Here’s how that works. Items are typically cheaper in thrift stores and flea markets than they are online. That means there’s potential to make a handsome profit if you buy something at a thrift store and then sell it on a digital marketplace.
Let’s look at an example…
You notice an item at your local thrift store that you’re certain sells online for about $60. You check the price tag—it’s only $5. You buy it and make a listing on your favorite digital marketplace. It sells! Let’s say shipping costs and selling fees are also $5 each. Your net profit is $45. You’ve made back triple the cost of your initial investment and business expenses.
It’s a simple, elegant, and fun business model that can potentially generate extra cash flow.
If you decide to start a thrifting business, consider these tips to maximize your profits!
Start at home. Before you send something to a landfill or thrift store, search for it on an online marketplace. You might be surprised how much of your “trash” is actually treasure! Make no mistake—some items aren’t worth your time salvaging and selling. But if you have clothes, toys, and books that are in good condition, consider listing them online and see what happens!
Scout out the right locations. Whenever possible, shop at thrift stores in wealthier neighborhoods. They’ll typically have higher-end products that fetch better prices. Also, consider using an app like Nextdoor to monitor local garage and estate sales—those are where you’ll find the real treasures at potentially deep discounts.
Prioritize the right items. Not all resale items are created equal. Books, textbooks, picture frames, and designer clothes tend to have strong returns. But always check the price of an item on eBay or another online marketplace before you buy it.
Buff up what you buy. Before you buy anything from a second-hand vendor, check it for damage or blemishes, but don’t be put off by surface-level issues. You might be surprised at how many items are simple to repair, fix, or clean. Putting in a little elbow grease may substantially boost the selling price.
Remember to have fun while you’re thrifting. The beauty of the reselling business is that it allows you to make money and enjoy a hobby at the same time. It’s perfectly fine if you don’t walk out with an incredible find. Embrace the process, see what’s out there, and make some extra cash while you’re at it!
2020 witnessed home prices soar by 15% to average more than $320,000–a prohibitive price for many seeking to buy their first house.¹
But even if you aren’t ready to buy a house today, there are steps you can take now that may better position you to become a homeowner in the future!
Build your emergency fund
An emergency fund is a critical line of financial defense that can help lay the foundation for buying a house. That’s because an emergency fund provides a cash cushion while you prepare to purchase your home and then begin paying off your mortgage. The unexpected expenses of homeownership can be far less detrimental to your long-term goals when you have a dedicated fund specifically designed to cover emergencies!
Increase your credit score
An excellent credit score is imperative for first time home buyers for two reasons…
First, actions that increase your credit score–debt management and paying your bills on time–can help create a solid financial foundation as you shoulder the responsibility of servicing a mortgage.
Second, lenders typically offer more favorable loan terms to people with high credit scores. That can result in more cash flow over the life of your mortgage. A recent survey discovered that mortgage holders with very good credit scores save more than $40,000 over the lifetime of their loan!²
Take steps to boost your credit score before you start house hunting. Automate your bill payments so they’re always on time, and begin reducing the balances on your credit cards, student loans, and auto loans!
Start saving for your down payment ASAP
Aim to have a down payment of at least 20% of your future home’s value saved before the home buying process begins.
Why? Because paying more up front and borrowing less to buy your home reduces the interest you’ll owe over the long-term. A substantial down payment might also lower the price of closing costs and negate your need to buy private mortgage insurance. Usually, the higher your down payment, the better!
The time to lay the groundwork for buying your first house is now. Build an emergency fund, increase your credit score, and save enough for a significant down payment. Then, search for a house that meets your needs and won’t break the bank!
¹ “U.S. home prices hit a record high in 2020. Is home buying still affordable?,” Peter Miller, The Mortgage Reports, Oct 13, 2020, https://themortgagereports.com/70539/record-high-prices-record-low-mortgage-rates-during-covid#:~:text=Home%20values%20and%20sales%20prices,on%20record%2C%E2%80%9D%20says%20Redfin.
² “Raising a ‘Fair’ Credit Score to ‘Very Good’ Could Save Over $56,000,” Kali McFadden, LendingTree, Jan 7, 2020, https://www.lendingtree.com/personal/study-raising-credit-score-saves-money/
Nationwide shutdowns and social distancing orders bottomed out home buying in the spring, only for demand to skyrocket over the late summer and fall.¹ All the ups and downs and uncertainty about the future have made it hard to tell if now is the time to buy or if it’s better to wait things out!
Fortunately, there’s a simple principle that can bring some clarity to your house hunting process. The 30/30/3 Rule can help you determine the right amount of house for you, whatever your stage of life! It’s composed of three mini-rules that we’ll explore one at time.
Rule 1: Don’t spend more than 30% of your gross income on mortgage payments
In other words, don’t sign away too big of a portion of your income in mortgage payments. This rule makes sure you have a healthy chunk of your cash flow available for other essential spending and building wealth. There’s definitely wiggle room to pay more as income increases, but 30% of your gross income is still a good target!
Rule 2: Have 30% of the home’s value saved in cash before you buy
Banking up a solid stash of cash before you purchase can protect you from several threats. Using about 20% of that cash as a down payment can get you lower mortgage rates and dodge private mortgage insurance.² Also, keeping a 10% buffer provides you with a useful line of defense against unexpected repairs and appliance replacements. Just remember to keep your housing fund away from risk. Think of it as an emergency fund for your house rather than a savings vehicle!
Rule 3: Avoid houses over 3X your gross annual income
This one is simple: Don’t buy a house you can’t afford! Do you make $50,000 per year? Shoot for a maximum $150,000 price tag. This is a simple way of narrowing your house hunting and managing your overall debt.
Why The Rule Works
Let’s say you’re earning the average American income of $56,516 per year, or $4,710 per month.³ You read the headlines about the housing market and decide to snatch up a home. An opportunity presents itself; there’s a gorgeous home in a good neighborhood that’s selling for $169,548 (3X your annual income) with a 3.1% interest rate (the national average). With monthly payments of $724 per month, you’ll only be handing over 15% of your income to the bank. Almost $4,000 dollars of cash flow would be at your disposal!
What if you had the same income level but were looking at a house worth $339,096 (6X your annual income) with a 6.2% interest rate (double the national average). You’ll be forking over nearly half your income for your house. That’s a huge amount of firepower that could be used to build wealth or start a business!
The 30/30/3 Rule is an easy way to simplify your search and protect your income from costly mortgage payments. Don’t forget to review your home buying plan with a financial professional who can help put this helpful principle into practice!
¹ “‘The housing market is on a sugar high’: Home sales are soaring, but is it a good time to buy? Here’s what the experts say,” Jacob Passy, MarketWatch, Aug 24, 2020, https://www.marketwatch.com/story/the-housing-market-is-on-a-sugar-high-home-sales-are-soaring-but-is-it-a-good-time-to-buy-heres-what-the-experts-say-2020-08-21
² “Should You Go Beyond a 20% Down Payment?,” Crissinda Ponder, LendingTree, Aug 30, 2019, https://www.lendingtree.com/home/mortgage/large-down-payment/#:~:text=Compensates%20for%20a%20lower%20credit,risk%20for%20your%20mortgage%20lender.
³ “Here’s how much the average American earns at every age,” Emmie Martin, CNBC Make It Aug 24 2017, https://www.cnbc.com/2017/08/24/how-much-americans-earn-at-every-age.html#:~:text=Here's%20how%20much%20the%20average%20American%20earns%20at%20every%20age,-Published%20Thu%2C%20Aug&text=The%20median%20household%20income%20in,men%20and%2040%20for%20women.
⁴ “Current mortgage rates – mortgage interest rates today,” Jeff Ostrowski, Bankrate, Oct 7, 2020, https://www.bankrate.com/mortgages/current-interest-rates/
We didn’t think how fragile chatting around the water cooler at work, having a meal in your favorite restaurant whenever you wanted, or going to the movies on the weekend really were. But months of shutdowns, social distancing, and required mask-wearing have made us feel it. Life is definitely different from what it was in February 2020.
And that’s where your opportunity lies.
Despite the negative ramifications, COVID-19 has created the chance you’ve been waiting for to live life on your own terms. Here’s how you bounce back from the pandemic stronger than ever and poised to pursue your dreams.
Decide Where You Want To Live
You’ve seen the headlines; people are fleeing cities like New York and Los Angeles for suburbs or even totally new states¹⁺². Those trends aren’t necessarily new, but there’s no doubt that COVID-19 has accelerated the process. And it makes sense when you think about it. Cities are convenient. People are willing to live there and often pay absurd rent because it places them near job opportunities. But months of lockdowns and surging unemployment have either shattered traditional career dreams or shown workers they can function anywhere with an internet connection. Why live somewhere expensive that you don’t like with no jobs?
But the mass urban exodus is also the opportunity of a lifetime. First, remember that you can work anywhere in the world that has an internet connection. You’re no longer tied to the eastern seaboard or California if you want a high paying job. Second, those ex-city dwellers have gotten used to services and amenities. Meeting those demands in a smaller city where property can be cheaper and taxes can be lower has huge upside potential. All you have to do is identify where you want to live and determine the opportunity level. Love mountains and fast internet? Check out Chattanooga, the “Gig City” of the south! Durham, North Carolina has a low population density paired with a huge demand for college degrees.³ And Iowa, once thought to be a cornfield disguised as a state, has a booming economy and awesome culture.⁴ The point isn’t that you should move to a remote part of the midwest and flee civilization (though that’s always an option). It’s that opportunity is more accessible than ever from anywhere in the country and is only limited by your imagination and courage. So why not investigate that small town or mid-sized city you may have never considered before? Now is the time to explore your options!
Build A Business
You’ve always wanted to build a business. And the COVID-19 pandemic has created the perfect opportunity to become an entrepreneur. Before you think it, let me just say—I know it sounds crazy. Starting a business is risky in the best of times, much less after economic shutdowns and a massive market decline. Plus, the pandemic has shot our collective anxiety levels through the roof!⁵ It can feel like there are uncountable roadblocks between you and pursuing your dream of being a business owner.
That’s why you have to be strategic about what type of business you start. Remember, the key to making money is problem solving. The larger the problem you solve, the more money you can potentially make. You probably won’t have to think too long and hard to come up with a list of ways you can help people for a dollar. Real estate agents, for instance, are helping families relocate outside the big city. Food delivery services are helping people stranded at home satisfy their pizza cravings. Do some research into a problem you’re passionate about solving and try some brainstorming for solutions. And because of the economic climate, you might be one of the few people taking action to fix things instead of living in fear!
In short, there’s opportunity hidden in this pandemic. You can bounce back from this season of COVID-19 in a place you love with a business you’re passionate about. If you’re interested in starting a business, let me know! We can talk about some big problems that are facing Americans and how you can help solve them.
¹ Matthew Haag, “New Yorkers Are Fleeing to the Suburbs: ‘The Demand Is Insane,’” The New York Times, Aug 30, 2020, https://www.nytimes.com/2020/08/30/nyregion/nyc-suburbs-housing-demand.html
² Sally Lockwood, “‘The city has become unbearable’: Why are so many people leaving Los Angeles?,” Sky News, Sept 14, 2020, https://news.sky.com/story/the-city-has-become-unbearable-why-are-so-many-people-leaving-los-angeles-12070183
³ Madison Hoff, “20 US cities with great jobs and smaller crowds that could bounce back quickly after the coronavirus pandemic,” Business Insider, May 16, 2020, https://www.businessinsider.com/cities-that-could-bounce-back-from-coronavirus-2020-5
⁴ Winona Dimeo-Ediger, “Why is everyone moving back to Iowa?,” MarketWatch, March 19, 2019, https://www.marketwatch.com/story/why-is-everyone-moving-back-to-iowa-2019-03-18
⁵ Alexa Lardieri, “Coronavirus Pandemic Causing Anxiety, Depression in Americans, CDC Finds,” U.S. News & World Report, Aug 13, 2020, https://www.usnews.com/news/health-news/articles/2020-08-13/coronavirus-pandemic-causing-anxiety-depression-in-americans-cdc-finds
It’s not Wal-Mart or Amazon or Apple; those are companies. The answer, while it might surprise you, actually makes perfect sense. It’s the industry that manages, stores and protects money for billionaires, conglomerates, companies—and you.
That’s right, the financial industry is the largest industry in the world!
Totalling $109 trillion, it dwarfs the competition.(1) For comparison, real estate is worth $33 trillion and retail amounts to $26 trillion. But what exactly is the financial industry? Here’s a quick look.
Technically, the financial industry is composed of companies that offer financial services. But what exactly is a financial service? The International Monetary Fund defines it as “how consumers and businesses acquire financial goods such as loans and insurance.”
— The most obvious example of financial services are the services a bank offers. It offers a place for you to safely store your money. You can also get a loan from a bank if you need to make a big purchase like a home or car. Banks make money by charging interest on loans and adding fees to their services, and they can range in size from local, small-town establishments to massive nationwide banks.
But there’s more to the financial industry than just holding and lending money. Investment is a huge part of this sector. Financial advisors and brokers help everyone from the middle class to the rich and powerful make and manage their investments. They can manage staggering amounts of money for huge businesses. Financial protection services, like insurance, is another major segment of the financial industry.
The foundation of the economy
Modern economies are fueled by the financial sector. They’re the gatekeepers to prosperity. Anyone trying to start a business, save for their future, or protect their family has to go through banks, advisors, and agents. Economies thrive when the financial sector is healthy and melt down when it’s not!
The financial industry might appear as conspicuous as other sectors. We don’t go to a financial advisor every week for groceries or fuel our car at the bank. But that doesn’t mean it’s not vital to every part of our lives.
1) Federal Reserve, February 2020
What if you could get paid for doing something that you already enjoy doing? We’re all good at something. Many people have turned their hobbies into a side business as a way to earn extra money. For nearly everyone, there’s a topic they know well or a skill they have that many other people don’t have. That niche can spell opportunity – and a chance to turn something you enjoy doing anyway into a money-maker.
Depending on the type of hobby you want to monetize, your startup expenses may be quite low. For writing, coding, or graphic design, you might only need a laptop or tablet – something you may already have. If your hobby is fixing up old cars, however, you might need a place to do the work – possibly adding to the expense. For that scenario, you could check out the possibility of putting in a couple of Saturdays per month at a local shop to help save on rent and insurance costs.
With a little ingenuity, you might be able to earn $10 to $40 (or maybe more) per hour doing work you enjoy. Artists can earn extra money by selling arts and crafts items through virtual stores on specialized websites. Freelance writers, coders, designers, and even teachers can find work as well on similar type websites that bring clients and service providers together. If you have a knack for knowing what’s valuable, you may be able to turn garage sale and estate sale buys into a rewarding online business on any popular consumer-to-consumer and/or business-to-consumer sales website. (Hint: If this is something you’d like to try, start out small. Concentrate on one type of item that might be near and dear to you, like brass musical instruments, or antique mason jars.)
The old saying that asserts “knowledge is power” applies here as well. Let’s say your childhood fascination with dinosaurs never quite went extinct. Maybe there’s a successful educational blog or a YouTube channel in your future. Technology has given us the power to reach a larger audience than ever before and to bring our knowledge to anyone who wants to learn more. Sharing what you know can be monetized in many ways and – if you love doing it – you might not feel like you’re working at all!
Do your research and understand any legal or insurance requirements that may apply to the area you want to get into, but don’t let a little legwork bar the way to your next great endeavor – even if it just starts as a side gig.
A recent New York Times article details the rise of consumer debt, which has reached a new peak and now exceeds the record-breaking $12.68 trillion of consumer debt we had collectively back in 2008. In 2017, after a sharp decline followed by a rise as consumer sentiment improved, we reached a new peak of $12.73 trillion.[i]
A trillion is a big number. Numbers measured in trillions (that’s 1,000 billion, or 1,000,000 million – yes, that’s correct!) can seem abstract and difficult to relate to in our own individual situations.
While big numbers can be hard to grasp, dates are easy. 2008 is when the economy crashed, due in part to an unmanageable amount of debt.
Good debt and bad debt
Mortgage debt still makes up the majority of consumer debt, currently 68% of the total.[ii] But student loans are a category on the rise, currently more than doubling their percentage of total consumer debt when compared to 2008 figures.[iii] Coupled with a healthier economy, these new levels of consumer debt may not be a strong concern yet, but the impact of debt on individual households is often more palpable than the big-picture view of economists. Debt has a way of creeping up on families.
It’s common to hear references to “good debt”, usually when discussing real estate loans. In most cases, mortgage interest is tax deductible, helping to reduce the effective interest rate. However, if a household has too much debt, none of it feels like good debt. In fact, some people pass on home ownership altogether, investing their surplus income and living in more affordable rented apartments – instead of taking on the fluctuating cost of a house and its seemingly never-ending mortgage payments.
Credit card debt
Assuming that a mortgage and an auto loan are necessary evils for your household to work, and that student loans may pay dividends in the form of higher earning power, credit card debt deserves some closer scrutiny. The average American household owes over $15,000 in credit card debt,[iv] more than a quarter of the median household income. The average interest rate for credit cards varies depending on the type of card (rewards cards can be higher). But overall, American households are paying an average of 14.87% APR for the privilege of borrowing money to spend.[v]
That level of debt requires a sizeable payment each month. Guess what the monthly credit card interest for credit card debt of $15,000 at an interest rate of 15% would be? $187.50! (That number will go down as the balance decreases.) If your monthly payment is on the lower end, your debt won’t go down very quickly though. In fact, at $200 per month paid towards credit cards, the average household would be paying off that credit card debt for nearly 19 years, with a total interest cost of almost $30,000 – all from a $15,000 starting balance! (Hint: You can find financial calculators online to help you figure out how much it really costs to borrow money.)
You may not be trillions in debt (even though it might feel like it), but the first step to getting your debt under control is often to understand what its long-term effects might be on your family’s financial health. Formulating a strategy to tackle debt and sticking to it is the key to defeating your personal debt monsters.
It seems like that candy bar in the check-out lane has doubled in price without doubling in size. Unlike the value of stocks, real estate, or similar assets, candy doesn’t appreciate in value. What has happened is that your money has depreciated in value. Inflation has a sneaky way of eating away our money over time, forcing us to either find a way to earn more – or to get by with less. Even for the youngest of Generation Z, now in their early teens, consumer prices have increased about 30% since they were born.[i]
In 2018, the average new car costs $35,285 – up $703 since the previous year, or about 2%.[ii] While a $703 increase in a single year might seem high, the inflation rate (as a percentage) is lower than for many other items. And some other items may not have gone up as much as you would expect. For example, in 1913, a gallon of milk cost about 36 cents. One hundred years later in 2013, the average cost was about $3.53.[iii] But if milk had followed the average rate of inflation, the price for a gallon would be nearly $10.00 by now. Supply, demand, and more efficient production and distribution all contribute to a lower price than expected with the milk example. The U.S. government uses what is called a Consumer Price Index (CPI) to measure inflation, which unfortunately does not include food and fuel – both essentials and daily expenses for households – making the true rate of inflation more difficult to determine.
Inflation is due to several reasons, all with complex relationships to each other. At the heart of the matter is money supply. If there is more money in circulation, prices go up. Under the current monetary system, which utilizes a Central Bank to govern monetary policy, inflation rates have been as low as about 1.3% annually in 1964 to 13.5% in 1980.[iv] That means something that cost $10 in 1979 cost $11.35 just a year later. That may not seem like a big increase on $10, but if you’re like most people, your pay probably doesn’t go up 13.5% in a year for doing the same work!
How does inflation affect my savings strategy? It’s a good idea to always keep the current rate of inflation in the back of your mind. As of August, 2018, it was about 2.7%.[v] Interest rates paid by banks and CDs are usually lower than the inflation rate, which might mean you’ll lose money if you leave most of it in these types of accounts. Saving, of course, is essential – but try to find accounts for your cash that work a bit harder to outrun inflation.
[iv] & [v] https://www.usinflationcalculator.com/inflation/historical-inflation-rates/
Take the life insurance card in the Community Chest for instance. That might give the impression that life insurance is free money to burn on whatever the next roll of the dice calls for.
In grown-up reality, life insurance proceeds are often committed long before a policy holder or beneficiary receives the check they’re waiting for. Final expenses, estate taxes, loan balances, and medical bills all compete for whatever money is paid out on the policy.
If your parents don’t have a policy or if you think their coverage won’t be enough, you can plan ahead and buy a life insurance policy for them. Your parents would be the insured, but you would be the policy owner and beneficiary.
A few extra considerations when buying a life insurance policy for your parents:
How Can I Use The Life Insurance For My Parents?
Depending on the amount of coverage you buy – or can buy (remember, it may be limited), you could use the policy to plan for any of the following:
Can Life Insurance Pay The Mortgage Or Car Loans?
It isn’t uncommon for parents to pass away with some remaining debt. This might be in the form of a mortgage, car loans, or even credit card debt. These loan balances can be covered in whole or in part with a life insurance policy.
In fact, outstanding loan balances are a very big consideration. Often, people who inherit a house or a car may also inherit an additional mortgage payment or car payment. It might be wonderful to receive such a generous and sentimental gift, but if you’re like many families, you might not have the extra money for the payments in your budget.
Even if the policy doesn’t provide sufficient coverage to retire the debt completely, a life insurance policy can give you some breathing room until you can make other arrangements – like selling your parents’ house, for example.
You Control The Premium Payments.
If you buy a life insurance policy for your parents, you’ll know if the premiums are being paid because you’re the one paying them. You probably wouldn’t want your parents to be burdened with a life insurance premium obligation if they’re living on a fixed income.
Buying insurance for your parents is a great idea, but many people don’t consider it until it’s too late. That’s when you might wish you’d had the idea years ago. It’s one of the wisest things you can do, particularly if your parents are underinsured or have no life insurance at all.