Financial Learning Center

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Financial Learning Center
Financial Learning Center
  • Can I get a second income from investing?

    Putting the money you have to work through investing is a side hustle that you can do while you’re working hard at your regular job. As the sad cliché goes: “no one ever got rich through their salary.” The point being that equity – in real estate, your investment portfolio or businesses, is the key to long-term financial success.

    You work hard for your money. Make it work hard for you.

    In the US and in many countries, investment income is taxed at a much lower rate than your salary is. Which is why the 1% (aka the very rich) probably pay a lower tax rate than you do. The higher the percentage of your income that is investment income, the lower the overall percentage of tax that you pay.

    Remember, if the value of your portfolio goes up, that is not income. Not unless you sell some or all of it, and realize the gain.

    Investment income comes in the form of dividends (from companies), interest (from bonds) and capital gains (from the sale of investments that have increased in value).

    If you plan on tapping into your investments to take our some income, you should do some math to figure out what that means. Let’s say you have a $500,000 nest egg. At a conservative 4% return from interest, dividends and capital gains, that will amount to only $20,000 in potential income per year. That’s not a huge income, at least not one you can live off of.

    The key to investing is to not take out much income, but rather reinvest your earnings. This compounding effect, where you make money on the gains you’ve already made, is the key to generating substantial savings. By taking out some of the gains as income, you put a big dent into your ability to grow your nest egg.

    The goal of investing is usually to grow and reinvest your gains until you retire. If you do this, you will maximize the size of your retirement fund and will buy you options later in life. And when you retire and have no income, you can then draw an income from a much more sizable pool of savings.

    But you can find sizable income streams from other types of investments. Investments such as real estate, or investing in a small business can also create income. Just make sure you have contingency funds in case the income doesn’t come immediately, or if problems arise (for example, investing in a rental property that stays vacant for a year).

    So the answer is yes, investing can be a second income if that is your goal, but the key thought is that in the longer term, multiple income streams can build your savings and buy you future options in life. Investing your time, attention and money in more avenues than just your primary career, is a great way to ensure that your net worth can grow.

  • How can I supplement my income?

    It is always a good idea to try to find alternative income streams. Focusing on your paycheck is great, and making sure you get paid a fair wage for your work is super-important. But if you’re trying to maximize your earning potential, it’s always good to look further than your paycheck.

    In order to do this, you need to focus on your assets and look at things in your life that have value. It may be your education, your car, your house or your collection of baseball cards. There are things in your life that have value that you can unlock.

    The two main places you can unlock earnings is in either yourself, or in the things you own. 

    Starting with you…

    Your knowledge and experience is always worth something. But it’s not something that is easy to unlock. On the simplest level, companies will pay for your opinions. Places like findfocusgroups.com will pay you for taking part in focus groups. It’s an easy way to make some extra cash on the side.

    If you have a specific skill, you may be able to leverage it to earn extra money. Teaching classes on things you know, like music, languages or hobbies are great starting points. You can pitch your idea to community colleges and private institutions. The Learning Annex is the largest adult education site in the US and is a great place to pitch teaching ideas.

    But leveraging yourself can be hard to do. It’s hard to put yourself out there and hustle up extra income. So it may be easier to turn to your assets.

    Assets can be anything of value that can be turned into cash. And with the advent of the sharing economy it is much easier to unlock the potential of any asset. There is a market for just about all assets, and there seems to be a lot of people out there who are willing to buy or rent anything.

    Let’s look at selling your assets. The best things to sell are things that are rare or have tremendous demand. These are the things that drive the highest price. But even if they are common goods, you can still get money from selling things. Anything from antiques and collectables to clothes and household goods can be sold. And there are countless places to sell your items.

    If you have tickets to concerts, sporting events and plays, StubHub is a great marketplace for selling your tickets.

    For art, antiques and collectables, take a look at Invaluable. They have listings of hundreds of auction houses that will sell your collectables. Search around the site to see what sells and for how much. And find an auction house that specialized in what you’re trying to sell (you’ll get the best price there). But also know that the capital gains tax on collectables is 28%!

    How about those “gently used” clothes that you don’t wear any more? Take a look at Thredup. All you do is put your old clothes in a box, send it to Thredup and they will list your items on their site. If they sell, you get some cash!

    And don’t forget eBay! You can sell just about anything there. Spend time looking to see what sells and for what price. Also look at Etsy if you have cool and unique stuff that might be popular.

    But what if you don’t want to give your assets up? Can you still unlock value from them without selling them?

    For sure! Here are just a few ideas.

    Is your car just sitting there not being used most of the time? How about renting it out when you’re not using it? There are services like Turo and Getaround that allow you to list your car for rent. They will insure your car while it is rented and will even help you fix it if something goes wrong.

    Are you away from home a lot and your place is sitting there empty, or do you have access to a vacation property? Think about listing it on Airbnb or VRBO (Vacation Rentals by Owner) or Homeaway while you are gone. You can put it up for a few days, a week or a month at a time. Or rent your home while you’re away on vacation as a way to fund your trip so that you can enjoy it even more!

    And what about all that other stuff that is cluttering your cupboards. Those power tools, AV equipment, video games, kitchen appliances, furniture and baby things? Take a look at Zilok.com. They allow you to rent out just about anything. You never know what kind of value you can unlock from the things stashed in your closet or basement.

    Hopefully you can use some of these ideas to generate a bit of extra income. It’s always nice to find a way to supplement your paycheck! Good luck!

  • How do I ask for more money at work?

    Asking for a raise is one of the most difficult conversations to start.

    It usually goes something like this:

    “I need a raise.”

    To which your boss can reply with an endless number of reasons why it’s not going to happen.

    Here’s a more practical way to prepare for that conversation so that you can increase your chances of success.

    First of all, your starting point is critically important. If you are looking to break into a new job, you have to make sure your initial salary is adequate. Raises come in small increments. And when you move jobs, it’s unusual to get more than a 10-20% jump. So you need to make sure you start as high as you can, otherwise you’ll always be working just to catch up.

    Next, it is vital that you understand the context of your “ask”, specifically, what is happening behind the scenes at your company.

    Ask yourself these questions:

    1. How is the company doing? Is it expanding and hiring new people, or shrinking via layoffs? If the company is shrinking you can still be paid more– in fact during tough times it’s even more important for companies to keep their high value team members. So never let that put you off asking.
    2. How does the company see you? Are you high profile, respected and seen to be contributing? Or do you keep your head down hoping someone will notice?
    3. Do you have a skill that pays a premium? Sometimes it’s not the bosses that make the most money, but the people who do the specialized work that is harder to hire for.
    4. Who makes the decisions about salaries? Most businesses have budgets. And people’s salaries are usually forecast at least a year in advance. Well-organized companies also have a pool of money in that forecast to cover raises. But consider this. If you expect a 15% raise – but the company only forecasts 3% per person – that means you ‘took’ the equivalent of 5 people’s raises.
    5. What time of year is it? Asking for a raise when the business is close to the end of the financial year, when every dollar counts, is tricky.
    6. Is there a formal review cycle? Do you know when conversations will happen, or is it ad hoc? Either way, don't wait until your performance review to bring up your request

    OK, now you’ve done your homework - how do you go about ensuring that you are being considered for an increment?

    Firstlook closer at your scope of work

    What were you hired to do, and what are you doing now? The most powerful tool you have is a record of the value that you add to the business. If you are saving the company the need to hire another person, it’s easier to justify an increment.

    Use online tools such as glassdoor.com and payscale.com to find competitive and comparative positions.  Gather data on what other people with your scope of work and experience and being paid. And go a step further and ask your colleagues what they are paid. But be warned, that can be a conversation that can change your view on your job!

    If you are lucky enough to work for an organization that publishes salary data make sure you’re clear that what you’re asking for is in line with what is published.

    Next, figure out WHO is best to talk to

    The first conversation you have should be with someone who is empowered, and in your corner. If you have a good relationship with your boss or supervisor, they can negotiate with HR and Finance on your behalf. If you don’t have a good relationship, you will need to work much harder to show your value, and your boss’s word can undermine all the hard work you’ve put in.  Every day HR managers have people in their office complaining about their compensation, but rarely do the complainers propose what their salary should be, or have people championing their compensation for them. Don’t be the complainer.

    Next, have the conversation

    Remember, this is a negotiation. And one big rule of negotiations is: “Don’t take a no from someone who isn’t empowered to say yes”.  Don’t be like Oliver Twist asking for more gruel. This is not a favor to be doled out – but a business case to be made.  

    The top 4 points for you to present

    • Your scope of work, and the increased value you bring
    • Comparative data from your own company or your industry
    • Your commitment to the company and your intention to continue to expand your role to bring increased value
    • Your number (first, think of what you think is fair. Next add 10-20% to that number. This gives yourself room to negotiate down)

    Practice your conversation. Your pitch should be no more than 60 seconds to cover the points above – but have extra points ready should the person you’re talking to want more detail. Make the ask. And then stop talking.

    Don’t leave the conversation open ended. Ask clearly what the next steps are and how you can help make it happen.  Even if you get a ‘no’ – persist with requests for performance review dates and insights into why you got the no (remember, there’s always a lot going on behind the curtain – it’s often not even about you).

    Lastly, even if you get a ‘no’ or you aren’t able to secure the money you want - there are other ways for you to benefit from your loyalty and contribution to your employer. Instead of money you can ask for extra time off, or have the company pay for courses or continuing education. Or perhaps ask for a flexible work arrangement, a more challenging assignment, or even a transfer to a different location. All of these things can help increase your long term earning potential.

    There is a LOT of anxiety around asking for more money at work – it’s tied so closely to our self worth that it can be far more comfortable to wait. But you are your own champion. If you have a sponsor or mentor in the organization recruit them in too, but the most important thing is that you ask.

  • How do I make a side hustle work for me?

    The future is coming fast where having a side hustle (or multiple income streams) may be the rule and not the exception. Salaries are becoming less predictable as companies benefit from a flexible workforce.

    It’s time to take a more contemporary view of your income sources and make sure you’re getting paid in more ways than one.

    Spend a moment and think about who is paying you now, and how you think you can be paid a few years from now.

    Inherent in that assessment is an examination of how you spend your time. Time is truly a finite resource; once you spend it, it’s gone. Do you spend time expanding your skills? Or take classes? Have you tried to find a mentor? Have you expanded your horizons with a weekend job? Think critically about how you spend your spare time, and see if it is opening opportunities for you.

    If you’re looking for extra income streams, there are 3 main areas where you can look– your skills, the things you own, and your liquid assets.

    First - your knowledge and experience is always worth something, but as a person with finite hours in the day, it’s hard to exponentially grow income based on your job. But don’t let that stop you from exploring side hustles – from teaching, to participating in focus groups, to making things to sell on Etsy. Doing something with your time that can turn into cash is a great way to create multiple income streams

    Next, look at the things you own – especially things of value that can be turned into cash. And with the advent of the sharing economy it is much easier to unlock the potential of any asset. Look at listing your car on rental sites like Turo and Getaround, your lawnmower on Zilok.com or your house on Airbnb and VRBO. And don’t forget – if you’re willing to put in the time, there’s always a market for selling your second hand goods and clothes.

    The third way to generate a different income stream is to put the money you have to work through investing. This is a side hustle that you can do while you’re working hard at your other job, or jobs. Growing your money in real estate, in your investment portfolio or in a business, should be a part of everyone’s money mindset

    And finally, a potential ‘watch-out’. Some employment contracts have exclusivity clauses. Make sure your current contract doesn’t have one of these. And don’t forget about taxes! That extra money you earn will also be taxable – so make sure you’re keeping some money aside for tax if you’re being paid for your side hustle.

    Empowerment comes with multiple income streams. Look for opportunities and think how you can expand your skills.  It may start as a trickle at first, but before you know it, you may be generating good income from your side hustle.

  • How do I make money on my savings?

    So you want to make some money on your savings? Great! You work hard for your money; it should work hard for you too.

    Savings can be any money that you’ve put aside for the future. Savings can have different purposes. It can be put away for the long term, so that it can be used for big life events like buying a house or for retirement. Or it can be set aside for short-term needs like paying bills or for unexpected expenses.

    To make things clear for yourself, label long-term savings as ‘investments’ because giving your savings that label can help to change your thinking about how this money can be managed. If you call that money ‘investments’, you start looking at wider areas to put this money. Instead of a bank account, you look to stocks, bonds and funds as a way to grow that money.

    But for now, let’s stick with savings and look at the money you have in your bank account. This money should cover your month-to-month expenses, as well as any emergencies that could suddenly come up. Ideally, this savings should cover about six months of expenses.

    If you’re thinking six months of savings is a lot, you’re correct. JP Morgan did a study and found that when they divided their account holders into 4 groups based on income, no group had enough money saved to cover even one month of lost income… So you may not be alone if you’re having trouble putting money away for emergencies!

    So how do you maximize the money you do save? The first step is to figure out what interest rate your bank is paying you on your savings.

    Maybe you had a savings account opened for you when you were younger and have been depositing into that account without considering what you could be earning elsewhere. Maybe you opened a savings account with the same bank that operates your checking account out of convenience and never thought too much about the interest rate they were offering.

    So take a second to look at your savings accounts and figure out not only the interest rate you are getting on your deposits, but also try to figure out any fees and account minimums that might apply to your account.

    The next step is to figure out if there is something better out there.

    There are great tools on-line to help you compare rates on savings accounts and help you find a higher yield savings account. A terrific one can be found at Nerd Wallet. The tool lets you filter by location, initial deposit amount, and even tells you the minimum balance you need to maintain in order to earn interest.

    You might find that you're already earning a pretty decent rate on your savings with your current bank, or you might find that you could be earning more. If you dig around, you may even be able to find a whole percentage more of interest each year by switching to a high-yield savings account. Sweet!

    Finally, before you make a move, make sure you know all the relevant issues that impact your account.

    • Variable Rates: Savings account rates can change without notice and can even shift daily at the discretion of the bank or credit union. The interest rate you get when you open the account might not be the same rate a few months or a year later. So make sure you keep your eye on your rates, and if they drop, go back and comparison shop again.
    • Transaction Limits: There are limits to how often you can withdraw money from your savings accounts without getting slapped with a penalty or have your account closed. Make sure you know the transaction limits so you don’t run into trouble with your bank.
    • Fees: Some savings accounts carry monthly maintenance fees or service fees and have minimum balance requirements. Be sure to read up on the account’s fee schedule before deciding to stash your cash there.
    • Compounding: If you have a choice between two accounts that pay the same interest rate, take the one that pays the interest more frequently. The more frequently the interest is paid, the more the interest compounds on your already accumulated interest. You’ll find daily, weekly and monthly interest accounts.
    • APR vs. APY. Be careful that you’re comparing the same interest rates. Annual Percentage Rate (APR) is what banks use to calculate the interest they pay to you. Annual Percentage Yield (APY) is what you use, after the fact, to calculate what your real return has been, and includes the effects of compounding. But when you compare rates between banks, make sure you compare APY to APY or APR to APR. And if you have a choice between an equivalent APR and APY, take the APR rate. You’ll make more money.

    When you take a look around, make sure you look at all options. Small banks, credit unions and Internet only banks sometimes offer good deals. Do some digging and you might be surprised about what you’ll find. Once you're aware of what else is out there, you'll be able to make informed decisions about how best to make your money work for you.

  • Living on a fixed income

    Living on a fixed income can mean many things. From the obvious (earning a fixed salary) to receiving payments from an annuity, to living on social security or a pension– the key is that every month you have a finite level of income on a regular basis.

    Here are three ways to optimize your fixed income life:

    It goes without saying that you need a budget – and that your expenses should be less than your income. Not “break even.”

    You should not spend every dime that you get. This may mean some adjustments to the way you live. And change is never easy – but the sooner you the make necessary adjustments the better!

    If you’re younger, and work in a profession with a pension, start planning now for ways you can maximize or subsidize your income – and keep your cost of living in check.

    Life is full of surprises – good and bad, so include a buffer each month. And if you don’t have any surprises – great! Put that money aside as savings and put it to work!

    Which leads to the second point. Contrary to popular opinion that retirees should be risk averse – if you have money that you’ve put aside, you can still put it to work and earn money on it.  This doesn’t mean risky or speculative investments, but you can now put smaller amounts into lower risk balanced portfolios that could earn you more than what a savings account can do. But remember – all investing involves risk, so only put in what you can afford to potentially lose.

    Also, regardless of how you earned your living, or currently get your fixed income – there are always ways to make more money.  For ideas, look to the next generation of workers, where having a side hustle, or multiple sources of income, is increasingly becoming the norm.

    Start with the sharing economy – what do you have that you can rent? A car that sits in your garage 99% of the time – put it to work.

    Maybe you have a home with room to spare, or access to a vacation property. Check out AirBNB or VRBO.com. Or if you don’t use your car much, get rid of it and use car-sharing services in your area.

    Remember, that there’s always work to be done. From proofreading, to serving coffees, to teaching. It probably won’t make you rich to do side hustles like these, but there’s an upside. The time that you spend working and earning money isn’t time you spend spending your money.

    Also, a warning. With all the advances in technology, there are increasingly creative ways of getting scammed. Be suspicious of anyone offering easy money or demanding upfront payments for future income. Older people in particular have been major targets for scammers and thieves.

    And finally, if you are closer to retirement and have some money saved, but are worried that the money will not last, look to an annuity to bridge the gap. Annuities are a way to take a lump sum and turn it into a predictable monthly income that will last until you pass away. They are a great way to top up social security.  But they can be complicated products, so if you are interested in one, make sure you talk to a financial planner to make sure it is appropriate for you.

    Remember, living on a fixed income doesn’t have to be an exercise in restriction and deprivation – but it should be a realistic starting point from which to build the lifestyle you want.

  • What's the sharing economy and how can it help me?

    In the past decade, the culture of ‘ownership’ has shifted. Many people are rejecting the notion that you need to OWN all your own stuff. Instead they are borrowing and sharing things they used to buy and own. And if they do own stuff, they put it to work by renting it out to others.

    This is the core idea of the sharing economy.

    And it’s an idea that may have come at the perfect time. In the US right now, every second household is struggling with credit card debt, fueled in part by the mountains of products people have needed to “own”. So maybe the widespread adoption of a ‘buy less, share more’ mindset is a good thing!

    Let’s look at a few ways that you can benefit from this change.

    One of the most high profile changes (for urban dwellers especially) is the idea of car sharing.

    When you add up the cost of a car itself, then what it costs to park it, service it, register it and insure it – even the cheapest car may be costing you thousands of dollars every year. Look into services like Zipcar to see whether you can rent one on demand instead. And if you do need to have one or more cars in your life, is there a way to put them to work to generate more income? Services like Uber and Lyft allow for you to sign up to become a driver, and work as much or as little as you like. Or look into Turo or Getartound, where you allow people to rent your car when you’re not using it.

    What about other big-ticket items in your life that you ‘need’ but don’t use all the time. Lawn mowers, leaf or snow blowers or bikes - look to rent your stuff at us.zilok.com where you can list your items, with their availability and price.

    And your biggest ticket expense of all – your home! AirBnB has revolutionized the travel industry, allowing people everywhere to generate extra income by renting out their homes. And now sites like Homeaway and VRBO.com have become great alternatives to expensive hotels, where travelers look to rent unique vacation homes.

    The world of finance has also been impacted. You can now participate in the cycle of borrowing and lending in ways that banks have done for years, by depositing money with online lending clubs like Prosper and then earning interest as other people borrow your money. Just make sure you understand the risks of putting your money in these programs, it wont be insured the way bank deposits are!

    Of course, there are ideas that have been around a long time that are essentially part of the ‘sharing economy’ - car pooling, babysitting clubs, ‘shop my closet’ clothing swaps and even potluck dinners – anything where a cost can be shared by a group of people versus taken on yourself.

    So why not set a goal today to get extra money in your pocket by reducing some of your expenses or generating some more income – or both!

  • What’s the big deal about compounding?

    Compounding is your friend. And if you’re serious about investing, it is your best friend.

    Compounding takes average investment returns and kicks them up a notch. Here is the basic premise in a simple question. Would you like to get a penny today and have it doubled every day for a month, or would you like to get $10,000 dollars per day for a month? If you picked the penny, you’ve understood the power of compounding. And it’s not even close. After 30 days, your $10,000 a day plan would earn you $300,000. The penny strategy is essentially 100% daily interest compounded daily, which would earn you $5.3 million dollars by the 30th day! Sweet!

    Compounding is essentially a way to accelerate the growth your investments by earning interest on the interest you’ve already earned. The difference between compounded earnings and non-compounded earnings is substantial. Let’s look at an example. Take a $1,000 bond paying 4% interest. Without compounding that money doubles after 25 years. With compounding, the money doubles after 18 years. That’s seven years sooner! That’s a big difference!

    To calculate the impact of compounding, a super-simple method is the Rule of 72. All you do is take 72 and divide it by the interest rate.  The result will give you the number of years it will take to double your money. So at a 12% interest rate your money will double in six years (72 divided by 12).  Super easy!

    The key to compounding is to make sure interest is reinvested. Interest bearing savings accounts automatically add interest back into the same account. Some bonds add interest to the principal owed and compound future interest payments automatically until the bond is paid out. But many bonds, like US Treasury Notes and Treasury Bonds, pay interest out directly to you every six months. Unless you reinvest the interest yourself, you will not get the compounding benefit.

    You can also use the power of compounding with stocks. If you get a dividend or cash out a stock for a gain, you can reinvest the earnings back into another investment. Many 401(k)s and mutual funds have an ability to do this automatically through a dividend reinvestment option. Find out if they are available and make sure you use them!

    So make sure you harness the power of compounding. It will accelerate your earnings and help you get to your financial goals more quickly.

The information contained herein is solely for informational purposes and should not be construed, in any manner, as accounting, legal, tax, or investment advice from Amalgamated Bank. Investments or strategies mentioned on this website may not be suitable for you. Consult your investment, tax or other professional as appropriate with regard to your specific situation. Although the information provided to you on this site is obtained or compiled from a source we believe to be reliable, Amalgamated Bank does not guarantee its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation by Amalgamated Bank for the purchase or sale of any securities, insurance products, investments, or other products named.