Is the RV Life Right For You?

January 13, 2021

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Jonathan Brutto

Jonathan Brutto

Financial Professional

15150 Preston Rd Suite 300

Dallas, TX 75248

January 4, 2021

Is a Metal Roof Right for You?

Is a Metal Roof Right for You?

Metal roofs might just be the best way to put a roof over your head.

And not just because the sound of rain hitting metal is incredibly relaxing. They clobber traditional asphalt shingle roofing in several critical categories. Read on to discover why a metal roof might be right for you!

They last for decades
A properly installed metal roof can last up to 70 years.¹ That absolutely clobbers asphalt roofing, which typically lasts only 12 to 20 years. Make no mistake–20 years is a long time. But a metal roof has the potential to be the only roof you’ll ever need installed.

Plus, they tend to be more durable than traditional roofs, meaning they require less total upkeep and preserve the resale value of your home.

They’re more energy efficient
It’s understandable if you’re concerned that a metal roof would transform your house into a walk-in oven. It seems like they would absorb so much heat and radiate it throughout the house, right?

But it turns out that they actually reduce cooling costs by up to 25%.² Instead of absorbing radiation, a metal roof actually reflects heat and light away from your home. That means you can stay cool without having to crank up the air conditioner!

They handle extreme conditions
Metal roofs tend to perform better in the face of extreme weather and natural disasters. For instance, steel and aluminum won’t catch fire if they’re struck by lightning or embers from a fire land on them. And if you’re more concerned about hurricanes than forest fires, a metal roof will still have you covered–they can withstand gusts of wind up to 140 miles per hour!³

But be warned–installing a metal roof is a skill-intensive process that can cost up to 10 times more than traditional roofing.² Before you decide to remodel your home, it’s critical to find a roofer who’s well-reviewed and qualified to do the job right. It’s also worth considering how long you’ll stay put. A metal roof might make more sense on your forever home than it would on a small starter home.

Research the costs and benefits, identify the style and materials you want for your roof, and, if you decide to go through with it, seek out a qualified contractor. Then, sit back, close your eyes and enjoy the sound of rain gently falling on your brand new metal roof!

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¹ “Pros and cons of metal roofs for your home,” State Farm, https://www.statefarm.com/simple-insights/residence/metal-roof-pros-and-cons

² “7 Things to Know Before Choosing a Metal Roof,” Donna Boyle Schwartz and Bob Vila, Bob Vila, https://www.bobvila.com/articles/metal-roof-pros-and-cons/

³ “Standing Tall in Hurricane-Force Winds with a Metal Roof,” Liquid Creative, Gulf Coast Supply and Manufacturing, Apr 8, 2019 https://www.gulfcoastsupply.com/standing-tall-in-hurricane-force-winds-with-a-metal-roof/#:~:text=Metal%20roofs%20can%20be%20a,are%20prone%20to%20blow%2Doffs.&text=In%20wind%20uplift%20tests%2C%20metal,gusts%20up%20to%20180%20mph.

December 28, 2020

More financial tips for the new year

More financial tips for the new year

There’s nothing like the start of a brand new year to put you in a resolution-making, goal-setting, slate-cleaning kind of mood.

Along with your commitment to eat less sugar and exercise a little more, carve out some time to set a few financial aspirations for the new year. Here are some quick tips that may add up to significant benefits for you and your family.

Check your credit report
Start the new year with a copy of your credit report. Every consumer is entitled to one free credit report per year. Make it a point to get yours. Your credit report determines your credit score, so an improved score may help you get a better interest rate on an auto loan or a better plan for utilities or your phone.

Check your credit report carefully for accuracy. If you find anything that shouldn’t be there, you can file a dispute to have it removed. There are several sites where you can get your free credit report – just don’t get duped into paying for it.

Up your 401(k) contributions
The start of a new year is a great time to review your retirement strategy and up your 401(k) contributions. If saving for retirement is on your radar right now – as it should be – see if it works in your budget to increase your 401(k) contribution a few percentage points.

Review your health insurance policy
The open enrollment period for your health insurance may occur later in the year, so make a note on your calendar now to explore your health insurance options beforehand. If you have employer-sponsored health insurance, they should give you information about your plan choices as the renewal approaches. If you provide your own health insurance, you may need to talk to your representative or the health insurance company directly to assess your coverage and check how you might be able to save with a different plan.

Make sure your coverage is serving you well. If you have a high deductible plan, see if you can set up a health savings account. An HSA will allow you to put aside pretax earnings for covered health care costs throughout the year.

No spend days
Consider implementing “no spend days” into your year. Select one day per month (or two if you’re brave) and make it a no spend day. This only works well if you make it non-negotiable! A no spend day means no spur of the moment happy hours, going out to lunch, or engaging in so-called retail therapy.

A no spend day may help you save a little money, but the real gift is what you may learn about your spending habits.

Do some financial goal setting
Whether we really stick to them or not, many of us might be pretty good at setting career goals, family goals, and health and fitness goals. But when it comes to formulating financial goals, some of us might not be so great at that. Still, financial goal setting is essential, because just like anything else, you can’t get there if you’re not sure where you’re going.

Start your financial goal setting by knowing where you want to go. Have some debt you want to pay off? Looking to own a home? Want to retire in the next ten years? Those are great financial goals, but you’ll need a solid strategy to get there.

If you’re having trouble creating a financial strategy, consider working with a qualified financial professional. They can help you draw your financial roadmap.

Clean out your financial closet
Financial tools like budgets, savings strategies, and household expenses need to be revisited. Think of your finances like a closet that should be cleaned out at least once a year. Open it up and take everything out, get rid of what’s no longer serving you, and organize what’s left.

Review your household budget
Take a good look at your household budget. Remember, a budget should be updated as your life changes, so the beginning of a new year is an excellent time to review it. Don’t have a budget? An excellent goal would be to create one! A budget is one of the most useful financial tools available. It’s like an x-ray that reveals your income and spending habits so you can see and track changes over time.

Make this year your financial year
A new year is a great time to do a little financial soul searching. Freshen up your finances, revisit your financial strategies, and greet the new year on solid financial footing.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Before investing or enacting a savings or retirement strategy, seek the advice of a financial professional, accountant, health insurance representative, and/or tax expert to discuss your options.

December 23, 2020

Ways to Curb Holiday Spending

Ways to Curb Holiday Spending

More than 174 million Americans spent an average of $335.47 between Thanksgiving and Cyber Monday this year. And the holidays are just getting started!

You and your wallet don’t have to suffer if you follow these simple ways to curb holiday spending. Well, ways to curb the rest of your holiday spending.

1. Decide beforehand how much you’re going to spend on gifts. Yes: Budget. This is one of the most spoken of tricks to curb spending, but do you actually follow through? Before you ever start your holiday spending, have a firm plan about what you’re willing to spend, and do not go a penny over. If you’re one of the millions mentioned above that already spend a good chunk of cash, be sure to take that into account when you set your new amount. A budget can help get the creative gift-giving juices flowing, too. Remember White Elephant parties where no one could bring a gift that cost over $15? There had to be a little extra thought involved: What would be an unforgettable gift that would fit right into your budget?

2. Dine in. When you’ve budgeted for picking up the tab on a big family meal outing, it can be no sweat! But when you haven’t, the cost can really sneak up on you. Say you venture out with a party of 15 family members. At $10 an entree plus appetizers, desserts, cups of cocoa for the kids, eggnog or something harder for grown ups, and any other extras… Whew, that’s going to be a credit card statement to remember! But what if you instead planned a night in with the whole family? A potluck or pizza night. The warmth and comfort of home. Baking cookies. Still with cups of cocoa and eggnog, but at a fraction of the cost. And with much more comfortable chairs.

3. Stay with relatives when you travel home for the holidays. This practice is standard for some, but if this suggestion makes your face flush and your blood run cold, this may help you change your mind: the average hotel stay costs $127.69 per night. That’s not including taxes and fees. Let’s say you head to the town where you grew up for 4 days and 3 nights. The 3 nights at a hotel are going to cost you…

$127.69 x 3 = $383.07

Add in tax and hotel fees as well as the daily cost of gas to and from the hotel, and the thought of a few nights spent in your childhood bedroom that now has the surprise treadmill-as-a-clothing-rack addition might not be so terrible.

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December 16, 2020

Save Money This Holiday Season

Save Money This Holiday Season

Have you ever looked at your wish list and thought you heard a muffled scream coming from your wallet?

Inevitably, someone you love will wish for a $1,000 t-shirt or a chocolate fountain. And because you love them, you might go with it. But when December 26th rolls around and the ripped up wrapping paper settles, your wallet might feel a little battered and bruised!

The holidays don’t have to derail your financial future. Here are some straightforward tips that will help keep you on track during your annual shopping spree.

Establish a holiday budget
Entering a department store without a cap on how much you’re willing to spend is like walking into a bakery when you’re on a diet. Could you resist picking up a dozen donuts “for the family” or a couple of fresh baked loaves of bread “to make sandwiches later”?

A gift list and realistic budget can cut through the feverish fog of free-for-all shopping and impulse buys. They help you focus as you navigate aisle upon aisle of half-off sales and shiny things you don’t really need but feel like you do.

A budget can also help curtail extravagant gift requests. Telling someone that you want to buy them a gift that’s under $50 can hedge against extravagant designer clothes or the latest technological gadget.

Use cash!
Part of the power of cash is that it works in tandem with your budget. Walking into a store with no cards and just $50 limits your spending and forces you to buy only what you intended.

Cash also reduces your reliance on credit. Unleashing your cards to cover Christmas shopping is an easy way to enter the New Year with extra debt. Plus, the interest payments can add up and make your holiday shopping even more expensive in the long run. Stick with cash and save yourself the headache!

Play Secret Santa
Secret Santa has long been a staple of huge families that don’t have the time or money to get gifts for two parents, nine siblings, the in-laws, and all the cousins, nieces, and nephews. Everyone still gets a gift or two, but it helps the whole family out on their holiday budgets. Here’s how it works!

Have everyone write their names on scraps of paper. Include some highly specific gift ideas with the names. Then, put all the paper into a hat and shake it up. Have the secret Santas choose names from the hat one at a time. You get to buy gifts for ONLY the person you select!

What’s great about Secret Santa is that the mystery of the game offsets the expectation of getting tons of presents. It’s a fun way to save some extra cash!

So let chance decide who’s been naughty and nice, make a budget and list and check them twice, remember that some cash will suffice, and do some holiday shopping that won’t make you think twice (about derailing your financial dreams)!

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December 14, 2020

Good Financial Decisions You Can Make Today

Good Financial Decisions You Can Make Today

Are you afraid to fix your finances?

It’s understandable if you are! Confronting a bad spending habit or debt problem can feel overwhelming and uncomfortable.

But leaving financial issues unresolved is never a good idea. Little annoyances become serious threats if you don’t take initiative to nip them in the bud!

Fortunately, there are dozens of simple financial decisions that you can make today. Here are some of the most important ones!

Save anything you can, no matter how small
If you stash away a single dollar, you’re already ahead of the game. Half of all Americans had zero dollars (you read that correctly) saved before the COVID-19 pandemic started in 2020.¹

Anything that you’ve put away where you can’t spend it is a good thing, even if it’s a dollar. Putting money away regularly is even better. You might literally have only $1 to start. That’s fine! It’s the thought (i.e., habit) that counts, and you’ll already be closer to financial stability than many people in the country.

Don’t gamble
Americans might not be great at saving, but we sure do love playing the lottery! We spend, on average, $1,000 per year on precious tickets and scratch-offs.² Yikes! You’ll probably get struck by lightning or crushed by falling airplane debris before you win a powerball.³

If you don’t play the lottery now, don’t start. If you do play (which should fall in your budget under “fun fund”), write out how much you’ve spent on tickets vs. how much you’ve won. That’s a ratio to always keep in mind!

Eat at home
Regularly eating out can devour your income. We spend about $232 monthly at our favorite restaurants, or about $2,784 annually.⁴ There’s nothing wrong with occasionally enjoying a meal out at your favorite spot. But it becomes a problem when you’re eating out multiple times a week and using fast food as a substitute for cooking for yourself while your budget goals suffer.

So instead of hitting up a drive-thru tonight, go to your local grocery store and buy some fresh ingredients. It doesn’t have to be complicated or fancy. Ground beef and pasta or chicken curry with rice are both great (and tasty) ways to start. Check out some online recipes and try some new dishes!

Just trying these three simple things can put you ahead of the curve. They might seem small, but you’ll take a huge step forward to financial independence. Choose one of these actions and try it out today!

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¹ “Here’s how many Americans have nothing at all in savings,” Ester Bloom, CNBC Make It, Jun 19 2017, https://www.cnbc.com/2017/06/19/heres-how-many-americans-have-nothing-at-all-in-savings.html

² “Americans spend over $1,000 a year on lotto tickets,” Megan Leonhardt, CNBC Make It, Dec 12 2019, https://www.cnbc.com/2019/12/12/americans-spend-over-1000-dollars-a-year-on-lotto-tickets.html

³ “The Lottery: Is It Ever Worth Playing?,” Investopedia, Jan 27, 2020, https://www.investopedia.com/managing-wealth/worth-playing-lottery/

⁴ “Don’t Eat Out as Often,” Trent Hamm, The Simple Dollar, April 13, 2020, https://www.thesimpledollar.com/save-money/dont-eat-out-as-often/#:~:text=What%20kind%20of%20money%20are,Again%2C%20that's%20reasonable.

December 9, 2020

Setting Up Your Reindeers For Success

Setting Up Your Reindeers For Success

Dasher. Dancer. Prancer. Vixen. Comet. Cupid. Donner. Blitzen. (And Rudolph too, of course.)

This is a holiday roll-call that’s instantly recognizable: the reindeer that pull Santa’s magical sleigh. But what if things got so hectic at the North Pole (not a stretch when you’re in charge of delivering presents to every child on Earth), that when it was time to hitch up the reindeer on Christmas Eve, they were all out of order?

Prancer. Cupid. Dasher. Comet. Dancer. Vixen. Blitzen. Donner.

Hmmm, someone’s missing…. what happened to Rudolph? (Looks like he got left behind at the North Pole. In all the hubbub one of Santa’s elves forgot to review the pre-flight checklist.)

Since so much can change during the year from one crazy “Happy Holidays!” to the next, your ducks – or reindeer, that is – may not even be in a row at this point. They could be frolicking unattended in a field somewhere! And who knows where your Rudolph even is.

We can help with that. An annual review of your financial strategy is key to keeping you on track for your unique goals. Lots of things can change over the course of a year, and your strategy could need some reorganizing. I mean, did you hear about everything that changed for Prancer? (What do you call a baby reindeer, anyway?)

Here are some important questions to consider at least once each year (or even more often):

1. Are you on track to meet your savings goals? A well-prepared retirement is a worthy goal. Let’s make sure nothing drove you too far off track this year, and if it did, let’s explore what can be done to get you back on the right path.

2. Do you have the potential for new savings? Did your health improve this year? Did that black mark on your driving record expire? Changes like these have the potential to positively impact your life insurance rate, but we’d need to dig in and find out what kinds of savings might be in store for you.

3. Have your coverage needs increased? Marriage, having a child, or buying a home are all instances in which your life insurance coverage probably should be increased. Have any of these occurred for you over the last year? Have you added the new family member as a beneficiary?

If you haven’t had a chance to review your strategy this year, we can fit one in before Santa shimmies down the chimney. Which of your reindeer do you need to wrangle back into the ranks before the New Year gets going?

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December 7, 2020

How To Save Money On Transportation

How To Save Money On Transportation

Americans drain a huge portion of their income on transportation.

It eats up roughly 16% of our income every month, the majority of which is spent on car purchases ($331 per month), then gas and oil ($176 per month), and then insurance ($81 per month).¹

But what if you made that money work for you?

Here are some simple ways to spend less on getting around, so you can save more for your future!

Drive the speed limit
Speeding is never a good strategy. Zipping around town with your pedal to the floor is dangerous for you and others and realistically doesn’t save you much time.¹ Even worse, speeding can cost you money in the long term.

Obviously, speeding tickets are expensive. They cost about $150 on average.² They also have a nasty habit of increasing insurance premiums by up to 25%.³ But that’s not all. Rapidly accelerating and suddenly stopping reduces the efficiency of your engine and can cost you at the pump as well. Stick to the posted speed limit, accelerate gradually, and drive safely!

DIY the basics
There are plenty of car maintenance basics you can handle from the comfort of your own garage. For instance, a new air filter can boost your gas mileage by up to 10%.⁴ They’re also cheap and usually easy to change out once they get dirty. Even something as simple as inflating your tires can boost your car’s performance.⁵ Remember to do your research and consult your car’s owner manual.

Take the bus
If public transportation is available, use it! Research says trading your car for a bus or train can save you over $10,000 annually.⁶ The cost of tickets and metro passes pales in comparison to car insurance premiums, car maintenance, loans, and gas.

Buy Used
Don’t have access to public transportation? Stick with used cars and drive them as long as you can.

New cars almost always lose value. By the end of their first year, a new ride will shed 20% to 30% of its value. Over 5 years it loses 60% of its value.⁴ Unless you’re restoring a vintage masterpiece or have cash to blow, you’re much better driving an older model of the same car for a fraction of the price.

Remember, how you get around is a practical problem. It doesn’t need to be fancy or flashy when you’re starting your journey towards financial freedom. Utilize local transportation options, buy a clunker that you maintain yourself, and drive the speed limit. Your wallet will thank you in the long term!

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November 25, 2020

Money Black Holes You Should Avoid

Money Black Holes You Should Avoid

It’s true that sometimes you’ve got to spend money to make money.

But there are plenty of things that people spend money on that give them absolutely no return. Some of these are obvious (lottery tickets and ponzi schemes), but others are subtle parts of our lifestyle. Here are three money black holes that you should avoid at all costs!

New Cars
Nothing feels better than driving off the lot with a new set of wheels. Until, that is, you realize that your car’s value has already started plummeting.

The most important rule to remember is that cars are practical tools, not long-term investments. Blowing a huge stack of cash might feel cool, but it’s a huge misallocation of money if you don’t have any to spend. Try to find a used model of the same car that’s five years old or more. Chances are you’ll get many of the same features for a fraction of the cost.

Pricey Phones
It seems like phones are improving every day and in every way. But is your high-end, name brand personal assistant really worth the steep price tag? Phones always decline in value after you buy them; The highest value-retaining phone dropped almost 50% a year after its release.¹ Unless your mobile device is a tool of your trade (i.e., you’re a TikTok influencer), dodge the hype and choose a cheaper or refurbished alternative.

Designer Clothes
New threads are awesome. You’ll never feel more like a hero than when you first hit the town in a freshly fitted suit or a designer t-shirt.

They’re also insanely expensive. Sure, they might not all cost $1,690 like a Tom Ford long sleeve solid T-Shirt. But regularly buying top-of-the-line clothes can burn huge holes in your wallet.

Fortunately, you have some fun alternatives at your fingertips. Off-price retailers might sometimes carry your favorite brands at a fraction of the cost. And thrift stores can be goldmines of high quality finds if you’re adventurous enough to explore them with a friend!

Remember, it’s okay to spend money on cool gadgets and gear if you’ve saved up for them or you’re already financially independent. But if you’re just setting out on your journey, it’s best to practice some discipline and seek out cheaper alternatives to these potentially dangerous money black holes.

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“Depreciation among top smartphone brands compared: Apple’s iPhone tops the list as the least depreciating brand,” Abhin Mahipal, SellCell, Oct 14, 2019, https://www.sellcell.com/blog/depreciation-among-top-smartphone-brands-compared-apples-iphone-tops-the-list-as-the-least-depreciating-brand/#:~:text=Apple%20once%20again%20blows%20the,release%2C%20making%20it%20worth%20%24580.

November 11, 2020

How Much Should You Pay For a Car?

How Much Should You Pay For a Car?

Cars will drain your wealth.

In 2019, Americans were spending about $773.40 per month on their vehicles, or $9,281 annually.¹ That’s like owning a tiny house whose value nosedives the instant you buy it!

That’s not even counting the opportunity cost of throwing that money at a car. How much could that cash grow if it were invested or saved?

That’s why you should follow this simple rule for guarding your wealth from a car.

It’s called the 20/4/10 rule, and it’s composed of three parts. Let’s explore them one by one.

Start with at least a 20% downpayment.

Committing a hefty downpayment to a car curbs how much you’ll lose in interest later down the road. It’s always best to cover as much as you can up front with cash.

Finance the car for no more than 4 years.

How long would you want to dump money into an “investment” that doesn’t grow in value? Not long! Keep your financing period short and sweet and then get back to saving for your future.

Dedicate no more than 10% of your income to car expenses.

Your cash flow is a powerful wealth building tool if it keeps, well, flowing. Don’t let a car divert it somewhere else that it won’t grow and won’t build wealth.

Remember, this is not a bulletproof strategy.

You might be facing substantial mortgage or credit card debt obligations that make it difficult to afford the car you want. It’s always a good idea to meet with a licensed financial professional before you commit to buying a new vehicle.

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November 4, 2020

Disappearing Pensions and Protecting Your Retirement

Disappearing Pensions and Protecting Your Retirement

The old days of working at the same company for 30 years and retiring with a company pension are just about over.

Today, very few companies offer pension plans and those that do are finding those plans in peril.

Most modern workers must learn to plan their retirement without a pension. Luckily, there are still great financial tools for your retirement strategy, and workers who save diligently and prepare well can still look forward to a well-funded retirement.

Disappearing Pensions and the Rise of the 401(k)
A company pension was commonplace a few decades ago. In exchange for hard work and service for somewhere around 30 years, a company would provide you with a guaranteed income stream during your retirement.

Many Americans enjoyed a comfortable and secure retirement with a pension. Coupled with their social security benefits, they lived fairly well in their golden years.

The reason pension plans are going the way of the wind has many factors, including changes in workers’ behavior, longer life expectancies, and rising costs for employers.

A study by the professional services firm Towers Watson found that from 1998 to 2013, the number of Fortune 500 companies offering pension plans dropped 86 percent, from 251 to 34.1 Couple that with the Revenue Act of 1978, which allowed for the creation of 401(k) savings plans, and you’ll have a good view of the modern retirement landscape.

How to Retire Without a Pension
The company pension isn’t coming back, so what can workers do to secure a retirement like their parents and grandparents had?

Here are a few retirement planning tools that every worker can put to good use.

Take Full Advantage of Your Company 401(k) Plan
If your company offers a 401(k) retirement plan, make sure you’re taking full advantage of it. Here are a few ways to maximize your 401(k) plan.

  • Make the match: If your employer offers matching contributions, don’t leave the match on the table. Contribute the required percentage to collect the most you can.
  • Get fully vested: Make sure you are fully vested before you make any employment changes. Your contributions to a 401(k) will always be yours, but to keep 100% of your employer contributions, you must be fully vested.

Open a Roth IRA
A Roth plan is funded with taxed income. The upside is that you won’t pay taxes when you take it out. If your 401(k) contributions are maxed out, a Roth could be a good savings vehicle for you.

Consider an Annuity If you like the idea of a guaranteed income stream, consider an annuity. An annuity is an insurance product, so most of the time it isn’t invested. In exchange for a lump sum of money, an annuity will pay a guaranteed monthly income stream.

Talk to a Trusted Financial Professional
Pensions are all but gone. This means today’s workers must be more involved in how they create a strategy for their retirement. There are many great retirement savings tools. Talk to a trusted financial advisor to understand and learn how you can make sure your retirement income is going to be there when you need it.

This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you.

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“Pensions Are Taking the Long, Lonely Road to Retirement,” Lou Carlozo, U.S. News and World Reports, Jul 20, 2015, https://money.usnews.com/money/personal-finance/mutual-funds/articles/2015/07/20/pensions-are-taking-the-long-lonely-road-to-retirement

October 19, 2020

When Education Isn't Worth It

When Education Isn't Worth It

After room and board, a degree from a private university costs $46,950 per year.¹

A public university charges less than half that, with an annual price tag of $20,770.² That’s over double what it was in 1980 after adjusting for inflation.³ Why the sharp increase? Part of the answer is that demand has skyrocketed over the past 40 years. An information age requires knowledgeable, highly-skilled workers, and getting a degree is the traditional way of meeting those criteria. Rising demand has occurred alongside a steady decline in state funding for public education. One report found that 79% of tuition increases stemmed from such cuts.⁴

But there’s always been an assumption, despite the ballooning costs of higher education, that attending university would be worth it. Afterall, graduates almost always earn more than their peers.⁵ It’s an investment in a future income, right?

The diminishing returns of a degree
But that old model is simplistic at best. College simply doesn’t pay off for some graduates. Data demonstrates that the lowest earning college grads actually earn less than their highschool educated counterparts. ⁶ They actually lost income by going to university! It makes sense when you do the math. Going into crippling debt to get a speech and drama degree only earns you about $28,300 after graduation. ⁷ And the huge supply of highly-educated workers has put pressure on once prosperous careers. For example, more people graduate from expensive law schools in the United States than there are job openings for attorneys. ⁸ Sure, there’s 6-figure potential there if you can land a job, but you’re competing with dozens of other qualified prospects. It’s easy to see why people have become so cynical about higher education.

Simple solutions?
Overall, there are certainly times when a college degree is not worth the time and treasure. Spending 12 years at a private institution to get a doctorate in an obscure field with low pay and a brutal job market? There are probably more profitable ways to spend your time. But overall, there are numerous degrees that may still pay off; the average Bachelor’s degree is worth around $2.8 million over a lifetime. ⁹ But you must plan strategically. It all comes down to how you reduce the cost of your education and maximize your upside potential post-graduation.

Narrow your search to only include public schools in your state. Do as much research on scholarships and apply for as many as possible. Live with your parents to cut down on room and board costs. Take a gap year of work between your bachelors and masters degree. And do some research on job opportunities in the field before you get a diploma. You might decide that going into debt to become a petroleum engineer is a better investment than signing your life away to the humanities!

If you’re a parent, start planning your child’s higher education today. That will involve choosing the right schools and encouraging them to work hard and love learning. But you must also provide them with a steady financial foundation to pursue their dreams. Helping them get a degree debt-free might empower them to study their passions instead of chasing paychecks to fight off loans. There are financial products on the market designed to help you save for your child’s future, no matter what level of education they decide to pursue. Let’s schedule a time to meet and we can discuss your options in detail!

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¹ Hillary Hoffower, “College is more expensive than it’s ever been, and the 5 reasons why suggest it’s only going to get worse,” Business Insider, JunE 26, 2019, https://www.businessinsider.com/why-is-college-so-expensive-2018-4

² Hoffower, “College is more expensive than it’s ever been,” Business Insider

³ Hoffower, “College is more expensive than it’s ever been,” Business Insider

⁴ Abigail Hess, “The cost of college increased by more than 25% in the last 10 years—here’s why,” CNBC, Dec 13 2019, https://www.cnbc.com/2019/12/13/cost-of-college-increased-by-more-than-25percent-in-the-last-10-years.html

⁵ Anthony P. Carnevale, Ban Cheah, Andrew R. Hanson, “The Economic Value Of College Majors: Executive Summary,” Georgetown University Center On Education And The Workforce, 2015, https://cew.georgetown.edu/wp-content/uploads/Exec-Summary-web-B.pdf

⁶ Emma Kerr, “Is College Worth the Cost?,” U.S. News & World Report, June 17, 2019, https://www.usnews.com/education/best-colleges/paying-for-college/articles/2019-06-17/is-college-worth-the-cost

⁷ Alison Doyle, “Average College Graduate Salaries: Expectations vs. Reality,” The Balance, June 6, 2020, https://www.thebalance.com/college-graduate-salaries-expectations-vs-reality-4142305

⁸ “Occupational Outlook Handbook, Lawyers” Bureau Of Labor Statistics, Sept 1, 2020 https://www.bls.gov/ooh/legal/lawyers.htm#tab-6

⁹ Anthony P. Carnevale, Stephen J. Rose and Ban Cheah, “The College Payoff: Education, Occupations, Lifetime Earnings” Georgetown University Center On Education And The Workforce, 2011, https://cew.georgetown.edu/cew-reports/the-college-payoff/

October 7, 2020

How To Talk To Your Spouse About Money

How To Talk To Your Spouse About Money

Family finances isn’t always a fun topic.

But getting in the habit of discussing money early on in your relationship may help pave the way for a smoother future. Whether or not you see eye to eye, learning each other’s spending habits and budgeting styles can help avoid any financial obstacles in the future. Below are some tips on getting started!

Talk about money regularly
One of the best ways to approach a conversation about money is to decide in advance when you’re going to have it, rather than springing it on your spouse out of the blue. Family budgeting means making the time to talk upfront and staying transparent about it on a consistent basis. If you and your spouse choose to set a monthly or annual budget, commit to sitting down and reviewing family expenses at the end of each month to see what worked and what didn’t.

Start a budget
It’s easy to feel overwhelmed if you don’t have a family budget and don’t know where to start. However, with the development of mobile applications and online banking, you can now more easily track your spending habits to find ways to cut unnecessary expenses. For example, if you see that you’re going out to dinner most nights, you can try replacing one or two of those evenings out with a home cooked meal. Small changes to your routine can make saving easier than you might have thought!

Remember your budgeting goals
Budgeting comes down to a simple question—how will these money decisions affect the happiness of my family? For example, you might need to ask yourself if taking an awesome vacation to your favorite theme park will give your family more happiness than fixing your minivan from 2005. Can’t do both? You aren’t necessarily forgoing the vacation to fix your car; instead, you might need to invest in your car now rather than potentially letting a problem worsen. You might then decide to rework your budget to set aside more money every month to take the trip next year.

The key is that talking to your spouse about money may actually become more about talking to them about your goals and family. When you put it that way, it may be a much more productive and rewarding conversation!

Even if you haven’t discussed these things before you walked down the aisle, it’s never too late to sit down with your spouse. This topic will continue over time, so talking about your financials with your partner as you approach new milestones and experience different life events as a family can help you financially prepare for the future.

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August 10, 2020

First time home buyer? Beware hidden expenses.

First time home buyer? Beware hidden expenses.

If you’re getting into the home buying game, chances are you’re feeling a little overwhelmed.

Purchasing a home for the first time is exciting but it can also be very stressful! Anyone who’s been through that process could probably share a story about a surprise hidden expense that came along with their dream home.

Read on to help prepare yourself for some common costs that can pop up unexpectedly when you’re purchasing a home.

Emergency fund
Before we get into the hidden costs of homeownership, let’s talk a little about how to help handle them if and when they do arise. If you’re getting ready to buy a home but don’t have an emergency fund, you may want to strongly consider holding off that purchase, if at all possible, until you do have an emergency fund established. It’s recommended to put aside at least $1,000, but preferably you should save 3-6 months of your expenses, including mortgage payments. An emergency fund is the most fundamental personal finance tool you can have in your toolkit. It’s like the toolbox itself that holds all your other financial tools together. So, before you start home shopping, build your emergency fund.

Homeowners associations
If your dream house happens to be in a neighborhood with a homeowners association (HOA), be prepared to pony up HOA fees each month (some HOA’s may charge these fees every quarter, or even annually). HOA fees may cover costs to maintain neighborhood common areas, such as pools or parks. They may also cover maintenance to your front lawn, and/or snow removal from driveways, etc. Typically, a homeowners association will have a board that enforces any agreed-upon property standards, such as having you remove ivy from your home exterior, or making sure your sidewalk is pressure washed regularly.

If you purchase a home with an HOA, be prepared for the added cost in fees as well as adhering to the rules. You may incur a fine for such things as your grass not being mowed properly, or parking your boat or camper in your yard.

Private Mortgage Insurance (PMI)
PMI comes into play if you can’t make at least a 20% down payment on your new home. If that’s the case, your mortgage lender charges PMI which would kick in to protect them if you default on the loan. It can cost 0.3 to 1.5% of your mortgage. However, once you have 20% equity in the home, you don’t have to pay it anymore. (Note: You may have to proactively call your mortgage company and tell them to remove it.)

Maintenance costs
If you’ve been living the maintenance-free life in an apartment or rental home, the cost of maintaining a house that you own may come as a shock. Even new homes require maintenance – lawn care, pressure washing, clearing rain gutters, painting, etc. There’s always going to be something to upgrade or repair on a home, and many first-time home buyers aren’t prepared for the expense.

A good rule of thumb is to budget about 10 percent of the value of your home for maintenance per year. So, if you buy a $250,000 home, you should prepare for $2,500 a year in maintenance costs.

Home insurance
Be prepared for some sticker shock when purchasing your homeowners’ insurance. Homeowners insurance is typically significantly more expensive than purchasing a renter’s policy. If you live in an area prone to natural disasters, be prepared to pay top rates for homeowners’ insurance. If you live near a body of water, you may also need flood insurance.

Life insurance
Many first-time homebuyers may not give life insurance a thought, but it’s an important factor that can help protect your investment. You probably need life insurance if anyone is depending on your income. Especially if your income helps pay your mortgage every month, you should strongly consider a life insurance policy in case something were to happen to you. This will help ensure that your spouse or significant other can continue to live in your home.

Homebuying is exciting and part of the American dream. But don’t neglect to come back to reality – at least when making financial decisions – so you can budget properly and anticipate any hidden costs. This will help ensure that your first-time home buying experience is a happy one.

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August 5, 2020

Savings accounts vs. CDs – which is better?

Savings accounts vs. CDs – which is better?

Interest rates are on the rise, which might not be great news if you carry revolving debt.

But savings accounts and certificates of deposit (CDs) might start looking more attractive as places to put your money. Currently, both savings accounts and CDs might be good options, so which is better? In large part, whether a savings account or a CD is the better tool for saving depends on your savings goal.

Access to funds Savings accounts offer more flexibility than CDs if you need to withdraw your money. However, be aware that many banks charge a fee if your balance falls below a certain threshold. Some banks don’t have a minimum balance requirement, and some credit unions have minimum balance requirements as low as a penny. It could be worth it to shop around if you think you might need to draw down the account at any moment.

CDs, on the other hand, have a maturity date. If you need access to your funds before the maturity date, which might range from six months to up to five years depending on which CD you choose, expect to sacrifice some interest or pay a penalty. Accessing funds held in a standard CD before its maturity date is called “breaking the CD”.

“Liquid CDs” allow you to withdraw without penalty, but typically pay a lower interest rate than standard CDs.

Interest rates CDs are historically known for paying higher interest rates than savings accounts, but this isn’t always the case. Interest rates for both types of accounts are still hovering near their lows. Depending on your situation, it might be better to choose an account type based on convenience. If interest rates continue upward, CDs may become more attractive.

In a higher interest rate environment, CDs might be a great tool for saving if you know when you’ll need the money. Let’s say you have a bill for college that will be due in thirteen months. If you won’t need the money for anything else in the meantime, a twelve-month CD might be a fit because the CD will mature before the bill is due, so the money can be withdrawn without penalty.

If your goal is to establish an emergency fund, however, a CD might not be the best option because you don’t know when you’re going to need the money. If an emergency comes your way, you won’t want to pay a penalty to access your savings. Keep an eye on current rates, and if CD interest rates start to increase, then you might consider them for longer-term savings if you won’t need the funds until a fixed date in the future. For emergency savings, consider a savings account that keeps your money separate from your checking account but still provides easy access if you need it.

Depending on your situation, a CD or a savings account may be the better fit. Shop around for the best rates you can find, and make sure you understand any penalties or fees you might incur for withdrawing funds.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Before investing or enacting a savings or retirement strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

July 15, 2020

The Stock Market Crash of 1929

The Stock Market Crash of 1929

What comes to mind when you think of The Great Depression?

Maybe images of long unemployment lines and dusty farmers.

But it all started with a massive stock market crash. Here’s a quick history of the Stock Market Crash of 1929.

The Roaring Twenties
The decade leading up to the Great Depression is referred to as the Roaring Twenties. The First World War had just ended and Europe was in shambles. But the United States was poised to become an economic powerhouse. The U.S. economy was exploding in the years before the war and, unlike Europe, had escaped the conflict relatively unscathed. It didn’t take long for the U.S. economy and culture to kick into overdrive.

During the 1920s was the birth of consumer and mass culture. Women now had access to white collar jobs. That meant more money for the family and more freedom to live and dress how they wanted. Affordable cars, courtesy of Henry Ford, meant families could travel and vacation in places that were never before possible. Radios and phonographs meant that popular music (a.k.a., jazz) could reach a wider audience and make big money for artists.

The Big Bubble
But people weren’t content to just spend their money on Model-Ts and the latest Louis Armstrong record. They were buying stocks. And when they ran out of money to invest, they borrowed more. Banks were eager to lend out money to a new generation of investors with stable incomes. One of those things that seemed like a good idea at the time.

By the end of the decade, the American economy was booming. But underneath the surface was a tangle of high debt and wild speculation that the economy would keep on expanding. In reality, the only direction things could go was down.

The Stock Market Crash of 1929
The stock market set a record high in August 1929. Then it began to moderately decline in September. But by the middle of October, a modest slump became a total free fall. Spooked by the cooling market, investors started selling their shares in the millions. The technology of the time was overwhelmed trying to calculate how much was being sold. The massive bubble that had expanded during the roaring twenties was collapsing.

But the catastrophe didn’t end in the stock market. The public panicked. Droves of people started withdrawing money from banks as quickly as they could. But those banks had used that capital to invest in the market. Huge amounts of wealth were wiped out.

Aftermath
This upheaval caused the U.S. economy to take a nosedive. By 1932, stocks were worth only 20% of their 1929 peak.(1) Half of America’s banks were belly up, and nearly 30% of the population was unemployed.(2) Economies around the world were deeply shaken by the collapse of the U.S. market, making the Great Depression a global phenomenon. It would take the massive economic mobilization of World War II to resurrect the U.S. economy.

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July 1, 2020

Considering a home equity loan?

Considering a home equity loan?

Home prices may be leveling off in some areas but they’ve had a healthy recovery nationwide, leading to massive amounts of untapped equity.

According to a recent report, the average homeowner gained nearly $15,000 in equity in the past year and has nearly $115,000 available to draw.[i]

This can be good news if you need to increase your cash flow to pay for a special project or unusual expense.

Home equity risks
It might be obvious, but a home equity loan is secured by your home, based on the equity you’ve built. Your eligibility for a home equity loan involves several factors, but a primary consideration is going to be the difference between your home’s market value and the remaining balance on the mortgage. Keep in mind that missed payments due to a job loss, illness, or another financial setback may put your home at risk from two loans – the original mortgage and the home equity loan. Before you take out this type of loan, make sure you have a solid strategy in place for repayment.

Home equity loan costs
Funds acquired through a home equity loan can feel like found money, but keep in mind that a home equity loan takes an asset and converts it to debt – often for up to 30 years. As such, you’ll be paying certain fees to use the money.

Home equity loans often have closing costs of 2% to 5% of the loan amount.[ii] It might be worth it to shop around, however, to see if you can find a lender who won’t bury you in fees and loan charges. Interest rates may vary depending on your credit rating and other factors, but you can expect to pay about 6% or higher. If you were to borrow $100,000 of the $115,000 the average homeowner now has in equity, the interest costs over 30 years would be $115,000 – $15,000 more than you borrowed. If you can manage a 15-year term instead, this would drop the interest costs down to about $52,000.[iii] Carefully consider what you’ll use the funds to purchase. A new patio addition to your home or a pool with a deck may not add enough value to your home to offset the interest costs.

Tax benefits
Once upon a time, the interest for a home equity loan was tax deductible, much like the interest on a primary mortgage. Now, there are some rules attached to the tax benefit. If you use the loan funds to make improvements to the home you’re borrowing against, you can usually deduct the interest. In the past, the tax benefit didn’t consider how the funds were used.[iv]

Home equity loans can be a powerful financial tool. But as with many tools, it’s important to exercise caution. Before signing on the dotted line, be sure you understand the long-term cost of the loan. With interest rates climbing, a home equity loan isn’t as attractive a source of funding as it once was.

Depending on how the funds are used, a home equity loan can make sense. If you’re buried in high-interest debt, like credit cards, the math might work to your favor. However, if the money is spent on a shiny, red sports car and a trip to Vegas, it might be tough to make a financial argument for that – unless you win big.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

[i] https://www.cnbc.com/2018/07/09/homeowners-sitting-on-record-amount-of-cash-and-not-tapping-it.html
[ii] https://www.lendingtree.com/home/home-equity/home-equity-loan-closing-costs/
[iii] https://www.mortgageloan.com/calculator/loan-line-payment-calculator
[iv] https://www.cnbc.com/2018/05/21/5-things-to-know-before-taking-out-a-home-equity-loan.html

June 24, 2020

Read this before you walk down the aisle

Read this before you walk down the aisle

Don’t let financial trouble ruin your future wedded bliss.

Most newlyweds have a lot to get used to. You may be living together for the first time, spending a lot of time with your new in-laws, and dealing with dual finances. Financial troubles can plague even the most compatible pairs, so read on for some tips on how to get your newlywed finances off to the best possible start.

Talk it out If you haven’t done this already, the time is ripe for a heart to heart talk about what your financial picture is going to look like. This is the time to lay it all out. Not only should you and your fiancé discuss your upcoming combined financial situation, but it can be beneficial to take a deep dive into your past too. Our financial histories and backgrounds can influence current spending and saving habits. Take some time to get to know one another’s history and perspective when it comes to how they think about money, debt, budgeting, etc.

Newlyweds need a budget Everyone needs a budget, but a budget can be particularly helpful for newlyweds. A reasonable, working household budget can go a long way in helping ease financial stress and overcoming challenges. Money differences can be a big cause of marital strife, but a solid, mutually-agreed-upon budget can help avoid potential arguments. A budget will help you manage student loans or new household expenses that must be dealt with. Come up with a budget together and make sure it’s something you both can stick with.

Create financial goals Financial goal setting can actually be fun. True, some goals may not seem all that exciting – like paying off credit cards or student loans. But formulating financial goals is important.

Financial goal setting should start with a conversation with your new fiancé. This is the time to think about your future as a married couple and work out a financial strategy to help make your financial dreams a reality. For example, if you want to buy a house, you’ll need to prepare for that. A good start is to minimize debt and start saving for a down payment.

Maybe you two want to start a business. In that case, your financial goals may include raising capital, establishing business credit, or qualifying for a small business loan.

Face your debt head on It’s not unusual for individuals to start married life facing new debt that came along with their partner – possibly student loans or personal credit card debt. You may also have combined debt if you’re planning on financing your wedding. Maybe you’re going to take your dream honeymoon and put it on a credit card.

Create a strategy to pay off your debt and stick to it. There are two common ways to tackle it – begin with the highest interest rate debt, or begin with the smallest balance. There are many good strategies – the key is to develop one and put it into action.

Invest for the future Part of your financial strategy should include preparing for retirement, even though it might seem light years away now. Make sure you work a retirement strategy into your other financial goals. Take advantage of employer-sponsored retirement accounts and earmark savings for retirement.

Purchase life insurance Life insurance is essential to help ensure your new spouse will be taken care of should you die prematurely. Even though many married couples today are dual earners, there is still a need for life insurance. Ask yourself if your new spouse could afford to pay their living expenses if something happened to you. Consider purchasing a life insurance policy to help cover things like funeral costs, medical expenses, or replacement income for your spouse.

Newlywed finances can be fun Newlywed life is fun and exciting, and finances can be too. Talk deeply and often about finances with your fiancé. Share your dreams and goals so you can create financial habits together that will help you realize them. Here’s to you and many years of wedded bliss!

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June 10, 2020

The Food Waste Epidemic... And What You Can Do About It

The Food Waste Epidemic... And What You Can Do About It

Food waste is a big problem.

Don’t believe me? Just check out these food waste facts:

- The average family throws away around $1,500 of food every year.(1)

- One recent study found that we toss around a third of all consumable food, with wealthy nations being the biggest culprits.(2)

- Cutting back our food waste just 15% would free up enough food to feed 25 million Americans.(3)

Those are incredible numbers. And they touch everything from the poor in other parts of the world to your own wallet! But what can you do? How can you not only combat a global problem but also look out for your own financial needs? Here are a few practical ways to reduce food waste and save some money while you’re at it!

Shop with a plan
The first step to not wasting food is only buying food you plan on eating. That means deciding ahead of time what you want to eat, making a list, and only buying those items at the store. Sure, it’s thrilling to walk down the produce aisle just waiting for an exotic veggie to catch your eye or buying extra meat just in case you want pork chops instead of chicken thighs. But you’ll quickly find that shopping without a strategy can lead to overbuying. This raises the potential that food won’t get prepared and will get thrown out. Always start with a list and shop from there.

Online shopping may help you stay on track with your list—and save you a ton of time! It’s fairly simple these days to log in to your favorite grocery store app, check items off, then click Delivery or Pick-up. (Keep in mind the store may charge a small fee for these services, but if it means not throwing out yet another unopened box of spinach, it might be worth it!)

Store wisely
Even the best planner will overbuy at some point. Maybe there’s a great sale on your kids’ favorite snack crackers, or you want to pick up a couple extra bottles of wine since they’re BOGO. You might stock up on Monday and then remember you have dinner plans with the in-laws on Friday. Don’t panic! Keeping your food from going bad is actually pretty simple. For many perishable items, just take a deep breath, open your freezer, and put your food inside. Close the freezer door. Your food should be safe from going bad until your schedule clears up. Just remember to dethaw your food before you try cooking it!

If you find you’re stocking up often on dry goods, you might want to invest in some quality containers (plastic, glass or metal) to help keep your food fresher, longer.

Reuse (safely)
But what happens if you prepare a ton of food for a meal only to discover that your stomach is smaller than you anticipated? Open up the trash can and dump all of that delicious, edible food?

Never!

The classic leftovers loophole is to put your food in proper containers and leave them in the fridge until you can get back to them in the next day or two. You can also freeze leftovers if you need. But why stop there? Those leftovers are just begging to be transformed into something fresh and delicious! Why not stir fry them with some rice or cook them into a casserole? Get creative and make something new and amazing!

Reducing food waste takes a little work and planning. But with the right attitude, it can be a fun way of contributing to your community, helping the planet, and avoiding a hunger strike by your bank account!

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June 1, 2020

What Are the Effects of Closing a Credit Card?

What Are the Effects of Closing a Credit Card?

Americans owe over $900 billion in credit card debt, and credit card interest rates are on the rise again – now over 15%.

If you’re on a mission to reduce or eliminate your credit card debt, you may decide to just close all your credit cards. However, some of the consequences may not be what you’d expect.

Lingering Effects: The Good and the Bad
Many of us have heard that credit card information stays on your credit report for 7 years. That’s true for negative information, including events as large as a foreclosure. Positive events, however, stay for 10 years. In either case, canceling your credit card now will reduce the credit you have available, but the history – good or bad – will remain on your credit report for years to come.

Times when cancelling a card may be your best bet:

  • A card charges an annual fee. If you’re being charged an annual fee for the privilege of having a credit card, it may be better to cancel the card, particularly if you don’t use the card often or have other options available.
  • Uncontrolled spending. If “retail therapy” is impeding your financial future by creating an ever-growing mountain of debt, it may be best to eliminate the temptation of buying with credit by cutting up those cards.

When You Might Want to Hang Onto a Credit Card:
You may not have known that one aspect your credit score is the age of your accounts. Canceling a much older account in favor of a newer account can leave a dent in your credit score. And canceling the card won’t erase any negative history, so it may be best to hang on to the older credit account as long as there are no costs to the card. Also, the effects of canceling an older account may be larger when you’re younger than if you have a long credit history.

Credit Utilization Affects Your Credit Score
Lenders and credit bureaus also look at credit utilization, which refers to how much of your available credit you’re using. Lower percentages help your credit score, but high utilization can work against you.

For example, if you have $20,000 in credit available and $10,000 in credit card balances, your credit utilization is 50 percent. If you close a credit card that has a credit limit of $5,000, your available credit drops to $15,000, but your credit utilization jumps to 67 percent (if the credit card balances remain unchanged). If you’re carrying high balances, going on a credit card cancelling rampage can have negative effects because your credit utilization can skyrocket.

To sum it all up, if unnecessary spending is out of control or there is a cost to having a particular credit card, it may be best to cancel the card. In other cases, however, it’s often better to just use credit cards occasionally, or if you have an emergency.

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May 27, 2020

How Do Youtubers Make Money?

How Do Youtubers Make Money?

People make tons of money on YouTube.

And a lot of it doesn’t seem to make any sense. The highest paid YouTuber is Ryan Kaji, an eight-year-old child who opens toys and plays with them on camera. He made $26 million from June 1, 2018 to June 1, 2019 (1). The list of highest earning YouTubers includes another child, multiple gamers, and a group of guys who do tricks.

So how do people make money opening toys, playing video games, or doing makeup tutorials? What value are these people bringing to their millions of viewers?

The power of the parasocial
It’s important to understand why people watch YouTube. Part of it is for the occasional funny video. Those are great, but they’re difficult to monetize. What’s become more common is for someone to start a channel dedicated to creating a certain kind of content. It can be anything from music reviews to makeup tutorials to skit comedy. Viewers stumble onto the channel and enjoy what they see, but soon something special starts to happen; they form a type of relationship with the content creator.

This is a well-observed phenomenon called a parasocial interaction. People start to feel like they know someone without ever actually meeting them in real life. You’re not just watching someone play video games or watching the news or listening to a music review. You’re spending time with someone you relate to and think of as a friend, sort of. And that results in racking up consistent viewing hours.

Ads
Roughly 1 billion hours of YouTube videos get watched every single day (2). It’s really the perfect platform for almost anyone trying to advertise their business. Content creators can become YouTube partners once they have a certain number of subscribers and watched hours. This allows them to put ads in their videos with Google Adsense, provided they follow certain guidelines.

On paper, ads don’t pay much; Forbes estimated in 2018 that top YouTube talent could make about $5 per 1,000 views from ads (3). That’s why the key is to create lots of bankable content. Uploading 5 days a week with an average of 100,000 views per video 52 weeks per year could hypothetically earn you $130,000 annually. But there’s more ways to monetize YouTube than ads.

Sponsorships
There are plenty of businesses looking for more personal ways of marketing their products. (Remember that YouTubers can have parasocial relationships with their audiences.) A recommendation from your favorite channel feels like a recommendation from a trusted friend. And brands are willing to pay big dollars to cash in on that opportunity. Compensation for a sponsored video varies on the size of a YouTuber’s audience, but on average it’s around $2,000 per 100,000 subscribers. This is where the numbers start to skyrocket. A single sponsored video per week with 100,000 views can now potentially net you $130,000 annually. At that point, you’re poised to grow your audience and further increase your cash flow.

Realistically, YouTubers make money the same way entertainers have for years. They draw attention to ads and are mouthpieces for brands. The differences are that the barriers to entry are incredibly low and scope of the audience essentially limitless. There’s no doubt that YouTube has revolutionized who gets to shape modern media.

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