investment

Earn Passive Income by Investing in Tax Liens

January 29, 2021 By Allen Francis Leave a Comment

You don’t only have to invest in stocks – you can invest in alternative investments like debt.

Do you know what the biggest financial hurdle is for many aspiring homeowners?

The typical mortgage payment is about $1,600 per month. However, many Americans pay a lot more than that for their mortgage.

But mortgage payments are not always the greatest financial hurdle facing Americans. Many Americans can’t handle paying their property taxes at all or on time.

The typical property tax rate is 1.1%, or about $2,375. Now that may not sound like a lot of money.

But if you are trying to pay a mortgage, utilities, and other costs of living bills, then a property tax may be the straw that breaks the camel’s back if you live on a fixed income.

And you must consider that your property tax rate is determined based on where you live. Believe it or not, New Jersey technically has the highest property tax rate in the country at 2.47%.

So, if you own a luxury home in New Jersey, you could end up paying $8,100 in property taxes annually.

A recent study by the National Tax Lien Association reveals that homeowners are unable to pay over $14 billion in property taxes every year.

In November 2020, about one in every 14,000 homes was foreclosed on.

These may be some morbid statistics to focus on, but it is also reality. And there is a lot of opportunities that can be found in misfortune.

If you are strategic and develop a diverse portfolio, you can invest in tax lien certificates. If you invest in a couple of tax lien certificates, you could generate a nice passive income.

Tax Lien Certificates 101

When local or federal government authorities seize residential property due to unpaid property taxes, then a tax lien is invoked on the property.

This basically means that the homeowner cannot reclaim the property until the tax lien is paid off and removed.

Remember, over $14 billion dollars in property taxes are never paid annually, so a lot of tax liens get issued every year.

One way that local governments mitigate their property tax losses is to auction tax lien certificates through courthouse or online auctions.

Third-party investors can buy a tax lien certificate for as little as $100 with interest rates ranging between 5% and 50%.

You get paid every time the original homeowner pays back on their tax lien. In some states, the property tax interest penalty is applied after a lien is purchased. So, you could qualify for an interest payment return without the original homeowner paying back anything.

And instead of viewing such an investment as ghoulish, it can help motivate the original homeowner to pay back their tax lien and expedite a return on your investment.

Just make sure that you buy a couple of tax lien certificates to ensure a healthy return on investment. Since tax lien certificates are relatively affordable, relative to auction prices, this won’t be hard to do.

You can earn a steady passive income by investing in tax lien certificates. This is an affordable way to begin investing relative to investing in the stock market as well.

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Benefits of Saving Using the Investing Rule of 72

July 9, 2020 By Kathryn Vercillo Leave a Comment

There are many different tools, techniques, and tips that can assist you in improving savings and investments. One popular one that you might want to check out is the Investing Rule of 72. Using just a little bit of simple math, you can figure out how long it will take you to double your investment.

What is the Investing Rule of 72?

The Investing Rule of 72 is a quick-and-easy way to figure out how many years it will take to double an investment you have made.

For example, let’s say that you invest $2000 into a fixed-rate CD. You want to know how long it will take to double it up to $4000. That information might even help you decide the length of CD you want to choose.

The investing rule of 72 will provide you with the answer. It will tell you, based on your annual rate of return, how long it will take to double your investment.

Investing Rule of 72: The Math

All that you need to know in order to use the investing rule of 72 is what your annual interest rate (rate of return is). Of course, it’s also helpful to know how much you are investing, since that’s what gives you the number that you’ll have in the bank at the end of the investment period.

Then you just do this math: Divide the number 72 by the interest rate. The answer is how many years it will take to double your investment.

Use this personal finance calculator to do the math for you.

How Long Does It Take to Double an Investment?

Obviously 72 divided by 1 is 72, so let’s first use that as an example. If you invest a specific amount at a meager 1% interest rate, then it will take 72 years to double that amount. Therefore, if you invested $10000 at 1% then in 72 years you would have $20000 in that account.

Of course, nobody wants to wait 72 years to double their investment. So, let’s say that you’re able to find a terrific savings account that gives you 10% interest. 72 divided by 10 is 7.2. Therefore, it would take just over seven years to double your investment. If you invested $10000 at 10% then in just over 7 years, you’ll have $20000 in that account.

How to Use the Investing Rule of 72 to Improve Savings

This is simply a tool to help you better understand your money. Interest rates can get confusing. Therefore, you might not exactly understand how much money you can expect in the future when you invest in various savings accounts today. This tool increases that understanding. The more you understand your money, the better the decisions that you can make.

So, obviously, you’ve always known that you would rather have 10% interest than 1% interest on your investments. But now you understand what this means in terms of actual numbers and the length of time it takes to double your money. Doubling your money is a tangible goal that you can readily understand.

Therefore, you can use this information to make plans for your finances. If you know that you want to have X amount of money in Y years then you can figure out how much you have to invest and what interest rate you would require in order to meet that goal.

For example, let’s say that you know you want to have $40000 saved for your child’s college education. They will be going to college in ten years. You currently have $20000. Therefore, you need to double your investment in ten years. Do the math to figure out what interest rate you need to make that happen. (72 divided by 10 is 7.2; therefore, you need at least 7.2% rate of return to double your money in ten years.)

Use the Investing Rule of 72 to Understand Debt

As CNBC points out, you can also use this formula to figure out how much money your lenders are making off of you. In other words, you can enter your credit card’s interest rate into the math for the investing rule of 72 to find out how fast they’ve doubled your money and put it into their pockets.

For example, if you have a credit card balance with a 10% interest rate, we already know that’s going to double in about seven years. Of course, there are variable interest rates to consider. Moreover, as you pay down your debt, the numbers will change. But the investing rule of 72 gives you good insight into how fast they’ll be taking your money if you only make the minimum payment.

How does this help you? More than anything else, it offers incentive. If you realize that the credit card company is going to double your money (straight into their coffers) in seven years, it might remind you that you don’t want that to happen. You want that money in your pocket. While you always know that, it becomes more tangible when you think about how few years it takes to double your losses. This can help you resist impulse buys and pay down that debt.

It can also help you think twice about purchases. After all, if you realize that the $1000 you’re spending at 20% interest rate will become $2000 in less than four years, then you might think twice about spending that money at all. If you’re really smart, you’ll put that money into savings and let it grow for you instead of against you!

Is the Investing Rule of 72 Accurate?

The Investing Rule of72 isn’t exact. However, it gives you a fairly accurate number. It is particularly accurate with interest rates between 7% and 9%. Rates that are lower or higher vary a little bit.

For example, with an interest rate of 2% it takes you 35 years to double your investment, although the investing rule of 72 will tell you that it takes 36 years.

Similarly, with an interest rate of 25% it takes you 3.11 years to double your investment, although the investing rule of 72 will tell you that it takes 2.9 years.

So, there are some slight inaccuracies when using this tool. That said, if you’re using it for planning and incentive towards saving then it’s accurate enough to meet your needs.

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Financial Lessons From Fantasy Football

September 12, 2008 By Shane C. Leave a Comment

Our personal finances mirror many things in life, and fantasy football is no exception. Wittingly or not, we apply many of the same tactics to succeed in both. At the risk of using way too many football analogies in one article, here it goes:

An Investment In Your Future

First and foremost, fantasy football is an investment. No, not gambling. Picking players is like picking stocks. We plunk down our league fees – and any debts from the previous year – knowing that if we choose just right, we could strike it rich with a big end-of-the-season payoff.

Just like stocks, the media hypes up players as the next big thing, and we bite, usually leading to disappointing earnings. The key is to find that diamond in the rough. The old veteran everyone forgot about is like a battered stock that reemerges to outshine the bigger stronger opponents, or the rookie is like the newcomer in the industry that defies odds with it’s new, fancy ideas.

The stock market isn’t the only area of similarity. We can also learn a few lessons about our everyday expenses and budgeting.

Show Up On Game Day

The biggest mistake you can make in fantasy football is missing a deadline. Leaving a regular starter on the bench because you were too busy with work and family can cost you a game. It’s like throwing away money on late fees. There’s nothing worse!

Plan Your Budget

Most leagues allot a certain number of free-agent pick-ups or you pay a fee for each one. Either way, you have to budget yourself. Every Tuesday morning, millions of fantasy football players everywhere are looking for the most valuable players that nobody has picked up yet. If you don’t budget correctly, you may be high and dry when you need it the most. Just because everybody else is buying doesn’t mean you have to.

Defective Merchandise

We’ve all bought something we wish we hadn’t. That pair of jeans that never fit right, the microwave meal that looked so much better on the box or the cell phone that never seemed to work right. The same can be said for some players. You positioned yourself just right in the draft to get that one player you had been eying all preseason. Injuries, off-the-field antics and just plain lackluster performances can turn what you thought was a brilliant pick into a dud.

When It Rains, It Pours

Sometime it seems like every financial decision you make is the right one, and money keeps piling up at the door. Other times you’d think every company you owe money to conspired to make your bills all due at the same time. When it rains, it pours. Fantasy football is no exception. Injuries pile up at inopportune times and every time you score 100 points, your opponent scores 101. There are also times when you find yourself playing all the right players at all the right times and the wins keep rolling in.

Playing for Pride

While money is the tangible reward of doing your homework and making the right picks, in the end it is all about bragging rights. What good is it building your nest egg or buying your dream house after saving for so long if you can’t enjoy it and show it off to people?

Make Giving A Priority

All the hope you had when making your initial “investment” at the beginning of the season can quickly turn your team into a non-profit foundation. For all the winners there are 10 times as many losers. That’s OK. Giving money to charity should be a part of everyone’s budget.

Image courtesy of droob