November 2017 - Smart Money Seed

11/24/17

Bank Account Bonuses: Extra Cash In Your Pocket

11/24/2017


As the holiday season rapidly approaches, a lot of us begin to budget our finances to ensure that we can afford gifts for our friends & family. For some of us, that means scrapping some leisure activities or that meal out on Friday to save some extra cash. I’m the oldest of 5 children and know that the holiday season definitely finds me strapped for money. Fortunately, I’ve been able to utilize one of the overlooked assets of the travel hacking community to finance recreational trips & that extra beer at the bar in December: bank account bonuses.

Why Bank Account Bonuses?

I find that many of the available sign-up bonuses across the banking industry are quite easy to obtain and put cash in your bottom line quickly. Throughout the last few years, I’ve been able to utilize bank account bonuses as a buffer to many of my side hustles I have going. If you were worried about paying tedious manufactured spending fees or simply want to make the rent burden a little less, checking/saving account bonuses have you covered. Here are a few of the ways I’ve used checking account bonuses in the past:
  •     Excursions on a cruise
  •     Student loan payments
  •      Wedding expenses

The best part about these bonuses-you are not tied into travel partners or a specific points program. This is stone-cold cash that you take home at the end of the day (minus some tax obligations, depending on the bank in question). No matter how you decide to use the extra cash, it’s definitely convenient to have these bonuses readily available at your disposal.

General Requirements of Checking & Savings Account Bonuses

The checking & savings account field tends to be a bit more competitive in their bonuses than credit card companies of late, who have slashed benefits & point bonuses across many major cards (looking at you, AMEX Platinum & Citi Reserve). The bonuses associated with checking and savings accounts tend to range from $100-$500 and will have steeper requirements as the bonus rises.

Keep in mind that in this hobby, your mileage may vary. Every bank has a separate list of requirements necessary to reach their specific bonus-it is vital to keep all of these in mind while meeting the requirements.

While every bank has different requirements for the customers to earn the extra cash, here are a few that are standard across the industry.

Setup Direct Deposit

This is something that anybody with a checking or savings account has heard before. Many bank bonuses will require a direct deposit of a certain threshold as a requirement, e.g. two direct deposits of $1500 or more in consecutive months after account opening. If you do not want to change your direct deposit setup at work to accommodate this requirement, there are ways around this.

I’ve found that simply initiating a transfer from my personal checking account to the checking account associated with this bonus often registers as “direct deposit”. Depending on the bank & credit card, you may also be able to utilize your credit card and not have this count as a cash advance, which could simultaneously help you meet minimum spend on a credit card while satisfying bonus requirements for the checking/savings account.

Debit Card Transactions

One of the easier requirements of banking bonuses, this simply requires using your debit card multiple times over the course of a month. A standard Wells Fargo requirement would be 10 debit card transactions/month for three straight months to earn the bonus (typically $200-300).
As many of us would prefer to use our credit cards instead of debit, an easy solve for this is to simply load your Amazon account with the minimum amount required per load ($.50). A simple $5/month to earn hundreds of dollars doesn’t sound too bad to me!

Account Requirements-Don’t Get Hit With A Dumb Penalty

With bank account bonuses, there are a few things to keep top-of-mind that the banks may try to sneak past you. Similar to credit card bonuses, it is imperative that you read the stipulations of the account you are opening so you are not hit with a monthly account fee or the dreaded bonus clawback, leaving you holding the bag with an account you would not have opened without the bonus. Some of the various requirements a bank may stipulate to avoid additional fees include:

·         Keeping an account open for a certain period of time
o   Chase is notable for doing this-if you do not keep your account open for 6 months or more, they will take your checking/saving bonus back.
·         Minimum balance in the account
o   Many checking accounts require a minimum balance in order to avoid a small fee. Ensure that you are at least leaving the minimum-required balance in the account to not get hit with that pesky $5-10 monthly penalty.
·         Monthly direct deposit
o   This is exactly as it sounds-simply direct deposit the minimum requirement (in many cases, $500/month) to avoid a service fee ranging from $5-15.

Every bank is different. Some banks may simply require meeting one of the above three to avoid a penalty; some require all of the above AND MORE. This is why reading the fine print is so important when signing up for these accounts-we don’t want to give back our hard-earned money!

Geographical Requirements

Before signing up for a checking/saving account, be sure that the offer in question applies to your specific geographical region. Many banks cater to a specific part of the country and as such, their bonuses only apply to people in that area. I recently found a great offer from Wells Fargo ($200 for 10 debit transactions/month for three months) only to find that the offer was only good for residents of 9 different U.S. cities. Be sure to keep this in mind when deciding what bonus is right for you!

Image result for globe

Bonuses Are TAXABLE INCOME

Unlike our credit card bonuses we’ve come to know and love, these checking/savings account bonuses are indeed taxable. Most banks will issue a 1099-INT at the end of the fiscal year; again, your mileage may vary on this. This may be the biggest drawback to the banking bonus game; where we don’t have to worry about this when accruing miles & points, the cash earnings we are getting from these are liable to Uncle Sam & the IRS.

Image result for uncle sam

Where To Look For Offers?

When I’m looking for the best bank account offers, I find that using a variety of methods tends to be my best bet. If you live in an apartment complex, look twice before throwing out that large stack of grocery flyers/local business advertisements. You never know when you’ll find a juicy bonus offer-this is where I tend to find a lot of my local banks (Chase, Huntington, Credit Unions, etc.)

You can also use the built-in time you are looking for credit card offers with the major banks as an excuse to venture (if you’ll pardon the pun) to the bank account page and see if you are targeted for any specific offers. Many of the best bank account offers come from targeted bonuses and as you’ll be on the bank’s website anyways to service credit card needs, why not take a look at your checking/savings account offers?

Summary-Earn That Cash!

As you can see, it’s relatively easy to earn a little extra cash on the side to supplement your travel hacking endeavors. Checking & savings account bonuses have provided me with the extra juice necessary to go on that extra guided tour on vacation, upgrade that seat I booked in economy or simply buy the next round at the bar. Once you find the offer that works for you, you’ll have that extra cash at your disposal in no time. Enjoy!

Cheers,


Tyler Henze

11/15/17

Quit Wasting Your Free Time

11/15/2017


Any fellow procrastinator can relate - taking action on goals can be tough!

Some days getting your ass off of the couch and doing something can be much harder than it sounds. Binging on Netflix shows, winning Super Bowls in Madden, and watching endless YouTube videos takes priority and that to-do list takes a back seat. It happens to all of us, and sometimes that's okay. We all need escapes to refresh and recharge, and a lazy day can be the perfect solution. But too much of anything can be a bad thing, and unfortunately that includes lazy days.

Your free time (i.e. time spent away from work or school) is a valuable commodity. Out of the 168 hours in a week, most people work 50+ hours, and sleep for another 50 hours (if you're lucky); that leaves only 68 hours of free time! This may sound like a lot of time, but for most people that means well over 50% of their time is spent working or sleeping. Despite what you may think, I'm not writing this to be discouraging, but when you do that math, I think it really shows how valuable your free time is! All of a sudden those couple of hours you spend watching TV really starts to eat into your free time.

A Personal Testimony

Quitting your lazy habits cold turkey is pretty tough. The good news is you don't need to quit the habits for good, you just need to cut back on the frequency. Before I started writing this blog with Alex, I probably averaged at least 10-15 hours a week playing video games. I still consider myself a pretty big video game advocate, but I knew there were better ways that I could have used some of that time.

For me, I knew I could be doing something more to learn and grow, both personally and professionally. The solution: Smart Money Seed! I've replaced a lot of my weekly video game time with Smart Money Seed, and I can't begin to tell you how much I've learned from it. Despite all the fame and glory that comes with blogging, I'm not suggesting that you need to start a finance blog. Maybe you have been putting off:
  • Remodeling part of your house
  • Saving for retirement
  • Working on your resume
  • Looking for a new job
  • Getting maintenance on your car
  • Starting a new hobby
  • Learning how to cook a new meal
  • Exercising
  • Stopping a bad habit
  • Cleaning out the garage
  • Doing something on your bucket list
Whatever the task may be, channeling your inner motivation is the next step that will help you achieve your goal.

So, how do I get motivated?

"Getting motivated" isn't always as easy as just flipping a switch. Letting Netflix autoplay to the next episode of Stranger Things is way easier than getting up and cleaning out the garage. It takes baby steps to increase your motivation, and the first step is energizing yourself. Here are some of my tips and strategies to get energized:
  • Get up! Easier said than done, but make an effort to literally get off your ass and move around. Try exercising, walking, or playing a sport.
  • Change your diet. I don't have the best diet in the world, but I've found I'm much more productive when I eat healthy meals.
  • Get off your phone. Spending too much time staring at your phone screen can make you feel like a zombie.
  • Go outside. There's something special about the outdoors that can re-focus and energize your train of thought. Get away from the day-to-day hustle and bustle and spend some time with nature.
  • Find an accountability partner. Everyone knows its a lot easier to skip leg day when you don't have a lifting partner. Find someone that shares a similar goal and hold each other accountable. Without Alex, I can pretty confidently say there's no way I'd be able to run a blog like this alone. (Please don't tell him I said that, I don't want him to think that I like him.)
At the core, getting motivated is about finding your "why". Why do you exist? Why do you get out of bed each morning? What is your purpose? I highly recommend watching Simon Sinek's TED Talk about starting with "why". Here's a link:

Rosie and I tried camping this summer and we fell in love with it. It was a great way to relax and refresh after a long week!


I used to be motivated, what happened?

Losing motivation is discouraging, and it's something almost all of us face. If you find yourself in this scenario, the most important thing to do is understand what has changed.

Do you have a new boss? Are you in a new environment? Did you lose focus or did it become too repetitive? Are there other issues (i.e. family or personal) that are causing distractions? Is there uncertainty or a lack of communication?

This stage takes reflection. Take a moment to dissect the situation and determine what drove your disengagement. Do you think you can re-capture your motivation, or is it simply time to move on?

We're All Connected - Share Your Motivation!

Humans thrive off of each other's moods and energy, and motivation is no exception. When you're excited and passionate about something, it causes a ripple effect of excitement that builds an unstoppable wave of momentum. When you approach tasks and challenges with dedication and energy, others will become more engaged, and their engagement will only motivate you even further. It's a compounding effect like this allows teams to accomplish goals far behind their wildest dreams.

So let's recap; how do I get motivated?

1. Identify what you want to accomplish or what you have been putting off
2. Evaluate your free time and make some sacrifices
3. Take some small steps to energize yourself and build your momentum
4. Tackle your task with passion and tenacity
5. Spread your motivation and excitement with others
You have the tools. Time is already ticking. What do you want to accomplish?

11/8/17

Retirement Savings 101 - Educate Yourself Early for Financial Freedom in Retirement

11/08/2017
You see, young stud, if you follow the information in this
article, you'll never have to worry about your financial future!

Okay maybe you don't need this information quite that early. And maybe that was just a dumb excuse for me to show off how cool my earruffs... err... earmuffs were. But the point is, if you follow this advice early and stick with it, you'll be sitting pretty when retirement comes around!

We've taken the first half step towards helping you plant your retirement seeds with a high level investing discussion. Your retirement savings are a long-term investment that should be overwhelmingly comprised of mutual funds and ETFs especially for younger investors. If you're new to the investing game, give yourself a refresher with that post and come back to us.

Our generation has been bombarded since well before our working lives that saving for retirement early and often is probably the most important tool available to us in our financial lives. Market returns can contribute substantially to our wealth building process over our 40 year working lives.

But generally speaking, that's where the advice stops. Nobody cares to take the time to explain what or how to invest for retirement which leaves hungry young professionals with good intentions but poor knowledge and preparation.

The Skinny

The true power of retirement investing is a magical phenomenon called compound returns. When you invest money, the money you take out of your pocket is called your principal. Your principal makes a return on the market and then the returns start making their own returns. 

The easiest way to illustrate this is with graphs. I found a great tool that simplistically lays this out for us which I used back in our first post. This graph is showing the compound returns over 20 years from an initial investment of $1,000 assuming a 10% annual return. The interest from your principal will be $100 per year which means you'll have $3,000 over the 20 years, right? 

Not quite, Dwight. Because of the power of compound returns, you will end up with nearly $7,000 after 20 years! The amount of return you make off your returns actually exceeds the amount of return you make off your initial investment. 

Graph and calculation courtesy of MSN Money.




And it doesn't have to stop there. Compound returns cause your money to grow exponentially. For example, if you invested in that same scenario over 40 years, you would end up with over $45,000!

That's great, but what does this have to do with saving for retirement?

Great question, Alex! You're so smart, awesome, funny, and handsome.

 Retirement savings are a long-term investment. If you're in the workforce, you need to have a retirement account. If you don't already have an account, go establish one right now. We'll wait for you.

Types of Retirement Accounts

Private sector workers have two main options for retirement accounts: 401(k) and IRA. A 401(k) is a company sponsored plan where you can invest pre-tax dollars in a traditional 401(k) or post-tax dollars in a roth 401(k). Roth 401(k)s are not quite as popular but are starting to be offered by more and more employers. 

Often times employers receive discounts on fee structures and may offer a company match on some level of investment you make yourself. For example, Marathon matches the first 7% I invest in my 401(k). Both 401(k) options are easy set it and forget it options since the money can come straight out of your paycheck before it hits your bank account.

IRAs, or Individual Retirement Accounts, are accounts you directly setup with a financial institution. Similar to the 401(k), you have an option of a traditional IRA or a Roth IRA. Often times you can setup an IRA through the same institution and platform you use for your company's 401(k) plan. If not, just Google how to setup an IRA. That type of advice is why we get paid the big bucks, folks.

Generally speaking, you should utilize traditional accounts if you think you're in a higher tax bracket now than you will be in retirement, and you should utilize roth accounts if you think you'll be in a higher tax bracket in retirement than you're in now. Many people utilize some mix of both to diversify their risk. The important thing to remember is that traditional dollars are taxed when you withdraw the money and roth dollars are taxed now.

Investment Options

Within a 401(k) or IRA, you will face multiple investment options which can be somewhat overwhelming if you don't know what to look for. My recommendation if you're new to the investing game is to keep it simple. Invest in a target date or lifecycle fund which will start out risky and gradually lower risk as you get closer to retirement or index funds which will generally follow the overall stock market.

The important attributes of any fund you need to be cognizant of are the age of the fund and the expense ratio. Generally speaking, I would not recommend any fund with an age less than 5 years or an expense ratio greater than 1%.

My Retirement Investments

I invest 10% of my income into a traditional 401(k) account. 10% is a good number to shoot for with 15% being what is widely considered the ideal threshold to all but ensure a financially prosperous retirement. Because of my company match, 17% of my income is being invested for retirement, so I'm on a pretty good path.

70% of my money is invested in an index fund which follows the S&P 500 (0.01% expense ratio) and 30% is in a mutual fund focused on growth stocks (0.4% expense ratio). Growth stocks are generally newer companies that have some probability to grow and produce high returns.

They are also more risky than a company in the S&P 500 since they have a shorter track record, so the growth stock funds tend to be more volatile. My year to date rate of return is about 16% which is slightly better than the return of the S&P 500 around 14%. I expect those numbers to be very similar over the life of my retirement accounts.

Experts suggest that you save 10-15% of your income for retirement. If that's a stretch for you, start with 5 and increase your savings rate by 1% each year. Another strategy my dad learned early in his career and has used is to put half your raise towards savings (retirement or otherwise) each time you get a raise.

Fortify Your Financial Future

Investing is a powerful tool over the long haul- especially when we're talking about investing for retirement. It's important to setup your investments as almost a set it and forget it with regular monthly or quarterly check-ins.

DO NOT ACTIVELY INVEST ON A PASSIVE BASIS. Don't trade individual stocks or constantly switch your retirement accounts. If you're in a vastly under-performing account, switch to something with a longer, solid track record. If you see an individual stock kicking the crap out of the market, let it go. You don't want to introduce the risk associated with actively trading into the determination of your future financial well-being. Unless you're essentially dedicating your life to learning the trade, you will not beat the market.

Don't freak out when the market dips. It will happen, but the market will come back. It always does. The market has produced an average return of 10% over the past 90 years which we have every reason to continue to expect over a long period of time. Start investing now and stay investing throughout your working life.

When you're sitting on a beach at 65 sipping an ice cold Corona or pina colada, don't forget to thank Smart Money Seed!

For more retirement advice (and some overlapping advice), check out the second episode of the Smart Money Seed Podcast!

PS: The earmuffs actually didn't even really stay on that well. Beauty hurts.

11/1/17

Podcast Episode 2: Investing 101

11/01/2017




Welcome to the second edition of the Smart Money Seed Podcast!

The SMS guys talk about the world of investing including why we invest, how we invest, and tips & tricks for making the most out of your investments.

We also touch on our Top 5 favorite Halloween activities, introduce a new segment of "Who Said It", and cover some current events about taxes.

Thanks for listening!