Beating Broke was included in the following carnivals this week:
Yakezie Carnival hosted by Parenting and Money
Lifestyle Carnival #27 hosted by Femme Frugality
Carnival of Money Pros hosted by Finance Product Reviews
Carnival of Retirement #44 hosted by Cash Net USA
Thanks to the hosts for including my posts!
Lending Club, the peer-to-peer lending company, announced earlier this week that they had surpassed the $1 Billion mark in loans originated and funded. $1 Billion. That’s a lot of moola. Cashola. Cream. Dough.
I don’t think it comes as any surprise that Lending Club has quickly become my favorite peer-to-peer lending companies. It doesn’t hurt, of course, that it’s competitor, Prosper, doesn’t allow me to invest with them. Despite having to use Lending Club’s secondary market to buy my notes, I’ve still managed to make over 14% in returns. I’m continuing to invest with them, and have reached a point where the principle and interest payments each month are enough to allow me to make one $25 investment each month without adding anything more to the account.
For those of you who are unfamiliar with Lending Club, and peer-to-peer lending, the prospect of investing by helping fund what really boils down to a bunch of unsecured loans can be a bit daunting. After all, those of us who are on the other side of lending are quick to say that you shouldn’t get an unsecured loan because of the rates. Why, then, are we so quick to invest/fund them? Well, the rates are good on this side. For the borrower, the rates are still higher than they would be with a secured loan, but are generally better than the borrower would be able to get with a traditional bank or credit union. But, what really makes you leery is the risk.
Unsecured loans, by their nature, are more risky. That’s why the traditional lenders charge higher rates on unsecured loans than they do on a secured loan. There’s nothing to repossess if the borrower defaults. But, unlike a traditional lender who is usually the only lender on the loan, peer-to-peer lenders have the ability to only fund a small portion of each loan. I, and most of my fellow investors, like to keep that portion at about $25. Instead of having several thousand dollars riding on one borrower, and their ability to repay the loan, you have several thousand dollars riding on many borrowers. You’ll still have a few loans that default occasionally, but, because you’re investment is diversified across all those loans, one or two defaults won’t break the bank (you).
If you haven’t, I encourage you to learn more about peer-to-peer investing. I think it’s a very viable avenue to get above average return on your investments. I happen to think the risk is about on par with investing in stocks. If you’ve already got investments in traditional stocks, I would suggest considering adding a portion of your portfolio in peer-to-peer lending in the same way that you would add a new mutual fund or EFT to your portfolio.
Are you a p2p user? How do you view the risk? How much bigger does the industry have to get before it becomes seen as a more “mainstream” investment avenue?
Where you live, and how much it costs to live there can make a huge difference in what your finances look like. The differences in the cost of living between someplace like Seattle, or San Francisco and where I live, in North Dakota are stark. Oftentimes, when you see someone using a calculator of some sort for your retirement “number” there are some assumptions that get made. People simply assume that they are talking to people who have the same economic circumstances. They also assume that a 20 year old male is going to need the same amount in their retirement account as the next 20 year old male.
Now, let me tell you something that will knock your socks off. At least, it will if you live in one of those bigger cities. Me and my family of 4 (+1 dog) do just fine on less than $70,000 a year. We’re not extremists, living in a small trailer in a campground somewhere, eating only rice and beans all the time either. Could we survive on less? I know we could. We have debt; student loans, car loans, medical bills, a mortgage, and your regular monthly utilities and such. But, the cost of living here makes it not only doable, but affordable to live on that amount.
There are some things that cost about the same everywhere. New and used cars, for instance. A new pickup here still costs about the same $40,000 (depending on model and features, of course). Other, more universal goods, like books, computers, and pretty much anything you can buy off the internet, still cost about the same. But, for many of the other standard items, we’re a lot closer to the source. A pound of hamburger is only about $3.50. A pack of cigarettes is only about $4.50. Compare that to the prices in someplace like New York, and you start to see the benefits.
Where the real difference is, is in the local goods. Property being the big one. I’ve compared a few times in different markets. After the real estate crash a few years ago, prices have gotten a little better, but still aren’t all that close. We own a 2+1 bed, 1 bath, house with no garage on a good sized city lot. When we bought it, back in 2004, we paid a little over $46,000. Some of you reading this likely drive cars that you paid more for. The houses value has gone up some over the years, but the last time we had it valued, which was in 2011, it was worth $57,000. I truly hope there aren’t too many of you driving cars that you paid more than that for, but I’d bet there’s one or two. Comparable houses in some of the larger markets usually are priced closer to $250,000. If I do the quick and dirty math on that, the mortgage payment would be $2,040 more in one of those larger markets.
I don’t have any real way to compare the utilities, but I have the suspicion that we pay less there too. Our house is older (c. 1950), so it’s not the most energy efficient house out there, but we still only pay about $90 a month for our electricity, and about $35-$40 for our natural gas a month. Water, sewage and garbage are lumped together, and usually end up around $50 a month.
Another huge way that our cost of living is different is in travel costs. I don’t mean vacations. For most of that, we’re far enough from a major travel hub that it is usually a little more expensive. What I’m talking about is commuting costs. Last week, I slept through my alarm. I’m supposed to be at work at 8. I woke up at 7:55. I skipped the shower, but I was able to get up at 7:55, get dressed, quickly help get the kids started getting dressed, and still made it to work at 8:15. How many of you would just call in sick because you’d have missed the whole first half of the work day? When I time my drive to work, it’s somewhere around 5-10 minutes depending on traffic. And, when I talk about traffic, what I really mean is if there’s anyone coming when I have to make a turn onto a street and I have to wait ’til they pass. I usually have to fill my 12 gallon tank with gas about once a month. Sometimes I stretch it to 5 or 6 weeks. And then there’s the savings on wear and tear on the vehicle. I rarely put more than 12,000 miles on a car in a year. That makes it really easy to keep a car for 10 or more years!
Now, I’m not telling you all of this just to boast about how cheaply I can live here. Really, I just wanted to make you aware of the differences. What you perceive as “normal” sometimes isn’t. The same is true for me. What is a good paying job here, would be considered a poorly paying job in a big city. People who live in those big cities usually have a lot of amenities that come along with those extra costs. Choices in movie theaters. Professional sports teams. Entertainment venues that can hold more than 30,000 or so people. They pay for those extra amenities in extra costs that aren’t always monetary. Crime rates, crowding, and more competition for jobs to name a few.
How does your cost of living compare? How big is the city that you live in? (for reference, the city I live in is about 15,000 people.)
img credit: afiler, on Flickr
Beating Broke was included in the following carnivals this week: Carnival of Personal Finance #385 hosted by Fabulously Broke Yakezie Carnival hosted by The Ultimate Juggle Carnival of Money Pros hosted by Debt Black Hole Carnival of Financial Camaraderie #54 hosted by Cash Net USA Thanks to the hosts for including my posts!
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Most of the time, when you hear or read the phrase “Dollar Cost Averaging”, it’s being applied to the stock market. It’s the practice of buying a set amount of stock at a regular interval whereby the average cost per share of stock ends up normalizing. So, if you buy stock high one time, and [...]
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Beating Broke was included in several carnivals this week: Yakezie Carnival hosted by Portfolio Princess Carnival of Money Pros hosted by Thirty-Six Months Carnival of Financial Camaraderie #53 hosted by My University Money Festival of Frugality #359 hosted by Reach Financial Independence Thanks to all of the hosts for including my posts!
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Beating Broke was included in the following carnivals this week: Yakezie Carnival hosted by Cult of Money Carnival of Money Pros hosted by Making Sense of Cents The Wealth Artisan FinCarn hosted by Wealth Artisan Lifestyle Carnival hosted by Blue Collar Workman Thanks to the hosts for including my posts!
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