Top 10 money questions asked online

Dear money-making friends. Today we would be focusing on the ten most often asked money questions online and some short answers or points for each of them.

Many of those questions will probably be no surprise for you, and it is interesting what people are looking for and what their needs are in terms of financial information and queries online.

So here we go with the top money questions list

1. How can I make money online?
It is obvious the majority of the population nowadays read stories about people getting rich online every day. And it is understandable that people don’t want to work for somebody and try their luck in the online business.

The straightforward answer is -> you can make money online, the same way you make money everywhere else. You need knowledge, skills and good business sense in order to get rich and out-compete the others. It doesn’t matter if you do e-com, marketing, ads, affiliate or simply sell products and services online – the foundation of making money online is to create a niche, difficult to penetrate by the competitors, and to serve your users better and more efficiently. Then you can charge percentage of the volume and make money.

2. How to invest in stocks?
The second question is also obvious. The majority of the people are just lazy and would like to simply put their money ‘somewhere’ and start earning – easy, with small hassle.

Investing in stocks is not difficult. But if you are going to win or lose out of it depends entirely on the timing. Did you know that, in order to be successful with stocks, in the last 10 years, there are about 20-30 days which you wouldn’t miss in order to make money (remember those March days in 2020, do you?). All the other days are close to irrelevant. If you missed trading on those ‘special’ days – your investment will barely make you any money (in the best possible case scenario). So, the answer is – to be successful on the stock market you need to learn and keep a close eye on your investments. Analyze, calculate, and look at the trends daily, not to miss the ‘special’ days.

3. What sort of a house can I afford?
A very reasonable question, as people intend to borrow money from the banks in order to buy their homes.

Let us give you a different perspective. What if we tell you that it is not a good idea to borrow money from the bank, unless you already have most of the funds to cover for your home. Let’s say you would like to purchase a $200 000 house. The worst thing that could happen is to go to the bank with your savings of $10 000 and ask for $190 000 mortgage plan. The bank will offer you an expensive and lengthy plan, and the risk for something bad happening and for you losing your home is big. Instead, you should be aiming to have at least $110 000 or even close to $150 000 before borrowing the rest of the money.

Now, I know what you are thinking. Are you crazy? There is no way I can save $110 000, and besides even if I am able to – the house will be more expensive by time I manage to come up with the savings. On the first point – how then you expect to repay the bank – and keep in mind you would probably need to pay twice as much (if not more) than what you borrowed? On the second point - well, the housing market also has it’s ‘special moments’ (years). Do you remember 2007 – all the markets are cyclic, which means that when the market goes up, you should be saving money (and avoid buying), only to buy when the market crashes. Smart renting while you wait, and low mortgage are usually the better decisions.

4. How to pay for my college without going broke?
Another very important question. Nowadays the college costs have risen dramatically, and many students are either left out of the system or broke with enormous debt.

The other perspective is not to be in a hurry with your college degree. It is perfectly fine, and often advisable to skip college in your teenage years and go for some experience gathering, e.g. working in an area you would like to specialize and learn the trait from a master and make some invaluable connections. This would usually be much more beneficial, and also let you save some money for the future to get your degree.

5. Should I pay off my credit card or save money?
This is a very good question. As a general rule – you would like to get rid of any debt as quickly as possible in order to stop generating interest on it and pay much more in the future.

As a general rule of thumb, always try to have savings enough to endure 6 months without income. Those would help you survive, without going broke in case anything bad happen to you or (God forbid) your family.

6. How to get my student loan forgiven?
Student loan could be an enormous burden. In some cases, people might qualify for their loan being forgiven. The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your direct loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

7. What is the best bank for college students?
Before committing to a bank, analyze well. Many of the banks offer quite good offers, especially for students, and special discounts and low rates on all services and loans for students. So, don’t be shy – dedicate a couple of days and research all the banks in the area, do all those calls and gather the information. This will also test and improve your soft and negotiations skills to try and find the best offers for you and your financial needs.

8. How much do YouTubers make?
Another topic, which shows that many people are after quick money in the entertainment business.

Do you know that less than 1% of the YouTubers actually make some meaningful amount of money from their channels? It again, depends on the niche, on your style, experience, and most importantly on the timing. In order to be a successful YouTuber you would need a terrific amount of traffic in an area easy to monetize. If you would like to be one of those successful and rich people – start analyzing niches, and start thinking ‘what problems can you solve for your audience?’ and ‘is there anybody who would pay for you to solve those problems?’

9. When should I retire?
Retirement stories of young chaps living in luxury at their late 20s or early 30s are all over the net.

The reality is there is no better source of income than ‘the active source’ of income, where you actively solve problems to users and customers and charge for it. Nevertheless, a good formula is to multiply your monthly spending by the number of months (years) you expect to live up to, to check if you have enough money. Then add at least 30% on top of that for any emergency or family needs, etc...

10. How much should I spend for my wedding?
It’s an understandable question, for all of you with traditional relationship.

Keep in mind, though, nowadays a lot of couples prefer to just stay in relationship, without getting married to save on all those wedding costs, rings, etc… And there is a good point in it. Statistically, most of the marriages end up in a divorce anyway, so why spending huge amount of money getting married on the first place, then spend thousands of dollars in a divorce trials, etc… it’s much better to have a contract with your partner, related to rising your kids and move forward, without the unnecessary complications and spending.

How to manage your money

Let’s talk about what personal finance is, and more specifically about the 50/30/20 rule.

Your full income of money is 100%. And 50% of those will go to your needs. This is all about budgeting and understanding where all your money is going in an ideal, personal budget portfolio. So, 50% are ‘needs’, 30% will go to ‘wants’, and 20% will go to ‘savings.’

Now, let’s dive deeper to understand each one of those categories. Keep in mind we would be giving examples in after tax income – which means net income, you will have some gross pay, but in the end what matters is the money you take home – your net income.


1. So - 50% of the income will go to ‘needs.’ Those are:

• Groceries
• Housing
• utilities
• Health insurance

Literately – ‘need’ means something you really can’t live without or something that will greatly inconvenience you, and even the lack of it harms you.


2. The next area is ‘want.’ Let’s see what we consider as ‘wants’, as we will put 30% of our income there. There is a great difference between ‘need’ and ‘want’, and you should always try to understand it. Simply put – ‘want’ is everything you desire but can live without it. Or something that causes mild inconvenience in your life. It’s not necessarily a matter of survival if you give up on something you want.

• Shopping – e.g., new pair of shoes, or modern clothes.
• Dining out – it’s easier for most of the people in the US to buy dish, than cook themselves
• Hobbies – everything you do for fun and not earn money with it
  

3. The last 20%, although it sounds basic, should go to ‘savings.’ Or paying off debt. Examples:

• Emergency fund (6-12 months of living expenses).
• Credit cards
• Student loans
• Deposits
• Retirement plan
• Investments
  

You might be thinking, you know all of that but until you sit down and write down the 3 categories and track monthly your spending – you will not be able to get the full picture and make corrective adjustments in order to be able to save more money and achieve your financial dreams.

How banks create money

Today we will explain how banks create money out of thin air. Yes, you might not believe it, banks create money out of thin air.

To explain how this is possible let's talk about what a bank does. A bank accepts deposits from the customers but doesn't just hold that money. If all banks did was holding other people's money, there would be no profit in that. Instead what a bank does it takes that money and it loans most of it out. You might wonder, why can't it loan all of it out? And the answer is because sometimes customers come back and they want to withdraw some of that money.

So, if you and I and everybody else goes to the bank the same time to get our money out, the bank does not have that money. They wouldn't be able to pay us, and the bank would default. That's called a bank run and it's bad.

In the United States there is a Deposit Insurance to make sure bank runs don't happen, but the point is the bank doesn't hold all those deposits. They loan it out. The amount of deposits that the bank needs to hold by law is called a required reserve. In the United States it's 10%. This means that the other 90% is something called excess reserves and they're free to loan that out.

Let's say someone goes into a bank and deposit a hundred dollars from their pocket into the bank. This won't change the money supply because money from your pocket is part of money supply, so is demand deposits inside banks. So far there's been no change in the money supply but here's where the magic happens - the bank is going to hold a certain percentage by law let's say 10% so they're going to hold $10. That means they are going to loan the other 90 out.

The person who deposited $100 has $100 in the account but the person who borrowed the 90 also has now $90. That $90 is money that was created from thin air and did not exist until the loan occurred.

If that person's going to spend that $90 and eventually that $90 can make its way back into another bank that other bank is going to take that $90. It's going to hold 10% and require reserves so 9 dollars it holds, and it's going to loan the other $81. Out of that 81 new dollars is new money supply - it was not created until the loan occurred.

Eventually the person who borrow the money is going to take it and spend it and that's going to make its way to a new bank and the same thing is going to happen again and again, and again, and again.

Now it turns out that the Initial deposit of $100 is actually going to become $900 of new money created.

The way you could calculate it is by looking at something called the money multiplier, which is one over the reserve ratio. In this case when the reserve ratio is 10% that meant the money multipliers 1 over 0.1 so it's 10. If you are asking yourself ‘if the initial amount deposited was $100 and the multiplier is 10 why didn't a thousand dollars of new money get created?’ And the reason why is - because the initial hundred dollars was actually part of the money supply to start off with, so the only amount of new money that was created was from the initial loan of $90. The calculation is $90 times 10 equals $900 of new money created.

And that explains the whole idea of fractional reserve banking! Banks hold a portion of deposits and they loan the rest out and whenever they loan it out, they create new money.

10 Money questions to answer by age of 30

As usual, we continue our never-ending mission to provide you with the best money-related answers to the top money questions. Today we will cover the top 10 most important money questions you need to answer by 30.

1. What is your net worth?
It is surprising how many young people do not know, neither care about their financial worth. Although it might be true that your personality worth cannot be measured in money, you need to be aware at every moment what is your financial stats. In terms of money – net worth means the monetary sum of all your assets (real estate, car, furniture, cash, saving accounts, investments, stocks) minus all your liabilities (debt, financial obligation, mandatory spending).

Precise calculation of your net worth is not an easy task. You need to consider the current market value of your assets, not the price you bought them for, but the price you can sell for. Calculating and understanding your net worth provides you with complete insight on how you are doing, and helps you elaborate your future financial goals.

2. What is your credit score and why is it important?
(we already deeply answered the money question in What is a credit score? article)
Your credit score number is a three-digit indication to potential lenders of your ability to repay money you borrow. The FICO score is the most commonly used, ranging from 300 (worst) to 850 (best) and is calculated based on the following factors: payment history, length of credit history, credit utilization ratio, the mix of credit types in use and number of credit inquiries.

You should aim for an excellent FICO score It includes anything from 750 to 850. The next category down is between 700 and 749. It is still considered good, but it might not get you approved for the best deal the lender offers Anything below 700 – you should consider fixing and improving before even consider borrowing money. Otherwise, even if you qualify for a loan, you might not be getting the lowest possible interest rates on that loan. Mortgage lenders and credit card companies usually reserve their lowest rates and largest loans for people who have exhibited a quality track record when handling credit.

3. How much money do you have, saved in your emergency fund?
It is advisable to have enough money in your emergency fund to cover your living expenses for you and your family for about 6 months. It might sound a lot, but you will be grateful to have access to the money in bad or even worst-case scenarios – losing your job, coping with emergency repairs, or even medical conditions.

Your first goal should be saving 100USD, then eventually growing the saving to 500-1000USD, until you reach the sum of your 6-months expenses. For some people this could be as low as 1000USD, for others it could go up to 10000USD and above. The worst case that could happen to you is the need to declare bankruptcy (we will cover extensively the disadvantages of bankruptcy, and those are not trivial), due to some extreme event.

4. Where do you put an excessive amount of money; you will need in 1 to 10 years?
Plan carefully your financial future. If you are going to need the money in 1 or 2 years, consider buying a Certificate of deposit. They provide a better interest rate than saving accounts (also have some disadvantages). If your timeframe is longer, consider investing in stocks, shares, and bonds. Just be aware that, while the stock market has historically gone up over time, it can go up or down in the short run. Keep in mind that past performance doesn’t guarantee future returns. While stocks may provide higher growth opportunities than Certificates of deposit and Bonds, you want to allow enough time to ride out the downturns and may consider relocating funds into more conservative options to cope with shorter periods of time. Investing in a mix of stocks and bonds is advisable as it lowers your risk.

5. What dividends and interest money do you get?
Interest money is usually paid by the bank on your deposited money, while dividends are periodically paid by companies to you as a shareholder. Dividends are typically paid in cash or additional stock shares. If you are an investor, this is a good way to collect some income while still investing for higher returns. Always keep in mind that dividends might be subject to taxes.

6. How do you diversify your financial assets?
Diversification means spreading your investments across a variety of assets. Those include cash (in different currencies), real estate, stocks, bonds, certificates of deposits, and so on. You don’t want to be putting all your eggs (erg… we mean ‘money’ :)) in one basket. An example of a good stock market allocation would be to invest in companies in the US and abroad, small, medium, and large, well-established (usually considered safer), and rapidly growing businesses. Ideally, you are aiming for a well-diversified portfolio, including deposits, cash, real estate, other properties, to cover for market fluctuations – when some go down, others go up.

7. When are you going to be debt-free?
Calculating your numbers is only one part of the equation. You also need a solid repayment plan with a solid end date. Create your schedule and include a plan for repaying mortgages, student loans, and other loans. If you managed to secure the best term loans and the rates are very low - you might not need to bother paying your debt faster.

On the topic of the credit cards – be very careful with them. If you only pay the minimums, you’re wasting a lot of money on interest and losing a lot of money you should not. Always be careful with credit cards and always pre-calculate how your financial balance change if you are up to paying more and faster.

8. How much money can you comfortably spend on housing and mortgage?
As a general guideline, experts’ advice is to limit your housing expenses to a maximum of 30% of your income. Many lenders obey that number and don’t even consider approving mortgages unless your proposed home expense compared to income ratio is 30% or less.

It doesn’t matter if you rent, lease, or own the place. Always try to lower your housing costs as upkeep and repayments could become huge and threaten your financial stability.

9. What types of insurance do you have and need?
Again, the experts suggest considering life insurance, home insurance, and automobile insurance as the minimum – in order to avoid sinking down in cases of emergency.

If you own your home or car, often you’re required to have insurance, and the minimum mandatory requirements vary depending on your location and specific case. Renters insurance may seem optional, but sooner or later you will realize that it is essential to protect your personal belongings, not to mention some modern buildings require it. Life insurance is a great way to ensure your relatives will be covered in the worst-case scenario. Consider it – especially if you have kids dependent on you.

10. How much do you save for retirement?
There is no golden money advice, as everyone has different goals for retirement finance, but most of the experts suggest you save between 10 and 20 percent of your annual income. Again, it depends on your vision and goals. Some people prefer investing, instead of putting money into retirement plans. Nevertheless, retirement plans are a good option. If you can’t afford much try to just save something there and increase a little with time when possible.