Happy Valentine’s Day !

Valentine’s Day, a day that we express our love for each other. One of the things I realized growing up in the world was that you have to love yourself first before you can love another. Wise words that everyone knows and understands. Yet we can put so many things ahead of ourselves out of love and not realize that we are limiting our ability to give more in the future.

Yes, it is love when parents sacrifice their retirement plan for their children’s education, and it is love when careers vanish in order to take care of a sick child or parent.

Financially we can love ourselves by paying ourselves first. It is a basic concept in personal finance and one that so many of us still don’t practice. We pay the bills, and the kid’s education, and anything left becomes spending money or savings.
With this new year, consider reversing that trend. Pay yourself first. Commit to fully funding your 401K or put 10% of your gross income into savings. Do this on automatic deposit so it doesn’t cost you anything. Why? Because you want your money to be working for you right away. The power of compound interest is magic! Money growing at 6 percent per year will double in about 12 years, but it will be worth four times as much in 24 years.  Compound interest requires you to sacrifice today to reap a benefit tomorrow. The future reward will be greater than the sacrifice. For a detailed description of compound interest, check out the video here from Kahn Academy.
You will be surprised at what can happen. Most people don’t even notice that they have less money to spend but adjust their spending to whatever is left.

The upside is there is more for yourself and your family. More money for retirement, more money for the kid’s education, more money for vacation, and more money for taking a sabbatical.
We can all use a little more money…… pay yourself first, and watch the money pile up.

The post Happy Valentine’s Day- Now Love your Financial Self! first appeared on Whole Hearted Way.

Peer-to-Peer Lending, commonly referred to as P2PL, is exactly what it is: a person-to-person lending. It is an alternative to traditional credit lending for small loans.

Peer-to-Peer has become a great option for people who need a personal loan and people who want to lend it to them. Peer-to-Peer Lending is a type of micro lending.

P2PL companies, such as Lending Club and Prosper, manage peer-to-peer lending online in these major three steps:

Check the borrower’s credit to make sure they are eligible for a loan

Assist investors to lend money to the borrowers

Help borrowers to pay their loans back to the investors

The reason for the growth of the peer-to-peer lending’s popularity for both consumers and the lenders are these major reasons:

The interest rates are generally low for consumers who want to get a small loan

The loans are term-based, generally 2-5 years versus traditional bank loans

The Investors get a better return on their investments.

Even though the interest rates are low, they might be higher depending on the risk involved and that has to do with the borrower’s credit score.

The better your credit score is the better are your chances of getting lower interest rates, because of the lower risk for the lenders.

Who is P2PL for?

It is for anyone who needs to get a small personal loan. Generally people who want to consolidate their debt, like credit card bills or for a person who might have an unexpected expense.

What are the advantages of getting P2P loan?

Lowest interest rates

Fixed rates that would not go up

Fast and simple applications process

Low late fees

No prepayment penalty.

For example, Prosper offers unsecured loans from $2000 to 35,000. Their interest rates are from 6.6% to 35%. The loan average is about 13000 with 13.9%. The investors earn in average between 5%-9.5% depending on the risk involved.

Lending Club: Their personal loans are from $1000 to $35,000 with interest rates from 6.6% to 29.9%. Average loan is about 15,000 with a 13.4% APR.

Do these companies have any fees for their services?

Yes, both Prosper and Lending Club have a fee for new loans. Lending Club has a 1.11% – 5% fee of the total loan amount. And Prosper has 1-5% fee. It varies based on the size of the loan. The origination fee is included in your APR and then subtracted from your total loan balance before you receive your loan.

On late payment fees both Prosper and Lending Club have a low fee of $15.00 charge for the bound check or 5%, depending on whichever is greater for over 15 days late payments.

Why can these Peer-to-Peer Lending companies offer low interest rates and fees?

All the process is done online, unlike other finance institutions that have lots of overhead expenses; the P2PL companies have fewer expenses so they can pass on their savings to the consumers.

What are some of the drawbacks of Peer-to-Peer Lending?

You must have a good credit score

Fees to pay

If you default on your loan, it will have an adverse effect on your credit score rating

Higher Payments

Higher interest rate based on your credit score

Note: Always research to understand the risks, conditions and terms of each company’s loan terms.

How does it work?

Each P2PL has a quick online step-by-step process for you to follow. First step is to fill out the online application. You also need to have a good credit score to be eligible. The process usually can be as fast as seven days.

Are there other P2PL Companies that offer different types of loans? Here is the list of some P2PL companies, which offer different types of loans:

Funding Circle offers business loans

Lending Club also offers small business loans beside personal loans

SoFi for refinancing student loans

Kiva is a non-profit that helps alleviate poverty in other countries by lending them money

Other Peer-to-Peer Lending companies for personal loans beside, Lending Club and Prosper:

Upstart offers personal loans

Zopa offers personal loan (a UK-based company)

You also want to be aware of scams – Read this article for what to look for here.

Finally, before you get any loan, make sure that you do your own thorough research and find the best alternative that works for you and your situation.

The post What You Need to Know to Invest in Peer-to-Peer Lending first appeared on Whole Hearted Way.

After 8 months of looking, and being outbid twice (yes, Bay Area real estate is still hot in certain areas), I finally found a home to buy. Every time I think that prices cannot go any higher – they go higher… and higher. What does this mean for all of us?

For people trying to get into their first home, it can be very hard.  They have to save faster than their rent will go up and faster than what the prices of homes will appreciate. There are options for them such as condos and TICs (tenants-in-common) properties which are similar in structure to the co-ops that are on the east coast.  These people will need a structured savings and cash flow plan to get into their first home.

Obviously buying and being tied down to a home is not desirable for all. In that case, you need to be prepared to pay the escalating rents that will happen to compensate landlords that are building equity in their property. Most renters I know are paying more than what my mortgage is for a much smaller space. But I am tied down to a locale and a mortgage and they are not. Pros and cons to each so it is an individual choice.

For those already in a home, you are building up quite a bit of equity. Now the problem begins if you should tap that equity or not. Depression era people believed in being debt free. The idea was to pay off their mortgage and live debt free and with high cash flow in their retirement. That sounds great — if it actually worked. What really happens is that the mortgage gets paid off and so goes the biggest tax write off they have and the high cash flow never happens.  Think you won’t need a write-off by the time you retire? Think again. Most retirement plan withdrawals will be taxable. On top of that, if you make a certain amount of income at retirement, your social security will be taxable too. You may end up paying more tax on less income at retirement if you don’t structure your investments properly.

What about that higher cash flow? Well, if you aren’t working at all then you can’t take any risk so your investments will probably provide a fixed income for the rest of your life. That sounds good unless a high inflationary economy starts. And what are the chances of that? With humans living longer than ever before, I would say most retirees will see another high inflation period that will eat away at their cash flow.  Does anyone remember the eighties?

Attracted to those reverse mortgages on the television?  Lenders are chomping at the bit to give seniors cash out of their homes — at exorbitant fees and rates. That’s because you won’t be able to qualify for much on a fixed income and the reverse mortgage will be your only option to get cash out while you are alive.

I don’t like to think of the place where I live as an investment. After all we all need someplace to live, but when your home has substantial equity in it; equity that you can use for retirement income or other purposes, it may be in your best interests to review your options with a Financial Advisor or Wealth Coach before you are retired.

I have experienced too many people living in multi-million dollar homes and can’t afford the heat or maintenance of their property because they didn’t plan ahead.

Coaching Question for you – what does your ideal home look like when you are retired or working part-time?

The post Home or Investment? first appeared on Whole Hearted Way.

Cash flow is where you start. You may not think that you have cash flow but if you are earning money either through a job or investments, then money is coming into your bank account and that is cash flow. But wait! – Before you start paying the bills- start by paying yourself FIRST- not after all the bills are paid, but before. Start with taking 10% of your salary and divide by 12 months.  That is the monthly amount you should save. Open up a savings account and request a direct deposit from your paycheck to your savings account. That is automatic savings and a smart way to start paying yourself first every month.

Congratulations! You have made the first step in creating wealth- saving. A savings account will give you a cushion. Don’t worry if you are only getting a small amount of interest on the money. The point is to have some funds to rely on when the roof needs repair or the car breaks down. That’s what this money is for- short term expenditures and surprises that come up in life.

Also a good savings account will prevent you from dipping into investment funds which should be held for the long term for maximum value. Many good investment plans go sour when they are dipped into for emergency cash. Keep them separated, and you will keep your investments intact and you are on your way to real wealth.

I have written some posts also about having and maintaining good credit, too. After you have money going monthly into a savings account and your credit score is 720 or better, then you are ready for step #2.

Congratulations! You have made the first step in creating wealth- a savings account and good credit.

The post Do-It-Yourself Financial Plan Step #1 -Cash & Credit first appeared on Whole Hearted Way.