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Earning Easy Money on Your Extra Funds

Earning Easy Money on Your Extra Funds

Everyone knows that one of the most important principles of personal finance is to build up your savings in order to have extra money on hand. However, they don’t always tell you what to do with those funds once you have them. For that reason, all too many of us let our checking accounts get fat when our funds could be better used elsewhere.

Don’t let your money just sit there—put it to good use! Here are a few ways you can make some extra money from your savings:

Online bank accounts, CDs, and money markets

If you’re like many people, odds are you simply keep your extra money in a traditional savings account. That’s a good start, but unfortunately the interest rates that most big banks offer are minuscule at best. In fact, several major intuitions pay as little as .01%. Luckily there are other options, and one of the best places to start looking is the Internet.

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Since online banks don’t have to deal with many of the costs associated with brick and mortar branches, they typically offer much higher interest rates to their customers. For example, online institutions such as Discover Bank, Ally, Synchrony and others offer savings accounts with interest rates as high as 1%. Additionally, many online banks provide other options like certificates of deposit (CDs) and money markets that can also earn you a return on your money. Both products are somewhat similar to savings accounts but have their own pros and cons.

Starting with CDs, the biggest difference between this option and a regular savings account is how accessible your money is. CDs allow you to deposit money for a set period of time—ranging from one month to 10 years—in order to earn what is typically a higher interest rate. In most cases, the longer the terms, the better the rate. Of course, if you absolutely need the money you’ve deposited, there is a way to get it out. However, you will typically be assessed a penalty for doing so, amounting to a few months worth of the interest you’d collected.

As for money market accounts, they could almost be compared to a savings/checking hybrid. That’s because some banks will allow you to write checks against your money market balance, or perhaps even use a debit card for the account. The downside is that these types of accounts typically require a much higher initial deposit, as well as daily balance requirements you’ll need to maintain in order to avoid penalty. With that in mind, this is really only an option for those with a large chunk of extra cash to stash.

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While it might seem odd to put your money into a bank you can’t actually visit, technology is making it easier to live without physical banks. Many of the aforementioned online banks offer mobile apps and other conveniences—such as partnerships with ATM providers—to make accessing your money easier. However, it’s important to note that there are usually limitations on online accounts, including the number of transactions you can make per month. Lastly, be sure to check that the online bank you go with is FDIC-insured just in case.

Dabbling in investing with FinTech

In terms of passively earning on your money, the 1%+ you can get from online savings accounts, CDs, and money markets is pretty great. On the other hand, if you want a potentially bigger reward and are willing to take a few risks, there are a number of ways to get started in the world of investing. Although that might sound intimidating to many, today there are several tools and platforms from financial technology (mashed together to form the incredibly cool sounding term “FinTech”) companies that not only make investing easier, but also offer new ways to make money.

One prime example of this trend is the mobile app Acorns. Basically, this application links to your debit and credit cards to “round up” your purchases to the nearest dollar and invest the change. What’s also cool is that you can adjust your settings to choose whether you want to be more conservative or aggressive with your investments.

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Another growing FinTech invention is peer to peer (P2P) lending. P2P is actually strikingly similar to crowdfunding platforms like Kickstarter and Indiegogo that you’re likely already familiar with, except that sites like Prosper and Lending Club help borrowers in need of loans. Simply put, approved borrowers can have their loans funded by investors, who then earn interest on the loan.

As investing in peer to peer lending has evolved new tools that help to manage the process, such as Lending Robot, which help to automate your loan investments. The peer to peer platforms themselves are also rolling out tools to manage investments. As these tools gain adoption, investing in peer to peer loans will likely become a more mainstream practice to help diversify investment portfolios. That said, you can still get started today with investing as little as $25 in individual loans.

Interestingly, companies, such as Able Lending, are now combining P2P and crowdfunding so that friends and family can lend money more formally for startup businesses. For that reason and others, it’s worth keeping an eye on the FinTech sector for possible investment opportunities in the future.

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When it comes to building your savings, there are many places to put your money. Whether your prefer passively earning from online savings accounts or taking on some risk by trying your hand at investing, it’s often worth exploring your options and ensuring that your money is put to work earning you even more.

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Last Updated on January 2, 2019

How Personal Finance Software Helps You Get More Out of Your Money

How Personal Finance Software Helps You Get More Out of Your Money

Do you know what mental health experts point to as the biggest cause of stress in the United States today? If you said “money,” then ding, ding, we have a winner!

Three out of four adults today report feeling stressed out about money at least part of the time. People are either worried about not having enough money or whether they’re putting the money they do have to use in the best possible way.

Your money is either in charge of you or you’re in charge of it, there’s no middle ground. Using some type of personal finance software can help alleviate some of that money stress and better allow you to manage your money effectively. Without it, you may just be setting yourself up for constant financial worry. Life is already tough enough and there’s no need to make it more difficult by simply hoping your money issues will all work out in your favor. Hint: they won’t.

This guide will help you to understand how personal finance software can better assist with both accomplishing long term financial goals and managing day-to-day aspects of life.

Whether it’s tracking the savings plan for your child’s college fund or making sure you won’t be in the red with the month’s grocery budget, personal finance software keeps all this information in one convenient place.

What Exactly is Personal Finance Software?

Think of it like the dashboard in your car. You have a speedometer to tell you how fast you’re going, an odometer to tell you how far you’ve traveled, and then other gauges to tell you things like how much gas is in the tank and your engine temperature. Personal finance software is essentially the same thing for your money.

When you install this software on your computer, tablet, or smartphone, it helps to track your money — how much is going in, how much is going out, and its growth. Most personal finance software programs will display your budget, spending, investments, bills, savings accounts, and even retirement plans, levels of debt, and credit score.

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How It Leads to Financial Improvement

It shouldn’t come as a surprise, but people who regularly monitor their finances end up wealthier than those who don’t. When you were a kid, keeping track of all of your money in a porcelain piggy bank was pretty easy. As we get older, though, our money becomes spread out across things like car payments, mortgages, retirement funds, taxes, and other investments and debts. All of these things make keeping track of our money a lot more complicated.

Some types of personal finance software can help make things a little less complicated, setting you up to meet financial goals and taking away some of the stress associated with money.

Even if you already have a Certified Financial Planner (CFP) some type of personal finance software can be of great benefit. Whereas CFPs focus on the big picture of your money, they don’t handle the day-to-day aspects that determine your overall financial health.

It’s also not nearly as complicated as you might think and can take out a lot of the tedium that comes with doing everything on an Excel spreadsheet or with a pad and pencil.

Types of Personal Finance Software

When it comes to personal finance software, it generally fits into two categories: tax preparation and money management.

Tax preparation software such as Turbo Tax and H&R Block’s software can help with everything from filing income taxes to IRS rules and regulations and even estate plans. Plus, there’s the benefit of filing online and getting your refund check a lot faster than if you were to mail off your forms after waiting in line at the post office.

For the purpose of this article, however, will be focusing more on the personal finance software that aids with money management.

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Money management personal finance software will help you to see the health of your cash flow, pay down debt, forecast for expenses and savings, track investments, pay bills, and do a host of other things that 30 years ago would have practically required a team of accountants.

When to Use Personal Finance Software

So far we’ve gone over what exactly personal finance software is and how it can be a benefit to your money. The next logical step in this whole equation is determining when it should be used and how is the best way to go about getting started using it.

Below are four of the most common and practical ways to use personal finance software. If all or any of these apply to you and your money, then downloading some type of personal finance software is going to be a smart move.

1. You Have Multiple Accounts

There’s a good chance that when it comes to your money, it’s in more than one place. Sure, you probably have a checking account, but you may also have a savings account, money market account, and retirement accounts such as an IRA or 401k.

If you’re like the average American, you probably have two to three credit cards as well. Fifty percent of Americans also don’t have loyalty to just one bank and spread their money across multiple banks.

Rather than spending hours typing in every detail of every account you have into a spreadsheet, many programs allow you to easily import your account information. This will help to eliminate any mistakes and give you a bird’s eye view of everything at once.

2. You Want to Automate Some or All of Your Payments

Please don’t say that you’re still writing out paper checks and dropping each bill in the mailbox. While it’s noble that you’re doing your part to keep postal workers employed, we’re 18 years into the 21st century and you can literally pay every bill online now.

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There’s no need to log into every account you have and type in your routing number either.

With personal finance software you can schedule automatic payments and transfers between all of your imported accounts. Automatic transfers will help to make sure you have the necessary funds in the right account to ensure all bills are paid on the appropriate date. Late fees are annoying and do nothing but cost you money. It’s time that you said goodbye to them once and for all.

3. You Need to Streamline Your Budget

Perhaps the best feature of personal finance software is that it allows you track everything going in and out of your virtual wallet.

Nearly every brand of personal finance software out there has easy-to-read graphs and charts that allow you track every cent you spend or earn, should you choose. You might be pretty amazed when you see just how much you spent on eating out last month or if you splurged a little more than you should have on Christmas gifts last year.

Every successful business on the planet has a budget and using personal finance software can help you trim the fat on your spending in ways that affect your everyday life.

4. You Have Specific Goals to Meet

Maybe it’s paying off debt or saving for up something like a European vacation. Whatever your financial goal is, whether it’s long-term or short-term, personal finance software programs are one of the savviest ways to go about reaching those goals.

You can do everything from set spending alerts to notify you when you’re over budget to automating what percentage of your paycheck goes to things like retirement investments. The personal finance software that you choose should show you exactly how close you are to hitting those goals at any given time.

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How to Get Started

From AceMoney to Mint and Quicken, there ’s no shortage of personal finance software apps out there. Many of these programs are free to download and will allow you to pay bills, invest, monitor your net worth and credit profile, and even get a loan with the swipe of a finger.

Other programs may only offer you limited services and will require a one-time fee or subscription to unlock all that they offer. These fees can often vary from as little as two dollars to 50 bucks a month.

It’s best to start off with the free version and then gauge whether you’re able to accomplish everything you’d like or if it’s worth exploring one of the paid options. Often times the subscription programs come with assistance from financial planning and investment experts — so that can be a real benefit.

When deciding which personal finance software program to use, it’s also important to look at how many accounts you wish to monitor. Certain programs limit the number of accounts you can add. Be sure that if you have checking, credit card, and investment accounts to monitor, that you choose a service that can monitor them all.

Finally, when looking around for the right personal finance software that meets your needs, make sure that you’re comfortable with the program’s interface. It shouldn’t be expected that you recognize every single feature instantly, but if the features don’t seem readable and manageable to you, then you’re not as likely to use it and get the full benefits.

Final Thoughts

Personal finance software can go a long way in helping you to take control of your money and meeting your financial goals. It’s important to note, however, that some focus more on budgeting and expense tracking while others prioritize investing portfolios and income taxes. Explore several different programs and read reviews to find the one that’s right for you.

In this day and age, managing one’s personal finances in a secure manner that allows the user to have a real-time visual representation of their money is easier than ever before. With the numerous applications that are out there — both free and subscription-based — there’s no reason that every person can’t take control of their money and ensure they’re making smart money moves.

Featured photo credit: rawpixel via unsplash.com

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