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April 14, 2020

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A municipal bond, or muni bond, is a type of bond A municipal bond, or muni bond, is a type of bond issued by a state or local government to raise money for public projects. Think of it as essentially a loan from an investor to the government. When a government entity needs to raise money to pay for a big project, it sells bonds to interested investors. Here’s an example of how it can work: The state decides to issue muni bonds to pay for a new highway. ↓ Investors buy the muni bonds, which provides the government the money it needs. ↓ The government may use funds from the highway (like tolls) or from other sources to repay investors. ↓ Investors receive interest (usually semiannually) plus the original investment when the bond matures. Muni bonds can be issued by states, cities, counties, or other municipal entities, like a water district. Governments use muni bonds to raise funds for projects that will benefit the public. Common examples include: ➡️ Roads, highways, bridges, and other infrastructure ➡️ Hospitals ➡️ Schools and libraries ➡️ Government buildings ➡️ Power plants ➡️ Sewer systems Other bonds may be issued to fund an entity’s day-to-day operations. Muni bonds can be a popular investment option because they offer: ✅ Low risk—Because they’re backed by government entities, muni bonds generally come with low risk of default. (Bonds are usually issued with credit ratings, which rate how likely the borrower is to make on-time payments—like a credit score.) ✅ Tax advantages—The interest you earn is usually exempt from federal income taxes. If you buy bonds from an entity in your home state, there’s a good chance you can also skip state income taxes. ✅ Steady income—Muni bonds are often popular with retiree investors as a way of earning a steady paycheck from their portfolio. Because tax advantages are a main draw, muni bonds typically make more sense to hold in a taxable account (like an ordinary brokerage account instead of an IRA or 401(k)). Those tax benefits become more valuable for investors who are in higher tax brackets—so the bonds also tend to be popular with wealthy investors. Check out today's stories or click the link in our bio to learn different types of muni bonds and more!
The truth? Closing credit accounts can actually lo The truth? Closing credit accounts can actually lower your credit score because it reduces your credit age (how long you’ve had credit) and increases your credit utilization (how much of your available credit you’re using). Both are key factors in credit score calculations, so be sure to keep this in mind anytime you decide to open another credit card!
Have you heard of the term "Opportunity Cost"? 🤔 It's the return or benefit you miss out on by choosing one option over the next best alternative. Every choice you make in life involves an opportunity cost because it requires you to pick one thing instead of something else. You might also think of this as a trade-off. For example, by spending your bonus on a vacation, you might give up the chance to use it to pay off debt. Opportunity cost is directly related to the economic principle of “scarcity”—that is, limited resources force us all (e.g., individuals, companies, governments) to make choices about how to use our resources. Although most people don’t actually go through life making decisions this way, economists and finance types argue that opportunity costs represent real costs that we should take into consideration. For example, suppose that the bonus you received was for $5,000. You might think that if you spend it on a vacation then your vacation costs $5,000. But suppose that instead you could have used it to pay off $5,000 in credit card debt that’s racking up interest at a 15% rate. Opportunity costs are important because they can help you see the total price tab of your decisions. Corporations often use opportunity costs in deciding the best use for their money, such as whether to: ➡️ Invest in developing a new product ➡️ Invest in new technology to boost production ➡️ Invest in replacing old equipment ➡️ Use cash to issue dividends or buy back stock But people can consider opportunity costs, too, and it doesn’t always have to be a hard calculation. Experts recommend that you think about opportunity cost from both a short- and long-term perspective. When making a decision, ask yourself: ✅ How important is this to me? ✅ Is there a better way I could be using this money? ✅ What will I miss out on in the future based on my decision today? Without considering the opportunity cost, a better choice might go unnoticed. Have you used Opportunity Cost before? Where and when? Check out our stories or the link in our bio to learn more.
Compared to 20% of those age 70-79, younger indivi Compared to 20% of those age 70-79, younger individuals reported more of a financial loss, however, when people age 70+ had a loss, the median loss was much higher (an average of $1300 for those 80+ compared to around $326 for those age 20-29. And out of 4.8 million reports, the top 3 categories are: 1. Identity Theft 2. Imposter Scams 3. Online Shopping and Negative Reviews Did you experience fraudulence in 2020? Did it result in a financial loss of some kind? Click the link in today's stories to see more.
Let's talk about the difference between 401(k)s an Let's talk about the difference between 401(k)s and IRAS! IRAs and 401(k)s are two popular types of retirement savings accounts. Most people who work in the private sector have at least one of these accounts (government employees often have different options), and many people own several retirement accounts. Both can provide great perks, including: ✅ Potential growth—both typically offer a range of investment options you can choose from, so your money grows over time. ✅ Tax advantages—contributions to either type of account are typically tax deductible and so reduce your current year’s tax bill. And both let you avoid paying taxes on your money’s growth while it’s in the account. ✅ Chance to build wealth—by contributing regularly and letting your money grow, you can use either type to meet your retirement goals. One downside? Because the accounts are truly supposed to be used only for retirement, you can face a big tax and penalty bill if you ever need to withdraw money early. So it’s important not to treat them like savings accounts. They also have some important distinctions, including how you open an account, how much you can contribute, and perks. Both 401(k)s and IRAs come in two flavors: traditional and Roth. The main difference is when you pay taxes. Because of this, Roth accounts are often a good fit for someone who has relatively low income today but expects to have higher income in retirement (like those early on in their careers). If you’re choosing between accounts or just want to know what you’re in for, here are some things to keep in mind: ➡️ You’re generally required to start taking withdrawals from your retirement accounts in the year you turn 70½ (there’s an exception for Roth IRAs). ➡️ You can have both a 401(k) and an IRA ➡️ Contributions to IRAs aren’t always tax deductible. That perk gets phased out above certain income levels (and where those levels are set depends on whether you’re also eligible for a 401(k) through work). Which do you prefer? Share below! And click the link in our bio or swipe up in today's stories to learn more.
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