How I Earn Extra Income By Renting Out Extra Space

The following is a guest post by Bryn Wied. Bryn is a stay at home mom whose love of travel and budgeting needs only grew when the kids started coming. You can find more thrifty travel parenting stories, ideas and tips at her blog at http://www.ihavekidswilltravel.com/. Enjoy! 

Landlording on the side can be a quite profitable side gig and another way to add a couple hundred extra dollars to the travel fund. The great part it is it can almost border on passive income, meaning it doesn’t take a lot of extra work or time, especially if you can land yourself a full time boarder position. You get to meet new people, make some money from home, and walk away with a couple of good stories and a few lessons learned along the way.

These days, you don’t need to be a millionaire with an entire house to rent out to become a landlord or to make money renting out to borders. Any extra space you may have, from a house, guest cottage, tent, or even an extra couch, can be up for grabs as a potential to bring in some extra cash.

My husband and I first moved across the country in an RV. After upgrading to an apartment, we weren’t able to sell our camper because we still owed money on it from when we first bought it. So we decided to become “landlords” and rent out our extra space instead! Not only did we immediately start making money off of it, but we have since paid it off and now have a steady stream of side income coming in with little to no work involved.

Attracting Business

Utilizing online resources will probably be the best way to attract business when you are first starting out renting. By all means spread the news through word of mouth, because you never know where networking can lead you. But unless you happen to know someone who is actively looking for a place to rent, there are a handful of great websites that are already set in place to help you start renting as soon and hassle free as possible.

I briefly dabbled in airbnb.com. It was very easy to use, and much easier to protect yourself by collecting information ahead of time, secured payments, etc. I also received quite a few inquiries, although the clientele consisted mainly of occasional vacationers who needed a night or two, so if you are looking for a steady renter you should probably try elsewhere. The key is to under price the competition; I consistently do research for similar finds or even just all finds in my area and underbid them by $5. You wouldn’t believe how much business I have attracted simply by underbidding the competition. The same people who look for alternative housing tend to be the same people who think outside the box and are always on the lookout for a deal.

I also used craigslist.com, and have found the most success for long term renters here. The obvious drawback is Craigslist is sketchy. I only did month to month rentals, nothing shorter so as to attract only people who were going to be there for a while and less likely to bounce without paying. I met potential renters with my husband, never alone, and always in a public place first. It helped that the RV we were renting out was stored in a very active and well maintained RV Resort, so there were always lots of people around and a good security system in place. Do what makes sense for you, but just be smart.

We also found a fair amount of business through local church bulletin listings and newsletters. There were a few people who were in need of housing in-between moves or were looking for a place to stay while they looked for more permanent housing in the area.

Safety

Obviously as a stay at home mom, safety of my daughter is a big deal to me. In our specific situation, we didn’t have anyone staying with us, so it wasn’t as if I was sharing my house with someone. We still did face some issues, like renters not paying on time, and the possibility that someone could show up and literally drive off with our RV in the middle of the night and we would have no idea.

The first safety measure that should be put in place is collect money UP FRONT. I know this sounds like Captain Obvious, but we admit we made this mistake, and unfortunately with a long term renter. It took us 2 months to kick him out, and in the end I still don’t think we were ever fully paid. He was also an incredibly sweet guy, which only made it more awkward. My advice would be to avoid that whole situation and just get paid up front and on time.

A great way to make sure this happens, and another step to have in place to protect yourself, is get something in writing. You don’t have to have a law degree to write up a very functional agreement or contract that will protect you in the case of a misunderstanding down the road. Be sure to include:

• Everyone’s name
• Date
• How long the agreement is valid for
• When rent is due and what sort of fine/termination is allowed should rent not be paid on time
• What your responsibilities as landlords are (who pays utilities? What if something breaks?) and what is the responsibility of the tenant
• Any safety deposits needed and their return time
• Move out date

You can add additional information if needed. The important part is to print it out, and have everyone involved sign and date it. Make sure to make 2 copies, one for you and one for the tenant.

Another good idea if you are renting out a larger space such as a guest house, room or RV is to take pictures of the area before your rent it out. That where there is no confusion as to who is responsible for the stained carpet or the broken mirror.

Live Long and Prosper

Hopefully none of the above scares you away from renting out extra space for supplemental income. As a stay at home mom, I can take care of collecting rent and do nothing else while still earning an extra $300-500 a month consistently for the past year and a half. That’s around $4000 a year of extra income we get to use traveling! If we ever get sick of renting, we can turn around and sell the camper for an extra couple thousand. As a bonus, our current renters have become great friends and now are permanently renting the RV.

***Photo courtesy of http://www.flickr.com/photos/106574022@N04/11415400896/in/

The Pitfalls of Bad Credit

More and more in today’s economy, we hear of people and businesses alike getting behind on their loans and bills, and even having to default / go bankrupt. This obviously can be devastating for a person’s credit rating, report, and score.

Along with the psychological impact, there are some pretty detrimental material ramifications of having bad credit as well. Let’s walk through a couple of these common pitfalls today to see what sort of benefits can come from potentially repairing your credit.

1. Employment

Back in November of 2014, I started a new job after finishing graduate school. After going through the interview process and accepting the job offer, one of the final paperwork items I had to fill out was a release for the company to perform a background and credit search, if they desired.

Since most jobs in today’s society involve some sort of interaction with monetary / budget management, you can imagine that if an employer pulled your credit report and saw a bunch of overdue loan and bill payments and delinquent accounts, it just might jeopardize your job chances.

2. Mortgage Approval

On December 30th, 2014, my wife and I closed on a single family home purchase in Colorado. Prior to even really talking seriously with a real estate agent, the first step was that he connected us with a mortgage lender to secure home loan pre-approval. During this process, our ability and history to repay debts, credit card balances, and utility bills was scrutinized.

Along with the ability to actually secure a home loan in the first place, having bad credit history can drive up your interest rate and/or add mortgage origination points (to mitigate the bank’s risk), which can increase the cost of your home ownership.

3. Having Your Dream Business Flourish

Do you have a dream of owning your own business? If so, having bad credit can be a pitfall to this plan as well.

First, unless you are planning to open up a virtual business, most brick-and-mortar businesses require a fair amount of capital investment in the first phase of operation. If this capital investment exceeds the amount you can personally round up from friends, family, and investors, you will probably be looking at obtaining a business loan from a bank or grant from a small business association. Both of these routes will involve a thorough investigation of your credit history, and therefore, having bad credit can be quite detrimental.

Next, if certain contract businesses, clients can demand the right to perform a background check on you and your company. If this happens, you want to make sure your credit history is positive.

So there we have it – three fairly significant pitfalls of having bad credit. If you feel like any of these may be important to you, repairing your credit may be a very logical, important, and beneficial next step. Good luck!

***Photo courtesy of https://www.flickr.com/photos/jakerust/16610023059/in/

4 Solid Reasons Why You and Your Spouse Should Share One Bank Account

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

Throughout the past couple years of chatting with various couples about money, I have noticed a shift from the words, “our money” to “his money” and “her money”. It seems that fewer and fewer people are combining their bank accounts and have instead decided to keep them separate.

When you stop and think about, it kind of makes sense I guess. People are waiting longer to get married and have therefore become self-reliant for many years. And, many more people are living together before marriage (with separate accounts still) and just continue to live the same way even after they do eventually get hitched. One of them covers the mortgage, the other pays for groceries, and when they go out to eat it might be a toss-up for who covers the bill. This method seems to work well for some, but I’m still a promoter of shared finances.

Why I Believe in a Joint Bank Account

When I was growing up, I remember my parents sitting down at the table once a month to do two things. One was to type up sales receipts for the cars my Dad had sold (he owned a car dealership as his side-business), and the other was to pay the bills and balance the checkbook. They held the belief that since they were married, they therefore agreed to share their possessions, which simply meant to place both of their incomes into the same account. After viewing this first-hand as a child, I have seen four positive outcomes stem from their joint account.

1) It Encourages a Common Goal

When people have separate accounts, it is less likely that the two individuals share a common goal. If I would split them up and take them into separate rooms to ask the question, “What are your goals 10 years from now? How about 30 years from now?” it is very unlikely that they would provide the same answer.

A shared account encourages a common goal between the two individuals. If they commonly spend all of their money each month and contribute nothing to savings, they will probably ask each other the question, “What are we doing? And why are we not saving for something in the future?” In other words, “What are our goals?” As they both view the account, it is more likely that they would come together and spend (or rather, not spend) with a purpose for the future.

2) It Yields Built-In Accountability

If I were married (it’s happening soon by the way) and my spouse and I decided to try and save $300 each month, but instead, I had a bad habit of spending this money on random magazines, candy, and coffee, then this would be a serious problem. The joint account would probably make me think twice about spending the money on pointless things, and would instead provide me with a new accountability partner, my spouse. This might be a nuisance in the present, but it will create a much brighter future.

3) His/Her Money Becomes “Our” Money

Adults are sounding more and more selfish these days. Wives want more appealing décor in their house and men want new fishing rods, but each of them say, “I’m not wasting my money on that purchase. Why don’t you use your money?” When you spoke your vows at the wedding, didn’t you both agree that what’s yours is hers and hers is yours? Then what’s this “my money” and “your money” business? Simply put, it’s just a whole bunch of childishness.

If, however, you both have a mindset of that pot of money being both of yours, then you’ll have to come together and decide what’s stupid for your future and what’s smart. If you both can’t come together on a decision, then you don’t purchase the item. Simple as that. Let me tell you, stupid purchases occur much less frequently this way.

4) No Hidden Purchases

When you’re married to someone, there should be no secrets. No hidden relationships, no hidden actions, and no hidden purchases. If you’re trying to hide something, then you probably shouldn’t be doing it in the first place. Joint accounts leave everything out in the open, which will encourage each of you to stay on the straight and narrow and if that happens, it should bring you both closer together.

Many couples say that they fight much less frequently since they separated their finances, and I believe them. The only problem is that instead of being one in their marriage, they have now made themselves into two individuals that live under the same roof. Sure, there are less fights, but I believe that separate accounts are actually distancing both of you from one another. If you want to truly care for each other and build up your common goals, then I think a joint account is the ticket to get there.

What do you think? Are you an advocate of a joint bank account?

 Share your experiences by commenting below!

***Photo courtesy of https://www.flickr.com/photos/exalthim/3800467037/in/

What to Know Before Buying Your First Investment Property

The following is a guest post. Enjoy! 

Investing in your first property is a big financial step to take. Depending on whether things go well or not, you could find yourself with a new passion for real estate investment. With something so important, it’s crucial to do as much research and absorb as much information as possible before committing to your chosen property. Here are some of the key things you should know before you even think about making a purchase.

Your Ideal Price Range

Choosing a property above your financial capacity will obviously have negative repercussions, but settling for one below your price range isn’t ideal either because you’ll be limiting your returns. Something you should do long before you start looking at potential properties is to analyse your finances and work out the appropriate price bracket for your investment to fall into. Of course, this will usually be based on what you can afford as a deposit and what you can manage to repay over time; thanks to investment loans, you can invest in a property long before you’ve accumulated enough funds to pay for it outright.

The Area

It’s important to have some basic knowledge of the area where the property you’re investing in resides. This will be easier if you’re investing close to home, but there are plenty of ways to gather information about a locale further abroad – start online, order some market reports, and make some phone calls to relevant agencies in the area. Having some fundamental knowledge of the city or town’s recent and likely future market trends will help you ensure that you end up paying the correct amount for your property. It will also help you establish whether this location is actually ideal for your investment.

Your Endgame

The exact importance of the location will depend heavily on your endgame, i.e. where you want this investment to eventually lead. If your goal is to resell, the area you choose will still influence the kind of tenants you attract and the appropriate amount of rent to charge, though the likely resale value will be a larger factor. If your plan is to one day move into your investment property, then the location becomes all the more significant. If this is the case, you’ll want to take extra care when researching both the neighborhood and the property itself to ensure that they will be suited to your needs and desires in the future.

The Kind of Tenants You Would Prefer

If you have a preference for a particular type of tenant, you need to consider this when looking at potential properties. A small apartment in the city won’t appeal to families, while a spacious house in the outer suburbs probably won’t have university students applying for the lease. So, if you have a specific image in mind of who you’d like to rent your property, choose accordingly.

Buying your first investment property is a big decision. There are lots of factors to consider and plenty of research to be conducted. But your financial future – and your future in general – could depend heavily on the outcome of this purchase, so it’s crucial that you don’t try to take any shortcuts. Investing wisely and carefully should leave you with a positive result and perhaps even put you in the position to invest in another property.

How Can You Reduce Financial Stress?

Recently, I found out that April is Stress Awareness Month. I was very pleased to find out about this Awareness Month, as in today’s society, it seems that we are becoming increasingly connected and pulled in many different directions at one time.

Going along with this, I figured it would only be fitting to take a moment (on this personal finance blog) and share the ways/techniques that I personally use to manage my financial stress.

Overall, I believe that the 3 most effective ways that I am able to reduce financial stress are: 1) having an emergency fund savings account, 2) automating my finances, and 3) using a passive investing strategy.

Let’s walk through each of these one by one….

Emergency Fund

As I’ve covered previously, an emergency fund is a very stable, liquid, accessible, and/or cash account in which you place anywhere from 6-18 months’ (depending on your situation) worth of expenses. These funds can then be drawn upon in emergencies, such as losing a job or becoming injured.

By placing the emergency fund savings process as a very high financial priority and accumulating a substantial balance in this account, it can very effectively reduce your financial stress.

An important consideration in order for an emergency fund to reduce your financial stress is deciding ‘where’ this account should be located. As mentioned, you want your emergency fund account to be very accessible (liquid) and sheltered from financial fluctuations of the stock market. Online money market savings accounts are my favorite vehicle of choice for an emergency fund, as they offer these features. In today’s competitive banking environment, there are many options to choose from.

Automating My Finances

My second favorite way to manage financial stress is to automate my finances as much as possible. Since most financial transactions can take place electronically these days, it has become very easy to do this.

So, what exactly does automating your finances mean? Basically, it entails the following:

• Scheduling auto-payments for your credit card bills each month.
• Scheduling auto-payments for your utility, TV, internet, and other bills each month.
• Scheduling auto-payments for your rent or mortgage.
• Scheduling automatic transfers for your savings goals as well. This includes setting up automatic transfers from your checking account to your emergency and other savings accounts, IRAs, and 401ks.

The idea behind automating your finances is that since we are all human, we are bound to make mistakes and forget to pay bills and/or save for our goals at some point in our lives. By taking the human factor out of the equation and not having to think about things, I find that it not only helps me reduce my financial stress, but also helps me better achieve my financial goals.

With all of this automation, you still want to make a note for yourself to check your accounts at least once a month to make sure everything is functioning properly.

Passive Investing / Asset Allocation Strategy

The third favorite way that I reduce financial stress is to employ a passive investing strategy with an appropriately selected asset allocation.

First, let’s discuss the asset allocation portion of this method. What this means is that I select a pre-defined split between equity (stocks, which have more risk and more return) and fixed income (more-stable) investments to maintain on a month to month basis. I have selected a 70% equity / 30 % fixed income asset allocation because I figured that I would be able to lose ~30% in portfolio value in one year, given my risk tolerance and personal situation. In my experience, most people are overexposed to equity, and hence overexposed to risk, which will increase financial stress greatly when the markets are experiencing a downturn.

Next, I reduce financial stress by investing in passively managed index mutual funds. These are mutual funds which instead of attempting to beat the stock market indices, simply mimics the performance of the stock market. By employing this strategy, it makes it so that I do not have to constantly monitor my portfolio and worry if I am investing in the ‘correct’ stocks.

How about you all? How do you find is best to reduce your financial stress?

Share your experiences by commenting below!

***Image courtesy of https://www.flickr.com/photos/83633410@N07/7658305438

Why Stocks Are Your Best Inflation Hedge

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

Any talk about the effects of inflation on investing will move into the realm of precious metals at some point in the discussion. And while precious metals do have a history of responding favorably to periods of high inflation, they tend to languish or even fall during times of low-inflation.

But, if we look at the long-term trend, stocks are your best inflation hedge.

Though that may seem counter-intuitive, there’s plenty of evidence to support the case for stocks as the best long-term inflation hedge.

Stocks Do Well In the Low Inflation Environment That’s More Typical

Over the past 100 years they have been a couple of periods that involved relatively high inflation. Those occurred in the early 1940’s (due to World War II), and the entire decade of the 1970’s. Apart from those two periods, inflation has been pretty tame for the other 85 years.

That’s not a small point, either. When we look at the effects of inflation, we have to consider it in terms of what it does to money that is invested over decades, and not just years. And in most of the low inflationary years, stocks outperformed precious metals.

The best example has been the performance of stocks since the early 1980’s. Inflation has been tame during the entire period, staying mainly below 5% and usually much lower. According to the Bureau of Labor Statistics Inflation Calculator general price levels have increased by about 250% since 1982. But during that time frame, stocks have risen from a low of Dow 800, to the current level of nearly 18,000. That’s an increase of more than 2,200%.

That performance has more than overcome the stagnation that stocks experienced between 1970 and 1982. If you were a young person saving and investing for retirement since and during the 1970’s and early 1980’s, you would have done much better on the inflation front investing in stocks than just about any other asset class.

Commodities Aren’t the Inflation Hedges That We Assume Them to Be

There’s no question that commodities performed very well during the 1970’s, certainly much better than stocks. But looking at the same time frame used above, gold averaged roughly $400 an ounce in 1982. It currently trades at about $1,200, which is to say that it’s 300% higher than it was in 1982.

Now to be sure, gold has acted as a true inflation hedge, increasing by 300% while general price levels increased by 250%. But it didn’t do much more than keep up. Compare gold’s 300% price increase with the 2,200% increase in stocks (as measured by the Dow), and decide which has been the better inflation hedge.

We have to remember that inflation isn’t marked just by the times when it is particularly high. When you’re investing for the long run, you have to account for inflation over the course of your lifetime. When viewed from that angle, stocks are the better inflation hedge.

Bonds Are a Guaranteed Money Loser to Inflation

Whether stocks or commodities are a better inflation hedge, one thing is certain: bonds are an inflation train wreck. Probably no investment security is more vulnerable to inflation than bonds.

Here’s why…

Bonds are priced at a specific amount, say $1,000. They also carry a fixed interest rate, say 3%. If inflation rises and causes bond rates to rise to 4%, the value of the bond will fall. The reason that it will fall is so that its price drops low enough that the yield on its market value will produce a 4% return to match market level returns.

If you bought a 30 year bond for $1,000 at 3% ($30 per year), and rates increased to 4%, the value of the bond would have to fall to $750 to support a 4% yield ($30 divided by $750 equals 4%).

Inflation is the primary factor driving higher interest rates. When inflation rises, so do interest rates – and that causes bond prices fall.

Translation: Bonds are not an inflation hedge. They’re more of a classic inflation victim.

Real Estate is a Good Inflation Hedge – But Stocks are Easier

Much like stocks, real estate can be an excellent inflation hedge. This is true not the least of which because it can be easily leveraged For example, if you can buy a property for $200,000 with a 20% down payment (plus a $160,000 mortgage), and the value of the house doubles to $400,000 in 20 years, you will get a 600% return on your investment.

You put $40,000 down on the property ($200,000 X 20%), and you’re equity grows from $40,000 to $240,000 (the $400,000 current value, less the original mortgage of $160,000). The calculation becomes even more impressive if you factor in the pay down on your mortgage.

So far so good. But real estate is not necessarily an easy investment, and that’s true whether it is an investment property or the home that you live in. You will pay real estate taxes, insurance, and utilities, as well as the costs to maintain, repair, and upgrade the property over those 20 years.

None of those complications exist with stocks. You invest your money with only very small costs (transaction fees and investment expenses), and because your investments are highly liquid, you can move in and out of them virtually any time that you want.

Real estate may be as effective as stocks as an inflation hedge over the long-term, but stocks are the easier solution. This is even more true when you consider that real estate goes through periods of illiquidity, when it is close to impossible to sell out at any price. That’s never true for stocks, or at least hasn’t been up to this point.

The Track Record of Stocks Speaks for Itself

When you look at the track record of stocks, it’s hard to argue against them on any level. The historic rate of return on stocks as measured by the S&P 500 is somewhere between 9.60% (geometric) and 11.53% (arithmetic) for the period from 1928 through 2014. Either is an impressive number, especially when you consider that it covers 86 years.

That time frame includes periods of growth, inflation, depression (deflation), wars and political crises. That’s the precise type of investment that you want to be in for the long-term, and certainly for retirement planning.

Different Stocks for Different Inflationary Environments

There’s one other aspect of stocks in regard to inflation that doesn’t get much coverage. Unlike most other investments, stocks are highly segmented. That means that the potential exists to hold stocks even during periods of high inflation, and still come out ahead.

You can do this by investing a larger percentage of your portfolio into sectors that specifically benefit from inflation. This can include stocks and funds that are invested in precious metals, energy, food, and other commodities. This kind of investment strategy can enable you to continue earning outsized returns even during a period of inflation that may not be beneficial to the stock market in general.

So in the event that high inflation returns, you don’t need to dump your stocks – you’ll just have to shift the allocations to take advantage of the new trend.

How about you all? What do you utilize in your investing portfolio for hedging your bets against inflation?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/101332430@N03/9681099086/in/

Are You Becoming Wealthy, What’s Next?

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

Today, it seems that everyone’s ambition is to go on expensive trips, acquire a bunch of stuff, and live in a huge house. After all, that’s what our friends and family are doing as well.

But, is this really the best way to live? Is this the way to wealth? If you ask me, I say certainly not!

The Road to True Wealth

For those that measure wealth with their stuff, they will likely have a bunch of toys, but will always be worried about paying all the bills when the end of the month comes. This should be obvious to you that this is not the road to true wealth.

So what does wealth really mean? It comes as a surprise to many, but wealth is not just measured in dollars, but is also measured in time and relationships. But, without first taking care of the dollars side, the two other areas of wealth can be difficult to attain. For example, I know of a few doctors that have million dollar houses and nice cars in the driveway, but in order to fund their lifestyle they must continue to work their butts off, day in and day out. By spending all of their time at work, they clearly aren’t enjoying a wealthy lifestyle of extra time. And, their relationships with their spouse, kids, and friends probably aren’t the best either.

So how can someone become truly wealthy, with money, time, and great relationships? Well, in order to have true wealth, it is often best to start by getting your finances in order.

Fixing Your Financials – 7 Steps

It’s pretty hard for me to hide, and you probably suspected this already, but I am a huge Dave Ramsey fan. On his site and in many of his books, he mentions seven steps to becoming getting out of debt and becoming rich, and I have not found any major holes in his teaching yet. In order to increase your cash flow situation, one should follow the below seven steps:

1) Set up a $1,000 Emergency Fund

2) Pay off all consumer debt with the snowball method

3) Save up a large emergency fund with 3-6 months of expenses

4) Put 15% of your income into investments

5) Save up for your children’s education

6) Pay off your mortgage

7) Become rich

I have personally gone through all seven steps of this plan and it flat out works to become rich! But, as we have discussed before, the financial aspect is only a portion of what it takes to be truly wealthy.

Building Relationships and Freeing Up Time

Money without time or friends is a pretty huge bummer and doesn’t qualify as a wealthy lifestyle in my book. Money should be earned in order to grow a more passive income – either with the stock market or with a side business. By forgoing an immediate possession or two (which will only hurt your net worth as it drops in value), your money can grow even more money, which will allow you to decrease your work without sacrificing a sizable income. With this mentality, time can be freed up, which will then add to your overall wealth.

The relationship side of the equation is a little more difficult because we are not all blessed with the gift of communication. And honestly, some of us think that a life in the woods away from people might be more fitting for us. But, we were not created to be hermits. Instead, we were meant to befriend and love others, to be selfless and give of ourselves. And somehow, this adds to our happiness and wealth in this world (I can’t explain it, but personal experience proves this to be true).

So what do you think the main ingredient of relationships is? You got it: giving. It may seem oxymoronic, but in order to be truly wealthy, we must learn how to give, both financially and physically. By giving of ourselves and our blessings, others may benefit and reciprocate that gift either back to you or to someone else. And, when you take your focus off of yourself for just one minute you can begin to understand how much you really have to be thankful for.

How about you all? What do you think about this equation for wealth? Do you agree with it?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/42931449@N07/5299199423/

What You Need To Know Before Switching Mobile Phone Carriers

The following post is by MPFJ staff writer Travis.  Travis is a customer blogger for Care One Debt Relief Services, and also appears weekly at Enemy of Debt.  Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he’s learned along the way. As a father and husband he provides a unique perspective on balancing debt, finances, and family.

I could tell by the tone of their Facebook status that my friends were frustrated. They had used Sprint as their cell phone carrier for a couple of years, and frankly were not happy with the service they had received from them.  When their contract was up, they went shopping for a new carrier.  While Sprint did honor the request to unlock their phones, they found that leaving Sprint might not quite be as easy as they had thought.

Do You Speak My Language?

There are actually two different types of mobile phone networks used in the United States. Global Systems For Mobile Communication (GSM) networks are used by T-Mobile and AT&T, while Code Division Multiple Access (CDMA) network are used by Sprint and Verizon.  Mobile phones manufactured for specific carriers identical at their core, but a special smart card is then added that enables the phone to talk to the type of network used by a specific carrier.

It is possible to use a GSM enabled phone with any carrier that uses a GSM based network.  Similarly, it is possible to use a CDMA enabled phone with any carrier that uses a CDMA based network. However, since the two networks essentially speak different languages, you cannot take a GSM phone and use it with a CDMA network carrier.

For example, my friends were seriously contemplating switching to T-Mobile. Unfortunately, even though Sprint unlocked their phones, since their phones speak CDMA, they would not work on T-Mobile’s GSM based network.

There are a select few phone models that have the ability to talk to both network types.  Some Blackberry phones, as well as the Apple iPhone 4s were dual mode phones.  For phones that can cost over $500, it likely isn’t cost effective to put hardware into a phone that may never be used.

Carriers Want You To Think You NEED Their Phone

While it is possible to take a phone from one carrier, and use it with another carrier that uses the same type of network, that doesn’t mean they make it easy for you.  I received a T-Mobile Galaxy S4 as part of a blogging promotion to try out Walmart Family Mobile, which runs on the T-Mobile GSM network.  When the blogging opportunity was over, I wanted to take my new phone and use it with AT&T, with whom I was under contract at the time. I got the phone unlocked, and slid my SIM card into the phone.  I was instantly able to make calls,  but there were a few functions that didn’t work:

• No Data: I couldn’t access the internet at all through the AT&T network, which was disappointing since the Galaxy had the largest and nicest screen of any mobile phone I had ever owned.  AT&T support was unable to help me, citing the standard line that they do not guarantee that a non AT&T phone would work on their network.  Despite their unhelpfulness, I found that I simply had to reconfigure the phone to use AT&T’s data server.

• No MMS Messaging: I could receive normal text messages, but multi-media messages could not be sent or received. Another call to AT&T, and another claim that it was likely just a limitation of the phone since it was not made specifically for the AT&T network.  This issue took a bit more searching, but buried deep in an Android forum I found network access point settings that finally made my phone fully functional.

What This Means To Consumers

Carriers obviously want to make it as unappealing as possible to leave them for another carrier.  They used to force you to sign a contract. Once you signed it, you were theirs for two years unless you wanted to pay a hefty early termination fee. Now that the new rage is the no contract service, what power to carriers have over you to make you stay?  Given the information I’ve provided, the answer is obvious; the price of a new phone.

Let’s revisit my friends that want to switch carriers, who really have two options:

1. Move To Another CDMA network carrier: If they take this route, they could defer the cost of a new phone until they were ready and willing to spend the money.  That assumes that their new carrier will aid them in getting their old phones running seamlessly with their new carrier.  Which is a huge IF.

2. Move to a GSM network carrier: This decision will render their current phones useless. To purchase new smart phones for each member of a family of four would be a hefty price tag.  That’s certainly not a decision to take lightly.

After careful consideration, our friends decided to jump ship and sign on with a GSM carrier which required them to buy four new phones.  For them it wasn’t entirely about cost as it was about service coverage and reputation of better customer service also played a huge role in their decision.

It’s easy to jump to a different mobile phone carrier because of a promotion,or because they can offer a better monthly plan for a lower price.  However, the monthly plan price isn’t the only thing that requires consideration.  The ability to use your existing phone with your new carrier, or the need to buy a new phone could be a major factor in whether switching carriers is worth it.

How about you readers?  Did you know there were different, non-compatible mobile phone networks? Have you ever switched carriers for a cheaper plan only to find out you had to shell out your hard earned cash because you needed to buy a new phone?

 Share your experiences by commenting below! 

Is It Time to Take a Serious Look at Energy Stocks?

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

Oil prices have been collapsing since the middle of 2014. There have been front page stories, and widespread speculations, that the price is heading still lower. But in an ironic twist, that applies to oil in particular – and energy in general – the sector may be worthy of buying into. It really is time to take a serious look at energy stocks.

The Time to Buy is When the “Blood is Running in the Streets”

That saying has been credited to Baron Rothschild (of the Rothschild family financial dynasty), and it has been a mantra on Wall Street since he was first believed to have said it back in 1871. As gruesome as it sounds, it makes perfect sense. It’s a crude version of another popular investment saying, buy when everyone else is selling, and sell what everyone else is buying. Or more simply buy low, sell high.

Right now the energy sector has entered a low phase when the rest of the stock market has pushed forward into still higher record territory. There are few sectors in the market where a buying opportunity has become more obvious than is the case right now with energy.

After a gradual multi-year increase in the price of oil, the price has collapsed since June of last year. That has largely flushed the speculators out of the energy sector, leaving prices based on the fundamentals of the underlying companies. If you are a value investor, this is exactly the type of investments you’ll be looking for.

An industry-wide purge like what energy is now seeing presents a sector-wide buying opportunity that comes along no more than once in a decade.

Oil Has Always been Volatile

This is an excellent time to remember that the price of oil has always been volatile. This
Crude Oil Price History Chart proves the point. The trend lines on this chart look like the teeth of a very jagged saw. There are times of price spikes, followed by a steep declines, which are then followed by a more steady recovery in price, sometimes to new record highs.

The most recent spike pattern took place in 2008, which isn’t that long ago. In June of that year, the price of oil people up over $133 a barrel. But by December of the same year, it was down to $41. But then notice that by May of 2011 – less than 2.5 years later – the price of oil climbed back to over $110. From there it traded in a narrow range of between $88 and $106 a barrel until June of 2014. It has since fallen to the $50 range and even lower.

If we look at the historic performance of oil, it’s clear that it is currently trading near a major multi-year low. Yes, it can certainly continue falling from where it is right now. But the likelihood of some sort of significant price recovery – one of several years in duration – is much more likely.

The Industry has been Purged – There are Deals Everywhere

As measured by the Dow Jones Industrial Average, general stock prices are up roughly 5% since the middle of 2014. However, in looking at the performance of the Vanguard Energy Index Fund (VENAX), energy related investments are down about 20% in the same space of time.

The entire energy investment spectrum has been purged by the dramatic fall in oil prices. This has created investment opportunities of the sort that come along only about once in a decade.

With the rest of the market being richly priced, energy is one of the few major sectors that represents a buying opportunity in the current market environment. And since we know that oil prices will bounce back – sooner or later – it’s one step short of guaranteed play, at least for the long-term investor.

The World Still Can’t Live Without Oil

There’s always the possibility that oil prices could fall even more than they have so far. A deep global recession can depress the demand for oil, that will cause prices to continue falling. There’s also the possibility that one or more cash dependent oil producing nations could ramp up production in an attempt to gain greater market share.

But there’s also at least an equal possibility that political instability in one or more oil rich countries could take most or even all of that country’s production off-line. If that were to happen, the price of oil would spike immediately. And an improvement in the global economy would have a similar effect, though it would happen more slowly.

The bottom line is that the world still cannot live without oil. All of the technological changes that have occurred in the past 40 years have not altered that fact. Oil is a basic economic and industrial commodity and it’s here to stay. Anytime the price of a base commodity tanks, that’s a sign to begin looking for investment opportunities in that sector.

Energy May be An Excellent Diversification Against a General Market Decline

Commodities have often been viewed as a counter play on stocks. Though precious metals – gold in particular – get most of the attention in this area, energy is probably even more significant.

Commodities are seen as more valuable at times when paper assets are losing their value. That certainly would be the case in a general decline in the stock markets. Market disruptions cause money to move from one asset class to another. And in general, money tends to move into underperforming assets during such a decline.

Given that energy is an underperforming asset during an otherwise strong market, it could become part of a general flight to safety in a major market decline. That can make it an excellent diversification against a disruption in the stock market.

That doesn’t mean that it’s time to go headlong into energy-related investments. But this is clearly a time to begin investigating the possibilities in the sector. The speculation has largely been driven out of energy investments, providing a clearer picture of the strength of the underlying companies. It’s likely that there are some investment candidates out there that will give you continued bullish returns even when the overall market turns bearish.

How about you all? Do you currently invest in energy stocks/ETFs/mutual funds? Why or why not?

Share your experiences by commenting below! 

Are the Low Costs of Oil Good or Bad for the United States?

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog,  LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

The price of oil has made a recent comeback from its historic lows, but oil is still far cheaper than what it used to be just a year ago. The stock analysts certainly think it’s a big deal, as we hear about the rise and fall of oil on a daily basis, but what is the true effect on the price of oil? Should we be rooting for a continued low price or a high one? Which one is best for our long-term success?

Source: Nasdaq.com

The Low Cost of Oil For the Consumer

To be completely honest, I have been loving the money savings at the pump each time I roll up. Gas was not really that big of an issue for me before, since I drive a gas-sipping Honda Civic and my drive to work is only about 8 miles, but filling my tank for less than $20 has made me exceptionally happy during these fall and winter months of 2014.

I dare say that you have had the same experience as well. According to the experts, the average American citizen has saved over $1,800 at the pump last year, which is like putting that cash money directly into your pocket. Now THAT’s a nice chunk of change! It is pretty safe to say that this decrease in the price of oil has been an excellent benefit for the consumers.

The Low Cost of Oil for the United States

What is good for the consumer is not necessarily good for the United States as a whole. First of all, the United States is the largest producer of oil in the world (seems strange right? But totally true!), so the decrease in oil prices are hindering the domestic oil production companies. Beyond this though, stems an even larger problem for the United States that many are not yet seeing.

While I don’t want to get too technical in this post, I want to help you understand the long-term impacts of this extreme drop in oil prices. We have already established that the falling oil prices has negatively impacted the United States’ oil companies, and it has definitely hurt some, but this one shift is not really harming the overall Gross Domestic Product of the United States. However, it is impacting many other countries that depend heavily on the production of oil. This includes the mid-eastern countries and also our friendly neighbor, Canada.

So what does this have to do with the U.S.? Foreign exchange rates. Yeah, I know, nobody wants to talk about FX rates, so I’ll make it quick. Because so many countries have depended on the price of oil to carry their economies, their currencies has fallen with the reducing oil prices, but the U.S. currency has not, making our dollar much stronger than almost every other country out there. This stronger dollar is great if you want to take a vacation to a foreign country because you can buy more stuff, but what will this do to our nation’s exports? It’s going to halt them completely, because who wants to buy expensive American goods? Nobody.

The future U.S. economy is going to be a struggle with a reduced demand for our exports. From this, many foreign companies selling into the U.S. will likely thrive, but sales from the U.S. to outer countries are likely to suffer.

How about you all? What are your investment plans in 2015 and 2016? Does this analysis impact your thoughts?

Share your experiences by commenting below!