Loan Repayment: What’s the Difference Between Principal and Interest?

Loan Repayment: What's the Difference Between Principal and Interest?

( – People have two options when they want to buy something they can’t afford to purchase entirely with cash: borrow the money or save up the funds for later. While seeking out a loan is a viable choice, remember that debt has two distinct parts — the principal and interest.

A loan’s principal is the amount of money someone wants to borrow. For instance, if you want to buy a car for $20,000, that represents the principal amount you would seek from a financial institution. The interest on the debt is the cost of borrowing the money. That amount adds to the principal periodically, using a percentage of the balance. In part, that’s how banks make their money. When a borrower pays their monthly obligation on the funds, part of the amount they remit pays toward the principal, and the other part pays toward interest.

Because the interest initially accrues based on the principal portion of the loan — the core amount of money the borrower requested — a good way to pay less, in the long run, is to pay down the principal as quickly as possible. Depending on the terms, a borrower could pay more than the monthly obligation and ask the bank to apply the extra money toward the principal balance. Doing so would more quickly lower the core loan amount, meaning the interest calculation would use a lower balance, saving the borrower money on the total debt.

Some people don’t realize the actual end cost when they borrow money. Assuming again that you borrow $20,000 for a car at a rate of about 6.2% interest over five years, that vehicle would ultimately cost over $23,300. The more you borrow and the longer the terms, the more you pay in the long run. 

Before deciding whether to seek a loan, consider the overall cost and work to minimize that amount by paying down the principal faster, if possible.

Copyright 2023,

3 Ways Practicing Delayed Gratification Might Help You Save Money

3 Ways Practicing Delayed Gratification Might Help You Save Money

( – In the world of technology, where information is at your fingertips, and you can have pretty much anything delivered right to the door, it’s easy to get lost in the sea of instant gratification. But doing so can come at a high cost. Delaying gratification can help pay for things with cash rather than living beyond one’s means. Incorporating some delayed gratification practices might also mean the difference between whether or not you can even retire. Here are three ways the technique can help save you money.

  1. Using Alternative Modes of Transportation: While you might need a car to get to and from work, cart the kids to school, or run errands, what you don’t need is a huge car payment weighing you down. Instead of buying a car as soon as you have a little extra room in your budget, consider using public transportation or carpooling while you save for part or all of the vehicle’s purchase price, minimizing the amount you borrow. That way, you’re not paying as much interest to the bank, saving you big in the long run.
  2. Reinvesting Profits: If you own a small business, turning a profit can be exciting. Those hard-earned dollars might tempt you to spend on a big-ticket item or a vacation. Yet, instead of reaping the benefits immediately, consider putting most of the money back into the business. Investing in your budding company could help it grow quicker, increasing profits more quickly. The strategy could help you build a stronger business, and you can still get the item if you want it later.
  1. Optimizing Later Returns: Try looking at the budget to see if there are any luxuries you could reduce or eliminate. Take the savings, no matter how small, and invest them into a retirement account. Better yet, have the bank automatically invest them so you don’t miss them. Consider doing the same with any surprise money that comes your way: Christmas bonuses, gifts, etc. Before you know it, you’ll have a nest egg to help with retirement.

Remember, even small sacrifices in the short term can net you big gains over time.

Copyright 2023,

3 Smart Ways To Pay Off Student Loans

3 Smart Ways To Pay Off Student Loans

( – In 2022, the national Chamber of Commerce released data concerning student loans indicating that the average balance on student loan debt hovered around $37,000. That amount could be daunting to any former student, and the obligation’s long-term nature can impact a person’s financial wealth. Paying down loans as soon as possible can positively affect an individual’s money situation. Here are three smart ways to rid yourself of student loan debt for good.

  1. Overpay: Banks or other financial institutions tie interest rates to the money they lend. The longer it takes to repay the loan, the more interest the borrower pays. To reduce that sting, consider paying more than the monthly payment and applying the extra amount directly to the principal. This strategy helps you pay off the debt faster and save money in the long run.
  2. Refinance: Take a look at the loans’ interest rates and compare it to the current rates offered by the bank. If the percentage is lower than what you’re currently paying on a student loan, it might be beneficial to refinance to get that lower rate — lowering the payment. However, consider continuing to pay the same monthly amount, applying the extra to the principal so you can pay off the debt faster.
  1. Snowball: Dave Ramsey recommends using the snowball method when paying off student debt. First, list all your obligations from the smallest balance to the biggest. Then, pay the minimum on each obligation, except for the smallest loan. Put every bit of extra money into paying off the balance of the smallest loan. Once you’ve paid it off, tackle the next biggest. Continue moving through the loans in that manner, concentrating your funds on paying off each encumbrance until they’re all gone.

Following a budget can help you reach financial goals. Before you know it, your student debt will be a thing of the past.

Copyright 2023,

MoneyHippo Reading Recommendations


( – There are many great books on personal finance, business, and investing. Here are some popular and highly recommended titles:

  1. The Intelligent Investor” by Benjamin Graham
  2. The Millionaire Next Door” by Thomas J. Stanley and William D. Danko
  3. Rich Dad Poor Dad” by Robert Kiyosaki
  4. The 7 Habits of Highly Effective People” by Stephen Covey
  5. The Total Money Makeover” by Dave Ramsey
  6. Think and Grow Rich” by Napoleon Hill
  7. The Four Hour Work Week” by Timothy Ferriss
  8. The Richest Man in Babylon” by George S. Clason
  9. The Little Book of Common Sense Investing” by John C. Bogle
  10. The Lean Startup” by Eric Ries

These books cover a range of topics from investing principles, personal finance management, and entrepreneurship, and are highly recommended by readers and experts in the field.
Copyright 2023,

Budgeting with the 50-30-20 Rule


( – The 50-30-20 rule is a simple budgeting framework that helps you allocate your income into three categories: needs, wants, and savings. The rule suggests dividing your income into the following percentages:

  1. 50% for needs: This category includes essential expenses that you must pay, such as rent or mortgage, utilities, groceries, transportation, and other bills. These are expenses that you can’t do without and should be your top priority.
  2. 30% for wants: This category includes expenses that are not essential but are things you desire, such as dining out, entertainment, travel, and other non-essential items. These are expenses that you can live without, but make your life more enjoyable.
  3. 20% for savings: This category includes money you set aside for your financial goals, such as building an emergency fund, paying off debt, or investing in your retirement. It is important to prioritize saving to ensure you have a solid financial foundation and are prepared for unexpected expenses.

Following the 50-30-20 rule can help you balance your finances and make sure you are putting enough money towards your essential expenses, while also allowing for some flexibility for non-essential items and saving for your future.

Copyright 2023,

How to go from “Wantrepreneur” to Successful Entrepreneur


( – The journey from being a “wantrepreneur” to becoming a successful entrepreneur requires a combination of determination, hard work, and a strategic approach. Here are some steps you can take to make the transition from a wantrepreneur to an entrepreneur:

  1. Develop a clear business idea: One of the first steps to becoming an entrepreneur is to develop a clear and well-defined business idea. This idea should be based on a problem that you’re passionate about solving and should have a clear target market.
  2. Create a business plan: A business plan is a roadmap that outlines your business idea, target market, competition, marketing and sales strategies, and financial projections. It is an essential document that will guide you through the process of building and running your business.
  3. Identify your target market: Knowing your target market is critical to the success of your business. You need to understand their needs, preferences, and behaviors to create a product or service that meets their needs.
  4. Validate your business idea: Before you invest time and money in your business idea, you need to validate it. This involves conducting market research, testing your product or service with a small group of customers, and making adjustments based on feedback.
  5. Develop a financial plan: Starting a business requires financial investment. You need to create a financial plan that includes a detailed budget and cash flow projections. This will help you determine how much money you need to start and run your business.
  6. Build a professional network: Building a network of professionals who can help you with various aspects of your business is important. This can include lawyers, accountants, marketing experts, and other business owners. You can also seek out mentors who can offer advice and guidance as you start your business.
  7. Take action: To become an entrepreneur, you need to take action. This means taking risks, making decisions, and executing your plan. You need to be willing to put in the work and take the necessary steps to turn your idea into a successful business.

Becoming an entrepreneur takes time, effort, and dedication. By taking these steps, you can increase your chances of success and turn your dreams of entrepreneurship into a reality. Remember, it’s not just about having a good idea, it’s about having the determination and drive to turn that idea into a successful business.

Copyright 2023,

3 Reasons To Comparison-Shop Banks

3 Reasons To Comparison-Shop Banks

( – Choosing where to keep money is a big decision. Luckily, technology has brought with it lots of competition benefitting you, the consumer. Banks can differ significantly in their offerings, services, and charges, so looking at several and comparing features becomes key. Similar to buying groceries, knick-knacks, and even cars, comparison shopping is crucial to obtaining the best values and features. Here are three reasons why choosing a bank this way is so important.

  1. Insurance against loss: The first feature depositors should always look for before making any transaction with a financial institution is Federal Deposit Insurance Corporation (FDIC) coverage. Credit unions use a similar service — the National Credit Union Association (NCUA). These insurance organizations guarantee deposits up to $250,000 per depositor per insured depository. If a bank doesn’t have federal insurance backing deposits, skip it and move on to those that do.
  2. Fees and interest: Once you’ve initially narrowed your list of contenders to the most secure entities, consider comparing fees, interest, and minimums as your next step. Find out what you receive in return when a financial institution charges a fee. Is it a higher interest rate? Does the cost eliminate the need for a minimum balance? When comparing side by side, think about the goals you want to achieve and pick the bank offering the best perks with the lowest possible costs.
  1. Deposits and withdrawals: While comparison shopping, consider how you will put your money in the bank and take it out. If you’re not transacting entirely online, look to see if the entity has brick-and-mortar locations or ATMs available near you. If so, does the financial institution charge fees to use them? 

Also, remember you don’t have to choose just one bank. Think about what you’re trying to accomplish. Putting your money in multiple accounts or financial institutions could actually help you meet those particular goals.

Copyright 2023,

Investing on a Shoestring Budget

Investing on a Shoestring Budget

( – Investing remains one of the best ways to grow money. But when you’re living paycheck to paycheck, how do you start? The truth is, you don’t need a lot of money to start. Investing on a shoestring budget is entirely possible. Still, it’s important to eliminate as much debt as possible before you start. For example, if you’re paying out 10% in interest to a credit card company and only bringing in 6% on an investment, your wealth will shrink. Once you’ve eliminated those obligations, here are a few easy ways to start an investment journey.

  1. Checking: Instead of keeping money in a regular checking account, consider choosing an interest-bearing one. In exchange for paying interest on the money, the bank might have some parameters you must follow — like keeping a minimum balance. This type of investment is hassle-free, and a checking account is likely something you already use.
  2. Stocks: These days, investing in the stock market is easier than ever. Several online brokerages let you open an account for free and have no minimum investment requirements. You can either make your own trade decisions or ask an advisor for help, depending on which one you choose. TD Ameritrade, for example, has commission-free trading, and you can invest in various instruments like stocks, options, and ETFs.
  1. CDs: Certificates of deposit (CDs) are like savings accounts that you can’t touch for a certain time. While the money sits in the CD, it typically earns a better interest rate than in a regular savings account, and you have a guaranteed rate of return — unlike the stock market. However, an early withdrawal will trigger a penalty. If you stick to the terms, it’s an easy and safe way to grow money.

Remember, you don’t need a lot of money to invest, but if you want to be successful, be consistent. Regular investing, even in small amounts, snowballs over time.

Copyright 2023,

How to Do a 401(k) Rollover

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A 401(k) rollover is the process of transferring the assets of your 401(k) plan from your current employer to an individual retirement account (IRA) or a new employer’s 401(k) plan. Here are the steps to do a 401(k) rollover:

  • Choose the type of account you want to rollover to: You can choose to rollover your 401(k) assets to a traditional IRA or a Roth IRA. It’s important to consider the tax implications of each option, as well as the investment options and fees associated with the account.
  • Contact your current 401(k) plan administrator: Inform them of your decision to rollover your account, and request the necessary paperwork to initiate the rollover.
  • Open a new IRA or new employer’s 401(k) plan: Once you have the paperwork from your current plan administrator, open a new IRA or new employer’s 401(k) plan.
  • Complete the rollover paperwork: Fill out the necessary paperwork and submit it to your current plan administrator and new account custodian.
  • Wait for the rollover to be completed: The rollover process can take several weeks to complete. Once it’s done, the assets from your old 401(k) plan will be transferred to your new account.

Does it Make Financial Sense to Purchase an Electric Vehicle?


( – Whether purchasing an electric vehicle (EV) makes financial sense depends on a number of factors, including the price of the vehicle, fuel costs, maintenance costs, and local incentives.

In general, EVs tend to have a higher upfront cost compared to gasoline-powered vehicles, but the cost of ownership can be lower in the long run due to lower fuel and maintenance costs. For example, electricity is typically cheaper than gasoline, so charging an EV is often less expensive than refueling a traditional car. Additionally, EVs have fewer moving parts than gasoline-powered vehicles, which means they often require less maintenance and repairs.

Incentives such as tax credits, rebates, and HOV lane access can also play a role in reducing the cost of ownership for an EV. For example, the federal government offers a tax credit of up to $7,500 for the purchase of certain EVs, and many states offer additional incentives.

It’s also important to consider your driving habits when deciding whether an EV makes financial sense for you. If you do a lot of driving, an EV could save you a significant amount of money over the long run, especially if you recharge your vehicle at home. On the other hand, if you only drive a short distance each day, the cost savings may be less significant.

In conclusion, whether purchasing an EV makes financial sense depends on your individual circumstances. It’s recommended that you do a thorough cost analysis, taking into account your driving habits, fuel costs, maintenance costs, and any available incentives, to determine if an EV is right for you.

Copyright 2023,