Shopping for homes is exciting until one needs to secure financing to purchase. Even with savings, most Americans can only buy a house through a mortgage loan. In the fourth quarter of 2022, the US residential mortgage debt reached $11.92 trillion.

As home prices continuously soar and interest rates hit historically high levels, getting a mortgage loan becomes increasingly tricky. Obtaining an estimate of how much you can comfortably spend on a home is an excellent starting point. Doing so shows your commitment as a serious buyer.

That’s where mortgage pre-approval and pre-qualification come into play. Both are valuable steps in the mortgage application process. While they’re often used interchangeably, there are critical distinctions that every homebuyer should understand.

Are you in the process of applying for a purchase mortgage or home refinance? Read on to learn the difference between getting pre-approved and pre-qualified and how they affect your chances of purchasing a home.

The Differences Between Getting Pre-Approved and Pre-Qualified

Obtaining either pre-approval or pre-qualification means that a lender has examined your financial situation and verified that you meet specific criteria for their loan approval requirements.

While both terms are similar in many ways, differences exist between getting pre-approved and being pre-qualified. Understanding the distinctions between pre-approval and pre-qualification can help you decide which path to take as you start your home-buying journey.

Requirements

The information required in the pre-qualification process is limited. Typically, the lender only asks about your basic financial information to give you an estimate of the mortgage amount you will qualify for. In contrast, mortgage pre-approval demands more information and documentation. Some lenders may even require you to fill out a mortgage application during pre-approval.

Timeframe

Since getting pre-qualified doesn’t involve an in-depth look at your finances and credit report, the pre-qualification process typically only takes a few minutes. Meanwhile, most lenders take 7 to 10 business days to process a mortgage pre-approval, though some may only take one to three business days.

Application fee

Pre-qualification can be performed online or over the phone, so you don’t usually have to pay application fees. There’s also no cost involved in pre-approval applications. However, some lenders may impose an application fee, which can amount to several hundred dollars.

In some instances, lenders may waive application fees to attract more borrowers. Others may integrate the payments into the closing costs. It’s critical to inquire about these fees before submitting your pre-approval application.

Credit inquiry

Mortgage lenders will perform a credit check to assess the likelihood of homebuyers making timely loan payments.

With pre-qualification, the credit check is limited to a soft credit inquiry. It enables lenders to view your credit report without affecting your credit scores. On the other hand, a pre-approval requires a hard credit inquiry, which will remain visible on your credit reports for a period of two years.

Accuracy

Since pre-qualification doesn’t involve in-depth financial background checks, it’s less reliable than pre-approval. The information that pre-approval provides is more accurate than pre-qualification.

For instance, the lender only gives you an estimate of the loan when you get pre-qualified. However, pre-approval outlines the loan amount for which you will be eligible, along with the interest rate information.

Advantages

Since pre-approval is significantly more precise about the amount you can borrow and the corresponding interest rates, it gives you more confidence to negotiate with sellers.

Pre-approved buyers are more likely to close on the home at the agreed-upon price. Unfortunately, many skip the pre-approval process. However, avoiding making concrete plans solely based on your pre-qualification status is essential.

Getting pre-qualified can convince sellers that you’re a serious buyer. However, getting pre-approved is paramount to stand out from other prospective buyers in today’s highly competitive housing market. Pre-approval gives sellers assurance of your capacity to get a mortgage.

To better comprehend the distinctions between pre-approval and pre-qualification, let’s look at how they work and the steps involved in each process.

Understanding How Mortgage Pre-Approval Works

A mortgage pre-approval is one of the most valuable steps when securing a home loan.

Numerous lenders claim that your chances in a highly competitive housing market are slim without it. But what exactly does getting pre-approved for a mortgage mean, and how can it help distinguish you from other potential buyers?

Obtaining a mortgage pre-approval doesn’t guarantee that you’ll secure a loan for the home you want to purchase. It’s only a written document from a mortgage lender verifying that you qualify for a mortgage under specific terms and conditions.

While it doesn’t ensure final approval, getting pre-approved makes you a more attractive home buyer to potential sellers. It gives you and the seller a picture of your borrowing capacity, enabling you to make an appealing offer that meets your needs.

Moreover, sellers are more likely to accept offers from someone with mortgage pre-approval than those who don’t have one. That’s because a home sale is more likely to go through if the buyer has already been pre-approved for a mortgage.

Steps Involved in Getting a Mortgage Pre-Approval

When sellers get multiple offers or inquiries about their house, a mortgage pre-approval will secure you a more favorable position in the selection process.

But how do you get a mortgage pre-approval? Whether you’re a first-time home buyer or have been through the process, here’s an overview of the steps to get pre-approved for a mortgage.

Assess your finances and the market

A pre-approval is a physical assessment of your financial situation. But before getting pre-approved, it’s a good idea to assess your finances and learn what kind of market you’re in.

Doing so can help you make a more informed decision about how much you feel comfortable spending monthly on your mortgage. A lender may grant you pre-approval for a larger monthly payment. Even so, you’d want to stick within your budget.

Contact a mortgage lender

Numerous mortgage lenders provide the option to process your mortgage pre-approval online. Each lender’s guidelines and interest rate options can significantly affect your mortgage monthly payments.

Hence, it’s beneficial to obtain quotes from multiple lenders. Getting pre-approved with one lender limits your options to what they have to offer. Meanwhile, with pre-approval from several lenders, you have better chances of finding the lowest rates and fees.

However, pre-approval usually involves a hard credit inquiry, which can cause a decrease in your credit score by a few points. Some financial experts recommend getting pre-approved by up to three lenders. If you decide to do so, request pre-approval within 45 days to lessen its impact on your credit score.

Submit the necessary documents

Submit your application and the necessary documents on time to prevent delays in the pre-approval process. The documents may vary depending on your occupation, loan type, and the residence category you intend to purchase. Ask the mortgage lenders for their particular requirements.

Here are the documents commonly required when seeking mortgage approval:

• Personal identification
• Social security card or driver’s license
• Most recent pay stubs
• Employment W-2 forms from several years
• Most recent federal and state returns
• Statements of bank and investment accounts
• Proof of deposits and assets
• Business record if you’re self-employed
• Credit reports

Receive your pre-approval letter

The speed at which a lender grants you a pre-approval letter varies. Some lenders take 7 to 10 business days to process a mortgage pre-approval. Others may only take one to three business days. Some elements that can impact the duration of the pre-approval process include:

• How fast you gather and submit the required documents
• The time needed to evaluate your financial paperwork
• The market’s demand for your choice of lender
• Income audits or other verifications

When Does It Make Sense To Get Pre-Approved for a Mortgage?

It’s wise to apply for mortgage pre-approval at the beginning of the home-buying process. Doing so enables you to gauge how much you can afford in a home and positions you as a serious buyer. However, getting pre-approved too early can be wasteful for numerous reasons.

Pre-approval letters have a limited validity period, typically 30 to 90 days. Your pre-approval letter might expire before you can utilize it to purchase your dream home. Only get pre-approved for a mortgage if you’re ready to bid or serious about making an offer on a home.

Moreover, applications for mortgage pre-approval often come with a cost. Reapplying for another pre-approval will incur additional charges. Getting pre-approved generates a hard inquiry on your credit report. Thus, securing pre-approval too early can harm your credit scores.

The mortgage pre-approval process can also take as long as two weeks. So you would not want to apply too late for a mortgage pre-approval. Assess your situation accordingly and your readiness to purchase a home before getting pre-approved.

Understanding How Mortgage Pre-Qualification Works

Mortgage pre-qualification is another crucial step in home-buying, particularly for first-time buyers.

Getting pre-qualified allows you to estimate how much you can spend on a house. Pre-qualification doesn’t guarantee your mortgage’s approval, but it will enable you to explore different mortgage options and identify the most appropriate for your needs and goals.

Typically, a pre-qualified mortgage also offers an estimated range of how much money lenders are ready to lend you. Hence, you can get a general idea of your potential monthly mortgage payments. This information can help you avoid looking at properties beyond your price range.

Likewise, a pre-qualification letter from a lender lets you make a more appealing offer on a home. Although it’s not a guaranteed loan offer, getting pre-qualified reassures the seller that you can secure financing for the home purchase.

Many sellers and realtors won’t bother showcasing a home to potential buyers unless you have a pre-qualification letter. With a mortgage pre-qualification, you can better demonstrate that you’re prepared and eager to purchase a house.

Steps Involved in Getting a Mortgage Pre-Qualification

With mortgage pre-qualification, you can get insights into what you can afford in a house. Note that it doesn’t ensure a subsequent pre-approval. Regardless, you can get pre-qualified shortly after deciding to purchase a home.

What are the steps involved in securing a mortgage pre-qualification? Every mortgage lender operates differently. Still, most potential homebuyers can get pre-qualified through online platforms or over the phone. The following are a few measures to help you commence the process:

Examine your credit report

Pre-qualification relies on a cursory review of your financial details. Although getting pre-qualified only involves a soft credit check, examining your credit report is still wise. Doing so at the onset of your home search allows you more time to correct errors or pinpoint areas to improve your credit score.

Typically, it takes 30 days or more to see changes in your credit score. The sooner you initiate improvements, the more advantageous it will be for you in the long run. A higher score will help simplify the pre-qualification process and boost your chances of securing a lower interest rate.

Speak with a mortgage lender

Speaking with multiple mortgage lenders is also advisable to get the best deal. Compare their mortgage interest rates and the various loan options they offer. Decide which lender will best suit your situation. Reviewing customer reviews can also aid you in making an informed decision.

Since pre-qualification is a preliminary indication that a lender may approve you for a mortgage if you apply, most lenders only perform a soft pull credit check. Hence, getting pre-qualified with numerous lenders lets you explore loan options without hurting your credit score.

Discussing the pre-qualification process with a lender can provide valuable information to improve your credit or finances. When you apply for final approval for a mortgage application, you may qualify for a larger loan or better terms.

Provide financial documentation

Some lenders may require you to complete an application to get pre-qualified. Meanwhile, others may only gather your personal and financial information verbally online or on a call. Regardless, a pre-qualification review usually includes the following basic financial details:

• Income
• Employment history
• Monthly expenses
• Debts
• Savings
• Credit score

Get your pre-qualification letter

After providing your personal and financial information to a loan officer, the process for mortgage pre-qualification only takes a few minutes. Typically, the lender will shortly review your application. It doesn’t involve underwriting and is only based on general guidelines.

You can expect to receive a pre-qualification letter in a few minutes through email. After getting your pre-qualification letter, you can learn about the various mortgage options. It may be accompanied by the estimated mortgage amount and interest rates you will likely be approved for.

When Does It Make Sense To Get Pre-Qualified for a Mortgage?

Pre-qualification involves a less rigorous process than pre-approval. Since getting pre-qualified is usually free and doesn’t affect your credit scores, it’s a good idea to seek mortgage pre-qualification to compare different lenders and their loan options.

A pre-qualified mortgage is also an excellent option to understand how much you can afford on a home. Note that pre-qualifications don’t expire. So, as long as there are no significant changes in your credit and finances, it will be helpful even if you’re still in the initial phase of house hunting.

Navigate the Mortage Process With More Ease

Unless you’re paying cash, getting pre-approved and pre-qualified is crucial in the mortgage application process. Both initial steps can help you secure a mortgage loan with more ease. They boost your negotiating power and help you shop for homes within your financial reach.

Despite their differences, mortgage pre-approval and pre-qualification share a commonality. They serve as lenders’ confirmations that you’re qualified for a mortgage. As a result, you can navigate the loan approval procedure and home-buying journey with minimal complications.

The post Mortgage Pre-Approval vs. Pre-Qualification – What’s the Difference? appeared first on Due.

https://www.entrepreneur.com/finance/mortgage-pre-approval-vs-pre-qualification-whats/467504

Being on a very tight budget can make life challenging. But it can also provide an opportunity to be creative, resourceful, and resilient. Even so, in today’s world, where living costs seem to be rising constantly, you need to find more ways than ever to make your dollar stretch.

Whatever your situation, whether you are a student, a young professional, or someone on a fixed income, there are many ways to maximize your budget. In this post, I’ll share 10 tips and tricks that can help anyone thrive when they have very little to no money.

1. Mindset Shift: Reframing Your Relationship with Money

In order to effectively live on very little money, it’s often necessary to change your mindset. After all, having a scarcity mindset can make you feel like you will never have enough. This negativity can, however, be counterproductive. Rather than focusing on what you don’t have, focus on what you do have and the opportunities that come with it.

You can cultivate a positive mindset by following these steps:

• Practice gratitude. You should take some time every day to reflect on the things you are grateful for, no matter how big or small they are. It could range from having a roof over your head to having family and friends who support you.
• Focus on experiences, not possessions. Material things fade away, but experiences last a lifetime. Don’t spend your money on things you’ll soon forget. Instead, spend it on activities and adventures that will bring you joy. What’s more, numerous studies have found that spending on experiences instead of possessions boots happiness.
• Challenge negative thoughts. Whenever you find yourself thinking about what you lack, reframe the thought by thinking about what you can do with what you have.

2. Budgeting and Planning: Your Financial Roadmap

Now that you have shifted your mindset, it’s time to get to work on your budget. To make informed spending decisions, you need to keep track of your income and expenses.

Listed below are some tips for budgeting effectively:

• Know your income and expenses. A financial plan cannot be constructed without this foundation. Keep track of your income and expenses for a month to understand how your money is spent.
• Choose a budgeting method that works for you. A variety of budgeting methods are available, such as the 50/30/20 rule, a zero-based budget, and an envelope budget. You should experiment with different options until you find one that works for you.
• Use budgeting apps and tools. Tracking your income and expenses, setting goals, and staying on track can be a lot of fun with many great budgeting apps and tools. Personal Capital, YNAB, and Mint are some popular options.
• Set spending limits. Make allocations for rent, groceries, transportation, and entertainment based on your income and expenses. Be realistic about your financial capabilities and prioritize needs over wants.
• Create a financial buffer. If you can, try to save some money every month. When it comes to weathering financial storms, it’s important to have an emergency fund.

3. Slash Your Housing Costs

Housing accounts for the majority of people’s budgets. As a matter of fact, housing accounted for the largest share of consumer expenditures (33.3 percent).

As much as possible, you need to reduce your housing costs when you have little money to spend. Among the options you might want to consider are:

• Downscale your living space. Your rent or mortgage payment can be significantly reduced by moving to a smaller apartment or even living with a roommate.
• Refinance. Your interest rate can be lowered and your monthly payment can be reduced if you refinance.
• House hack. Try housesitting, pet-sitting, or becoming a caretaker to earn rent-free or significantly reduced rent.
• Relocate. Rent, mortgage, insurance, property taxes, and utilities can all be reduced by moving to a smaller house or location.
• Negotiate your rent. If you’re renting from a landlord, don’t be afraid to negotiate your rent. Depending on your reputation as a good tenant, they may be able to work with you.

4. Master the Art of Frugal Food Shopping

Food can also be a big expense. You can save money on groceries without sacrificing nutrition with a little planning and creativity. These tips will help:

• Plan your meals. Based on what’s in season and on sale, develop a weekly meal plan. As a result, you will be less likely to make impulse grocery purchases.
• Embrace store brands. It is often possible to find generic brands at a fraction of the price of name brands.
• Cook at home. Spending money on eating out kills your budget. It is possible to control the ingredients and portion sizes when you cook at home, saving you a considerable amount of money.
• Utilize food banks and pantries. If you need help, don’t be afraid to ask for it. When people are struggling to make ends meet, food banks and pantries can provide them with essential groceries. You may also qualify for government assistance like SNAP benefits.

5. Ditch the Gas Guzzle: Smart Strategies to Slash Your Transportation Costs

Transport costs per American household reached $12,295 in 2022. After housing, this was the second largest category of household expenditures.

The good news? Depending on your specific situation and needs, you can reduce transportation costs from different angles. To help you decide what to do, here are some strategies:

Shifting your mode of transportation:

• Active transportation. For shorter trips, use a scooter, a bike, or a walk. In addition to being cost-effective, this is also environmentally friendly.
• Public transportation. Whenever possible, use public transportation, such as buses, trains, and subways. For frequent users, monthly passes may be a good option.
• Carpooling. Take a ride with a friend or colleague who commutes in the same direction. Also, carpool apps such as Waze Carpool can help connect you with others.
• Ridesharing. Take advantage of ride-sharing services like Uber or Lyft on occasion, especially if you can split the cost with a friend.
• Vehicle alternatives. It may be more cost-effective to rent a car or bike for specific needs instead of owning a vehicle full-time.

Optimizing your vehicle use:

• Fuel-efficient vehicles. Consider fuel-efficient vehicles such as hybrids or electric cars if you need a personal vehicle.
• Route planning. Avoid congestion by planning your trips efficiently. There are tools that can help, such as Google Maps and Waze. Also, consider combining your errands.
• Maintenance. You can improve your car’s fuel efficiency and keep it running smoothly with regular maintenance.
• Driving habits. Maintain a steady speed, avoid idling, and accelerate slowly as part of eco-friendly driving practices.

6. Finding Joy on a Budget: Entertainment, Leisure, and Personal Growth

Even when living on a tight budget, you can have fun and enjoy yourself. The possibilities for finding entertainment and leisure activities that don’t cost a lot are plentiful. Some ideas are as follows:

• Free and cheap activities. You can attend free concerts and events, borrow books from the library, or have game nights with friends if you explore your city’s parks and museums.
• Get creative. Whether you like to write, paint, draw, or play music, you can do it. You don’t need a lot of money to express yourself creatively.
• Cut out streaming services. Netflix, for instance, now charges $15.50 for its standard plan without ads. Originally $5 a month, Apple TV+ is now $10.Streaming services like Disney+ and Hulu without ads went up in price, too. There are, however, services such as Pluto TV, Roku Channel, and Tubi TV that offer hundreds of shows for free in exchange for ads.
• Learn new things. Consider taking free online courses, attending workshops, or joining a meetup group. If you want to expand your knowledge and skills without spending a lot of money, there are many ways to do so.

7. Sustainable Living: Saving Money While Saving the Planet

Eco-conscious living often goes hand-in-hand with living frugally. You can save money and protect the environment by reducing your consumption and waste.

• Reduce, reuse, recycle. Buy less, repair what you have, and compost food scraps to minimize your waste.
• Go energy-efficient. When you’re not using electronics, unplug them and switch to LED light bulbs.
• Embrace DIY. Rather than replacing broken items, learn how to fix them.
• Grow your own food. To enjoy fresh, homegrown produce, start a small herb garden or vegetable patch on your balcony.
• Become familiar with the secondhand market. Whether you are looking for furniture, clothes, electronics, and appliances, this can be another eco-friendly way to save money. For hidden gems, visit thrift stores, garage sales, consignment shops, and online marketplaces such as Facebook Marketplace.

8. Seek & Destroy: Identify Expenses That Are Sabotaging Your Buget

It’s easy for certain expenses to sneak in and wreck havoc on your finances if you’re not careful when budgeting. Listed below are some common culprits that deplete your budget quickly:

Recurring Traps

• Subscriptions on autopilot. Subscriptions to gyms you don’t use, streaming services you don’t watch, and other recurring charges can drain your account. Identify subscriptions that you are not using and cancel them.
• Mindless spending. Over time, a daily latté, an impulse purchase, and a convenience item can add up. Spend a month tracking your expenses to uncover these hidden costs.
• Dining out debt. A frequent habit of eating out can have a drastic impact on your budget. To avoid restaurant temptations, cook more at home, explore budget-friendly options, and pack lunches.

Financial Fangs

• Unnecessary debt. Predatory lending, such as high-interest credit cards and payday loans, can cripple your finances. Avoid taking on new loans with unfavorable terms and pay down existing debt first.
• ATM fees. A typical out-of-network ATM transaction costs $4.73. If you want to avoid these fees, use in-network ATMs or get cash back at the grocery store.
• Ignoring bills. The cost of late fees and penalties can quickly add up, straining your budget. Be sure to pay your bills on time and prioritize essential payments such as rent and utilities.
• Neglecting maintenance. In the long run, skipping car repairs, home maintenance, or preventive healthcare can result in costly problems. Make sure you budget for regular maintenance in order to avoid unexpected financial problems.

Lifestyle Leeches

• Keeping up with the Joneses. When you compare your spending with others, you can end up overspending and feeling stressed about your finances.Don’t let lifestyle inflation take over your finances. Focus on your own financial goals..
• Retail therapy blues. There’s no doubt that retail therapy can provide temporary relief, but it can quickly deplete your savings. Make a point of celebrating your accomplishments or finding healthier ways to cope with stress.
• Vacation vortex. It is true that travel can enrich our lives, but extravagant vacations can derail our budgets.You should plan your trips carefully, set a budget, and look for budget-friendly travel options, such as traveling off-season. Alternatively, you may want to consider a staycation.

The key to a healthy budget is finding a balance between expenses and income. Once you identify these “expense killers,” you will be better able to manage your finances and build a more secure financial future.

9. Tap into the Power of Community: Your Secret Weapon for Saving Money

It’s not always all about tightening your belt and scrimping. What if you possessed a hidden superpower that was waiting to be unleashed? One of those superpowers is community.

Your everyday connections can become your secret weapon to save money. How? Here are some powerful ways to get involved in the community and boost your finances:

• Share and barter. Don’t spend money on things you don’t need. Instead, borrow or barter. In exchange for favors, offer to help with tasks.
• Join community gardens or co-ops. Getting fresh food at a lower price and interacting with your community is a great way to remain connected.
• Knowledge and resources sharing. Help your community by sharing tips, tricks, and resources. Create a workshop on budgeting, debt management, or investing. As we learn from one another, we become more capable of making smart financial decisions.
• A group challenge and support system. Do you find it difficult to stick to your savings goals? Join a community of individuals who are also committed to saving. Encourage and support each other along the way by setting shared challenges and tracking progress. Having the support of others can help you stay on track when you are struggling.

10. Free Money? Not Quite, But Close Enough: Effortless Ways to Boost Your Wallet

It’s hard to resist “free money” — especially when you have very little. Although the idea of earning an income effortlessly may seem impossible, there are ways to boost your income without breaking a sweat. Over time, these methods can add a substantial amount of extra padding to your wallet for minimal effort.

Passive Income Power-Ups

• Matching 401(k) funds. We’ll start with the easiest way to get free money — your employer. There are many companies that offer 401(k) plans for their employees to save for retirement these days. In addition, many companies offer 401(k) matching funds. You won’t get a 100% match, but they might chip in 50% of your contributions, up to 6% of your salary.
• Investing. Although it isn’t totally hassle-free, investing can be surprisingly passive once it’s set up. For a hands-off approach, consider index funds or robo-advisors. For long-term success, patience is key.
• High-yield savings accounts. Take advantage of better-than-average interest rates on savings accounts. Even if the returns aren’t life-changing, this is free money you wouldn’t otherwise earn.
• Cashback apps and rewards programs. To earn cashback on your everyday purchases, download apps such as Ibotta, Rakuten, or Fetch Rewards. Basically, it’s like getting paid to shop.
• Rent out unused space. Do you have a spare room, storage space, or even a driveway? With platforms such as Airbnb, Neighbor, and Stash, it’s easy to make passive income from them.

Effortless Side Hustles

• Online surveys and microtasks. Prolific, Swagbucks, and Amazon Mechanical Turk are some platforms where you can complete surveys and small online tasks. It isn’t a lot of money, but it’s a fun way to earn some extra money.
• Content creation. YouTube, TikTok, and Instagram are popular platforms for sharing expertise and hobbies. Passive income can be generated through ads, sponsorships, or even selling your own products once you build a following.
• Freelancing. Is there a skill you have that others need? You can sell your writing, editing, graphic design, social media management, and other services on freelance platforms like Upwork and Fiverr.
• House sitting or pet sitting. Get paid to take care of someone’s house and pets while they’re away. You can connect with potential clients through platforms like Rover and TrustedHouseSitters.
• Sell unwanted items. You can sell unwanted items at garage sales or online to declutter your home. It’s one of the easiest ways to make extra money quickly.

Bonus tip. Whenever possible, automate! Invest in recurring funds, transfer automatic funds to savings accounts, and use reminder apps to stay on top of your side hustles.

Final Words of Advice

You can learn valuable life lessons about resourcefulness, creativity, and resilience by living with very little money. With these tips and a positive attitude, you can navigate this journey with confidence and find joy in a simple and fulfilling lifestyle.

Don’t forget that you’re not alone. Globally, many people are living on tight budgets, and countless resources are available to help them. No matter how empty the bank account feels, a positive attitude, a little planning, and a little effort will make you thrive.

FAQs

How can I create a budget when I have limited income?

Keeping track of your income and expenses for a month will help you understand where your money goes. Use a budgeting app or spreadsheet to categorize your spending according to what you need (housing, food, utilities) and what you want (entertainment, dining out). Spending patterns can be easily understood once you understand your income allocation and priorities.

What are some good ways to save money even on a tight budget?

It doesn’t matter how small the amount is, it adds up over time. If possible, invest at least 10% of your income in your savings account and set up automatic transfers. You might be able to reduce your recurring expenses like subscriptions and memberships if you look for ways to do so.

How can I build an emergency fund when I barely have enough to make ends meet?

Make a small contribution each week, even if it is only a few dollars. You can boost your savings by participating in savings challenges or programs. It’s important to keep an emergency fund handy in case of emergencies.

I have debt. How can I pay it off quickly on a tight budget?

Learn about debt consolidation options to lower interest rates. It’s advised that the highest-interest debt should be paid first. To pay off debts systematically, use snowball or avalanche methods.

You may be able to discuss hardship programs or payment plans with your creditors if you can’t make the minimum payment. Don’t take out a loan from a payday lender or loan shark. If you need help with your credit, you should consult a credit counselor or a legal aid organization.

How can I avoid feeling deprived when living with little money?

Consider activities and experiences that don’t require much spending. Engage in free activities such as hiking or going to the library, and focus on your personal development.

The post Top 10 Tips for Living with Very Little Money appeared first on Due.

https://www.entrepreneur.com/finance/top-10-tips-for-living-with-very-little-money/467450

PayPal (NASDAQ: PYPL), the online payment processor, has found itself in a curious position lately. While peers in the tech sector soared like skyrockets on the wings of e-commerce growth, PayPal remained grounded, trailing the pack by a significant margin. Yet, whispers of a potential breakout are starting to circulate, fueled by a recent change in the economic climate and a chorus of bullish analyst pronouncements. So, is PayPal poised to shed its underperforming skin and become a market darling once again? 

Can PayPal navigate the tech rally?

The recent shift by the Federal Reserve has altered the financial market landscape. Rising interest rates, once a major concern for technology stocks, have been replaced by the possibility of rate cuts. This change creates a potentially favorable environment for the tech sector. While the broader market, as represented by the S&P 500, may see steady growth, the tech sector, as represented by the Technology Select Sector SPDR Fund (XLK), has the potential to surge ahead.

However, within this potentially favorable tech tide, PayPal remains an anomaly. Despite its robust fundamentals and dominance in online transactions, its share price has stubbornly resisted the rising tide of the sector, trailing the XLK by a noteworthy 31.7% year-to-date. This divergence begs the question: why is PayPal struggling to keep pace with its nimble tech peers?

The answer lies partly in PayPal’s distinct exposure within the tech sector. While cloud computing and software-as-a-service companies thrived on the increased digital adoption during the pandemic, PayPal faced headwinds from inflationary pressures and economic uncertainty. Consumer spending, the lifeblood of many online businesses, contracted, impacting PayPal’s transaction volume and revenue growth.

However, the Fed’s pivot could catalyze PayPal, acting as a tide turning in favor. As interest rates potentially decrease, businesses may loosen their spending constraints, leading to a potential resurgence in online activity and a subsequent boost for PayPal’s transaction engine. 

Beyond transactions: Unleashing PayPal’s value

Although most investors think of PayPal for its well-known online payment processing, its true value lies beneath the surface. PayPal empowers businesses, especially small and medium-sized enterprises (SMBs), to navigate the ever-changing digital commerce landscape. PayPal’s focus on SMBs gives it a unique advantage in capitalizing on the potential tailwinds of a more relaxed Federal Reserve.

Through its diverse solutions, including digital wallets, branded checkout buttons, and data-driven marketing tools, PayPal helps SMBs reach new customers, streamline checkouts, and gain valuable insights into consumer behavior. These services become even more attractive in a climate where advertising budgets can potentially stretch further. As Morgan Stanley (NYSE: MS) analysts aptly noted, this potential for increased digital ad spending could propel PayPal’s share price towards their optimistic target of $118, representing a substantial climb from current levels.

Furthermore, PayPal’s ability to seamlessly integrate with existing online platforms and marketplaces gives it a distinct edge. SMBs don’t need to overhaul their entire infrastructure to tap into PayPal’s vast network of consumers. This ease of use and accessibility further strengthens PayPal’s value proposition in a potentially resource-constrained environment.

Undervalued fem or overlooked goliath? 

While PayPal remains a titan in the online payments sector, its valuation compared to peers raises intriguing questions. Is it a diamond in the rough, ripe for appreciation, or an overvalued giant facing headwinds? 

Let’s consider the price-to-earnings (P/E) ratio, a key metric for gauging a stock’s relative value. Compared to the industry average of roughly 40.3x, PayPal currently sits at a 16.69x multiple. This translates to a 69.4% discount, suggesting that investors are attributing significantly lower future earnings potential to PayPal than its peers.

But is this pessimism warranted? A closer look at PayPal’s historical performance and growth projections paints a different picture. Despite economic challenges, PayPal has consistently delivered strong annual revenue growth throughout the past decade. Analysts anticipate this trend to continue, with estimates suggesting 10% annual revenue growth over the next ten years. Such projections would seem to contradict the prevailing market sentiment reflected in PayPal’s valuation.

Further adding to the intrigue is PayPal’s insider buying activity. With management investing over $1.4 billion in open market repurchases, a clear signal of confidence in the company’s future trajectory emerges. This insider vote can bolster investor sentiment and potentially trigger a revaluation of PayPal’s price tag.

However, it’s crucial to acknowledge the competitive landscape. Players like Block (NYSE: SQ) boast a higher P/E ratio closer to the industry average. While such comparisons can be tricky, they raise questions about whether PayPal’s lower valuation reflects inherent weaknesses or simply a different risk-reward profile.

PayPal’s potential resurgence in the shifting market is contingent on a favorable economic climate and its diverse services for small- to medium-sized businesses (SMBs). Despite a lower valuation than its peers, the company’s consistent growth and insider confidence suggest promise. However, comparisons to competitors raise concerns about its valuation and risk profile, advising prospective investors to proceed cautiously.

https://www.entrepreneur.com/finance/paypal-a-potential-bullseye-in-a-shifting-market/467255

Boeing (NYSE: BA) has been soaring through the headlines like a 787 Dreamliner on a clear blue sky day. The aerospace giant’s stock has taken off, leaving analysts and investors scrambling to glimpse the tailwinds propelling it forward. Buckle up as we unpack the key factors fueling this flight and explore whether Boeing’s future holds blue skies or storm clouds ahead.

Seaplanes to starships: Boeing’s empire

Boeing is a company that conjures up images of soaring jets, majestic airliners, and cutting-edge technology that pushes the boundaries of flight. But this aerospace industry giant is more than just a plane manufacturer. Boeing is a diversified powerhouse, a global leader in developing, producing, and servicing commercial airplanes, defense systems, space vehicles, and more.

Orders soaring higher

Boeing’s commercial aircraft business, once experiencing turbulence, has received a welcome shot of adrenaline in the form of surging orders. The most significant boost came from Lufthansa, the German airline giant, placing a landmark order for 100 737 MAX jets. This marks an important moment as it’s Lufthansa’s first purchase of Boeing single-aisle planes since 1995, signaling a restored trust in the manufacturer and its flagship narrowbody aircraft. The $9 billion deal represents a substantial vote of confidence in the 737 MAX’s capabilities and future market potential.

Beyond Lufthansa, Boeing has secured additional orders from key players like United Airlines (NASDAQ: UAL) and Air Lease Corporation (NYSE: AL). These continued deals further solidify the company’s order backlog, providing crucial visibility into its production pipeline and future revenue streams. With a healthy backlog, Boeing can confidently ramp up production, optimize its supply chain, and secure financing for its ambitious manufacturing plans. This momentum in the commercial aircraft segment paints a brighter picture of Boeing’s financial health and long-term stability.

The significance of these orders goes beyond the numbers. They demonstrate a renewed industry-wide confidence in Boeing’s ability to overcome past challenges and deliver reliable, fuel-efficient aircraft. Once shaken by the 737 MAX disasters and subsequent grounding, this trust is slowly returning, paving the way for a potential market resurgence for Boeing’s commercial offerings. While external factors such as economic conditions and fuel prices continue to play a role, the recent order surge injects crucial optimism into Boeing’s commercial aircraft segment, propelling it towards a potential recovery in the future.

Taking control from the inside out

Beyond headline-grabbing orders, Boeing has quietly made internal changes that strengthen its financial foundation and future prospects. One key move is the promotion of Chris Raymond to head the aftermarket business. This strategic decision signals a renewed focus on maximizing revenue streams beyond selling new aircraft. By prioritizing the aftermarket, Boeing aims to tap into the lucrative potential of maintaining existing fleets through spare parts sales, maintenance services, and data-driven solutions. This shift in focus promises a more diversified and resilient revenue stream, less reliant on the cyclical nature of new aircraft orders.

Furthermore, Boeing’s financial performance has shown encouraging signs of improvement. Rising revenue signals a healthy increase in demand for its products and services. More importantly, the company’s free cash flow is stabilizing, indicating better control over its operating expenses and capital allocation. This financial stability gives Boeing greater flexibility to invest in R&D, pursue strategic acquisitions, and potentially return value to shareholders through dividends or share buybacks.

Boeing catches a shifting market sentiment

The winds of change are blowing in the financial markets, and Boeing feels the tailwinds at its back. The broader market’s recent shift towards cyclical and industrial stocks like Boeing has created a favorable environment for the aerospace giant. This shift can be attributed to several factors, including:

• A more optimistic economic outlook: Investors are gradually shedding their recessionary fears and adopting a more positive view of the economic trajectory. This newfound optimism translates into increased confidence in cyclical sectors like industrials, where Boeing is dominant.
• Repositioning of investment portfolios: With the potential for an economic rebound, investors are reallocating their capital away from defensive, “safe haven” sectors and towards cyclical industries poised to benefit from increased economic activity. As a key player in the transportation and manufacturing sectors, Boeing stands to gain significantly from this capital inflow.
• Attractive valuation: Boeing’s stock price is currently considered relatively undervalued compared to its historical averages. This presents a potentially lucrative opportunity for investors seeking exposure to a well-established company with significant growth potential in a recovering market.

Analysts sing bullish tunes for Boeing

The analyst community has joined the symphony of optimism surrounding Boeing, with several major Wall Street voices upgrading their ratings to “Buy” in recent weeks. This bullish sentiment is fueled by Boeing’s improving financial fundamentals, including rising revenue, stabilizing cash flow, and a more diversified revenue stream through its focus on the aftermarket. This vote of confidence from the analyst community fuels the positive momentum propelling Boeing’s stock price forward.

However, amidst the fanfare, it’s crucial to acknowledge the potential counterpoints to this bullish narrative. Despite the recent surge, Boeing’s stock price has already climbed significantly, raising concerns about a possible pullback or correction in the short term. Technical analysis suggests Boeing’s stock may be entering overbought territory, a technical indicator often hinting at a potential downward adjustment. This potential for a correction serves as a reminder that the current upward trajectory may not be a straight line to the skies.

Furthermore, the legal challenges stemming from the 737 MAX grounding persist. While progress has been made, resolving these legal issues remains a complex process with the potential to introduce uncertainty and impact future performance. Investors must carefully consider these headwinds alongside the recent surge’s positive developments.

While there are some lingering concerns, Boeing’s recent news has been overwhelmingly positive. The major aircraft orders, internal improvements, and shifting market sentiment have all contributed to the company’s stock surge. Whether this momentum can be sustained in the long term remains to be seen, but Boeing’s recent performance is certainly encouraging for investors.

https://www.entrepreneur.com/finance/boeing-ready-for-take-off-after-a-bumpy-ride/467256

The S&P 500 index has experienced a staggering increase of 15.2% over just 33 trading days, capturing the financial world’s attention. Various factors have contributed to this significant rise, including the Federal Reserve’s actions and an ongoing disconnect between the stock market and the central bank. This article will explore the events that led to this remarkable rally and discuss the potential implications for interest rates and the market.

Triggering Factors: The Federal Reserve’s Role in the Rally

One key event that sparked this market uptrend occurred on November 1st when the Federal Reserve announced the potential end of interest rate hikes. This signaled to investors that several interest rate cuts were likely on the horizon – a move generally seen as favorable for boosting stock prices. The resulting dramatic market reaction rippled through Wall Street, generating the meteoric ascent we’re witnessing today.

Another contributing factor began on November 26th, as suspicions emerged about possible “shady backdoor Wall Street games” artificially inflating the market as the year’s end approached. This sequence of events set the stage for the current market surge.

Finally, the Federal Reserve reentered the spotlight on a recent Wednesday, confirming earlier suspicions about multiple interest rate cuts planned for 2024. This marked another milestone in the ongoing rally, maintaining vigorous momentum well into the new year.

Expectations and Reality: Interest Rate Cuts and the Market

However, the market seems unsatisfied with the initial rumors of a mere three interest rate cuts. As 2022 began, traders and investors shifted their focus to the possibility of six interest rate cuts instead. This expectation change has further accelerated the market’s upward journey, outpacing the Federal Reserve’s decision-making process.

When the three-cut theory first circulated, the market responded to the potential cuts positively. The Fed’s recent alignment with those expectations only intensified market optimism. Consequently, with the market assuming possibly six interest rate cuts, the question remains – how will the Federal Reserve react at its next meeting?

What Lies Ahead: Market Implications and Central Bank Choices

For market players, keeping a close eye on the Federal Reserve’s actions and monetary policy decisions is crucial in navigating this highly volatile environment. As the stock market prices in the probability of six interest rate cuts, the onus falls on the Federal Reserve to either validate or counter the market’s assumptions.

If the central bank reaffirms its commitment to an extended easing policy, the S&P 500 is poised to maintain its high performance. However, if the Federal Reserve rejects the notion of six interest rate cuts, a sharp reversal in market trends – and a plunge in stock prices – may ensue.

Wrapping Up: Staying Investment-Savvy in a Tricky Market

The S&P 500’s moonshot rally has undoubtedly piqued the interest of financial professionals, with significant events propelling its growth. As the Federal Reserve’s interest rate decisions and the market’s insatiable appetite for higher returns become increasingly pivotal, 2022 appears to be heading towards even greater volatility and uncertainty.

Investors and traders must remain well-informed to anticipate the market’s next moves. Continually educating themselves on the driving forces behind these market trends and adapting their strategies accordingly is essential. With the Federal Reserve’s potential to either fan the rally’s flames or yank the emergency brake, market participants must remain alert and ready to react to any outcome in this ever-shifting, challenging landscape.

Frequently Asked Questions

What are the main factors contributing to the S&P 500’s rally?

The main factors contributing to the rally include the Federal Reserve’s potential end of interest rate hikes, which signals possible interest rate cuts, and rumors about “shady backdoor Wall Street games” artificially boosting the market. Instead of the previously anticipated three, the market’s expectations of six interest rate cuts have also played a part in sustaining the rally.

What role has the Federal Reserve played in the S&P 500’s increase?

The Federal Reserve announced the potential end to interest rate hikes sparked the market rally. Additionally, their confirmation of multiple interest rate cuts planned for 2024 helped maintain the rally’s momentum. Market participants now focus on the Fed’s decisions regarding the expected six interest rate cuts, causing greater uncertainty and volatility.

What could happen to the S&P 500’s rally if the Federal Reserve decides to reject the notion of six interest rate cuts?

If the Federal Reserve rejects the idea of six interest rate cuts, the market could experience a sharp reversal in trends and witness a significant drop in stock prices. This would greatly impact the rally’s ongoing momentum and high performance.

How can investors and traders stay well-informed amidst the volatility and uncertainty in the market?

Investors and traders should continually educate themselves on the driving forces behind market trends and adapt their strategies accordingly. Keeping a close eye on the Federal Reserve’s actions and monetary policy decisions is crucial in navigating this highly volatile environment, as these decisions can significantly influence market reactions.

The post The Events that Sparked the S&P 500 Rally appeared first on Due.

https://www.entrepreneur.com/finance/the-events-that-sparked-the-sp-500-rally/467167

Markets have been swinging between bearish and bullish territory in the past few quarters, driven by similar bounces between the upper and lower bounds of the U.S. economy. You see, 2023 saw heightened fears surrounding rate hikes and their pending effects; now, just the opposite is happening.

Now that the FED is turning more dovish than before, even pointing to six rate cuts coming in 2024, markets have rallied in the past week. However, some wonder why the FED would be looking to cut rates? Are they expecting a significant downturn ahead to make them choose this strategy?

Hence, the sideways market you are in; one thing is for sure, however, a bulk of economic activity – and investment dollars – is headed to the medical stocks space. Names like Pfizer (NYSE: PFE), Merck & Co. (NYSE: MRK), and Eli Lilly (NYSE: LLY) are being rewarded by markets today for reasons that will become obvious in just a bit.

Amazing recovery 

According to the latest employment situation reports, better known as the NFP (non-farm payrolls), the United States economy added 199 thousand jobs last month. MarketBeat has done the homework to bring you an in-depth look as to where the bulk of employment have been headed; here’s the answer:

99 thousand jobs moved into the healthcare sector, which is 49.7% of the total jobs added! What this means for you is that if the industry is seeking higher employment prospects, you bet your bottom dollar that profits and business activity are making their way there, too.

And it makes sense when you think about it. Suppose the market is still determining why or how the FED will start implementing another wave of ‘quantitative easing.’ In that case, employers and investors will bet on a safe space, and healthcare is one of those sectors that will always be here to carry the weight.

But, as great investors always say, a story without numbers is just a fairytale, and investing based on numbers alone is basing your wealth’s fate on a spreadsheet. So, now that the numbers are in and carry a reasonable story behind them, it is time for you to check whether markets agree.

Starting with analyst estimates, especially those regarding earnings per share growth projections in the next twelve months, the industry is shooting for an average growth rate pushing into the 11.8% level.

Knowing what you know now, you can use this growth benchmark to pick and choose the gems of the industry that are set to blow these averages out of the water and bring you the price action needed to make serious returns.

Checklist 

Picking and choosing can start with Pfizer, the smallest of the three in this list, small being $162.5 billion. Analysts have released their bold estimates for EPS growth at 46.1% in the next twelve months, which is 290.1% above the industry’s average growth.

With this in mind, it should be no surprise that these same analysts have landed on a consensus price target of $40.3 a share for this stock. Proving these targets right would require the stock to rally by as much as 48.4% from today’s prices.

But wait, there’s more. Because this stock is trading at 49.0% of its 52-week high prices, making it the worst performer in the space, management comes to reiterate how undervalued the stock is by paying you 6.0% in an annualized dividend yield, which simply beats inflation and the 10-year treasury yield.

This is a tough act to follow, but rest assured the rest of the list carries its own set of explosive marks. Merck analysts are expecting EPS to grow by 522.6% over the next twelve months; the math is just too crazy to explain how high above the industry average this one is.

With a $125.1 price target, there is still a double-digit upside from today’s prices in this stock as well, to the tune of 16.9%. You can now see how following the money (jobs) can pay off in terms of wealth building.

Last but not least, you have Eli Lilly to worry about. For this household name, analysts see EPS jumping by 92.1% over the next year, multiples higher than the industry average. 

So there you have it; if upside momentum is essential to you, you may want to stick with Eli Lilly, considering it trades at 95.0% of its 52-week high. But if, instead, dividend income and value are at the top of your checklist, you know that Pfizer is a better watchlist candidate.

Either way, jobs are going to the space, and so is the money, so choose wisely.

https://www.entrepreneur.com/finance/now-hiring-suddenly-jobs-are-going-to-these-healthcare/467150

Entrepreneurship involves numbers. It’s as simple as that. However, the way each entrepreneur interacts with numbers, especially when it comes to finances, varies from one individual to the next.

Even billionaires like Richard Branson have their struggles. Branson is dyslexic and struggled to grasp the difference between terms like net and gross. And yet, the man has built one of the biggest business empires in Europe.

Just because someone has entrepreneurial ambition doesn’t mean they’re comfortable with numbers. But it does mean they need to find the support people and tools to help them go the distance. With that in mind, here are a few ways numbers-phobic entrepreneurs can not just take care of small business finance but do so with ease.

1. Utilize Simpler Accounting Methods

There is small business accounting, and then there’s small business accounting. In other words, there are different accounting methods that you can use to manage your finances as a small business leader, and each option comes with varying levels of complexity.

Accounting methods are the rules, standards, processes, and overall methodology that you use to report your business’s income, expenses, and other financial elements. Investopedia highlights two primary methods for accounting: accrual accounting and cash accounting.

The accrual accounting method is common but also tends to be tricky to follow. It embraces tracking finances through sales, credit purchases, and the use of accounts payable and accounts receivable.

This is a nuanced and multi-layered accounting strategy that has its benefits — when used correctly. It is also required by the IRS …for companies making $25 million or more in sales for three straight years.

So, unless you’re an unusually revenue-prone small business, if you’re easily overwhelmed by numbers, chances are, you have the option to ditch accrual accounting for something more streamlined. Rather than try to make something as complex as accrual accounting work, scale back to the simpler cash accounting methodology for money management.

Cash accounting simply tracks all revenue and related business expenses when they occur. When cash flows in or out of your business, you track it. It’s a user-friendly way to keep your expenses under control and avoid the overloaded nature of running a system set up for credit transactions and AP/AR interactions.

2. Find User-Friendly Finance Tools

In the past, regardless of the specific methodology chosen, business owners had to crunch the numbers using pen and paper, calculators, and, in more recent history, the occasional spreadsheet.

Now, there are countless accounting and finance apps that can do this kind of work for you. Many of these are user-friendly and built for those who aren’t interested in understanding how finances work, so much as making sure that they’re executing their finances correctly.

User-friendly doesn’t just mean an application has nice features and an attractive color palette. In the modern, diversified tech landscape, there are literally endless options and nuances within each kind of technology. In the case of a finance tool, there should be no problem finding an app that caters to your specific needs as a business.

Thryv is a perfect example of this. The small business SaaS provider designed its ThryvPay solution for more than just retail businesses (which tend to get the focus of payment processing applications). You can tailor the company’s platform to any business model’s finances — including your own specific money management needs, from storing payment information to adding convenience fees to easy-access QuickBooks integrations.

If a tool like this fits the bill, go for it. If your particular financial activity is set up for something else, look for a tool that meets those specifications. The options are out there. Use them to offload the number-crunching aspect of your company to the machines.

3. Outsource Selectively and Work With the Right People

It’s a small world, folks. Business leaders are no longer restricted to hiring full-time financial employees from their immediate geographic vicinity. They can diversify, fractionalize, and outsource their small business finances to a variety of different individuals across their region, nation, and even the world.

Most of the time, these individuals come from three different categories of the labor force: freelancers, contractors, and employees. Let’s see how each one can help you with your finances.

Financial Freelancers

Financial freelancers are individuals who can provide specific, targeted services when needed. For instance, a freelancer might help create a financial plan, consult on the execution of that plan, or even audit existing activities.

In most cases, these are isolated services, and you can call on the support of a trained and experienced freelancer if and when it’s needed. It’s the ultimate safety valve for a business owner who still wants to do as much of their finances as they can on their own.

Financial Contractors

In many respects, a financial contractor functions in much the same capacity as a freelancer. They offer specific services such as auditing, consulting, or planning your company’s financial activity.

However, contractors tend to be a better option when there is a recurring need. You might hire a financial contractor to consistently help you execute a financial plan or operate as a financial assistant in an ongoing capacity.

Financial Employees

Finally, if the need is great enough and you have the resources, you can hire a financially-focused worker as an employee. This is a good idea if you find you want to fully pass off your company’s finances and you can’t trust or depend on a third-party solution.

Keep in mind that an employee is a larger expense. You have to pay them a full salary, train them, and provide benefits. Nevertheless, when financially feasible, having a CPA or other employee on staff to help with money management is a great way to avoid having to make numbers-related decisions as the business owner.

4. Create a CTS

Money management is complicated. This is true even when you’re using cash accounting and have the tools and individuals in place to help keep things humming along. When your financial responsibilities build-up, using a CTS is a great way to restore a sense of order in the chaos.

In the second chapter of his book Redeeming Your Time, author and ex-tech entrepreneur Jordan Raynor discusses the need for busy people to use a CTS or “commitment tracking system.” This is a productivity tool that helps with a variety of work and personal activities.

The concept is that when an unresolved thought (called an “open loop” in the book) is bouncing around your head, and you can’t tend to it right away, add it to your CTS. Then, when you have time, you process these open loops into various categories, such as ones that you can address sooner, as well as other larger projects or long-term responsibilities.

Again, a CTS is a Swiss army knife of an organizational tool that can help with countless different scenarios. One of these is finances. If you find the numbers game leaves you feeling overwhelmed at times, a CTS can give you a place to catch those open loops and tend to them on well-understood deadlines. It helps reduce stress and avoid fretting over future responsibilities and is a great way to reduce the negative impact of managing finances as a small business leader.

5. Hone Your Financial Literacy

Finally, don’t use outsourcing and financial management tools as an excuse to avoid learning about how to handle finances as a business owner. In the Richard Branson interview referenced in the introduction, the billionaire clarifies that even though you shouldn’t let academic shortcomings hold you back, you should still take advantage of the tools, resources, and support systems available to learn what you can.

While he is talking in reference to dyslexic individuals, in particular, the advice rings true for anyone who is numbers-phobic. At one point, he specifically says to “get help to get some of the basics with the particular thing that you’re struggling at.”

As a counterpoint, Branson follows this up with the important line, “Don’t fret too much about it.” Both pieces of advice are critical for the ongoing development of financial literacy in the number-averse. You want to be willing to learn what you can without letting your educational journey stress you out.

As a final word of warning, beware of excessive confidence sparked by the path to financial literacy, too. Many who struggle with financial literacy often operate as if they don’t. When that happens, misplaced self-confidence can not just hold you back. It can hurt you. Stay humble and willing to learn as you work your way through your company’s finances.

Managing Business Finances Without Becoming Overwhelmed

As the example of Branson and many others proves, it’s possible to be wildly successful at running a business without being a math whizz or teaching a master class on financial literacy. All that’s required is a little resourcefulness and a willingness to take advantage of the support lines available to you.

Keep your accounting methods simple. Use tech tools that line up with how your finances function. Hire freelancers, contractors, and employees based on your specific resources and needs. Use a CTS to track your financial responsibilities. Invest in improving your financial literacy over time.

If you can implement these tips, you can crush your small business’s financial goals with ease, all without personally stressing out or becoming overwhelmed in the process.

Featured Image Credit: Photo by Yan Krukau; Pexels; Thank you.

The post 5 Ways Numbers-Phobic Entrepreneurs Can Handle Small Business Finance With Ease appeared first on Due.

https://www.entrepreneur.com/finance/5-ways-numbers-phobic-entrepreneurs-can-handle-small/467076

Creating an effective retirement plan deserves a significant investment of your time, and the earlier you start planning, the better. Depending on where you are in your life, you might not be thinking about retirement. However, it’s never too early to start because some of the best retirement plans become more profitable with time, especially with owning and investing in real estate.

If your goal is to retire happy, healthy, and wealthy, consider getting into real estate investing. It doesn’t matter if it’s residential, commercial, or industrial – if you have the capital, the credit, and the time, it’s worth pursuing.

Owning real estate is the ultimate retirement strategy

If you want to retire faster, healthier, and wealthier, consider looking into real estate properties because there are several key benefits you won’t find in other opportunities.

When you invest early enough, owning rental properties is a highly effective retirement strategy that won’t take up too much of your free time (when done right).

When you think about retirement, you probably have the following goals/needs:

• To retire as quickly as possible
• To retire as rich as possible so you never run out of money and can spend freely
• To be healthy and in good spirits
• To have a reliable source of income
• To have someone else manage your technical tasks so you have more free time

Investing in real estate can help you achieve all of these goals and more.

How real estate can help you retire faster

Who doesn’t want a fast retirement? If you ask most people, they’ll probably agree that retiring as early as possible sounds like an excellent idea. Just because the official retirement age is 65 doesn’t mean you can’t retire before that. That number is just when you’re allowed to start collecting Social Security benefits. You can retire at 40 if you really want, although most people don’t because it takes them more time to save up enough money. Owning rental properties can help you retire faster if you’re willing to put in the work ahead of time.

According to FortuneBuilders.com, the elements needed for a successful early retirement are:

• Realistic goals with measurable outcomes
• Basic financial literacy
• Cash flow requirements for becoming financially free
• Buying the right type of properties
• Maintaining your properties in good condition to preserve their value
• Continuing to build your portfolio

Obviously, the sooner you start investing, the better. However, don’t be afraid to start buying investment properties at any age. Now is always the perfect time to start.

How real estate investments can help you retire wealthy

Hopefully, you’re planning on diversifying your portfolio with various stocks, bonds, and maybe even stock market investments. It’s never a bad idea to have multiple types of investments because you never know what fluctuations will impact you the most. However, real estate investing has a much higher profit potential because rental income generally pays more than dividend income and bond yields. For instance, the income yield from rent can be between 6% and 8% annually.

If you’re new to real estate investing, it’s important to remember that you won’t start raking in the high profits right away. Not in the first year or even after five years (unless you’re able to pay in cash and skip the mortgage). However, as time passes, you’ll gain equity in your properties as you pay off your mortgage. Once you get this going, your properties will begin to generate positive cash flow on a monthly basis.

You’ll need to invest in multiple properties to earn any kind of significant income, so keep that in mind. Real estate investing isn’t a get-rich-quick scheme, but it can make you rich over time when you invest in numerous profitable properties, and you have the patience to wait for them to become profitable.

What is an example of profitability?

Let’s say you choose to buy four single-family homes for $300,000 each. You’ll need to make about a 20% down payment on each one, which amounts to $24,000. If you charge $2,000 per month in rent for each property, you’ll be earning an 8% return on your investment based on the property purchase price of $300,000.

Now, say your expenses, including the mortgage, insurance, and other applicable fees, add up to $1,500/month per property. You’ll end up with $500 cash flow each month per property, which is $2,000 per month and $24,000 per year.

It’s easy to see how you can significantly increase your profits just by acquiring more properties. In fact, that’s how wealthy real estate investors make their money. They own a large number of properties that all generate regular income.

When you do get to the point of owning a large number of properties, you’ll definitely want to hire a professional property management company because it’s not a job for one person, and certainly not when you’re retired.

Although it will be another expense, it’s justified and supports your profitability. Having a property manager ensures that your properties will be well-maintained and occupied by qualified tenants. You’ll experience fewer vacancies and your property manager will make sure your tenants are happy. All of these factors contribute to maintaining your rental income and, in some cases, can justify higher rent prices. When your investment properties are well-maintained, they will hold their value and even increase in value more easily.

All these benefits are precisely why investors work with property management companies. For example, investors in Texas prefer working with Houston Property Management company Green Residential because they are experts in managing large portfolios for dedicated investors in the area. They know their craft well and have all the experience required to get the job done right.

A property management company will provide you with the following services:

• Rent collection
• Securing late fees from tenants
• Tenant screening
• Accepting and responding to applications
• Showing vacant units to prospective tenants
• Managing repairs and maintenance
• Creating iron-clad leases and short-term rental agreements
• Handling evictions and all required notices according to the law
• Performing walkthroughs before and after a tenancy
• Cleaning units between tenants
• Implementing new rules
• Increasing the rent on your behalf where necessary
• Enforcing lease violations
• Negotiating lease changes
• Handling reasonable accommodation requests
• Knowing local and federal landlord-tenant law
• Sometimes they’ll even pay your property-related bills on your behalf, like water, sewer, electric, landscaping, etc.

As you can see, these are clear-cut benefits, but you won’t get all of this if you just hire an individual for the job. Always hire a professional company because managing a property really isn’t a job cut out for one person. You really need a team to make it work, especially when you own more than one property.

How real estate can generate reliable income, long-term

The reason real estate generates reliable, long-term income is simply because you’ll always be charging monthly rent. At first, the rent you collect will go to pay the mortgage, but once that’s paid off, your rental income will be mostly profit. You’ll have to start paying property taxes when you finish paying the mortgage, so you will have regular, ongoing expenses in addition to repairs and maintenance, but they’re going to be lower than your mortgage payment.

As long as you own your properties, you can count on that rental income to continue flowing. As time goes by, you’ll be able to raise the rent accordingly to keep up with local rent prices, and if you keep your lease agreements short – like one to two years max – you can stay profitable and competitive.

What are the most profitable types of investment properties?

You may have noticed that almost all millionaires and billionaires invest in real estate, and there’s a reason. It’s a proven method for generating long-term wealth. It doesn’t happen overnight, but over time, it’s one of the easiest ways to have a passive income stream, whether or not you retire.

So, what are all these successful investors buying? There are three main categories of investment properties:

• Residential
• Commercial
• Industrial

Single-family homes, condominiums, apartments, student housing, and even mobile homes all fall under the residential category.

Commercial investment properties are buildings that are used for commercial purposes, like individual stores or office buildings with numerous rooms inside. This includes business parks, hospitals, retail outlets, large shopping malls, strip malls, gas stations, grocery stores, etc.

Industrial properties are buildings like manufacturing plants and warehouses. These are commercial business buildings, but they tend to be much larger than standard commercial properties.

All three options can be profitable, and you’ll find higher profits with commercial and industrial investments. However, these also come with a significantly higher mortgage payment. If you want to invest in commercial or industrial property, you can expect to pay up to 40% down.

While many millionaires and billionaires buy commercial and industrial properties, that’s not a requirement to generate your retirement cash flow. If you can manage the higher expenses, it’s worth pursuing. Otherwise, you’ll be fine sticking to residential investment properties. You may need to acquire more of them to generate the same amount of cash flow as you would from a few commercial investments, but it’s absolutely possible to retire on the income you generate from residential properties.

What about vacation homes?

As a subset of residential properties, vacation homes can be incredibly profitable. Since people will be paying a premium in rent for a short-term stay, as long as you can keep them rented out, you’ll have generous income.

Another similar type of rental is one that has been designated solely for renting on Airbnb. However, the company doesn’t have the best reputation for taking care of issues where renters have done damage or other strange things. Many hosts have been simply told they’re out of luck when trying to recover costs that should have been covered by the company. If you run an Airbnb rental, make sure you have someone tending to it full-time who can check on the property at any time and handle guest concerns immediately.

How does investing in real estate help you retire healthier?

Real estate has no direct connection to health. However, there are several reasons why investing in real estate for your retirement can help you maintain your health.

Investing in rental properties is less stressful.

Stress has a significantly negative impact on the human body, and creates elevated levels of stress hormones that can hurt your heart. Acute and chronic stress contribute to circulatory system inflammation, which can cause heart attacks and strokes.

When you choose to invest in real estate, you’re putting your time and money into an investment strategy that isn’t going to stress you out. At first, it might feel chaotic, but once you get a system for managing your portfolio and you start delegating responsibilities and outsourcing your landlord duties, the chaos will prove to have been only temporary.

Real estate is mostly hands-off.

Provided you hire a property management company to handle your affairs, investing in real estate will be pretty hands-off. That means you’ll have more time to stay active and engage in exercise at your leisure. You can play your favorite sport, golf on the weekends, or just hit the gym anytime you want. You’ll never have to worry about having your workouts disrupted by a tenant calling you at 3 in the morning because their toilet is overflowing.

Real estate investments have and always will be a great way to retire

If you haven’t started looking at properties yet, start now. See what’s available in your area just to start getting a feel for what you’d pay, how much rent you’d generate, and what kind of properties are out there. You don’t have to buy property in your area, but it does help when you first get started.

At the end of the day, your ability to retire healthy and wealthy will depend on how much time and energy you put into executing your retirement plan. You can generate as little or as much cash flow as you want when you retire if you plan it out first.

The earlier you start, the earlier you can retire, but it’s never too late to acquire rental properties.

Featured Image Credit: Photo by Binyamin Mellish; Pexels; Thank you.

The post Why Owning Real Estate Will Help You Retire Faster, Healthier, and Wealthier appeared first on Due.

https://www.entrepreneur.com/finance/why-owning-real-estate-will-help-you-retire-faster/467041

Occidental Petroleum (NYSE: OXY) has been making waves in the energy sector with its recent acquisition of CrownRock, a major player in the Permian Basin. This $12 billion deal represents a strategic move that positions Oxy as a key player in the future of US shale production.

The rise of a Permian powerhouse

Occidental Petroleum’s acquisition of CrownRock marks a pivotal moment in the company’s history, catapulting it into the ranks of the dominant players in the oil and energy sectors. This strategic move significantly expands Oxy’s footprint in the region, adding:

• 94,000 net acres: This substantial land acquisition provides Oxy with a vast platform for future drilling and development, significantly increasing its resource base.
• 1,700 undeveloped well locations: These locations represent a treasure trove of potential production, ready to be tapped for future growth.
• 170,000 barrels of oil equivalent per day (BOE/d): This immediate production boost solidifies Oxy’s position as one of the largest producers in the Permian, a clear indicator of its growing influence within the basin.

The CrownRock acquisition goes beyond simply adding numbers to the balance sheet. It signifies Oxy’s bold ambition to become a true Permian powerhouse. By acquiring these prime assets, Oxy gains:

• Enhanced scale: The increased acreage and production volume elevate Oxy’s status in the industry, allowing it to leverage its size to achieve greater operational efficiency and cost competitiveness.
• Improved access to infrastructure: CrownRock’s existing infrastructure, including water pipelines, recycling plants, and saltwater disposal wells, provides Oxy with a valuable logistical advantage, facilitating efficient and cost-effective operations.
• Diversification of assets: With CrownRock’s Midland Basin assets complementing Oxy’s existing Delaware Basin holdings, the company achieves a more balanced portfolio, mitigating risks associated with geological variations and production fluctuations.

This strategic move conveys a strong message to the market. That message is that Occidental Petroleum is a major player in the Permian Basin. With its expanded footprint, enhanced capabilities, and ambitious vision, Oxy is poised to become a major force in shaping the future of US shale production.

Oxy’s Strategic Vision for Long-Term Growth

Occidental Petroleum’s CEO, Vicki Hollub, aptly described the CrownRock acquisition as “the opportunity to build scale in the Midland Basin and positioning us to drive value creation for our shareholders.”

This statement indicates that this acquisition is not simply a land grab. It can be interpreted as a calculated move designed to solidify Oxy’s dominance in the Permian Basin. By securing access to vast resources and low-cost, high-return production opportunities, Oxy is laying the groundwork for a sustainable and profitable future.

Hollub’s emphasis on “building scale” highlights the essential role of size in the energy sector. A larger footprint translates to economies of scale, increased bargaining power with suppliers and customers, and the ability to invest in cutting-edge technologies.

The commitment to “driving value creation for shareholders” demonstrates that Oxy’s strategic vision extends beyond mere corporate expansion. By strategically allocating resources and maximizing returns from its assets, Oxy seeks to reward its investors and ensure the company’s long-term financial stability.

The acquisition of CrownRock aligns perfectly with Oxy’s long-term strategy of focusing on low-cost, high-return production in the Permian. The region’s vast reserves and relatively lower production costs offer Oxy an ideal platform to achieve its strategic goals. This synergy between the acquisition and Oxy’s established strategy ensures a smooth integration and a rapid realization of the anticipated benefits.

Financial considerations

The acquisition is financed through a combination of cash, stock issuance, and debt, raising Oxy’s debt levels from the current $20 billion to around $28 billion. While debt management will be crucial, the deal is expected to generate $1 billion in free cash flow in its first year, based on an oil price of $70 per barrel. This positions Oxy for continued growth and shareholder value creation.

As with any major acquisition, challenges remain. Integrating CrownRock’s operations and managing increased debt will require careful planning and execution. However, the potential rewards are significant. The acquisition opens access to new technologies, development techniques, and a vast resource base.

Investor reaction

Investors have reacted positively to the CrownRock deal, with Oxy’s stock price rising steadily in recent months. The acquisition showcases Oxy’s commitment to growth and its position as a leading player in the Permian Basin. This bodes well for the company’s future and potential to generate shareholder value.

Occidental Petroleum’s acquisition of CrownRock marks a significant milestone in the company’s history. It solidifies Oxy’s position as a leader in the Permian Basin, opens up new growth opportunities, and creates value for shareholders. While challenges remain, Oxy’s strategic vision and execution capabilities give it the right tools to navigate the future.

https://www.entrepreneur.com/finance/occidental-petroleum-a-giant-awakens-in-the-permian/466820

Shopify (NYSE: SHOP) started small, it was developed as an in-house solution for a snowboard shop called “SnowDevil.” The company’s unparalleled growth, underscored by robust revenue expansions and strategic maneuvers, has turned it into an e-commerce giant. As Shopify faces increased competition and aims for global expansion, understanding its adept financial management, adaptable strategies, and forward-thinking vision offers insights into its success and serves as a roadmap for the future direction of online shopping.

Record-breaking sales and surging merchant numbers

Shopify’s Black Friday Cyber Monday (BFCM) 2023 spectacle shattered records, with merchants leveraging the platform to generate an astounding $9.3 billion in sales across the shopping weekend. This marked a remarkable 24% surge from the previous year’s figures, showcasing a steadfast upward trajectory in sales performance.

During the ramp-up to the BFCM rush, Shopify witnessed an impressive influx of new merchants to its platform. This surge propelled the total number of merchants utilizing Shopify’s robust ecosystem to over 1.75 million merchants, underscoring its allure and effectiveness for businesses seeking a thriving online presence.

The online shopping holiday was spotlighted by the top five product categories that commanded the highest sales through Shopify’s platform during BFCM 2023:

• Apparel & Accessories
• Electronics
• Home & Garden
• Beauty & Personal Care
• Food & Beverage

Fueling this remarkable success were pivotal market factors that contributed to Shopify’s surge during the shopping holiday:

1. Upward trajectory in consumer spending: Forecasts indicate a notable increase in consumer spending, with an anticipated average spend of $930.96 per household during the 2023 holiday season. This marks a significant rise from the $886.27 recorded in the previous year, signaling a robust inclination towards festive shopping.
2. E-commerce on the rise: The paradigm shift towards e-commerce continues to escalate, with predictions indicating a surge to 21.9% of total retail sales in the United States in 2023, up from 19.6% in the preceding year. This burgeoning preference for online shopping amplifies Shopify’s role as a pivotal player in e-commerce.
3. Shopify’s unyielding performance: As one of the fastest-growing e-commerce entities, Shopify’s platform has become a cornerstone for millions of shoppers and merchants. This rapid adoption signifies Shopify’s effectiveness in empowering businesses and facilitating robust sales growth.

Shopify’s BFCM 2023 triumphs serve as a testament to the company’s unwavering growth and momentum. Positioned as a prominent contender in the flourishing e-commerce sector, Shopify’s prowess and continued innovation are set to capture a substantial share of this ever-expanding landscape.

Shopify’s financial strength in Q3 2023 and beyond.

Shopify’s financial performance is a testament to the company’s ability to capitalize on the growing e-commerce landscape. In the third quarter of 2023, the company reported an impressive 25% year-over-year (YoY) increase in total revenue, reaching $1.7 billion. This follows a consistent trend of growth, with a Compound Annual Growth Rate (CAGR) of close to 50% in revenue over the past five years. Such figures underscore Shopify’s ability to not only weather market fluctuations but to thrive in them.

Challenges and opportunities on the horizon

As Shopify charts its course through the e-commerce sector, it faces a wide array of challenges and opportunities. The company’s plans for the future are proactive as it aims to shape the evolving digital retail space.

Challenges

• Competition and market saturation: With emerging players and evolving market dynamics, Shopify must navigate increased competition. The challenge lies not just in staying ahead but also in maintaining its market share in an ever-expanding e-commerce landscape.
• Technological advancements: Embracing emerging technologies like AI and AR is imperative, but it comes with challenges. Integration, adaptation, and ensuring these technologies align with the diverse needs of Shopify’s merchant base require strategic planning.

Opportunities

• Global expansion: Shopify’s initiatives to expand into new markets, particularly in Latin America and Asia, present significant growth opportunities. Tapping into regions with burgeoning e-commerce potential positions Shopify as a global leader.
• Innovation and partnerships: Staying ahead in the competitive e-commerce arena necessitates continuous innovation. Shopify’s focus on building partnerships and fostering innovation through its partner ecosystem underlines its commitment to providing cutting-edge solutions.

Shopify’s performance during BFCM 2023, with record-breaking sales and a surge in merchant numbers, solidifies its position as a leader in the e-commerce sector. Its financial resilience and strategic maneuvers underscore its ability to thrive and shape the evolving digital retail landscape. Facing challenges from increased competition and technological advancements, Shopify’s proactive approach, including global expansion and innovative partnerships, sets a promising trajectory for the company’s continued success.

https://www.entrepreneur.com/finance/shopifys-finest-performance-beyond-the-balance-sheets/466047