Savings Accounts For Real Estate Investments: Storing Rental Income And Profits
Savings Accounts For Real Estate Investments: Storing Rental Income And Profits – Presenter Facilities You need a room with enough space for people to move around the room. This presentation should last approximately 1 hour and 45 minutes. Audience Master Financial Education Voluntary and public presentations. Objectives of the lesson Participants: Understand the basics of saving and investing Understand the importance of goal setting in terms of saving and investing Understand what IDAs are Understand the basics of investing Materials and equipment Multimedia projector Laptop with PowerPoint characters for compound interest activity. Risk Investment Pyramid Revised Celia Rai Haihoe, Ph.D., Family Resource Management Specialist, Virginia Tech Glenn Sturm, AmeriCorps VISTA Volunteer Developer Skip Henderson, CFCS, Former Extension Agent, Virginia Cooperative Extension 573
Individual development accounts (IDA) Basics of investing Do you know the difference between saving and investing? Are you afraid of investing because you don’t understand the terminology? Do you know what an IDA account is and are you eligible for one? These and other questions will be answered in the presentation. NOTE: Investment information related to investment funds is discussed in more detail in section 21. 574
Savings Accounts For Real Estate Investments: Storing Rental Income And Profits
Safe – low chance of losing principle Risky – chance of loss and profit Low ROI – low interest rates Higher ROI – Potential for appreciation and income Use – urgent funds and goals that will be realized in less than 5 years Use – goals over 5 years, for retirement Liquidity – easily converted to cash with little or no loss of principle Less liquid – marketable but can lose principle CDs, savings accounts, money market funds, money market funds Mutual funds, stocks, bonds, ETFs, investment real estate, business Savers expect: no loss of capital; predictable returns; every period the same return. Investors expect: no guaranteed return on capital; possibility of loss; unpredictable returns. Income is income from saving or investing. Rate of return or return is expressed as a percentage. Liquid assets are held as cash or can be easily converted to cash with little or no loss of value. It is used to cover living expenses, make purchases, pay bills and loans, and reserve for unexpected expenses and emergencies. Risk is uncertainty about whether a financial loss will occur and how big the loss will be. Investing money in a federally insured savings account is practically a risk-free situation because the government guarantees both the principal and the return. Most people have to save money in order to invest money. Real investors develop an investment philosophy, a personal investment strategy that anticipates certain returns and risks, and have strategies to achieve investment goals. 575
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Earn income Get out of debt Retire comfortably Deal with emergencies Pay for school or travel Buy a car, house, furniture, etc. Create security and carelessness Build a cushion for planned changes in family or career 576
“I’ll start tomorrow.” “I can’t plan that far ahead.” “I can barely make ends meet.” “I’ve never been good at understanding money.” “I’m waiting for the economy to stabilize.” “If I’m lucky, I don’t have to think about my financial future.” People don’t save more because they don’t plan for 577
Pay yourself first Saving money should be a priority of consumption and habit! Discipline yourself to “pay yourself first.” What does this mean? Treat savings like a bill and pay that “bill” first. Treat your savings as a mortgage or rent payment. Get into the habit of saving money instead of spending it. You will be surprised how pleasant it is to watch your savings grow. Try to set aside 10% of your take-home pay. 10% of gross salary is even better. If you are self-employed and do not participate in the pension system, you can save more than 10%. If you are just starting your savings habit, you may not be able to save 10% of your salary. Start at $1, $5, $10, $20 per pay period. If you’re struggling to save, consider saving on your payroll. Decide how much you want to save from each paycheck. Then have the money automatically taken out of your paycheck and automatically deposited into your bank or credit union savings account, or automatically buy savings bonds or participate in your employer’s savings programs (if available). . 578
Best High Yield Savings Accounts In October 2023 (daily Rates)
Investments 1. An emergency fund is the foundation of your savings program. You need an emergency fund for unexpected expenses that are not planned in the family spending plan. Try to set aside 3-6 months of living expenses as a reserve that you can fall back on if you have an unexpected emergency. 2. Another category you should save for is occasional or seasonal expenses. (Note: These are discussed in the spending plan unit.) 3. The third money saving category is for big goals. The main goals vary from family to family. Your goals change as your personal situation changes. Your age, marital status, financial status and finances are a few factors that can affect your goals. Saving money takes time. (Note: Setting goals is discussed in detail in the Values and Goals unit.) 4. The fourth savings category is for investments. You need to save to have money to invest. Your main long-term savings goals may overlap with your investment goals. 579
Lack of money Use the payments of the loans you have paid off. Follow a consumption diet for a month. Spend less on things like clothes. See if your credit card company will lower your interest rate. What can you do if you have no money to save? Look for ways to cut costs or increase revenue. Tips for saving The impulse is to spend unexpected money from the lottery, inheritance, gifts, etc. Save it to significantly increase your savings account. Once you’ve paid off the loan, continue paying into your savings account. Example: When you pay off your car loan, keep paying into your savings account. For one month, try to save all expenses; this would be like a diet that saves only the essentials. This way you can accumulate a significant amount of money for savings and investments. Be motivated knowing that it’s only a few days away! Save your tax refund instead of spending it. Spend less How can you spend less on clothes? Buy less. Recycle old clothes in the community, by hemming, sewing on lost buttons, etc. Sale in store. Look for a good buy at thrift stores and yard sales. Avoid buying clothes that say “dry clean only”. Buy classic styles, not trendy ones. Ask your credit card company for a lower rate. Lower your insurance premiums by buying the coverage you need at the lowest price. Eating out can be five times more expensive than at home. Limit the number of times you eat out. Bring lunch to work. Prepare meals at home. 580
Buy at the right time Don’t pay extra for the “name” Recognize the high price of the offer Use life cycle planning for large purchases. What is impulse buying? It is a purchase without need and without considering options completely. For example, you may have carefully shopped around for a personal computer, comparing prices and features, but when you made your purchase, you impulsively downloaded some games and entertainment software you hadn’t planned on buying—and spent another $245. This hinders your careful shopping. Paying in cash – saves money in two ways. It helps control impulse buying, which becomes easier when you use credit for unnecessary purchases. Second, using credit can make financial planning difficult because it takes away financial flexibility and increases the cost of goods (credit cards charge 12-24% or more interest). Buy at the right time – Pay attention to sales. Many items, such as sports equipment and clothing, are marked during certain holidays and at the end of each climatic season. New cars are cheaper at the end of the month due to quota incentives and other sales promotions. One caveat: If you don’t need it, a sale isn’t a wise use of your money. Don’t pay extra for the “name” – Buying generic products is a good way to save money. An “Excedrin” headache can cost $0.30 per dose, while a regular aspirin headache only costs $0.02 per dose. Scientific studies have shown that the effectiveness of all over-the-counter pain relievers is approximately the same. Similar examples can be found in hotels, food, and prescription drugs. Generic can save you money. Recognize the high costs of grocery shopping – instead of shopping in stores, buy a few items a day and plan a weekly visit to the local store. This approach can save you up to 30%
Places To Save Your Extra Money
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