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Power of Compound Interest – A Case Study

January 23, 2023August 17, 2022 by Finance Gourmet

Over at MarketWatch recently, was an interesting article entitled Make Your Kid Rich for $1 a Day. I’ll let you go over there and read the particulars if you are interested. However, I think that the concept provides a great way to study the phenomenon of compound interest, and the elements that go into it. Compound Interest Only Works Over Long Periods People love to quote Albert Einstein saying that the most powerful force in the universe is compound interest. What most people forget is, that as a physicist, Mr. Einstein was used to working on a very large scale, with a very long timeframe. Let’s start at the beginning. Compound interest is not magical. It is merely the phenomenon of earning interest on your previously earned interest. So, if you invest $10,000 and earn 10 percent interest annually, then you would earn $1,000 in interest, and have $11,000 at the end of the year. (Sort of, depending on how interest is paid and compounded, but let’s not quibble.) The following year, you would also earn the same 10 percent interest. However, this time, you earn 10 percent on $11,000, not just the original $10,000. In other words, you are …

Amazon Flex Side Hustle Gig

January 16, 2023July 5, 2022 by Finance Gourmet

I’ve heard of a lot of people turning to side hustle gigs like Amazon Flex as a way to make extra money for saving, investing, financial independence, or retirement planning. Is Amazon Flex worth it to make extra money for investing or saving? That depends a lot on where you live, where the Amazon Flex gigs are, and what kind of car do you have. Quick update: Between July 3 and July 9 if you deliver just one block, Amazon Flex will pay you a $40 bonus. That changes some of the calculus about whether Amazon Flex is worth it to you, at least in the short term. Amazon Flex Pay Amazon Flex pay varies based upon factors like day of the week, time of day, and how many drivers are available. For harder to cover times, Amazon Flex pays more. The Amazon Flex base rate varies by city. Is Amazon Flex pay worth it? Yes, but only if you live close enough to where you pick up your Amazon Flex gigs. Calculate your time and mileage starting from when you leave your house and ending when you get back to your house. Now, figure out what you made with …

FAFSA Scam on FAFSA.com

November 19, 2023May 5, 2022 by Finance Gourmet

A FAFSA scam is a bad way to start off your hunt for financial aid. If you, or someone you know, is going to college, or starting at a university, then chances are you need to apply for financial aid. Even if you don’t think you’ll qualify, there are often partial grants, federal loans, and various work-study programs that can help pay for college. Remember: the legit FAFSA website is FAFSA.gov. To apply for any federal financial aid, you’ll need to fill out a form called the FAFSA, the Free Application for Federal Student Aid. This form requires you to submit detailed financial information, which is verified against IRS records, and requires you to sign that all information is true under penalty of perjury. This is better than anyone else can really do as far as verifying your financial status, so many other financial aid grantors, including the universities themselves, rely on your submitted FAFSA. You have to fill out a FAFSA every year you are in college to continue to qualify for need-based financial aid. This is not one of those programs where you fill something out once. The easiest way to submit your FAFSA is online at fafsa.gov …

How To Improve Your Credit Score

August 2, 2022February 9, 2022 by Finance Gourmet

There is a lot of phony information out there about improving your credit score. There is also a lot of information that once worked, but doesn’t anymore, things like disputing everything on your credit report. So, what is the real way on how to improve your credit score? What Is In Your Credit Score? Let’s start from the beginning. What is in your credit score? Your credit score comes from the information in your credit report. If you are wondering how information gets on your credit report, your creditors are snitches. Each money, they report data to the credit bureaus about what accounts you have with them, how long you have had the account, how much money you owe, how much credit you have available, and if your payment was on-time, late, or never paid. How are they allowed to do that? Easy. When you signed up, it was buried in that agreement you never read. Besides, if it’s true, then there is nothing you can do about it. People are allowed to say true things about you. Your credit score is made up of four main things (check here for how your credit score is calculated) Your Payment History …

Acorns Review Automated Investing Made Easy?

September 7, 2024January 8, 2022 by Finance Gourmet

Note: This Acorns review article has been updated with the latest information as published on the acorns.com website. No sooner than I finished my Digit review, than I saw an ad for another automated savings app on Facebook that takes a different tack for building up your savings automatically with the help of an app and online financial service. This one is called Acorns. Let’s check it out. Is Acorn legit? Is Acorns a scam? Read on while I do my Acorns app review. Acorns Review – Legit, Scam, Worthwhile? Acorns vs Digit Whereas Digit monitors your bank balance and transfers money its algorithm determines is “extra” into a savings account for you, Acorns rounds up the change on every purchase you make to the next whole dollar amount and automatically saves that money for you. Another version of this type of automatic investing and savings app is Grifin. Grifin does away the clever sounding “round up to the next dollar.” Grifin is a user-controlled automatic app investing. Instead of gathering up a few dollars’ worth of transfers and sending them down into mutual fund land, Grifin take every transaction you make and invests $1 in the stock you just bought something …

529 Contribution Limits 2021

September 29, 2021May 3, 2021 by Finance Gourmet

The 529 plan is a tax-advantaged college savings plan. Of course, like all plans that offer IRS sanctioned tax savings, there are rules and regulations regarding just how and when a 529 plan may be used. One of these limitations involves how much money you can contribute to a 529 plan in 2021. 529 contribution limits tend to be pretty stable, based mostly on the federal gift tax exclusion amount. Head over here if you are looking for how a 529 plan works. If you want to know how to open a 529 plan account then head here. 2021 529 Contribution Limits Unlike IRA plans, where there are new IRA contribution limits, or other child tax credits, there are no income limits for 529 plans. That means that you can contribute to a 529 plan regardless of whether you are a high-income taxpayer or not. There are, however, still a few kinds of contribution limitations for 529 savings accounts that you want to be aware of. The first 529 plan contribution limit comes from the 529 plan rules established by each individual plan. Since 529 plans are administered by each of the 50 states, there can be 50 different plan rules. For …

What Is The Difference Between FSA and HSA?

April 28, 2021February 26, 2021 by Finance Gourmet

There is a lot of confusion around the difference between an HSA and a FSA. HSA stands for Health Savings Account. FSA stands for Flexible Spending Account, or sometimes, Flexible Spending Arrangement. Both types of medical savings accounts are tax-advantaged ways to save and pay for various medical expenses, but there are some very big differences. These accounts are very important for tax planning because otherwise, there is a very high threshold before you can deduct any medical expenses you might have. For many people, an HSA will be better than a Flexible Spending Account, but only if your health insurance plan qualifies. What Is a Flexible Spending Account or FSA? The FSA has been around longer, and so most people are more familiar with it. A flexible spending account is a benefit offered by your employer. You defer a certain amount of your paycheck into the FSA. Any funds contributed to an FSA are pre-tax contributions, just like a 401(k) contribution, which means you not only don’t pay taxes on that money, it doesn’t count as income for things like IRA contribution thresholds, or the child tax credit, or deducting student loan interest. That makes these contributions a very …

Microsoft Money in Excel

January 8, 2021 by Finance Gourmet

Once upon a time, Microsoft produced and supported a money, budgeting, and personal finance software called Microsoft Money. It was an attempt to compete with Inuit and its near monopoly in tax and finance software. It was one of the best personal finance software options out there, and it was free. While Microsoft Money had a hard core following, it never built a large following and was eventually abandoned by Microsoft who put out a final version sunset edition, and let everyone know that it was free, but there would be no more support. Microsoft Excel Money Template Microsoft is back with a template add-on for Microsoft Excel that offers the kind of personal finance management that used to come from its standalone software offering. By making MS Money into an Excel template instead of its own software, the Microsoft Money team has to support and update a lot less. You have to be a Microsoft 365 Personal or Microsoft 365 Family subscriber in order to get the Money in Excel template. Like Mint has done for a long time, Money in Excel will automatically pull in your transactions and keep them updated via a third-party called Plaid. I had …

Budget Killers – Cell Phones

July 7, 2024October 2, 2020 by Finance Gourmet

I just realized that in the last 10 years I never wrote a basic budgeting article for Finance Gourmet. There are a few reasons for that. One, when you get going as a former financial advisor writing a real-world personal finance advice website, you want to jump into the juicy stuff. Two, once you have been writing that juicy stuff for a while, you just assume that you have covered some of those basics. And three, budgeting is actually a personal thing. What works for one person doesn’t work so well for others. Anyway, look for my basic budgeting article in the next few days. For today, I want to start my series on Budget Killers. As a financial advisor, and as a regular finance writer today, I have seen common things that blow up a budget. I’ve also seen less common things that blow up a budget (owning a horse, motorcycle racing, and more). Let’s start with one of the most common things that blows up a budget, cell phones. Cell Phone Budget Killers It isn’t uncommon to see monthly cell phone bills in the hundreds of dollars. Unfortunately, many people don’t see the costs adding up until it …

Is myFICO Worth It?

August 11, 2022June 22, 2020 by Finance Gourmet

Don’t waste your money on services that allow you to constantly get your credit score. Use a little insder knowledge to get a free credit score and check it only when it makes sense.