them).

G.K. Chesterton's 1929 book The Thing includes an essay entitled “The Drift from Domesticity”. While I haven't read the entire essay, I'm fond of the intro, which describes the danger of discarding rules without careful consideration:

In the matter of reforming things…there is one plain and simple principle; a principle which will probably be called a paradox.

There exists in such a case a certain institution or law; let us say for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don't see the use of this; let us clear it away.”

To which the more intelligent type of reformer will do well to answer: “If you don't see the use of it, I certainly won't let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”

This paradox rests on the most elementary common sense.

The gate or fence did not grow there. It was not set up by somnambulists who built it in their sleep. It is highly improbable that it was put there by escaped lunatics who were for some reason loose in the street. Some person had some reason for thinking it would be a good thing for somebody. And until we know what the reason was, we really cannot judge whether the reason was reasonable.

It is extremely probable that we have overlooked some whole aspect of the question, if something set up by human beings like ourselves seems to be entirely meaningless and mysterious.

[…]

This principle applies to a thousand things, to trifles as well as true institutions, to convention as well as to conviction.

I learned about this concept — colloquially referred to as “Chesterton's Fence” — last March from a GRS reader named Marc. “With an old house,” he wrote, “I have found the principle of Chesterton’s Fence to be invaluable. When renovating or repairing never rip something out if you don’t understand why it is there.”

In the nine months since I first heard about this idea, I've thought about it often. I think it's important. It applies to many aspects of our lives. And it's directly applicable to the question of when to follow rules and when to ignore them.

From Amateur Spectator to Expert Producer

Earlier this week, David Wells (who runs the excellent Fifteen on Friday email newsletter) published an article on the four steps to expertise and meaningful contribution. These steps seem like a natural fit for a discussion of knowing when to follow (and when to break) rules.

According to Wells, there are four steps to moving from a “spectator” to a “producer”.

1. The first step is becoming an “amateur spectator”. At this stage, you're new to whatever it is you're experiencing. You don't know the rules, but you're able to enjoy the process. This is me when watching cricket. I have zero clue what is going on, but I'm entertained by the sport.
2. The second step is becoming an “expert spectator”. Here, you do understand the rules. More than that, you know why the rules exist and how they influence whatever it is you're experiencing. I'd say I'm close to being an expert spectator when it comes to film. I have an appreciation for film history, and I've read a lot (and watched a lot) about how films are made. This helps me appreciate the movies I see, but I couldn't make one of my own.
3. The third step is becoming an “amateur producer”. (Wells calls this an “amateur professional”, but I think he actually means producer.) At this level, you have enough knowledge of your subject, of its rules and conventions, that you can participate and create. An amateur producer, Wells writes, “is not someone who just undersands that something happened, but can explain to you why it did.” I'm an amateur producer when it comes to photography. I know the hows and whys of writing with light, and have even sold a few photos.
4. The final step is becoming an “expert producer” (or “expert professional”). Wells writes, “At this level, you not only understand why something works, but you are able to deploy various tools to accomplish a desired end.” I like to believe — although you might argue the point — that I am an expert writer. (Or, at any rate, an expert blogger.)

Here's the thing to note about these four stages of expertise. Folks at lower levels ought not break the rules. Hell, folks at the first level don't even know the rules. As you become more aware of the rules (and the reasons for them), you're able to actually create within this set of guidelines. At the very highest level — as an expert producer — you can, at times, break the rules.

And I'd argue that those at the very top can sometimes write their own rules. To wit:

LeBron got away with one ? pic.twitter.com/Uv4uMKKcDi

— SportsCenter (@SportsCenter) December 5, 2019

Let's return to Chesterton's fence for a moment. I believe that Chesterton is arguing that if you're an amateur spectator, you have no right to ask for the metaphorical fence to be removed. As an expert spectator, you at least appreciate why the fence exists, but you probably shouldn't be the one to remove it. Only if you're a producer — and preferably an expert producer — should you actually remove the fence.

Once, about 25 years ago, I decided to bake some brownies. Although my wife was an expert baker (and a chemistry teacher to boot!), I was not. As I mixed the ingredients, I realized that we were out of baking soda. “No worries,” I thought. “We have baking powder. I'll just use that.”

My brownies were a disaster. They didn't rise. Turns out you can sub one for the other, but you have to know what you're doing. It's not a one for one equation. I didn't have a clue why this “fence” existed — I was an amateur spectator in the kitchen — and I paid the price with bad brownies.

Obviously, some “fences” (and some rules) are more important than others. When I don't follow a brownie recipe correctly, there are no real consequences other than losing a small amount of time and money. But if you were to, say, disregard the rules for operating a nuclear power plant, you could end up with the Chernobyl disaster.

When you're dealing with trivial matters, it's less important that you follow the rules. When you're dealing with larger issues — marriage, firearms, vehicles, politics — knowing the rules and adhering to them becomes more critical.

Learning to Break the Rules

Now, there's no doubt that sometimes a fence — or a rule or a guideline — outlives its usefulness. Sometimes when a person complains that a fence serves no purpose, she's right. And sometimes, as in the case of recipes or financial rules of thumb, it's okay to stray from the path — if you know why you're straying.

Let's use that Chesterton passage above as an example. The quote I published in this article has been altered. The original was a wall of text, two ginormous paragraphs with odd punctuation. This worked fine in 1929 when Chesterton published the piece. It does not work so well in 2019 when people are reading on computer screens.

So, I took the liberty of re-formatting the quote to make it more readable for modern eyes. A minor thing, perhaps, but it's still a case of me altering Chesterton's Fence. (Literally!)

Actually, I can think of many examples of how I break the rules of writing. I didn't always do this. In fact, I used to be a strict prescriptive grammarian. I believed that the rules of writing were immutable and ought to be learned and followed.

Today, I don't see grammar rules as black and white. After decades as a writer, and after working with professional editors for the past ten years, I've come to understand that the purpose of writing is effective communication. Our grammar rules are useful guidelines because they tend to promote effective communication, but once you know them (and know why they exist), it's okay to break them.

Last night's dinner is another great example. Over the year that I've been using HelloFresh, I've followed their directions for rice many times. I know how they want me to make it — and why. In that time, I've learned one very important thing: I don't like the tablespoon of butter they ask me to add at the end. It serves no functional purpose. Kim likes the taste; I don't. (And I hate the texture.) Because I understand how the rice is prepared, it's okay for me to omit the butter.

My clam chowder is an even better example. My source was a recipe published in the November 2000 issue of Bon Appétit magazine. I've probably made this chowder fifty times since I first discovered it. At first, I was slavish to the recipe. (I'm a Rule Follower!) In time, I began to experiment.

• What happens if I add more bacon? (Deliciousness!)
• What happens if I add more garlic? (Deliciousness! But too much garlic makes things worse…)
• What about more onions or clams or potatoes? (More onions are good, but the potato ratio depends on the amount of liquid I use.)
• What if I use Yukon Gold potatoes instead of russets? (Gross! Yukon Gold potatoes are awful in chowder.)

Today, nearly twenty years since I first made the chowder, the recipe I use is mostly my own. I started by following the instructions exactly. At the time, I was a clam chowder “spectator”. Eventually, I gained the confidence to “break the rules”, to adapt things to my own preferences. As I gained competence, as I became an “expert producer” of clam chowder, I could play with the recipe.

When to Break the Rules

Breaking the rules can lead to innovation. Breaking the rules can let you build a life that is truly your own. Breaking the rules can produce better clam chowder. But in order to break the rules, you have to understand them. More than that, you have to know why the rules exist.

“Learn the rules like a pro,” painter Pablo Picasso is reported to have said, “so you can break them like an artist.”

I think it's also vital to ask yourself a few questions, such as:

• Why do you want to break this rule? What purpose does it serve? Is it simply out of laziness? Or will breaking the rule potentially lead to some useful reward? Driving on the shoulder because you're inconvenienced by slow traffic is not a valid reason to break the law. But adding bacon to clam chowder because it's delicious is a good reason to change things up.
• What are the consequences of breaking the rule? Will it harm anyone else? Will it harm you? Take the Balanced Money Forumla, which says that you shouldn't spend more than half of your take-home pay on Needs. If you do, you put yourself in a precarious financial position. You could really hurt yourself (and your family) if something goes wrong. On the other hand, you're not going to hurt anyone by jaywalking on an empty street at midnight.
• For some rules — office rules, personal rules, family rules — it's useful to ask what the new rule will be if you break (or change) the old one. If you decide to withdraw from your retirement accounts to fund a purchase — a financial rule I don't suggest breaking — is this a one-time thing? When will you allow yourself to do the same thing in the future? How will you replace those funds?

It's not bad to follow the rules. In fact, as a Rule Follower, I think it's generally a smart thing to do. When you follow the rules, you usually get good results.

Twenty years ago, I didn't understand the rules of money. I was violating the rules without even realizing it. As a result, I was deep in debt and living paycheck to paycheck.

In 2004, I surrendered to the idea that what I was doing wasn't working. I was playing the game without understanding the rules. As a result, I was losing and I knew it. So, I decided to teach myself how money works. I learned the rules. More to the point, I started following the rules. Surprise! My financial life improved. (In a way, this is what's happening with my friends Wally and Jodie. It's fun to watch them learn the rules of money — and to start winning the game.)

All the same, sometimes it pays to break the rules — if you do so wisely.

Credit cards are dangerous, yes, and ought to be avoided if they're going to lead you into debt. That's a solid rule. But if you're disciplined and sophisticated, you can use credit cards as tools to unlock all sorts of rewards.

And in a way, the modern FIRE movement — that group of folks who wants to achieve financial independence and retire early — is built on “breaking” the rules of retirement. The folks who pursue FIRE not only understand the “rules” of money, but understand why those rules exist. And because of this, they're able to re-write the rules to achieve something truly remarkable.

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