FINANCE & TECH

To gauge performance, you need to have net worth benchmarks. Otherwise, you have no idea whether you are outperforming or underperforming the masses.
Even if your net worth is up 10% one year, it may be not be so great if the S&P 500 is up 20% and you’re still young. At the end of the day, everything is relative in personal finance.
Net worth benchmarks will help you stay disciplined in growing your net worth over time. Further, net worth benchmarks will change as you age and have different financial objectives.

Net Worth Goals Change As You Age

When I was in my 20s and early 30s, my net worth goal was to always grow my net worth faster than the S&P 500. This is easier to do the less money you have thanks to aggressive savings.
Now in my 40s, my goal is to try and earn a return equal to at least 3X the risk-free rate of return. With the 10-year bond yield at ~1.1%, my target return is only about 3.3%. Sounds like a pretty low hurdle nowadays. However, being up 3.3% is great if the stock market, bond market, and real estate markets are down 10% one year.
The more money you have, the more risk averse you tend to become. At least that’s my experience. Further, there’s no need to swing for the fences when hitting singles and doubles can provide for a healthy lifestyle. If you’ve escaped the rat race, the last thing you want to do is have to get back in, especially if you have young children.
For example, you can invest your entire $300,000 portfolio in the S&P 500 to earn potentially $45,000 (15%) or lose $45,000 one year. Losing $45,000 is not a big deal if you’re making a decent salary and are willing to work for many more years.
But if you have a $5,000,000 portfolio and are approaching retirement, shooting for a 15% return is unnecessary. If you can comfortably live off $300,000 a year, then you only need a 6% return. And shooting for a 6% return (a ~40/60 stock/bond portfolio) will likely protect you from losing more during bad years.
Let’s review various net worth benchmarks you can follow to gauge your net worth performance. My hope is for all of you to outperform.
Net Worth Benchmarks To Gauge Performance
* The S&P 500 Index. If you live in America, the easiest and most common benchmark is comparing your portfolio’s return with the 500 largest stocks in the country. The S&P 500 represents 14 different industries, thereby thoroughly representing the economic health of our nation. Wherever you live, just use your country’s largest stock index as a benchmark.
* Risk Free Rate Of Return Times A Multiple. The risk free rate of return is the 10-year bond yield, which changes every single day.  You need to figure out a reasonable multiple on that bond yield because you are guaranteed to return the yield if you put all your money into Treasuries.
What rate of return over the risk free rate (equity risk premium) do you require? My simple formula is to take the latest 10-year bond yield and multiply the figure by 3 or 4.

Annual returns of Stocks, 3 Month Treasury bond, 10 Year Treasury Bond
* Sector Specific Exchange Traded Funds (ETFs). If you work in the real estate industry and invest in REITs and homebuilders, then perhaps you should consider benchmarking your financial performance to a homebuilder ETF such as ITB, XHB, or PKB.
If you work in pharma at Pfizer, then consider ETFs such as PJP, IHE, XPH. If you work in finance and own your bank’s shares as part of your annual bonus, then maybe indexing yourself against XLF is a good idea. Whatever industry you are in, there is an index or an ETF for you to use.
* Consumer Price Index. The CPI is produced by the Bureau of Labor Statistics and is often maligned as an unrealistic gauge of inflation. For example, the current CPI is roughly 1.8%, but how can this be if tuition, food prices, and everything else that matters to you are soaring? The CPI should be considered the base case benchmark for everyone to beat.

* The Case-Shiller Home Price Index. The Case-Shiller Home Price Index has risen to be the authoritative benchmark for real estate performance. The Index breaks down home price growth by region. Given we’ve discovered that a lion’s share of the median net worth in America consists of property, then the Case/Shiller Index should be a relative good barometer for the median American. Home prices have been accelerating during the pandemic.

* Hedge Fund Index. Hedge fund managers are supposed to be masters of the universe. Unfortunately, in a bull market they generally lag because of their mandate to hedge. They have absolute return goals where investors expect them to continuously make money even during recessions.
One of the most widely followed hedge fund ETFs is HDG. The HDG is designed to reflect hedge fund industry performance through an equally weighted composite of over 2000 constituent funds. Recently, HDG has performed quite well to many investor’s surprise.

Alternative Benchmarks To Track Performance
* Your Parents Financial Situation At Your Age. Ask your parents what their circumstances were at your age. Did they own a home? A car? What was their savings level, salary, net worth? It may be a fun exercise to have a candid financial conversation with your parents. Be sure to use an inflation multiplier to get a like-for-like comparison. It could be interesting to get some subjective thoughts about their financial situation compared to yours.
* The Neighbor You Despise. Comparing yourself to your neighbor is one of the most common, yet worst ways to compare your financial situation because you don’t really know exactly how they got their money. Whenever we see a new car in our neighbor’s driveway, it’s hard not to feel envious. We wonder whether they got a great bonus at work or in my neighbor’s case an inheritance.
My neighbor is 26 years old and rides a brand new $10,000 motorbike along with driving a sports car because he has no living expenses living at his parent’s house. His parents travel back and forth between their two houses. He probably has an embedded net worth of $2,300,000 because he will inherit his parent’s house when they pass.
He would be OK if he didn’t leave his motorbike running outside every morning, rumbling the entire street with noise. But he still lights firecrackers at night with his other deadbeat friend because he has nothing better to do.
* Balance Sheet Affluent Formula. This formula was created by Dr. Thomas J. Stanley, author of Millionaire Next Door. The formula is: 10% X Age X Income = Expected Net Worth. In other words, your household’s net worth should equal 10% of the age of the main breadwinner times your household’s annual realized income [adjusted gross income is a good substitute].
If you are in the Balance Sheet Affluent category, also known as prodigious accumulators of wealth, your net worth should be twice the expectation. Hopefully that’s all of you Financial Samurai readers!
* The Average Net Worth For The Above Average Person. I firmly believe many Financial Samurai readers can and will achieve a $1,000,000 net worth by age 50 by aggressively contributing to their pre-tax retirement savings, investing an additional 20% of their after tax savings, owning a primary residence, and working on a side hustle.

* The Average Net Worth For The Above Average Married Couple. Building wealth is generally easier if you have a life partner. Many have wondered whether they should just double the net worth figures in the above average person chart above if they are a couple. That’s one way to do it if you believe in equality. Or, you can take a hybrid approach like I’ve done below. Read the article about various ways to calculate an above average couple’s net worth benchmark.

* The Average Net Worth Of The Top 1% By Age. If you’re really gung ho, then you might want to try and earn a top 1% income level for your age group, followed by a top 1% net worth as well. There are plenty of people who make a lot of money but blow it all due to a lack of financial discipline. Shoot for a $1,000,000 net worth by 35, $5,000,000 net worth by age 50, and $7,000,000+ net worth by age 60. These numbers are roughly 13% light because nowadays top one percent income is over $400,000 a year.

* The Median Retirement Household Savings In America. If you’re feeling unmotivated, then you can always follow the mean (average) retirement account savings of American families by age based on 2016 data. The sad part of this chart is that it’s much higher than the median retirement account savings of families by age, where the median 56 – 61 year old only has $17,000 saved. I hope you guys all agree that the below figures are not very inspiring.

Best Net Worth Benchmark To Follow
Given everything is always changing, you need a dynamic net worth benchmark to follow. Therefore, I think the best net worth benchmark to follow is the annual performance of the S&P 500.
So long as your net worth is growing in line with the S&P 500’s performance, you’re making progress. During down S&P 500years, hopefully you’ll be able to still outperform or still grow your net worth through aggressive savings.
If you are close to retirement or retired, I think the best net worth benchmark to follow is 3X-4X the 10-year bond yield. The 10-year bond yield encapsulates everything from inflation expectations to equity and real estate return expectations. Once you’re close to winning the game or have won the game, it’s important to dial down risk.
Assign Meaning To Your Numbers
Having more money tends to be better than having less money. But after a certain point, more money means nothing, and can often bring about misery if too much time is spent chasing the almighty buck.
Write out your financial objectives, make a plan, track your net worth, benchmark its growth against your comparison of choice, and go about living as full a life as possible. If the numbers are good enough for your lifestyle, that’s all that matters.
Since 2012, my #1 goal has been to earn enough money from my investments and my writing to never have to work a day job again. In order to do this, I had to figure out a way to generate as much passive income as possible.
Today, with two kids and a non-working spouse, my goal is to consistently generate at least $300,000 a year in passive income until my kids graduate from college. This may sound daunting, but that’s the challenge I’ve set for myself!
Best Way To Track You Net Worth
The easiest way to track you net worth is with Personal Capital, the best free financial tool online today. I’ve used Personal Capital to track my net worth, analyze my investments, check for excessive fees, and plan for retirement since 2012.
All you’ve got to do is sign up, link up your financial accounts, and then you can see everything in one place. There’s no rewind button in life. Stay on top of your finances today.

Personal Capital’s Free Retirement Planner
Readers, what do you benchmark your net worth performance to? What are your main financial objectives? What other net worth benchmarks can you think of? […]

My first house hacking was my first primary residence. Although I technically became a landlord, I didn’t consider myself a real estate investor.
I sold that property at my first opportunity. However, if I only understood real estate investing strategies, I would have never let that property go!
In 2011, my wife shared that she wanted to own a condo downtown and rent it out. I quickly disagreed with her and told her, “I didn’t want to fix toilets.”
Fast forward, and I now own multiple investment properties in my local real estate market. My journey reminds me of two things 1) I love real estate investing, and 2) my wife is always right!

Table of Contents

What is House Hacking?
House hacking is when an owner lives in their property and rents out other parts of the property. Ultimately, the tenants are the ones paying the monthly mortgage payment while the owner lives rent-free.
For example, a person can buy multi-family property (e.g., triplex), live in one of the units, and rent out the other units. Another example is a person who owns a single-family home, lives in one of the rooms, and rents out the other rooms.
My simple house hacking strategy was owning a single-family house and having roommates pay rent. I didn’t do this to start building wealth. Instead, I invited my friends to live with me, primarily for social reasons.
I technically became a landlord. I owned the property, but my roommates were helping pay the mortgage!
Benefits of House Hacking
Looking for your first investment property but unsure of where to begin? House hacking provides multiple benefits, especially to rookie investors.
Live Rent-Free
The first big benefit of house hacking is living rent-free! A mortgage payment is composed of the principal amount, interest payment, and potentially mortgage insurance. However, the tenants are the ones paying back the debt service.
Financing
Lenders offer lower interest rates to people who will occupy their property compared to investors who do not. Lenders offer low-interest rates to people living on their property because they tend to take better care of where they live. Thus, they are less risky.
My rental properties’ interest rate is about three to six percent higher than my primary residence’s interest rate.
Low Down Payment
Owner-occupied properties don’t require as much of a down payment compared to non-owner occupied borrowers.
For example, the Federal Housing Administration (FHA) insures mortgage loans and only requires a down payment of less than five percent of the purchase price.
Non-owner occupied properties require 20 to 25 percent of the purchase price for a down payment. The down payment for owner-occupied borrowers is significantly lower compared to non-owner occupied borrowers.
I won’t bore you with the math. But, this low down payment makes house hacking a steal!
Passive Income
Aside from living rent-free, successful house hacking can generate monthly cash flow, known as the net operating income. You can calculate the net operating income (NOI) by subtracting the monthly operating expenses from the gross rental income.
Net Operating Income = Gross Rental Income – Operating Expenses
Below is a list of monthly operating expenses to consider:
Mortgage payment
Property Taxes
Property Insurance
Utilities
HOA fees
Property Management Company
How To Get Started In House Hacking?
Step 1: Become Creditworthy
The most powerful thing in real estate is leveraging other people’s money. Therefore, for a lender to approve you for real estate financing, you need to be as creditworthy as much as you can.
You can become creditworthy by improving your good credit score, having a stable income source, and reducing your debt-to-income ratio.
Step 2: Build a Relationship With a Local Bank
I always recommend new investors to build a relationship with a local bank or a credit union. A banker at a local bank can sometimes have more influence over your loan than a banker at a “big name” bank.
Communicate with your banker what you’re trying to accomplish with house hacking. A creative banker can develop loan suggestions to help you reach your goals, such as an FHA, 203k loan, or HomeStyle Renovation loan.
My banker works with many investors, and I’m fortunate to have built a great relationship with her. Her motto is, “I don’t invest in houses. I invest in people.” We’re at a point in our relationship where she increased our credit line, allowing us to purchase more properties.
Step 3: Study Your Local Real Estate Market
Study your local real estate market and look for areas with good house hack opportunities: research property values, rental income, and the kind of tenants in your market.
I practiced analyzing multiple properties before I made my first offer on an investment property. I calculated various numbers, such as the cash-on-cash return and the return on investment.
By the time I receive a lead, I know off the top of my head if it’s a potential deal or if I should move on.
Step 4: Create a Process to Find Leads
Finding real estate deals is the hardest part of real estate investing. Hence, you need to create a process that leads to potential deals, such as finding absentee owners.
Below is a list of ways you can generate leads:
Driving for dollars
Direct mail campaign
Signs
Online marketing
Reviewing property tax records
Work with a real estate agent.
Step 5: Make an Offer
There are always other investors looking for great deals. So, once you’ve analyzed the property, it’s time to pull the trigger and make an offer!
But, don’t be discouraged if you don’t get your offer accepted. As you make more offers on multiple properties, you’ll grow to see that you can’t win them all. You need one.
One year, I’ve analyzed over 50 properties, visited 12 of them, and made over five offers. Only one of my offers got accepted, and it was a great deal!
How to Grow Your Real Estate Portfolio
Rental property investing is a great way to generate passive income. However, if you’re looking to replace your income or become financially independent, you’ll need to scale your real estate portfolio.
BRRRR Method
BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat. The BRRRR Method is a real estate strategy that allows investors to recoup their initial investment and put it towards another investment property.
I often use this strategy. In less than two years, I acquired three properties. The method can be challenging to grasp at first. Therefore, it’s easier to explain through an example:
BRRRR Method Example
Joe BUYS a $100,000 property. His down payment is $5,000, while a bank lends him $95,000. For the sake of simplicity, I’ll ignore closing costs.
He spends $10,000 on REHAB costs to increase the after-repair-value and RENTS his property for $1,300 after he made improvements. Therefore, his overall initial investment is $15,000.
After a few months, Joe requests a bank to perform a cash-out REFINANCE. The property appraises for $150,000, and a bank creates a loan 75% of the appraisal valuation. Therefore, the principal balance of the loan is $112,500 ($150,000 x 75%).
The new loan of $112,500 replaces the other loan of $95,000, pays Joe back his down payment of $5,000, and the rehab costs of $10,000.
Refinanced Amount – First Loan Balance – Down Payment – Renovation Costs = $112,500 – $95,000 – $5,000 – $10,000 = $2,500
The rental income of $1,300 pays down the $112,5000 mortgage loan. Joe recouped his $15,000 investment along with an additional $2,500 from the cash-out refinance.
Joe can REPEAT the process and use the $17,500 as a down payment toward a new investment property.
The key to this strategy is purchasing an undervalued property and force appreciation through renovations.
1031 Exchange
A 1031 exchange is an Internal Revenue Service tax code that allows an investor to defer paying capital gains tax on their property’s sale. According to the 1031 exchange rules, an investor needs to exchange their current property with one that has a replacement value greater than or equal to its own.
Regarding house hacking, you’ll need to own the property for at least two years before you can take advantage of this tax code.
For example, Nathan purchased a house hacking duplex for $150,000 and made improvements to the property over time. After a couple of years, the property value became $600,000, and the net proceeds of the sale are $500,000.
Original Purchase Price: $150k
Fair Market Value: $600k
Net proceeds: $500k
Nathan can keep the net proceeds. However, the government will heavily tax him.
He can also scale and put it towards a more significant investment property, such as a 24-unit apartment complex or multiple short term rentals!
Besides paying capital gains tax, Nathan has also increased his ability to generate more monthly cash flow, reduce his maintenance costs, and improve tenants’ quality.
He went from a real estate rookie living rent-free to becoming an experienced real estate mogul!
Common House Hacking Mistakes
Treating Investing as a Hobby
Real estate investing is a business and should be treated as one. A common mistake that new investors make is treating it as a hobby. They don’t give their investing the necessary attention required, which can lead to financial ruin.
Not Following The Law
The city can shut down your business if you ignore any rental laws, such as not following local zoning ordinances.
I visited a property for sale because the owner was attempting to do creative house hacking. He illegally created a duplex from a single-family house, and none of his work was up to code.
Thus, the city shut him down. He had to cut his losses and sell.
Not Property Screening Tenants
Screening your tenants and doing a background check is essential!
You might feel desperate to have anyone rent your property to pay the mortgage. However, unfavorable tenants could lead to damages to your property. Those damages could cost thousands of dollars in repair or even force your property into vacancy.
I had potential tenants applying for one of my properties. Unfortunately, they had two large dogs that I don’t accept as part of my policy. Even though it would be nice to take their application, I still had to weigh the risks and move on.
Not Budgeting For Repairs
Another common mistake is that new investors don’t account for potential repairs or vacancies as part of their analysis. Also, they don’t have sufficient cash reserves to pay for these potential expenses.
I strive to maintain at least three months’ worth of rental income for each of my properties in cash reserves.
Conclusion
I did my first house hack unknowingly. However, if I had a plan when purchasing my first property, I would do a 1031 exchange and scaled my real estate portfolio.
I purchased that house for $135,000 and rented it out for $1,300 before selling it. Zillow says the estimated rental income for that property is now $1,600, and its market value is over $200,000.
These house hacking strategies are a great introduction to anyone interested in getting into real estate. Like any investment, you need to analyze your local market to make sure it’s a great deal! […]

Protection against loss is critical for everything you do, including running your own business or earning money from a side hustle. The primary tool for mitigating business risks, such as those described by Your Money Geek, is property and casualty insurance.
There are many insurance policies within the property and casualty insurance realm, each with its own vocabulary. Understanding the different types of property and casualty insurance can limit the number of many causes of catastrophic financial loss. In particular, you will want to know which ones apply to your business or side hustle.
This post will talk about the most important types of property and casualty insurance for small businesses and side hustles. These coverages include business owners (with key components – auto, liability, and property), professional liability, workers’ compensation, and fidelity and surety bonds. I’ll highlight the coverage provided by each type of business insurance. Also, I’ll touch on some factors to consider as you decide whether to buy them.

Table of Contents

Businessowners Insurance
Some small businesses buy a package policy, called a business owners policy (BOP), to cover their vehicle, liability, and property exposures. It is similar to the combination of personal auto and homeowners insurance policies. Businesses that don’t need all three types of insurance coverage can buy insurance policies separately. The separate policies are commercial auto (covers all vehicle types), general liability, and property. The package policy is usually less expensive than the three separate policies, as long as you need all three coverages.
The limit of liability determines the maximum amount the insurer will pay for a covered liability claim. Also, one or more deductibles determine the insured’s amount before the insurer starts paying for physical damage claims. Separate deductibles can apply to each of the comprehensive and collision portions of vehicle coverage and claims related to physical damage to any buildings and/or contents covered by the policy.
Vehicles
The vehicle coverage is the same whether bought in a BOP or a separate commercial auto policy. It protects against anything for which the business owner becomes legally liable related to vehicles’ operation covered on the policy. That is, if an insured driver is in an accident, liability insurance will usually cover the costs to third parties. These costs can include injuries or damage to their property.
The insured has the option also to purchase physical damage coverage. This insurance can cover damage to the insured’s vehicles either from an accident (collision coverage) or other perils, such as theft and fire (comprehensive coverage). The vehicle coverages for commercial vehicles are very similar to those in a personal auto policy, which I cover in detail here.
If you use your personal vehicle for your side hustle or business, you must buy commercial auto coverage. Personal auto policies generally exclude coverage for:
Employees during the course of employment.
While used as a public or livery conveyance, ownership or operation of a vehicle, such as Uber or Lyft.
The insured, when employed or otherwise engaged in any business.
Almost all claims made against your personal auto insurance will be denied if your vehicle was being used for a side hustle or business.
Premiums for auto insurance vary based on the number and types of vehicles insured; the coverages, limits, and deductibles purchased; characteristics of the drivers; where the vehicle is driven; and the distances driven, among other factors.
Liability
Businesses usually face one or more of four types of liability – vehicle (discussed above), premises and operations, products, and professional. Premises and operations and product liability are parts of both general liability policies and BOPs. Professional liability is a separate policy, so I’ve covered it below.
Premises and Operations
Premises and operations coverage (which I’ll call Prem/Ops) provides insurance for things related to your business location or operations. It covers injuries to third parties (not employees) or damage to their property.
Slips and falls by customers at business locations are the most common types of Prem/Ops claims. For example, if someone is injured at your business location, in your parking lot, or as the result of your operations, your business may be liable for their medical expenses and/or lost wages.
If your customers come to your place of business, you’ll want to consider premises and operations coverage. Most homeowners policies exclude coverage for claims related to a business. As such, it is important to check your homeowner’s policy if you do business out of your home to avoid gaps in coverage.
The premium for Prem/Ops coverage depends on your business’s nature, the number of types of locations, and the limit of liability you purchase, among other factors.
Products Liability
Product liability coverage provides insurance for damages related to your product. These damages include third parties (not employees) who are injured or their property when damaged. For example, medical device manufacturers’ product liability insurance protects the company against claims that their products are defective and cause injury or illness to patients.
On a much smaller scale, burns from McDonald’s coffee that was allegedly too hot are also insured under products liability coverage. If you make a product that could injure someone or damage their property, you’ll want to consider product liability coverage.
Premiums for product liability coverage depend on the type of products sold, the number of sales, and the limit of liability you purchase, among other factors.
Property
Property insurance protects your property, including buildings and their contents. You can also purchase insurance for just the contents if you don’t own the building. Property coverage protects against a long list of perils, including fire, hurricane, tornado, vandalism, and theft. In many places, you must purchase earthquake or flood coverage separately. Any intentional damage or damage from acts of war, arson, and sometimes riot is usually not covered. Read your policy to make sure you understand what is covered and what isn’t.
When you buy property coverage, you estimate the values of your buildings and contents. Insurers can often reduce the amount of any claim recovery, even for partial damage, if you underestimate your property’s value. As such, it is important to determine the value of your buildings and contents fairly.
Property insurance for businesses always includes business interruption coverage. Under this coverage, the insurer pays for lost profits and some overhead expenses when a covered peril has damaged your property. The insurer also covers expenses related to a temporary location where you operate your business while your building is being replaced or repaired.
Business interruption insurance applies only when your business is interrupted due to a peril covered under the buildings and contents coverage. For example, a pandemic is rarely a covered peril for buildings and contents because it doesn’t damage either one. In that case, there is no insurance coverage if your business is shut down from a pandemic.
Premiums for property coverage depend on the values, types, and ages of insured buildings, the value and types of insured contents, where the property is located, and the deductible you have selected, among other factors.
Umbrella
An umbrella policy allows you to increase the limits of liability on all your liability policies at once. An umbrella policy can provide coverage for vehicles, Prem/Ops, and products liability. The limits on the underlying policies must meet certain minimum requirements. An umbrella policy usually protects you against liability claims not covered by the underlying policies, such as libel and slander. The concepts underlying umbrella policies that protect businesses are similar to the concepts that underlie personal umbrella policies.
Umbrella premiums depend on all the characteristics of the underlying policies and the limit and deductible on the umbrella policy.
Professional Liability
Professional liability insurance protects you against claims that you have caused someone an economic loss by making a mistake when providing professional services. For example, if you are providing bookkeeping services, a client might sue you if you prepared tax returns incorrectly, leading to a client’s financial loss. If you are providing legal services, errors could include everything from missing a court deadline to providing incorrect advice. A professional liability policy usually covers all these errors unless intentionally made.
If your business provides advice or professional services to clients, you will usually want to purchase a professional liability policy. Professional liability covers services just as products liability insurance covers things your business manufactures.
Professional liability premiums depend on the type of services provided, annual revenue, and the limit of liability selected.
Workers’ Compensation
Workers’ compensation insurance (often called workers comp) protects you against the cost of injuries and illnesses to employees during their employment. Almost every US state requires you to provide workers comp for employees, as long as you have at least the minimum number of employees. That minimum number of employees is usually around four. Some states, such as California and Colorado, require you to provide coverage even if you have only one employee.
Workers comp reimburses employees for a state-mandated portion of lost wages and medical costs. Employees covered by workers’ comp cannot sue for covered injuries and illnesses except in minimal situations.
Premiums for workers comp depend on the number of employees and their wages, the state in which they work, and the type of work performed by each employee.
Surety & Fidelity Bonds
Some businesses need to buy surety or fidelity bonds as part of their operations. Most surety bonds provide guarantees to third parties (the obligees) that you (the principal) will perform certain actions. By comparison, fidelity bonds protect an employer against the fraudulent or dishonest actions of its employees.
Surety Bonds
One of the most common surety bonds is a construction bond. If your business is a construction company, it might promise to build a structure for a buyer. The buyer will likely pay your business for some of its services in advance. In that case, the buyer wants a guarantee that you will complete the structure.
You can buy a construction bond from an insurer for the buyer’s benefit (the obligee). If you fail to complete the structure, the insurer will either pay the buyer for the cost of completing the structure or will hire a contractor directly to complete it.
Other commercial surety bonds cover signature guarantees for notaries and remediation costs for mining or drilling operations. Surety bond requirements vary widely by state. I found the “What Bond Do I Need?” section of this website quite interesting.
Fidelity Bonds
Most fidelity bonds insure property, money, or securities owned by customers to which employees have access. For example, a fidelity bond usually covers the embezzlement of deposits by an employee for services or products not yet provided. Similarly, a fidelity bond can insure against misappropriation of pension assets or real estate escrow funds. A fidelity bond can also provide protection if an employee takes something while at a client’s business or home.
Bonds
Most side hustles and tiny businesses don’t require fidelity or surety bonds. Nonetheless, they are essential components of a company’s risk management plan if it has any of these types of exposures. The face amount of the bond, the type of coverage provided, and the insured’s history and financial condition determine the cost of surety and fidelity bonds.
Other Types of Property and Casualty Insurance
There are several other types of property and casualty insurance that a small business might need.
Crime Insurance – Property insurance and fidelity bonds don’t cover all theft losses. If you sell a product, you might need to look into purchasing crime insurance.
Cyber Insurance – Cyber insurance can cover your operations if a cyber-attack disrupts them. It also can protect you if your confidential business and/or your customers’ or employees’ personal information is stolen electronically. If your business has any of these exposures, you will want to investigate the various types of cyber coverage.
Directors’ and Officers’ Liability Insurance (D&O) – D&O insurance covers economic losses incurred by third parties that result from significant decisions made by directors or officers. Publicly-traded companies or companies with more than one owner often buy D&O insurance. If you are not the sole owner of your business, you might want to evaluate the need for D&O insurance.
Where to Buy Property and Casualty Insurance
Buying property and casualty insurance for a business are similar to buying it for your personal exposures.
Some insurers, such as Progressive (just an example – in no way do I intend to endorse Progressive as I know nothing about its premium, coverage, or service), allow you to purchase insurance for your business online.
Other insurers, such as Liberty Mutual (again, just an example), are direct writers. You talk directly to an employee of a direct writer when buying insurance.
Insurance brokers and agents provide access to all other insurers. They usually have access to a wide range of insurers. Small businesses, especially those without unique exposures, can work with an agent to acquire insurance. You may need to work with a broker if you have a large business or need unique expertise.
If you are new to buying insurance for your business or your business has unique exposures, I suggest a direct writer, insurance broker, or insurance agent. Purchasing insurance online, especially if you are an informed buyer, can often, but not always, save you money. The lower premium reflects insurers’ lower expenses as it doesn’t have to pay commissions or sales force expenses. […]

Some estimates show that diapers can cost over $1,500 for one child. Luckily, these legit ideas can help you save big money by getting your diapers for free. […]

For better or worse, apps like DoorDash and Uber Eats have disrupted the food-delivery industry. Since their launch in 2013 and 2014 respectively, restaurants across the country have outsourced delivery services to independent drivers who use the apps to make extra cash.
During the pandemic, these services have seen demand like never before. For customers, the apps make ordering food from just about any restaurant as easy as opening their smartphones. For drivers, it’s almost as easy to land a delivery job hawking food from local eateries.
But before you download your next job, take some time to review the key differences between DoorDash and Uber Eats so that you can make the most of your delivery gig.

DoorDash vs Uber Eats: The Top Food Delivery Apps Duke It Out
The general premise of the two apps is almost identical: Customers place food orders at local restaurants. The apps alert drivers in the area with the order details. The first driver to accept the order picks up the food and drops it off to the customer. Simple enough, right?
Several differences are worth noting, though. Some minor and some major. We took a deep dive into those differences, looking at pay, vehicle and job requirements, available locations, driver reviews and more to help you make an informed decision before you start delivering.
And if it’s too close to call, you can always sign up for both to see which one suits you better.
Round 1: App Reviews

Chris Zuppa/The Penny Hoarder.
Because the apps are so popular, they’ve amassed more than 4.1 million driver reviews. Both companies require their drivers to use different apps than customers, a huge perk when trying to get a sense of drivers’ perspective. Worker reviews from Glassdoor are also included.
DoorDash Driver (Dasher) Reviews
Feedback from Dashers is overall mixed, but there’s a clear preference for the iOS version of the app. Trends in negative reviews across all platforms show that many drivers have trouble with glitches and crashes, especially Android users, and that the nature of the work takes a toll on their vehicles. Many negative reviews mention that DoorDash’s strict performance metrics are a hassle.
Workers reviewed DoorDash more than 760,000 times.
App Store (iOS) review: 4.7 out of 5.Google Play (Android) review: 3.3 out of 5.
Glassdoor review: 3.7 out of 5.
Uber Driver Reviews
More than 3 million drivers reviewed Uber. A caveat worth noting is that Uber has one driver app. That means it’s hard to get the opinions of only Uber Eats drivers because general Uber app reviews are mixed in. Overall, reviews are positive.
Trends in negative delivery reviews on Glassdoor indicate GPS issues and trouble contacting customer service. Several drivers mentioned problems with promotion and surge pay (bonus pay during in-demand times). Negative reviews regarding vehicle wear-and-tear are common.
App Store (iOS) review: 4.6 out of 5.
Google Play (Android) review: 3.8 out of 5.
Glassdoor review: 3.9 out of 5.
Round 2: Job and Vehicle Requirements

Carmen Mandato/ The Penny Hoarder
To become a Dasher or Uber Eats driver, you have to meet a baseline of requirements. Some are vehicle related and some are age and experience related.
DoorDash
To qualify as a Dasher you must be at least 18. Dashers need to have a valid driver’s license. There are no car requirements, but auto insurance is required. In some markets you can make deliveries on scooters, bicycles and motorcycles.
Uber Eats
To make automobile deliveries, the minimum age requirement is based on your local jurisdiction, plus at least one year of driving experience. Vehicles must be no more than 20 years old. Drivers must be properly insured and can use bikes and scooters in certain markets. The age requirements are higher for those who prefer two wheels — 18 for bicycles and 19 for scooters.
Round 3: Sign-Up Process
Becoming a delivery driver for DoorDash and Uber Eats is simpler than landing a part-time job. You can complete the entire process from your smartphone or computer.
DoorDash
You can sign up to become a Dasher on the driver app. You’ll have to consent to a background and motor vehicle check (and pass both). They could take as little as a few days, but err on the side of a week or two.
After passing the checks, you’ll need to select what type of “orientation” you want. The pandemic paused in-person orientations. Depending on your market you may need to request an “activation kit” instead. Receiving your activation kit may take an extra couple of weeks, according to driver reviews.
The activation kit includes a Dasher manual, a hot bag and a credit card, which is used to pay for orders. Once you receive and set up the card through the app, you can start accepting orders.
Uber Eats
For drivers new to Uber, you can sign up on the website or through the driver app. Because of the stricter vehicle requirements, the application requires more detailed information on your ride. A background check is also required, which may take three to five business days to process.
After the background check clears and your application is approved, you’re free to start taking orders. No orientation or additional equipment is needed.
If you’re a current rideshare driver for Uber, it’s easy to start delivering with Uber Eats. You simply opt in to Uber Eats orders through the driver app and start delivering without any additional screening.
Round 4: Pay and Tipping
The two apps handle pay a little differently, both in how you get paid and how you pay for customers’ orders when you pick them up. Neither company offers guaranteed wages (unless you live in California).
DoorDash
As of Fall 2019, the company switched to a payment model where Dashers earn a higher base pay per order in addition to keeping 100% of their tips. Previously, a customer’s tip would subsidize the Dasher’s base pay.

Dashers report earning between $11 and $15 an hour depending on location, but those earnings aren’t guaranteed. Pay is based on how many orders you accept per hour and how much customers tip you. DoorDash pays weekly through direct deposit, or you can access your earnings early through Fast Pay, for $1.99.
When picking up orders, you may be required to pay for the order using the company red card from your activation kit.
Uber Eats
Depending on your location, you can expect to earn $11 to $14 an hour on average. Again, those wages aren’t guaranteed because your earnings are based on orders and tips. With Uber Eats, you pocket 100% of your customers’ tips. You get paid weekly via direct deposit, or you can pay a fee to access your earnings early through Instant Pay for 50 cents.
You won’t be involved in the payment process for food orders. Partner restaurants are reimbursed directly by Uber.
Round 5: Available Locations

Aileen Perilla/ The Penny Hoarder
This one’s easy. Both services are available in most big cities in all 50 states.
Previously, DoorDash and Uber Eats ran driver support centers in major metro areas of most states. In 2020, many of these centers closed due to the coronavirus. Some still exist, but neither company offers a comprehensive, public list of remaining locations.
Final Round: Additional Perks
Promotional offers are popular with both DoorDash and Uber, but they’re temporary and vary by location. Aside from sign-up bonuses and referral codes, here are a couple perks that are here to stay.
DoorDash
A few perks unique to DoorDash include grocery delivery options, automatic insurance coverage and health care services.
After you’re screened and accepted as a Dasher, you can choose to deliver food in any city where DoorDash operates, meaning there are no hard location requirements. The company also launched grocery delivery services in some Midwest and West Coast areas.
Dashers also get supplemental auto insurance and occupational accident insurance for accidents or injuries that fall outside your current auto insurance. The insurance plan covers up to $1 million in medical costs, a weekly payment of $500 for disabilities and $150,000 to dependents for fatal accidents. Coverage is automatic. There are no deductibles or premiums.
While DoorDash doesn’t offer health insurance, the company does partner with Stride Health, which provides free health care advising and assistance to Dashers who need help finding affordable insurance plans.

Uber Eats
Uber Eats drivers get a variety of discounts and may be eligible for Uber Pro perks.
All Uber drivers receive discounts for vehicle maintenance and phone service plans. Uber also partners with Stride Health to provide health plans and tax advice. Drivers automatically receive supplemental auto insurance, which covers up to $1 million in damages. There’s a $1,000 deductible before benefits pay out.
Uber Pro perks have recently expanded to all of Uber’s markets across the U.S. Only top-rated drivers receive Pro perks like tuition and gas reimbursement, and the program is designed for Uber drivers primarily, not Uber Eats drivers.
If you drive for both Uber and Uber Eats, your food deliveries may apply to Uber Pro, but Uber-Eats-only drivers aren’t eligible.
Final Decision in DoorDash vs Uber Eats
Ding! Ding! It was an even match-up. Uber Eats and DoorDash were neck and neck throughout. No knockout punches. A good few jabs by DoorDash’s insurance coverage and grocery options and a couple of hooks by Uber’s overall ratings and ability to switch to ridesharing.
The decision goes to our judges. (That’s you.)

Adam Hardy is a staff writer at The Penny Hoarder. He covers the gig economy, remote work and other unique ways to make money. Read his ​latest articles here, or say hi on Twitter @hardyjournalism.

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Having trouble paying your tax bill? Falling behind on taxes can be scary, but you have options to get caught up. One common, albeit last-resort option, is an “Offer in Compromise”. In the 2019 fiscal year, the IRS accepted 17,890 offers from American taxpayers who needed help catching up on their taxes, totalling $289.4 million. 
If you’re considering making an Offer in Compromise, you’ll need to know what it means and how to proceed. Here’s everything you need to know to determine if this strategy is right for you.  
What Is an Offer in Compromise?
An Offer in Compromise is an agreement you make with the IRS to settle your tax debt for less than the full amount. It’s used in cases where taxpayers would experience significant financial hardship if they paid the full tax amount that’s owed. 
Qualifying for an Offer in Compromise isn’t easy. The IRS will assess not only your ability to pay the debt but also your income, expenses, and any equity you have in your assets. If it approves your offer, there are two different payment options (monthly or lump sum) available to help you customize your repayment schedule to your needs. 
Offer in Compromise Eligibility
Here’s what the IRS looks for to determine eligibility for an Offer in Compromise: 
You can’t be in an open bankruptcy proceeding.
You have to be caught up on filing all of your federal tax returns. 
You need to have made all of your required estimated tax payments. 
You’ve submitted all federal tax deposits for any employees. 
Once you’ve met the basic criteria for eligibility, the IRS will review your offer. It typically approves offers where the amount you’ve suggested is more or less the maximum it could collect from you in what it determines to be a “reasonable” amount of time. 
How to Submit an Offer in Compromise
Submitting an Offer in Compromise can be complicated so many people prefer to use a tax relief company to help. If you go that route, be sure to compare the best tax relief companies online before choosing one. Review each company to ensure it has a good track record, excellent customer service and low tax relief service costs. 
Although you can go through a tax relief company to submit an Offer in Compromise on your behalf, you can choose to submit your Offer in Compromise on your own which can save you money. Here are the basic steps to preparing an Offer in Compromise for the IRS. 
Step 1: Gather Important Documents
You’ll need to provide many personal details to complete your Offer in Compromise. First, make sure you have documents that show your total financial situation. You’ll want to have all aspects of your finances documented, such as cash, investments and assets, available credit, debt and your income. 
Also, if there are others in your household who contribute to expenses you’ll need to provide information about their income and average expenses.
Step 2: Complete Form 433-A (OIC) or 433-B (OIC)
Form 433-A (OIC) is for wage earners and those who are self-employed. This form helps the IRS calculate what it believes is an appropriate offer based on your income, expenses and earning potential. Keep in mind, if you’re married, but living separately, your spouse will also have to file the same form. 
Form 433-B (OIC) is necessary to fill out if you own a business or corporation, or you’re a single-member LLC, taxed as a corporation. 
Step 3: Attach Supporting Documents
You’re not limited to only the information on the form, you can also attach additional documentation that shows your financial circumstances. Each form has a list of the specific documents you need to attach for support. 
For example, with Form 433-A (OIC) some of the supporting documents you need to attach are copies of:
Current pay stubs or earning statements
Individual bank statements from the last three months
Statements for each investment or retirement account you have 
Step 4: Complete Form 656, Offer in Compromise
In IRS Form 656, you’ll decide which tax years, and the type of tax, you’re going to offer a compromise for. You’ll also need to state the amount and how you’ll make payments. 
Step 5: Include Payment
There are two separate payments you’ll need to make with your offer — the application fee, which is $205, and your initial payment. 
Your initial payment depends on which repayment method you’re choosing. If you’re opting for monthly payments, then you’ll need to send the first month’s amount. If you’re opting for lump sum payments, you’ll need to send 20% of the total amount. If your offer is rejected, this initial payment will be applied to your tax debt. 
You can send both payments by personal check, cashier’s check or money order or through the Electronic Federal Tax Payment System. You should make them payable to the “United States Treasury.” 
There’s only one scenario when you don’t have to send any funds with your application  — that’s if you qualify for Low-Income Certification. In this case, your application fee is waived and you don’t need to send your initial payment. 
Step 6: Mail Your Application
Before you drop your application in the mail, be sure to make a copy of the entire package to keep for your records. It’s a good idea to send any sensitive documents, like an Offer in Compromise, via certified mail so that you can track the offer and retain proof of delivery.
What Happens When Your Offer Is Approved
If your Offer in Compromise is approved, you’ll have to continue to file taxes and keep up with estimated payments that are due in the future. An approved Offer in Compromise doesn’t give you any tax immunity on future earnings, it simply helps you resolve tax debt from past earnings. 
After receiving written confirmation that your offer is approved, you’ll need to review the Offer Terms, which will be listed in Section 7 of Form 656. Then, you’ll can start making payments. 
If you opted for lump-sum payment, you’ll have already submitted 20% of your total payment with your initial offer. After that offer is approved, you’ll need to pay the remaining balance in a maximum of five payments. 
If you decided to make periodic payments you’ll owe monthly installments to the IRS, which you must make until you’ve fully repaid your debt up to the amount in your accepted offer. 
What to Do If Your Offer Is Denied
Not every Offer in Compromise is accepted by the IRS. If yours is denied, you still have options. 
Here’s what to try next:
You have 30 days to appeal your rejection, which you can do using Form 13711.
Set up an installment agreement with the IRS that allows you to make monthly payments throughout a set term. This can stop any collection activity against you by the IRS. 
Apply for a payment extension using Form 1127.
Request “Currently Not Collectible” status, which could temporarily defer your tax bill until your finances improve.   
In addition to these strategies, you can also work to improve your finances to make it easier to repay your tax debt. If you don’t already have a budget, create one that includes debt payments. 
Once you’ve cut expenses and directed those funds toward repaying your tax debt, consider also increasing your income to help you tackle your debt faster. 
Even though paying your total tax bill might seem daunting, remember that it’s possible to fix financial problems — you won’t stay stuck forever. The key is determining the right plan for you and then staying consistent as you work toward your goals.  […]

Although enduring the pandemic has been stressful to say the least, I have learned a multitude of lessons I’ll never forget. One of the biggest is that, like it or not, I’m not cut out to homeschool four kids while trying to work at home. Most of all, though, the pandemic has reinforced my feeling of gratitude for the life I live — and the life my family lives.
For example, when schools began shutting down and the whole country went into lockdown, neither my wife, Mandy, or I had to miss work or struggle to find childcare. When I work on my blog, my podcast, and other ventures in my home office, my wife already stays home with the kids and has done so for several years. 
And when the economy stalled and the stock market dropped like a rock, we never had to wonder how we’d pay our bills or what the future might hold. After all, we have a fully stocked emergency fund, and have plenty of passive income streams that aren’t tied to an employer or the stock market on any given day.
The bottom line: The pandemic has reminded me all I have to be grateful for, including the peace of mind that comes with financial independence.

Teaching My Kids About Financial Independence
Anyway, part of me has always worried that my kids wouldn’t get to learn the same financial lessons I did — at least, not in the same way. Because of the situation we’re in, my kids have never really lived in a modest home, and they have never had to go without. They have never been in a situation where we are trying to stretch the groceries for another week until payday, and in fact, the pandemic has made us rely a lot more on takeout and food delivery than we normally do.
Regardless, I recently took some time on one of our homeschool days to map out what it takes to run and pay for a household for my kids. 
Writing It All Out
On a giant whiteboard in my office, I created a list of most of our household bills — our mortgage payment, transportation expenses, phones, gas, insurance, utilities, and all of the taxes we pay. In another column, I wrote out a rough example of the amount of income it would actually take to cover those bills. 
From there, I talked with the kids about our household wants, or stuff they prefer to have. My kids went ahead and added shoes to the list, an Xbox and some dolls. 
At one point, the kids started asking questions about where the money for our bills actually comes from. I explained that, while I continue working on my podcast and blog and other business ventures, the majority of our income is mostly passive — as in, I am not actually working for it and I am no longer getting paid by an employer.
And in that moment, I began explaining to them my thoughts on financial independence — what it means to me, and how we actually got to that point. 
While my kids were sick of dad teaching and barely listening by then, they did have some thoughts on financial independence. I explained to them that, if they could save a ton of their income in their early working years, they could invest in passive income streams they could rely on for decades after that. 
We also talked about how secure it can feel to have enough money stashed away to get by, and to not have to rely on the whims of an employer or a J-O-B to stay alive. 
How I Realized We Were Financially Independent
All of this got me thinking about when I knew we were financially independent, and the “aha moments” I had along the way. After all, our journey to financial security didn’t happen overnight, even though sometimes it does feel that way.
But before I share how I knew we didn’t need to worry about money, I want to explain what I think financial freedom really is, based on a note I wrote on my whiteboard for our kids. 
What Financial Independence Is (and What It Isn’t)
For me, financial independence is not about making the most money you absolutely can, and it’s not about how much is in your bank account, the car you drive, or the size of your home. 
Instead, financial independence is about choice. 
Based on the way I interpret the FIRE movement, financial independence is about being able to choose where you work and what you work on, having the ability to spend your free time how you want, and living life on your own terms. It’s about not having to go to a job you hate, and to still have the money you need to pay bills and live comfortably, regardless.
Further, financial independence means being able to have the freedom of choice without any worry, without any stress, and without any anxiety — at least when it comes to paying bills.  
My Aha Moments
So, what are the “aha moments” that helped me realize we had been blessed with all we need — that we are financially independent?
In reality, it has been a lot of small things over the last decade or so — things like being able to rent two hotel rooms or a large Airbnb each time we travel, and not having to worry whether we can afford it. After all, I have four kids, and my wife and I don’t want to sleep in a hotel room stuffed six-people deep. 
Another big moment we had was the first time my wife and I maxed out our old Roth IRA accounts while also fully funding our 401(k)s, which happened early in our marriage. 
Then there was the year we started building our first “dream house,” which we lived in before the one we live in now. Our “starter home” was around 1,900 square feet and we lived there for quite a while. But we started building our 5,000 square foot dream house right before the birth of our second son — we even put in a pool shortly after that. 
This was when we were in our early 30’s, and building at that time just seemed like a dream come true. We even started building our new home before we sold our old one, which was only possible because we had our financial ducks in a row.
Other key “aha” moments along our journey to financial independence included:
The many times I turned down lucrative job offers and opportunities so I could continue pursuing my own dreams
When I realized I could take two weeks off to drive my family to the Grand Canyon in an RV — and I did it!
When I’ve made more money in a month than my parents used to earn in a whole year (since my parents topped out at around $40,000 to $50,000 per year during their working years)
Realizing I had the cash savings to purchase my childhood dream car (a yellow Lamborghini!), if I really wanted to
The time I sold a minority stake in one of my businesses and was handed the largest check I have ever received to date
The first time I paid $400 for a pair of Jordan shoes with no regrets or stress, which actually happened just a few years ago!
Funny enough, I sent my wife Mandy a text, for research purposes, asking when she first felt financially independent. Her answer was totally different than mine. 
Mandy says that she felt like she no longer needed to worry about money when we reached one year of expenses in our emergency savings account.
I have to agree with her, because that milestone did give me a lot of peace of mind. After all, having 12 months of expenses in an emergency fund means a lot could go wrong with our finances and we would still have the time and space to figure it all out.
3 Key FIRE Principles and How You Know You’re On Track
If you’re pursuing financial independence but progress feels slow, know that your path to financial freedom will have a lot of bumps along the way. If you’re like me, you might also find that you’re inching toward financial freedom in spurts, and that it doesn’t all hit you at once. 
The key for those seeking FIRE is being on the lookout for those “aha moments” that tell you you’re on the right path. No matter what anyone says, you won’t become financially independent overnight. Instead, you’ll probably hit several different stages over the months and years it takes to get there.
Not only that, but you should strive to adopt the right mindset for FIRE. For the most part, this means being willing to think differently about how the world works and how it should work, and being open to going your own way.
What are the key principles of FIRE — or the key mindset changes that can get you there? Based on my personal experience, here’s what I think they are.
Key Principle #1: Gratitude for What You Have
In my opinion, being grateful for what you have (and what God has provided) is one of the most important steps anyone can take. Even if things aren’t really going your way, and if life seems bleak and miserable at times, there is always something we can be grateful for. 
With that said, I recommend being grateful and hungry — as in, don’t be so grateful that you become complacent and stop pushing for more in your life. 
Continue to entertain the idea that there is always something else you can learn, more experiences you can have, and more wisdom to obtain by trying new things. And if you try something and fail, look for the lessons you can find in that failure and be grateful you had the chance to learn them. 
Key Principle #2: Flexing Your Bold Intentions
Another key principle of achieving financial independence is being willing to share your goals with the world — loudly and without hesitation.
In your own life, you might’ve noticed that people who are pursuing FIRE can’t stop talking about it. This is because FIRE enthusiasts usually have one important thing in common: they’re brave enough to put their bold intentions on display no matter what anyone thinks.
Let’s say you have the bold intention of achieving financial independence and retiring at 35. Why not take that goal and post it to your Facebook page? Start sharing it with your family, and don’t forget to tell your friends. 
Chances are good that you’re probably going to get a lot more criticism than support from your peers, but who really cares? 
Most people who pursue FIRE actually don’t care at all what other people think. That’s part of the reason they’re able to live differently, save a large percentage of their income, and stop trying to keep up with the Joneses in the first place.
Key Principle #3: Full Release of the Past
Finally, you have to make sure your future is bigger than your past — as in, don’t let your past mistakes define who you are today and who you can become.
I know from experience that it’s far too easy to focus on all of the mistakes you’ve made and opportunities you’ve missed out on. Trust me, I’ve made more than my share of bone-headed mistakes that could’ve easily derailed me, yet here I am. 
The key for anyone pursuing FIRE is having some humility for the situation while never letting your past mistakes hold you back. You have to be willing to put yourself out there again and again, knowing you might fail. The thing is, every failure has a lesson, and sometimes those lessons lead you to something great right around the corner. 
Maybe you skipped saving for retirement early in your career, and you feel behind from where you should be. Although you definitely missed out by not getting started early, you can only control the steps you take to reach your goal right now.
Perhaps you made a poor investment and lost money at one point, which is something most investors have done at least a few times. Instead of dwelling on that mistake, you have to learn to cut your losses, find the lesson in the mess, and move on. 
Why? Because the alternative isn’t moving forward, and that won’t get where you want to be.
The bottom line: Let go of the past and take stock of where you’re at now. From there, figure out a plan to reach your goals, and don’t stop until you get there. […]

Investing in oil can have a major financial upside, which is why it’s a popular choice for many investors. But, it’s not without its risk, as the process can not only be complex but oil prices are prone to some volatility.
If you want to invest in oil, it’s important to do your research and find a method of investing that matches your risk tolerance. Here’s what to know about investing in oil and how to decide if this is the right investment vehicle for you. 
Why Invest in Oil?
Oil can be a volatile stock which is one of its disadvantages that scares some investors off. However, it has many upsides,too. 
Oil allows you to diversify your portfolio, which is highly recommended when creating a long-term investment strategy. Many oil stocks also pay dividends. For example, in the third quarter of 2020, Chevron stock yielded a dividend of $1.29 per share. 
Then, there’s the potential for tax write-offs. Oil investments present unique tax advantages in the United States. Through tax exemptions and offsets, oil investors can avoid taxes they’d otherwise have to pay if they invested in alternative industries. 
Despite this, oil isn’t the right investment for everyone. The volatile prices, high risk, environmental impact, and relatively high financial barrier to entry are some drawbacks to consider before jumping into an oil investment. 
Pros
Cons
Diversify your investments
Volatile prices
Potentially obtain tax write-offs
Environmental impact
Pays dividends
High cost of entry
How to Invest in Oil
There are several ways to get started investing in oil. When you’re evaluating your options, be sure to assess the risk level of each, to make sure it matches your own risk tolerance. Also, if you have any specific tax needs you’ll want to consider the tax advantages of certain investments and whether these can benefit you. 
Master Limited Partnerships (MLPs)
MLPs, which are most often found in the energy industry, are entities that will typically provide or oversee the supplies, materials or staff needed for other businesses in the energy industry to operate. 
Think of companies that provide services to the oilfield, transport pipelines, or help oil companies coordinate their operations. They’re structured as partnerships, not corporations, for tax purposes. This means they pay tax at what’s often a much lower rate.
MLPs are relatively low-risk, making them a popular choice for those who take a long-term approach to investing, or for estate planning purposes. 
Exchange-Traded Funds (ETFs)
Want to diversify your portfolio by adding oil, but aren’t prepared to buy oil itself? ETFs offer an alternative, and potentially less costly, method to integrate oil into your investment strategy. Since ETFs are essentially pre-packaged, you don’t have to make multiple purchases in oil stocks to round out your oil exposure. 
Having one transaction also helps reduce the fees or commissions you’ll pay. If you’re trying to invest a small amount of money, oil ETFs could be the way to go. 
You can trade ETFs just like you would any stock in your portfolio, so you don’t need a broker-dealer to help. This gives you greater control and makes overseeing your own portfolio easier. Plus, with oil ETFs, you don’t incur capital gains tax until the fund is sold. 
Think you want to add oil ETFs to your portfolio? Conduct thorough research first by paying attention to the price of oil. Target specific ETFs and note their behavior as oil rises and falls. When you have an understanding of how each ETF you’re looking at reacts to marketplace changes, you can make your oil purchase based on your projections.
Oil Futures
Oil futures might be a good fit, if you want an investment that’s more directly in line with the crude oil market. Futures are a type of financial contract that stipulates a transaction will take place at a set time, date and for a certain price. You can buy futures in many industries, including oil. When it comes to crude oil futures, the contracts specify how much crude oil will be sold on a certain date and at what price.
Futures contracts cover 1,000 barrels at a time. When you take part in purchasing futures, it’s not expected that you’re going to one day be the owner of a barrel of oil. You purchase futures through a commodities exchange, selling before the expiration date on the contract. 
Even a small change in oil prices can have a relatively big impact on your payout — if oil is at $45 a barrel and rises to $46 when you sell, that’s a $1,000 increase for just one futures contract.
Keep in mind, you’ll need a margins account to trade futures. Usually your margins account needs a minimum balance so that you can pay any losses you might incur at the close of the contract. 
Direct Participation Program (DPP)
If you want to make a direct investment into activities like the exploration of oil you might want to consider a Direct Participation Program. These are long term, pooled investments that rely on passive management, meaning they aren’t traded. 
With a DPP, all of the members contribute their funds to be invested by the general partner. Whereas funding an exploratory drilling program might otherwise be only available to wealthy individuals, participating in a DPP let investors — who otherwise wouldn’t have access to a lot of capital — participate with full exposure to the risk or reward. 
In oil, there are several types of DPPs:
Exploratory drilling program
Developmental drilling program
Working interest program
Rework program
Since DPPs are often incorporated as partnerships they enjoy tax benefits over corporations. However, DPPs aren’t publicly traded. This means you can’t simply purchase a position in one, like you would when buying a stock. 
You might also have to meet a certain income level or have a certain amount of assets to invest. Depending on the state, you might even need to be an accredited investor to participate in a DPP. This is because DPPs are not a liquid investment. Once you invest your money in a DPP, you’ll need to be prepared to leave it there for five to 10 years. 
Mutual Funds
Mutual funds take investments from many investors and use the collective total to secure assets, like stocks and bonds, related to the theme of the fund. They’re managed by professional mutual fund managers who research the market, and then either aggressively try to beat it or make safe investments that keep pace with the overall market. 
Although it can be hard to diversify your portfolio by yourself, especially if you have limited money to work with, participating in a mutual fund can help you achieve diversification. 
When it comes to oil, there aren’t specific oil mutual funds to invest in. Investors typically participate in mutual funds related to oil, such as energy funds or natural resource funds. Through choosing the most appropriate funds in these industries, you’ll get some exposure to oil.
The Bottom Line
Participating in oil — whether directly or indirectly — can be a smart way to diversify your portfolio. Keep in mind, while each investment vehicle gives you the opportunity to participate in the upside of the market, it also comes with risks. Make sure you understand your own appetite for risk when it comes to your money and choose your oil investments, accordingly.  […]

Petco stock soared in its trading debut Thursday after its initial public offering prices above forecasts late Wednesday.
X The pet supply retailer raised $864 million from its IPO after selling 48 million shares at $18 each, above the expected range of $14-$17. At that price, the company’s market valuation tops $4.6 billion.
Petco Health and Wellness (WOOF) will join the Nasdaq under the ticker symbol WOOF. Goldman Sachs and Bank of America are the lead banks for the IPO.
Shares jumped 69% to 30.39 on the stock market today.
The isn’t the first time Petco has made a public debut. It first went public in 1994 before going private in 2000. Then it went public again in 2002 before going private again in 2006.
According to IPO research and advisory firm IPO Boutique, Petco is “well-oversubscribed” and, it added, “the underwriters are currently guiding pricing to the high-end or above the $14-$17 range.”
More pet-focused IPOs are on the way in 2021. BarkBox, a popular monthly subscription service for dogs, is expected to go public via a merger with Northern Star Acquisitions, a blank-check company, in the second quarter. It will be listed on the New York Stock Exchange under the ticker BARK.
IBD Live: A New Tool For Daily Stock Market Analysis
Petco Stock Joins Rally
Pet ownership has boomed during the Covid-19 pandemic as Americans went on adopting sprees. Shelter Animals Count, a database that follows 500 shelters around the U.S., said adoptions rose 15% in 2020 vs. 2019.
Americans also spent more money on their pets last year. A LendingTree poll in October found that 1 in 3 pet owners increased spending on their pets during the pandemic even as unemployment rose and other types of spending fell.
The trend has lifted other pet stocks like Chewy (CHWY) and Freshpet (FRPT), while PetMed Express (PETS) and PetIQ (PETQ) have been more mixed.
Chewy stock fell 1% Thursday after surging 8% Wednesday. Freshpet dipped 0.5%.
Follow Gillian Rich on Twitter for investing news and more.
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Shopify could benefit from an acceleration in e-commerce, says Oppenheimer.
Andrew Harrer/Bloomberg
Another day, another set of recommendations for how to play the cloud.
Since the start of the year, a number of analysts have weighed in with thoughts on the outlook for the cloud software sector, after the group cranked out fantastic returns in 2020. On Thursday it was Oppenheimer analyst Brian Schwartz’s turn.

In a 116-page report, he laid out the case for taking a more selective approach to the sector this year, noting that multiple expansion is likely to be limited after last year’s fat gains. But he has plenty of stock picks to offer, and as part of his call adjusted ratings on several stocks.
“Our 2021 outlook … is positive because of the potential for outsized stock returns, though we expect share outperformance for this year to come more from upside to estimates and company-specific catalysts,” Schwartz wrote in his research note.
“SaaS [software as a service] technology presents a powerful market setting for durable growth and cash generation, and is experiencing accelerating market adoption from the Covid-19 pandemic,” he continued. “While SaaS valuations have reached the top shelf versus historical averages… we think the premiums are justifiable [because of] the scarcity of public SaaS names, investors searching for growth in a slow-growth macro recovery, heightened consolidation and private-equity interests for these names, investors playing catch-up and chasing performance, and low rates.”
Schwartz raised his ratings on both Shopify (SHOP) and ServiceNow (NOW) to the equivalent of Buy from the equivalent of Hold, and set target prices of $1,300 for Shopify and $600 for Service Now.
The analyst concedes that he’s “late to the party” on both stocks, but adds that he sees both companies gaining market share, innovating and “remaining in the Street’s good grades in 2021, even with any missteps.” He also downgraded eGain (EGAN) to the equivalent of Hold from the equivalent of Buy, in part because the stock has rallied 57% since mid-December 2019.
For Shopify, the analyst offered five reasons to own the e-commerce software company’s stock. First, he noted that the company operates in a “very large and accelerating” market. Second, he argued the company should be a “rule of 40” company for a long time to come—referring to companies that can grow revenue at better than 40% with gross margins above 40%. Third, he said the company can gain share in the global market; he also noted that the pandemic is driving an acceleration in e-commerce; and finally, he wrote that the company’s “international opportunity is still ahead.”
As for ServiceNow, Schwartz writes that the company “stands out … as the pioneering trailblazer in SaaS for IT services management.” He adds that ServiceNow “has transitioned and progressed over the years into a verifiable cloud platform success story as it rides atop a best-in-class and unified platform with multiple product pillars of substantial scale, profits, and growth trajectory.”
Schwartz includes both Shopify and ServiceNow on his list of top picks for 2021. Other picks include Adobe (ADBE), Paycom Software (PAYC), Coupa Software (COUP), Medallia (MDLA), and Workday (WDAY). He suggests that investors avoid Paylocity (PCTY) and 2U (TWOU), as well as eGain.
Despite the upgrades, Shopify was down 0.5%, to $1,194.27 on Thursday afternoon, while ServiceNow was off 0.7% to $518.04. eGain shares were down 0.8%, while the S&P 500 was up 0.1%.
Write to Eric J. Savitz at eric.savitz@barrons.com […]