How Does a Mortgage Work? The Ultimate Guide

Between the different types of mortgages and the seemingly endless amounts of mortgage paperwork, buying a home may seem overwhelming. But how does a mortgage work exactly? We have all the answers to that mystery and more. 

No home or homeowner is the same, which is why it’s so crucial to understand how to get the best mortgage for you. From how the mortgage process works to some qualification tips, we’ve rounded up all the key mortgage basics. Let’s get started and get you one step closer to your new home.

How Does a Mortgage Work?

A mortgage is essentially a loan taken out from a bank or financial institution to give you funding for a home. You can choose to finance almost the entire home or do a combination of financing and money down.

Whatever money you put down on the purchase comes from your own cash reserves. Money down reduces the amount you have left to pay on the home through your mortgage loan. Your mortgage loan is given with interest rates that may vary or be fixed each month

A mortgage is also considered an instalment loan. This means the payments are paid monthly or bi-weekly in instalments. You’ll pay your principal balance as well as the interest, fees associated with the loan, taxes, and insurance. You may have a mortgage for 30-years, 15-years, or less if you choose.

As the years go by, your mortgage is paid down each month. Once your home is paid off, you’ll no longer have a mortgage and you’ll fully own your home. In the event that you sell your home before it’s paid off, you will need to pay off the loan at the time of the sale.

Failure to pay your mortgage could have serious consequences such as foreclosure. This is why the mortgage qualification process is put in place to ensure you’re in a loan and a home you can comfortably afford. This makes your mortgage less risky for you and your lender.

How to Qualify for a Mortgage

While qualifying for a mortgage may seem overwhelming, it doesn’t have to be. There are a few easy things you can do before you apply to help make the process easier. Creating a budget is a great starting point.

Your budget will help you and your lender determine what loan amount you’re most comfortable with. Start by laying out your expenses and income. Take a look at your down payment amount to see how much you’re comfortable putting down as well.

Next, it’s time to look at your credit and try to reduce any other debt you may have. This is where your budget can help you make a plan for paying off credit cards and reducing your spending. Your credit score will affect everything from your loan terms to your interest rate.

The higher your credit score, the better your interest rate will be. A lower interest rate allows you to pay more of your principal balance. This means more money is spent on interest each month.

Key Considerations When Shopping for a Mortgage

Another key consideration when shopping for a mortgage is how much you’re budgeting for a home. The type of home is also a factor.

A condominium, for example, may have an association fee you pay each month for amenities. This will get factored into your qualification, as it’s a fixed expense you’re responsible for.

If you’re purchasing new construction or a fixer-upper, your loan options may differ as well. When you have a home that needs a lot of work, you may choose to put less down on your home. This will allow you more cash for renovations and repairs.

As you’re going through the application process, look over all the loan options you qualify for. Your bank will need to know your budget, down payment, income, and other factors to help you find the best mortgage for you and your family.

Home Buying Tips

Before you apply for a mortgage, it can be helpful to take a look at your local real estate market. This will help you come up with your ideal home and budget.

You may find your budget gets you more than you think. You may also realize you need to prioritize your wish list.

This is a great time to make a list of what is most important to you in a home. For some, it’s the proximity to a certain school. To others, it’s the commute to work or the number of bedrooms. Your wish list will help you come up with a budget and a target price range as you start to house hunt.

As you start to look at homes, it’s also helpful to get a mortgage pre-qualification. This will allow you to make an offer on a home while knowing what you’re approved for. This helps you know where you stand while also making your offer stronger as a potential buyer.

Getting a Mortgage 101

Wondering how does a mortgage work? You’ve come to the right place. We have wealth management, mortgage, investment, and financial resources to help you make an informed decision.

Your home is likely one of your biggest assets. Read up on mortgage rates, the economy, and the housing market in our wealth management section.

How Much Do You Need To Invest in Real Estate?

In an overwhelming majority of countries, real estate costs continue to rise due to low-interest rates and supply chain disruptions. 

Yet, while housing prices are sky-high, investing in real estate has never been easier. You might think buying real estate is only for the wealthy, but you would be wrong. 

The truth is, you can start buying real estate investments for as little as $1,000. Don’t believe me?

Then keep reading as we explore the question, “How much do you need to invest in real estate?” We guarantee it’s feasible for you. Besides, one of the best investing tips is to diversify your portfolio, which real estate will help you do. 

Real Estate Investment Trust (REIT)

The cheapest way to invest in real estate is through a REIT. They allow you to invest in real estate without the actual real estate. 

What does that mean?

REITs are similar to mutual funds as in they are securities. Investors trade REITs on major exchanges like stocks. REITs own commercial real estate like:

  • Apartments
  • Hotels
  • Office buildings
  • Retail spaces
  • Shopping malls

Most REITs specialise in a particular type of real estate or specific region. 

REITs offer a high dividend and a liquid way to invest in real estate. In addition, it’s easy to reinvest dividends to grow your investment further. 

When investing in REITs, experts say to stick with publicly-traded REITs, which you can buy from brokerage firms. 

As mentioned, you can invest in REITs for $1,000! 

Real Estate Investment Group (REIG)

If you’re an investor who wants to own physical real estate rather than shares of a company, then you may want to consider an REIG. 

An REIG allows you to buy one or more units in an apartment or condo building via an operating company. The operating company manages and markets the units. Then, the operating company takes a percentage of the monthly rent. 

REIGS are a cost-effective way to invest in real estate because you don’t have to succumb to the management work. 

Some partnerships accept investments as low as $5,000 or up to $50,000. So while it’s not enough to purchase a property, when several investors come together, they can co-own property and make a profit. 

If you want to invest in an REIG, you want to look for one that pays a monthly cash return on your investment. 

Crowdfunding

Similar to REIGs, crowdfunding is becoming more popular in real estate investing. It allows you to pool your money with other investors to fund commercial real estate investments. 

For example, a developer wants to buy an apartment complex for $3mn, make $1mn worth of renovations, and resell the complex for $6mn. 

The developer can borrow $2mn from the bank and contribute $500,000 of their own money, but they still need $1.5mn for the project. 

They can raise the rest of the capital via crowdfunding. Those who invest will share the profits. You could be one of those investors. Each crowdfunding project has its own minimum contribution. 

A typical contribution amount is $25,000, far less than outright buying a property. 

Buy Property

Of course, you can also buy property as a way to invest in real estate. In general, this will require more money upfront. However, you can buy a property with as little as 3-5% down, depending on the location and lender. 

If you choose to invest in property by buying directly, know that it is time-consuming but can see considerable returns. You can profit from purchasing property in two main ways: becoming a landlord or flipping. 

Rental Properties

Becoming a landlord can offer long-term income and capital growth. But it’s also a lot of work. You need to find and vet tenants, keep up with property maintenance and continue paying the expenses. 

It’s a good investment if you have the time and money to manage the property. It’s even better if you can afford to hire a property management company so you can focus your time on other investing projects.

Fix and Flip

If HGTV is famous for anything, it’s flipping houses. When flipping, you buy a property, revamp it, then resell it. 

The best way to flip properties is to find the unvalued ones. This means looking for foreclosed homes, short sales, and abandoned properties. This is because you want to pay the least amount possible for a property to maximise your return after remodelling.  

When flipping, you go through a different loan process. It’s best to pay cash, but if you need financing, you’ll want to have some wiggle room. Every property has different funding requirements based on its current condition.

If you have enough money to pay cash or put down a large downpayment comfortably, it’s a good investment option.

Fees When Buying

While purchasing a property with 3-5% down is possible, it’s not always the best financial decision. You could be left with a higher interest rate, and your mortgage payments will be bigger. 

If you’re able to put 15-20% down, it’s a better choice to do so. Going into debt to make money requires balance and strategy. Borrow too much money, and you may fail to pay it all back. 

Additionally, when buying a property, you have to remember you’ll be responsible for paying all the fees, not just the mortgage. This includes:

  • Closing costs
  • Property taxes
  • Homeowners insurance
  • HOA fees
  • Maintenance and repairs

If you rent out the property, these fees will remain your responsibility. However, if you sell the property, you won’t have to continue paying them once you sell.

But, you must factor these costs into your budget because you need to pay them as long as you’re the owner. 

How Much Do You Need To Invest in Real Estate, Explained

To invest in real estate, you don’t need a lot of money. A few thousand dollars can help you generate wealth and move on to bigger and better-investing projects.

Rather than pondering the question, “How much do you need to invest in real estate?” take the money you have and find a viable investment. 

If you’re still unsure about getting started, check out our real estate investing for beginners article to help you. 

Opening a Savings Account: A Guide for Young Adults

Did you want to start planning for your financial future? One of the best ways to ensure you’ll stay financially stable is to open a savings account. Savings accounts give you the flexibility to undergo unexpected financial hardships. They also help you plan for major life events, such as buying a house or car. It’s best to start saving as young as possible. As such, young adults should open a savings account as soon as they can.

Below, we’ll get into the basics of opening a savings account. Keep reading to start planning for your financial future today!

Compare Financial Institutions

Before you open your first savings account, you need to compare financial institutions. Many different banks offer savings accounts, but they’re not all created equal. Some savings accounts put you in a much better financial position than others. 

Young adults often get trapped in these poor financial situations because they don’t know which things to look for when they open a savings account. You should compare a few different aspects before you decide on a financial institution.

Interest Rates

First, compare interest rates. When you place your money in a savings account, it will accrue more money over time. As such, you can actually gain more money by leaving your cash in a savings account. 

Yet, not all interest rates are the same. In fact, banks often offer low interest rates. Sometimes, they’re even as low as 0.01%! So, you should look at the interest rate before you decide to open a savings account with a certain bank.

If you want to grow your wealth faster, you should invest and save at the same time. Buying reliable will help your wealth bloom. Still, you need to make sure your stocks don’t have a high level of risk. Investing in the wrong stocks can cause you to lose money as the market fluctuates.

The Minimum Requirement

Some savings accounts require you to have a minimum amount in them. If you don’t keep the minimum amount in the account, you may incur fees and penalties. 

Some savings accounts don’t have a minimum amount. This is ideal since you’ll have the ability to take out as much money as you need.

Don’t worry if your best savings account option will have a minimum amount. But you should make sure it isn’t high.

No Monthly Fee

Even though banks have low interest rates, they might also have monthly fees. 

These might be as low as $5, but they can pile up over time. Usually, you get charged this amount when you don’t have a certain balance in your savings account. 

So, if there is a monthly fee, you should figure out how easy it will be for you to avoid.

The Opening Deposit

When you open a savings account, you might have to pay an opening deposit. 

Sometimes, this is as little as $25. Yet, some people want their first deposit to be smaller. You’ll need to make sure you can afford to put the minimum savings amount in your account. So, take stock of your financial situation first. Then, decide which account allows you to make the first deposit that best meets your needs.

Look for Automated Transfers

Saving money is easy to talk about and much harder to do. If you have to manually put money in your account, you might forget to do it. You might also struggle to want to put your money in a savings account on a regular basis. 

To get around this, many banks offer automated transfers. You’ll get to pick a date and a certain amount of money. Then, the bank will draw money out of your account every month on the specified day. 

When you choose your date, you should think about when you need to pay your monthly expenses. Many people choose a date after their payday. Others pick a day after they pay for other necessities, like rent. 

Once you know how much will go into savings, work it into your monthly budget. Consider it a necessary expense so you ensure you make enough money to keep it up. 

Get Your Required Documents Together

Banks often require people to present a few documents in order to open a bank account. This is to prevent identity theft and fraud.

You’ll need your social security number, your address, and a valid ID. Your ID should be a government-issued one, such as a passport or driver’s license. You may also need a document that proves your address. You will also need to provide your date of birth and contact information.

Make sure you contact the bank before you open the account. Ask them what you will need to give them so you can prepare the documents in advance.

Fill Out the Application

Next, fill out your bank’s application. Make sure you know how to contact your financial institution if you have questions.

At this point, the bank will require you to know whether you want an individual or joint account. An individual account is best for unmarried people or those who don’t want to merge their finances. A joint account allows two people to easily access your finances.

This makes it best for married people or those who want to share the account with another person.

Ready to Open a Savings Account with Young Adults?

Now that you’ve read this guide, you’re ready to open a savings account for young adults. 

To make the most out of your savings, you should talk to a financial adviser. This person will help you plan for your life goals and big expenses. That way, you’ll be able to meet your objectives quicker.

Want more great advice? Check out more of our articles today!

The Future of Banking: Trends for 2022

As of 2022, the commercial banking market in the US is valued at $862.4 billion. As the world changes and technology advances, so does banking. There are several new trends that will affect the future of banking in the coming years. Keeping up with these changes is crucial to understanding how banks will continue to evolve.

For a rundown of the top banking trends in 2022, keep reading.

Embedded Banking

Embedded banking is a new type of banking that doesn’t use a bank, website, or mobile app. The most common example of this is buy now, pay later options presented by retailers.

Non-financial institutions can utilize financial services through APIs, giving consumers more options when it comes to transactions.

Another popular example is Shopify’s e-commerce software that merchants use. It contains payment services that would have previously been merchant-acquiring business for banks.

Embedded banking can be used by any company, and takes out the banks that act as a middle man between the business and the customer. This is also applicable for B2B activity.

Payments aren’t the only applications of embedded banking. Lending, insurance, and investment can all be processed this way.

As technology advances, so does the capabilities of embedded banking. Automation is more accessible and faster which is very appealing to customers.

Improved Personal Insights

One thing that customers regard very highly is personalization, which is likely to be one of the biggest baking trends in 2022. Banks are focussing on this in a number of ways to increase customer satisfaction.

Improved artificial intelligence and machine learning will make this easier moving forward. Banks will be able to use customers’ personal information to tailor experiences to peoples’ specific needs.

A typical example could be using data from previous transactions to give customers alerts if there is potential for shortfalls in their accounts.

This has already been implemented by some banks in the form of tips to help customers understand and improve their personal credit scores. Wells Fargo also has plans to add a virtual assistant to their app giving tailored insights to customers in real-time.

Facial Recognition

Security has always been one of the most important aspects of banking, and people are always happy if it can be combined with convenience. A lot of mobile devices and computers have facial recognition capabilities to unlock them, and this is starting to move over to banking.

A number of financial institutions in the US are already making use of facial recognition, along with document verification, for mobile and online banking services. Fingerprint scanning technology has also increased in use in recent years for similar applications.

One noted risk with this is the use of “deep fake” technology to make fraud attempts. This could allow fraudsters to create a false image of someone’s face to fool facial recognition systems or even other people.

This is one of the main reasons facial recognition still faces a lot of opposition, as well as the potential for certain biases such as race or sex to affect people.

Such opposition may slow the movement, but it is still currently happening, so it’s not something to ignore.

In-Person Digital Interactions

Virtual branches are a perfect example of how banking is changing. Communication tools are used to simulate a typical conversation that would take place in a physical bank. Some of these tools include:

  • Webchat
  • Mobile chat
  • Video chat
  • Co-browsing
  • Document sharing

Some banks across the US have already begun implementing this, helping people still bank efficiently as in-person branch visits have declined.

An example of an app that is already being used for this is Arvest Banker Connect. Customers can read banker profiles to find one that appeals to them and then message that banker directly. A running history of the communication is logged for reference.

Cryptocurrencies

Cryptocurrencies have exploded in recent years and they are unlikely to disappear anytime soon. Many banks have started to move towards cryptocurrencies, and more will do so in the near future.

Some banks already have functionality in their apps to allow their customers to buy and sell cryptocurrencies. A lot of people are still cautious as they are not very well understood, but as they grow in use so will people’s trust.

It is safe to say there will be a lot of growth in the use of cryptocurrencies in banking in 2022.

Matchmakers

The purpose of matchmakers is to form a connection between banks and fintechs. This is done by core-software providers, venture capital funds, and other entities, helping banks to improve their technological capabilities and enabling fintechs to adopt services used by banks.

This is of more interest to regional and community banks as well as credit unions as they often don’t have the resources to source these technologies themselves.

Banks that have formed relationships with fintechs have begun growing faster, which is encouraging other banks to quickly follow suit.

Hybrid-Work Technologies

Over the last couple of years, hybrid work has become significantly more common. As some employers work from home while others are in the office they must be able to communicate and collaborate effectively.

The consensus is that those working from home are at a bit of a disadvantage to those in the office, so banks (and other institutions) are constantly working on solutions to this.

Ally Financial finished a new building earlier this year that has “Zoom Rooms” specifically designed to improve video conferencing. These rooms have a touch panel for employees to sign in and a dedicated screen where participants will appear and can share content.

Keeping up With the Future of Banking

More trends are always appearing, so to best understand the future of banking you need to stay up to date.

CFI is always on top of the latest finance and banking trends, so if you have any questions feel free to contact us by clicking here.

If you want to stay up to date you can also subscribe to our newsletter at the bottom of this page.

7 Financial Planning Tips for Your Small Business

Small businesses are expansive. Small businesses are responsible for creating over 66% of net new jobs. Every business in America needs to have good business practices to reel in from last year’s losses. If you want to recover from the pandemic’s impact you need to adapt to the new standards. Coincidentally, you will also learn new effective methods to help your incoming customers. But, what exactly do you need to know to build your business? These 7 helpful financial planning tips will help reevaluate your business’s finances.

1. Controlling Your Invoices

When developing an invoice, you can attach your terms and conditions to the payment. Learn how to create a system that can streamline creating an invoice.

Understand how to negotiate these terms with clients. Make it clear that your invoice has a set due date and payment itemization.

Communicate these terms to your clients and business partners. If you complete the work, it’s not an issue to demand that clients comply with those terms.

When it comes to small business finances, a non-payment can make or break your workflow. It’s your responsibility to make sure payments are complete on-time.

In addition, if a company does not comply, a policy can allow you to add interest on late-payments. Sometimes, accidents happen. So, sometimes these circumstances aren’t malicious.

But, you deserve your money for the hard work you put into projects. Despite this, never feel insecure about demanding a client to comply with your invoice’s set terms and conditions.

2. VAT and Tax Accounts

International business transactions are implementing VAT and various tax accounts in their regions. Small businesses should separate their bank accounts, if possible.

This means having a tax account, a VAT account, and a current account. Make sure to verify whether you can move money between these accounts. This is a great tip for startups. 

You should delineate a portion of each check you receive into a VAT account to manage your V8.0. This can allow you to pay the VAT bill with ease without mismanaging your funds.

You should implement the same method for taxable accounts. You want to make sure you always have enough set aside to take care of tax expenses.

3. Reviewing Bank Accounts

With that said, it’s also important to create a regular workflow when checking bank accounts. This includes reviewing bank statements to track your money management.

While managing money, accounts and transactions are prone to human error. It is vital to prevent vulnerabilities and understand your small business finances as a whole.

Build a routine when checking your savings account. It’s important to hold a rainy day fund for when things get hectic. You may depend on it when business is slow for a few months.

4. Cash Flow Management

Your business should allow a two-month buffer for easy cash flow. Many companies and clients can make it difficult to make on time payments.

Certain independent clients will implement a net-30 or even a net-60 into their payroll system. This is due to payments or fees implemented into their own invoice processing.

With this in mind, make sure you have a clear forecast of how you’ll complete upcoming invoices.

It’s never too late to plan for a delay or a disruption in the payment processing. A 60-day buffer is great to give yourself a future ground plan.

You can create these formulas in excel is An invoice needs time to work through different payment systems, so give a clean 60-days notice. Excel is a great application that can help manage these timetables.

5. Bank Management Relationships

Building a repertoire with your bank management staff will prove beneficial for while you manage finances. A personal relationship with a bank manager can help in a difficult time.

They can help you beyond dileneating numbers and figures. They can notify you of changes within the branch and give you financial advice.

Bank managers can help you navigate and organize and manage finances. They can also give you advice on which savings accounts are most beneficial for your small business.

6. Setting Up Direct Deposit & More

An extra trip to the bank to cash a check or manage payments can take time. Building up a series of direct deposits or standing orders in other countries can streamline this process.

The influx of digital banking is allowing this to become an easier process. This can also prevent the added human error of paper transactions.

When you’re working with troublesome clients, they can use any excuse to not pay.

Setting up an automatic online transaction can help secure these payments. Banks and corporations work through a series of verification processes to break down the payments.

At times, interconnectivity between clients and direct deposits is a precarious process. This might become an issue for certain businesses that don’t have access to these accounts.

But, if you can, routing payments to your account on the first of the month can manage finances and bills.

7. Spreading Your Payments

When your business is dealing with large projects with several profiles, payments may turn tricky. If a project is requiring thousands of dollars to complete, try to even out the payments.

This can consist of scheduling payments across a number of months. These deadlines will hit faster than you expect.

Collect your budget and review the point of sale terminals. You must also account for surcharges of banking fees when predicting these payments.

Financial Planning Tips

If you have the initiative and management skills to run a small business, then start today! These effective financial planning tips can help manage your business and keep you on track.

It’s all about money management and making sure your business is in a good position. Understanding how to have a good grasp on money management can ensure your business is stable.

Click here for more information on how to build your business and manage your finances.

How to Choose a Bank for Your Small Business

600,000 businesses close each year. One of the main reasons why businesses struggle is that they are unable to stay on top of their finances or they have a lack of funding.

One thing that can help your business stay on top of changes and meet financial goals is by choosing the right small business banking company. 

Do you want to learn more about company banking options? Keep reading these top tips to choose a bank for your small business. 

Evaluate Your Needs & Business Goals

The first step to finding the best bank for your small business is evaluating your business needs and goals. Because each company requires different types of financing and services, you must find a bank that can help you meet your goals. 

For example, if your main goal is to grow your business, you may need access to different types of funding from your bank. In this case, you should choose a bank that has a variety of lending options for businesses. 

Consider both your short-term and long-term needs and make sure you find the right bank to help your business operate. 

What Types of Financial Products and Services Are Offered? 

Each bank typically offers the same services. However, there may be some banks that offer specialized financial products that would benefit your business. Before you choose a bank, you must ask them about their financial products and services for small businesses. 

Some common products include business checking accounts, business insurance. loan option, and more. 

Consider Bank Availability & Convenience

When it comes to services for your business, you need to find options that are easily accessible and convenient. For banking, you may want to find a bank that offers online or mobile banking services

This makes it easier to pay bills, monitor business activity, and more. Something else to consider is whether or not your bank has multiple locations. While smaller banks may be able to provide you with great service, you may prefer to have a bank with several locations.

This way, you will have easy access to your business funds when you are travelling, no matter where you are. 

Ask About Rates and Fees

Different banks have different fee structures, so you must ask your bank representative about their rates and fees. 

For example, some accounts may provide you with more interest on your deposits. Choosing a bank with the best interest rates will give you more money from your savings. Other banks may charge you monthly fees, fees for transactions, and charge you for other transactions.

To avoid these annoying fees, you may want to find a company that will help you maximize your savings without increasing your costs. 

Small Bank vs. Big Bank

Next, you should consider the network size of your bank. Most banks and credit unions offer the same services, so it may be down to your personal preferences when you choose between a small bank or a big bank. 

If you are a local business, it may be best to choose a small bank that has local expertise. These smaller banks will be more likely to cater to your business and focus on good customer service. 

However, big banks have more funds and account options, so this may be a big advantage for your company. As was mentioned before, big banks have more branches, so it will be easy to access your accounts while you are travelling. Big banks also often have digital banking services to make it even easier to access your funds. 

Similarly, you need to find a bank that can provide scalability for your future needs. While your business starts small, you may grow exponentially in the coming years. You must find a bank that will accommodate your growth and will be able to work with your growing business. 

This scalability is important when it comes to loan options as well. If your business is growing significantly, you need a bank that will be able to offer you enough funding in the future. 

Look For Industry Experience

When you are looking for a bank for your small business, it is not a one-size-fits-all solution. Different companies have different needs, so you must choose a bank that has experience in our industry. 

Banks with industry experience will have specialized products and services that are meant to help your specific pain points as a business owner in the industry. For example, banks that specialize in the real estate industry can help a real estate agent manage real estate finances and offer investment property loans. 

Do They Provide Lending? 

Finally, you must learn whether your bank provides lending options. As was mentioned before, many companies close due to a lack of funding or capital. To help your business stay afloat during tough times, you need to choose a bank that offers lending options. 

Learn more about a bank’s requirements for securing funding and make sure they offer good interest rates for business loans. You can also find a bank that participates in a preferred lender program if you want to apply for a Small Business Administration loan at some point. 

Learn More About How To Choose a Bank Today

Choosing a bank for your company banking is vital to meeting your financial goals and getting the lending that you need to grow. To find a bank that fits all of your needs, you must take each of these factors into consideration!

Do you want help learning how to choose a bank? CFI.co can help! Our website features articles about business, finance, and more. 

Check out our articles today for more financial tips for your business! 

How to Start Investing Money for the First Time

Did you know that about 145 million Americans own stock? That means that 56% of American adults are invested in the stock market.

Whether you’ve been planning on investing for a while or you’ve gotten swept up in some of the recent meme-stock crazes, learning how to start investing money is an exciting juncture in life.

If you’re looking for information about investing for beginners, you’ve come to the right place.

Let’s take a look at the steps you need to take to come up with a solid investing plan.

Determine Your Style

In the world of investing, there are two primary camps of how to invest your money. These are passive investing and active investing. Both of these have their advantages so long as you are interested in the long term rather than hoping for wins in the short term.

Depending on your personal situation, one of these types of investing might be more appropriate for you.

Active investing is when you do the work to research investments and build and maintain your portfolio. Basically, if you’re planning on signing up with an online broker and buying and selling individual stocks, then you’re thinking about being an active investor.

There are three things you need to ensure that you are successful as an active investor. These include time, knowledge, and desire.

Basically, you’ll need to do a lot of research and homework to be an active investor. You’ll also need to become quite knowledgeable about the stock market and the individual stocks you’re trading. Lastly, you’ll need to want to spend time this way as it’s a big time commitment.

Passive investing, on the other hand, involves putting your money in investment vehicles and letting someone else do all of the hard work. Investing in mutual funds is one type of passive investing, for example. With this type of investing, you can get good returns in the long run and you don’t have to put in nearly as much effort.

Some people choose to go a hybrid route such as using a robo-advisor or hiring a financial advisor.

Determine Your Budget

The next step is to figure out how much money you want to budget for investing. You actually don’t need as much money as you think to start investing, and can start a portfolio with as little as $100.

You will want to make sure that you are ready to invest before you take the plunge. Having an emergency fund is key before you start putting your money into investments. An emergency fund is cash that you have in an accessible account so that you can withdraw it quickly if necessary.

There is some level of risk when it comes to all investments and you want to avoid having to sell your investments out of necessity at an unideal time. Having an emergency fund can help avoid this outcome.

Six months worth of expenses is generally considered a good emergency fund. However, you don’t necessarily need to have that much money before you start a portfolio.

It’s also advised that you take care of any high-interest debt before you start investing. Basically, if you invest in the stock market while you have high-interest debt, you will typically lose money over the long run because of the amount of interest you owe.

Determine Your Risk Tolerance

The last piece of the puzzle is how risk tolerant you are. There is a risk to all investments, but some are riskier than others. Typically, the higher profit you stand to make the more you are at risk of losing. The less risk-tolerant you are, on the other hand, the less profit you will typically make in returns.

You will want to find the balance point that works for you between a risk level you’re comfortable with and maximizing the returns on your money. For example, the whole stock market returns almost 10% a year on average while bonds offer returns around 2-3%. However, bonds are much lower risk than stocks.

There can be huge differences in risk with the broad categories of stocks and bonds, too. You’ll want to understand what you’re getting into whenever you are thinking about making investments whether it’s stocks, bonds, real estate, silver, or something else entirely.

Some advisors suggest that beginners can start with robo-advisors to help them make a plan that works with their goals and risk tolerance. Basically, a robo-advisor is a brokerage service that builds and maintains a portfolio for you with the goal of maximizing your potential for returns and staying within your range of risk tolerance.

Are you looking to learn about different stock investment strategies? If so, check out this article.

How to Start Investing Money: Knowledge Is Power!

It’s easy to get swept up in the latest meme-stock when you’re making investments for the first time. However, it’s a really good idea to step back and look at all of your options with a more sober perspective. Sure, there are opportunities to make money in the stock market, but there is also the risk of losing a lot if you aren’t careful.

If you want to learn how to start investing, there is no substitute for doing a lot of fairly dry research about the market. However, passive investing is definitely a better choice if you aren’t interested in reading financial books or blogs.

Are you looking for more information on all things financial? If so, be sure to check out the rest of our blogs for more articles on investing and finance!

Methods to Improve Digital Banking Experience

Digital banking is a combination of mobile and online banking. Customers expect banks to create a banking experience culture that cultivates trust, nurtures their needs, customizes and surpasses expectations. A digitized banking experience ensures easy access across multiple devices, enhancing accessibility. Using live assistance tools like video chat and co-browsing, banks can provide real-time support, building loyalty.

Methods to Improve Digital Banking Experience

Customers want relevance and customized service. Using CRM software, banks gather insights into the customer journey, helping them deliver customer support. Digital banking safety is a significant concern for many customers. This is why banks should make customers feel secure when sharing personal information online. Here are ways to improve the digital banking experience.

Offer digital onboarding

Customer onboarding starts with applying a new account or service and goes on until the customer is fully engaged. While some banking institutions have part of their process digitized and require physical engagement to complete onboarding, consumers expect ease of completion and use security, digital documentation, and authentication capabilities that will streamline the whole process. When you integrate an ID card scanner into your apps and websites then combine it with optical character recognition technology, ID data is gathered and auto-filled in no time.

Promote mobile selling

As consumers continue to embrace digital banking channels, many in-person sales opportunities are also going digital. Consider personalizing product and service messages then make it possible for clients to purchase through a digital channel mainly because mobile access exceeds branch visits. Need-based services powered by advanced analytics are the way to go.

Include a real person option

Automated customer service options have become standard across several industries. While most of these services can only assist with the most basic requests, providing customers with real-time customer services when they can’t find what they want or have complex issues they need to be solved can boost their digital banking experience. You also include a live chat option for real-time assistance.

Leverage big data and analytics

To gain a sustainable competitive advantage with digital banking experience, understand your customers. Look at your customer’s banking experience and leverage the available data to improve the retail banking experience. Through analytics, banks can access insights to evaluate opportunities, segment customers, and enhance the customer experience for digital banking experience.

Keep mobile apps up-to-date

As customers continue to embrace mobile banking, banks should ensure that the experience is safe and seamless. Constantly updating banking apps allows you to get rid of old and dysfunctional features for more improved, secure, and fast-performing mobile services. Up-to-date mobile apps have fast loading times, improving user experience.

Talk to customers

Banking experiences are all about the customer. This is why they shouldn’t second guess the kind of experience customers want. To improve the digital banking experience, consider asking your customers’ perception of your services and what you can do better. You can survey email or leave a form on the mobile app for your customers to fill in whenever they log on. This can give you a lot of insights that you can use to customize the digital customer experience.

Endnote

Digital banking technology has streamlined most of the processes, making it easier for the consumers. Customers hold the key to success for banks. This is why every digital banking experience should be customer-centric.

Credit Card vs Debit Card: The Key Differences, Explained

While a credit card and a debit card look almost identical on the surface, there is a big difference between a credit and debit card. If you’re looking for which card to use when we’ve rounded up a handy credit card vs debit card guide.

From the differences between the two to how to use each card, we’ve rounded up everything you need to know about credit and debit. Let’s jump in and see which card is right for you and when to use them.

What is a Credit Card?

A credit card is a form of payment issued by a bank or financial institution to lend you money. Unlike a loan, a credit card doesn’t come with loan terms or fixed payment plans. Instead, you’re approved for a certain amount, also known as a line of credit or credit limit.

You can use your credit card as a form of payment online, in-person, through apps, or even on your cell phone in a digital wallet. You’re given a unique credit card number, a card expiration date, as well as a security code for verification purposes. This card is then linked to your credit account.

Whenever you pay for something using your credit card, your account is charged. Every month you don’t pay off your credit card balance, you’re typically charged an interest fee. You can charge an amount up to your available credit limit. A credit card payment is typically due each month.

When your monthly payment is due, there will often be a minimum payment that’s required. Any money over your minimum payment you don’t pay off gets rolled over to the next month, plus interest. To save money, it’s recommended you pay off your credit card balance each month.

What is a Debit Card?

A debit card looks almost identical to a credit card. You’ll have a unique debit card number, an expiration date, and a security code. This card number is then tied to your checking account. Unlike a credit card, you can only spend the cash you have available in your checking account.

A debit card doesn’t come with a line of credit or a credit limit. Whatever balance you have in your checking account is what you can withdrawal from your account using your debit cards. Some savings accounts will also come with a debit card.

You can also use your debit card to take cash out of your bank account. This is done at a Cash Machine, an Automated Teller Machine (ATM) or at a retailer that allows cash-back during a transaction. The money you spend using a debit card comes right out of your bank account almost immediately.

When to Use a Debit or Credit Card?

When it comes to when to use a debit card and when to use a credit card, there’s no right or wrong answer for anyone. Some people prefer to use their credit cards and then pay off the balance in order to accumulate rewards points. Many credit card companies and banks offer points for purchases to be used as cash, for travel, or for additional purchases.

Other people don’t want to run the risk of accumulating a high credit card balance. This is where using a debit card can help keep you out of debt. With a debit card, you’re only spending what you have in the bank.

At an ATM, you’ll often want to use a debit card in order to pull the cash directly from your bank account. You can sometimes withdraw cash from a credit card at an ATM, but this money is added to your credit card balance.

Credit Tips

When using a credit card, it can be difficult to keep your credit balances in check. Because this money doesn’t come out of your checking account directly, it can be easy to slip into a cycle of overspending. This can cause a high amount of debt that you have trouble paying off. This can also significantly lower your credit score

To keep your credit card debt manageable, make paying off your credit card each month a priority. Use your debit card for as much as possible and use your credit card for larger purchases or for places that require a credit card.

Most banks have an automated payment feature where you can choose to pay off your credit card balances or minimum payments each month. Doing this will help make sure you can keep up with the amount of debt you’re accumulating. Credit shouldn’t be used if you can’t afford to pay it back.

Debit Card Tips

When using your debit card, you want to be mindful of the balance in your bank account. If your balance is low and you’re using your debit card without checking, you may overdraw on your account. This means you’ve spent more than you actually have.

To help you stay on track, most banks have an alert system that tells you when your account is below a certain number. This will help alert you that your balance is low. If you’re constantly getting down to a low balance in your account or using your credit card as a way to pay for things you don’t have enough money for, this could lead to a dangerous cycle of debt. You may also be unable to pay important expenses such as your rent, mortgage, or car payment.

For security reasons, it’s recommended you use a credit card, however, so that if a fraud has occurred, your credit card company can cancel the charges and issue you a new card. With a debit card, your bank account information could fall into the hands of someone fraudulent giving them access to your assets.

Credit Card vs Debit Card

When choosing between a credit card vs debit card, it’s important to consider what you’re buying. Paying a utility bill or taking out cash from an ATM is usually done with a debit card. A hotel stay, however, is often done using a credit card.

If you’re looking for more great financial content, check out the banking section here. We have financial resources on everything from credit cards to home loans, wealth management, and more.

7 Essential Steps to Take If You’re a Victim of Banking Fraud

The FTC, also known as the Federal Trade Commission, had more than 2.1 million reports of fraud from consumers in 2020. Banking fraud is one of the most common types of fraud and results in millions of dollars lost each year. 

If you are a victim of banking fraud, there are steps that you can take to regain your safety and to prevent future fraud from happening. 

Do you want to learn more about what you should do if you are a victim of fraud? Keep reading these 7 steps to take after banking fraud to learn more.

1. Immediately Contact Your Bank

When you have identified fraudulent activity on your bank statements or credit reports, it is vital that you immediately contact your bank. While fraud cases and cybercrime continually increase, only 15% of these crimes are reported. 

Reporting fraud to your bank will allow them to take immediate action to protect your account from future transactions. This means that you can be sure that you will not lose any more money. 

They can help you cancel your credit cards and give you replacement cards to protect your finances. Your bank will also be able to refund the money that was stolen out of your account. 

However, if you wait too long to contact your banking institution, you may not be able to refund the money that was stolen.  

2. File Reports & Complaints

Next, it is important that you file reports and complaints. 

First, you should report this crime to your local police department. Even if they are not able to help you identify the source of fraud, filing a report is often a necessary step to take if you want to get your money back. 

Next, you need to file a report with the Federal Trade Commission. They will get more details about your specific case which may be able to prevent other people from being victims of the same scam. 

3. Collect Important Information

If you are the victim of bank fraud, you may need to open a case or file a claim with your insurance agency if you want to get your money back. To make sure you are protected, it is important to collect important information about your case as soon as it happens. 

This includes your account number, when you noticed the fraudulent activity on your account, when you reported this activity, and if you filed a report with the FTC or police. 

Having this information will make other organizations take your case seriously and may help you get a favourable result.  

4. Place a Fraud Alert

Something else that can give you peace of mind after you have been the victim of banking fraud is to place a fraud alert on your accounts. This will not have any impact on your credit score, but it can prevent people from getting credit under your name. 

It essentially acts as a red flag for lenders and other creditors and will require extra verification to be sure that it is you that is applying for new credit. 

5. Change Your Banking Passwords

Next, you need to change all of your banking passwords. If you have been the victim of a financial scam, you will not know how the criminal got access to your banking information. 

For example, they may have stolen the numbers off of your card. Or maybe they hacked into your bank account after you used a public computer to log onto your account. 

By getting a new credit card and by changing your passwords for things like your bank account, you can keep people from accessing your account in the future. It is also important to never share your passwords with anyone who should not have permanent access to your bank account. 

6. Request a Credit Freeze

Anyone can place a credit freeze on their account, which acts as an extra layer of security. It will prevent people from opening any new credit accounts in your name without authorization. 

If you place this alert and someone tries to use your information to open a new account, you will be notified and you may have a better chance of stopping the criminal who has your information. 

7. Take Steps to Prevent Future Fraud

Finally, it is vital that you take steps now to prevent credit card fraud from happening in the future. People who are victims of fraud are often targeted more than once, so it is important that you take steps to protect yourself from this. 

First, it is important to learn how to practice online banking safety. This includes regularly scanning your bank statements for fraud, avoiding public wifi or computers when using private information, and more. 

You also need to understand common types of scams. Recognizing scam techniques can prevent you from being a victim of a banking scam in the future.

 Finally, you can use things like anti-virus protection to stay safe from viruses or malware and to keep your private data safe. These types of fraud awareness will keep you safe in the future!

Learn More About Banking Fraud & Protecting Your Finance Today

Banking fraud is a common tactic that results in millions of dollars lost each year.

However, many instances of banking fraud go unreported. If you have been a victim of fraud or identity theft, it is vital that you take these steps to take control of your banking and to prevent fraud from happening again. 

By staying up to date on trends in finance and banking, you can be prepared for these situations and can even prevent them from happening. 

Do you want to learn more about banking and finance? CFI.co can help! Check out our website for more tips about banking and how you can protect yourself from fraud.