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Full disclosure alert, I’m a bit of a bitcoin junkie.  Globally, access to bitcoin is much easier with dozens of funding methods for international investors. However, the US of A has yet to embrace the bitcoin, so being able to buy and sell the cryptocurrency is a lot harder than you might think.

When bitcoin started making waves in 2010, I wrote a brief introduction about the cryptocurrency. At the time, the value of one BTC was just $13 (and was a mere $3 just a week before that!).  Today, the currency holds a value of $900 per bitcoin (as of 1.8.2017). Had I been a bit more clairvoyant — or maybe just less of a wuss — I could have taken my 8,000% profit and retired already.   Lucky for you, I’m still writing and am able to tell you the three most reputable websites to buy and trade Bitcoin.

bitstamp-logoBitstamp

All of my current bitcoins are held with Bitstamp, which I believe to be the greatest bitcoin exchange on the web today.  Current market price is always spot on and their blockchain tracking software is the the fastest at displaying hundreds of buy and sell orders every minute.  Bitstamp has been around for over five years and has three offices worldwide, one located in New York.   And while I love to use them to store my coins, the difficult part is being able to buy them.  Currently, the only funding method Bitstamp has available is via international wire (as they are a European-based company).  That transfer can take a few days and the volatility of bitcoin means the money I’m depositing may or may not have more “buying power” by the time I can use it.

bitstamp-trading

A view of the Bitstamp trading platform

Account verification is quick and painless with Bitstamp and their fee structure is the lowest you’ll find on any bitcoin exchange.  The most you’ll pay for a bitcoin purchase is 0.25% over spot (and that can be reduced all the way down to 0.10% if you trade more than $20M in BTC over a 30 day period).  For withdrawals, a transfer back to your bank account will only incur a 0.09% fee ($15 minimum). However, depending on your bank, you could incur additional fees (my bank, Citizens, does not impose any).

US-based customers can also request a debit card onto which the money will be loaded.  The fee for loading the card is $10 for amounts up to $1,000. Anything greater than that is a fee of 2%.  A fee structure for using the debit card can be found here.

coinbase-logoCoinbase

I do a lot of my buying of bitcoin on Coinbase because it’s the easiest of all websites to buy from. (Then, I transfer the coin to Bitstamp to hold and trade.)  Coinbase has two major selling points for any US-based customer looking to buy bitcoin:

  1. A credit/debit card can be used (with a 3.9% fee).
  2. A bank account can be connected for direct deposits and withdrawals (with a 3.9% fee). There is a four business day clearing period to buy, and a one business day clearing period to sell.
coinbase-account

Coinbase account interface

The verification process for Coinbase is a little bit more complex than that of Bitstamp.  Depending on how much of your identification they can verify immediately, your buy and sell limits may be pretty small to start (think $100 USD per week).  You simply need to go through the process of uploading documents, verifying your address with a utility statement, and waiting the initial 30 days after making your first purchase, though. Then, the limits to buy can quickly be raised to $1,500 per week via credit card or $10,000 per week via bank account transfer.

I’ve personally made 50+ purchases with Coinbase over the last couple of years and their BTC delivery has always been on time. Plus, their security is top notch.

cexio-logoCEX.IO

CEX.IO is a relatively new exchange, having been around for just under three years (and really only able to buy and sell BTC for two). I’ve recently begun to use them for trading and have dabbled in buying bitcoin through them.  Two immediate differences I have noticed in using CEX.IO to buy bitcoin recently are:

  • The amount of bitcoin I can buy in a 24-hour period is substantially more than I can buy anywhere else, when using a credit card.  After going through their verification process (which is extensive, requiring a passport among other things), I can deposit up to $3,000 per day with a credit card, up to a $10,000 per month max.  They actually have another verification step available for customers looking to increase their limits even further, but I didn’t bother to go the extra step because this is more than enough for me.
  • The fee for depositing is a reasonable 3.5% + $0.25 per credit card transaction, which is just above interchange fees (and cheaper than Coinbase).  However, what is not reasonable is that to convert your cash to bitcoin, you pay a steep ~8% fee to CEX.IO.
cexio-trading

CEX.IO Bitcoin price tracker

There are dozens of other exchanges and websites that charge even more than the 8% you see listed for CEX.IO. Some are even as high as 60%, so this is about my limit in terms of trying to purchase cryptocurrency.  That said, the trading exchange on CEX.IO is my favorite to use and they’ve now launched a margin trading platform.   If for some reason I need to buy bitcoin and cannot do so via the first two exchanges above (my limits are up, for example), CEX.IO is the way to go.

Through all three exchanges listed above, you have the ability to transfer your bitcoin to and from instantly (confirmed on the blockchain generally within an hour).  So buy on one, transfer to another, trade into Ether, then into litecoin, back into bitcoin, and so forth. Just know that you can move your money around for little to no fees whatsoever (the miner fee to transfer $1,000 of bitcoin between wallets is roughly four cents).  And if you don’t understand anything I just said, I urge you to have a look.  I believe that bitcoin is here to stay, and the number of new exchanges being invested in worldwide is increasing by the hundreds.

If you’re lucky enough to live near one of the 600 US based Bitcoin ATMs, you can buy bitcoin there.  The average ATM fee is 7.9%.

 

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There are so many different ways to organize, prioritize, and classify your tasks and responsibilities. You’d probably need a couple years just to sort through all of them on your own. You can have an organizer on your computer, your phone, in your pocket, or a notebook. If you’re short of paper, you can just scribble on your hand.

Even with all of the new ways to get organized, the most effective tool for me is still the simple, classic “To Do” list. My to-do list is nothing fancy, just a list of things that I need to accomplish. For some reason, though, this list motivates me to be smart with my time and get things done.

One of the reasons these lists are so effective is because they help you define what needs to be done. One of my favorite things to put at the top of a to-do list is “start a to-do list” — that way I can cross something out right away! Nothing like building momentum right off the bat.

In fact, checklists are so powerful that they inspired an excellent book, The Checklist Manifesto, by Atul Gawande.

This principle can be applied in any aspect of life. You can use a to-do list at work, at home, or even in relation to different goals you have. My wife and I even have a sort of ‘Financial To-Do List,’ covering our money goals. It has helped us get started and avoid wasting time.

A to-do list is particularly power when it comes to finances.

The Benefits of a Financial Checklist

Stay Organized

The list helps us know what bills need to be paid and when they’re due, what major tasks or purchases we might have coming up, and — perhaps most importantly — when we’re going to be paid. A well-defined to-do list answers all of the questions about what needs to be done and when. This helps you use your time more effectively.

Get More Done

Because we’re using our time more effectively, we can use time in more productive ways. For example, we might have spent hours poring over our budget or trying to find the electric bill. Instead, our newfound organization allows us to avoid these little time wasters and streamlines the process. We can get back to making money, fine-tuning our savings strategies, and looking for new ways to cut back. Or, we can quit thinking about money altogether and just go enjoy ourselves for a bit.

Meet Your Goals

We have all sorts of tasks on our list, both big and small. An easy way to design a strategy like this (if you’re using a word processing program or a notebook) is to use a list:

  • Big Goal 1
  • Little Goal A
  • Little Goal B
  • Big Goal 2

For example, if your big goal is to save $1,000 for your emergency fund, your To-Do list could look like this:

  • Save $1,000 Emergency Fund
  • Save $75 from each bi-weekly paycheck for 4 months ($600)
  • Take lunch to work 2/wk for 4 months and add savings ($25/wk) to emergency fund

See how easy that is? Now you’ve got a goal, and you know exactly what you need to do for it! Of course, you can substitute in anything you like.

The beauty of these lists is that they are completely scalable — that is, they grow with you. If you finish your emergency savings goal, you can just start your next goal: “Pay off car debt” or whatever it is on the next line. Figure out how you’re going to do it, and break the big “to-do” down into smaller tasks. Then, you’re well on your way to leveraging your simple list as an effective financial tool.

The Financial Checklist

Your specific to-do list will depend on your circumstances. That said, here are some Financial Checklist ideas to get you started:

Money Management Checklist

  • Create a budget
  • Compare your budget to actual spending
  • Balance your checkbook
  • Balance your credit card account
  • Conduct a spending audit

Credit & Debt Checklist

  • Check your credit score (here’s how)
  • Check your credit report for errors
  • Refinance credit card debt to 0% (here are current 0% offers)
  • Consider refinancing school loans
  • Consider refinancing a mortgage
  • Use the debt avalanche to pay down your debt

Banking & Credit Cards

  • Eliminate checking account fees
  • Confirm that your savings account offers a high yield (here are some options)
  • Set up direct deposit
  • Make sure your credit cards pay excellent rewards (here are our favorite cash back cards)

Investing

  • Check the fees of your investments
  • Confirm your asset allocation aligns with your investment goals
  • Rebalance your portfolio
  • Max out your 401k
  • Max out your IRA
  • Consider an HSA if you have a high deductible insurance plan

Tools

You don’t need anything special to start a to-do list. You can put it on a piece of paper in your wallet, a whiteboard in your kitchen, or keep it on your phone or computer. The “Financial To-Do” list is a completely customizable, easy-to-use money (and life) tool for anyone.

That being said, there is one free tool worth considering: Asana. Asana is a free online tool that tracks tasks. It allows you to create a team and assign tasks to team members. For couples, it can be a great way to share, save, delegate, and organize information on anything.

There are several reasons why Asana is perfect for a financial checklist:

  • It’s free
  • It’s easy to use
  • Tasks can be scheduled to recur on a regular basis (e.g., rebalance your investments once a year)
  • You can attach spreadsheets and other files to a task
  • You can leave comments for each task, perfect for communicating with your significant other

However you approach a Financial Checklist, and whatever tools you use, it can be a great way to improve your finances over the next year.

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At the end of the year, most people in the United States are thinking about the holidays and the potential credit card bills for gifts and family visits. One good way to control this potentially stressful month is to take some time to breathe and get your own finances in order. There are several actions you should consider and complete before the year ends in order to start next year on the best foot possible.

A few weeks ago, the IRS announced that the 2017 individual contribution limit toward a 401(k) retirement account will remain unchanged from 2016. Anyone financially comfortable enough to maximize the contribution will be able to tuck away $18,000 this upcoming year (the same as they could this past year). Savers aged 50 or older qualify for an extra $6,000, in addition to the $18,000, for a total contribution limit of $24,000.

If you plan to maximize your contribution, and did so this past year, you don’t need to make any changes. However, if you didn’t reach the contribution limit this year but plan to do so in 2017, take some time now to plan.

Contact your benefits department via phone or website and change your deductions for the upcoming year. The changes could take a few weeks to go into effect. If you want the increased contributions to take effect at the beginning of the year, it’s best to start looking at the details now.

Calculate Based on Employer Match

In many cases, employers offer some sort of matching contribution. For example, the company might match half of your contributions, up to the first 6% of your salary that you contribute. Or, perhaps they’ll match all of your contributions up to the first 3% of your salary.

Let’s take the first case. In order to maximize your tax benefit and matching benefit, you’ll need to deduct 6% of your paycheck every period, if 6% of your annual salary adds up to $17,000 or less ($22,500 or less if you’re 50+ years old). In the second case, you’ll only need to deduct 3% of each paycheck. If the optimal percentage would result in exceeding the government-mandated maximum, you’d have to determine the best percentage that prevents you from exceeding that threshold.

Special Provisions

I found out recently that some employers offer a benefit, sometimes called something like “spillover protection.” Let’s say you contribute more than the IRS maximum. Companies that offer this feature will allow you to continue deferring income to your 401(k); it would just be considered after-tax contributions. Most other employers would just automatically stop your contribution once you hit the limit. So why is this a nice benefit to have? Well, for those whose deferments automatically stop, and whose employer matches contributions on a per-paycheck basis, they’ll miss out on some matching contributions. Essentially, they’re giving up free money. With this spillover protection, their employer will continue contributing their match (the free money) up to the limit, versus leaving it on the table.

Employers may also have other contribution limits. It’s common for a corporation to say that the maximum contribution percentage is 50% of an annual salary. Be sure to check into your benefits and plan out the year’s contributions accordingly.

Not Maxing Out Contributions This Year?

Recalculating the 401(k) contribution at the end of the year is not a tactic just for those earning enough to maximize the tax benefit. Let’s say you received a raise or cost of living increase this year and haven’t adjusted your 401(k) deferment to match the extra cash flow. The end of the year is a good time to bump your contribution by one or two percentage points. Some 401(k) plans have options where the investor can initiate automatic investment increases each year. This is a good opportunity to turn this feature on or manually adjust your contribution.

This advice also isn’t just for people working for large corporations. Non-profit organizations often offer similar benefits called 403(b) plans, and if you’re self-employed, you may save for your retirement using an individual (or Solo) 401(k) plan.

Don’t wait. The process of changing your contribution can take a few weeks to take effect, so if you want to contribute a consistent percentage of your income throughout the new year, the sooner you make the change, the easier that will be.

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If you plan to retire early, you may be wondering whether it makes sense to invest in traditional retirement accounts, such as employer-sponsored 401(k)s/403(b)s and IRAs/Roth IRAs. The speculation comes into play because there’s an early withdrawal penalty when you take money out of these accounts before age 59 ½.

I argue that it’s still a good idea to invest in traditional retirement accounts if you plan to retire early. This is because there are tax benefits that come with these retirement plans. Money contributed to employer sponsored 401(k)s/403(b)s are pre-tax and reduce your taxable income for the year. Money contributed to Roth IRAs isn’t pre-tax but the money grows tax-free.

The best scenario is to have enough money outside of these retirement accounts so that you can live off other investments before age 59 ½ and then tap into your retirement accounts after turning 59 ½. Here are a few tips to aid you in your early retirement planning.

Avoid Early Withdrawal Penalties

Generally, the money withdrawn from a retirement plan before the age of 59 ½ is considered “early” or “premature.” When this happens, you must pay an additional 10% early withdrawal tax. For most, that 10% penalty is a big deal. It will likely result in enough money lost that you’ll want to avoid making early withdrawals.

One thing you can do to avoid early withdrawal penalties from retirement plans is to have other investments. We’ll get to that in a moment.

Another way to avoid early withdrawal penalties is via the IRS rule 72(t). This rule permits penalty-free withdrawals from an individual retirement account (IRA), provided that you take “substantially equal periodic payments (SEPPs)” for at least five years or until you reach 59 ½, whichever period of time is longer. The payment amount will depend on your life expectancy as calculated by IRS-approved methods.

The withdrawals will still be taxed at your normal income tax rate. You can roll over a portion of your 401(k) into an IRA to take advantage of this rule as well. A good guide for IRA conversion can be found here on Dough Roller.

The IRS rule 72(t) is a bit complicated. You may want to work with a financial advisor to make sure you are complying by the rule’s stipulations. If you stop payments too early, you’ll have to pay the early withdrawal penalty on the previously withdrawn amounts.

It’s good to know there’s a way to access your retirement plan funds without the early withdrawal penalty. But, that doesn’t have to be the only option if you plan to retire early. Another option is to have other investments that you can liquidate before you turn 59 ½.

Plan on Other Investments

The best thing you can do is not touch your retirement plan funds until you reach age 59 ½. It’s best to have other investments that you can use as income until you reach IRS retirement age. This means you’ll have to do even more saving during your early years. But it’s worth it for the sake of early retirement.

Here are some options for where to save the rest of your money:

  • Savings accounts and certificates of deposit (CDs) – These accounts offer lower interest rates but guaranteed returns. Your money is also FDIC insured up to at least $250,000.
  • Peer to peer lending – Companies like LendingClub and Prosper let you build an investment portfolio of personal loans. This gives you monthly cash flow.
  • Rental properties – This investment takes some time and skill. But it also offers monthly cash flow as long as you have tenants.
  • Dividend stocks – You’ll gain money in two ways. First, you’ll earn as the value of the stocks appreciate. Second, you’ll gain money from distributions paid out to shareholders by the dividend-paying companies.

You can use these investments to fund your lifestyle until you reach IRS retirement age. Depending on the age you plan to retire, you may not even need that much to sustain you until you reach 59 ½. It’s all about planning ahead of time.

Consider Phased Retirement

Most people work a long career and then jump right into retirement and stop working altogether. If you plan to retire early, though, that doesn’t necessarily have to be the path for you. Consider phased retirement as an alternative, in order to make early retirement work for you.

For example, if you work an office job now and want to retire at age 40, you can leave that day job and then start another career. You could start an online business that doesn’t require you to go into an office. Use the time between when you leave your first career and when you reach age 59 ½ to explore another one of your interests. Have you always wanted to write books? Do you have a passion for working with animals? The possibilities are endless.

Finding a new career to embark on during the first few years of early retirement will not only give you extra money to live on, but it’ll also keep you mobile and energized. Make sure it’s something you enjoy so you can still consider yourself “retired.”

Final Thoughts

Yes, you should invest in traditional retirement accounts if you plan to retire early. They have many tax benefits that make them good investments. What you want to avoid is early withdrawal penalties. You can avoid this by taking advantage of the IRS rule 72(t) as explained above. Or, you could have other investments that fund your lifestyle until you reach age 59 ½ and can withdraw money from your retirement plans penalty-free.

Another consideration to keep in mind is phased retirement. Although you retire from your day job at an early age, that doesn’t mean you don’t have to work at all. Consider starting a new career based on another one of your interests or passions. This way, you’ll keep some money coming in until you reach age 59 ½ — and can withdraw from the traditional accounts — but you’ll still enjoy your early retirement.

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Can You Earn More With a Fidelity CD Ladder?

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Can You Blame Them for Not Being Invested in Stocks?

by Luke Landes
Luke Landes

After the stock market closed on Friday, my portfolio was at an all-time high. That was likely also the case for a lot of investors living in the United States who are similar to me: earning income, investing in the stock market with a buy-and-hold strategy for the future, and leaving money invested during the […]

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