financial education

Xiaomi Sells Smartphones, EVs, and Lifestyle Products

Reviewed by Somer Anderson

Xiaomi is a Chinese technology company that manufactures smartphones, wearable devices, and smart home devices, which it calls lifestyle devices. Lifestyle devices include products for outdoor, office, health and fitness, and tools.

Xiaomi’s stated corporate strategy is to connect humans to cars, home products, and devices for an electronically integrated lifestyle in what it calls “Human x Car x Home.” Its proprietary operating system, HyperOS, powers the ecosystem it has designed, which “…proactively serves your needs and flows as you wish.”

Key Takeaways

• Xiaomi is a Chinese-based tech and electronics company.
• Xiaomi posted impressive results for the third quarter and first nine months of 2024.
• Xiaomi’s product lines include smartphones, electric vehicles, tools, home products, and more.

Xiaomi Financials

As of this writing, Xiaomi’s 2024 annual report had not been published, so results from the third quarter 2024, and nine months ended Sep. 30, 2024, are used. Results are in renminbi (¥):

• Quarterly Net Profit: ¥5,340 million
• Quarterly Net Profit Nine Months Ended Sep. 30, 2024: ¥14,583 million
• Growth in Net Profit: 5.3%
• Growth in Net Profit Nine Months Ended Sep. 30, 2024 (YoY): 14.4%
• Adjusted Net Profit (Non-IFRS): ¥6,252 million
• Adjusted Net Profit (Non-IFRS) Nine Months Ended Sep. 30, 2024 (YoY): ¥18,918 million
• Growth Adjusted Net Profit: 1.2%
• Growth Adjusted Net Profit Nine Months Ended Sep. 30, 2024 (YoY): 31.7%
• Quarterly Revenue: ¥92,506 million
• Revenue Nine Months Ended Sep. 30, 2024: ¥256,901 million
• Growth in Revenue: 4.1%
• Growth in Revenue Nine Months Ended Sep. 30, 2024 (YoY): 29.9%

Xiaomi experienced record revenue in the third quarter of 2024, shipping 43.1 million smartphones, a 3.1% increase from the previous year, and increasing its ecosystem’s monthly active users to 685.8 million, a 10.1% increase from the previous year. The company’s Internet of Things (IoT) and lifestyle products sales increased 26.3% year-over-year, and its artificial intelligence-enhanced IoT platform users reached 861.4 million.

Xiaomi’s share price on the Hong Kong Exchange tripled between August 2024 and February 2025, from a closing price of HKD 16.08 on Aug. 5, 2024, to HKD 51.70 on Feb. 17, 2025.

Xiaomi’s Business Segments

Xiaomi’s business model is broken into two segments: smartphones and AIoT, and Smart EV and New Initiatives. Smartphones and AIoT is further categorized into the following subsegments:

• Smartphones
• IoT and Lifestyle Products
• Internet Services
• Other

Smartphones

Xiaomi continues to earn most of its revenue from phones, which generated ¥47,452 million in revenue for the third quarter. Mainland China accounts for 56.6% of its smartphone sales, with the rest sold in India and Europe.

The smartphone segment generated ¥5,547 million in income in the third quarter of 2024, down 20% from the same period in 2023. Smartphones accounted for 51% of Xiaomi’s total revenues.

IoT and Lifestyle Products

Internet of Things and Lifestyle Products include products such as smart lighting, home wireless products, health and fitness products, tools, and outdoor equipment and devices. This segment is Xiaomi’s second-largest revenue-generating segment. It generated ¥26,102 million in revenues and brought in ¥5,418 million in income in Q3 2024, a 47% increase from the same period in 2023. This segment accounted for 28.22% of Xiaomi’s total revenues.

Internet Services

Xiaomi’s third-largest revenue generating segment is its Internet Services, which provides apps, gaming, and content and services to users of its products. Internet services generated ¥8,463 million in revenues and ¥6,555 in income in Q3 2024, a 13.6% increase from Q3 2023. The Internet Services segment accounted for 9.15% of Xiaomi’s total revenues.

Other Related Business Activities

Xiaomi uses this segment to account for installation services, product repair services, and materials sales. Other Related Business Activities generated ¥792 million in revenues but experienced a loss of ¥299 million in income, an 8.11% loss from Q3 of 2023. Other Related Business Activities account for 0.86% of Xiaomi’s total revenue.

Smart Electric Vehicles (EV) and New Initiatives

Smart EV and New Initiatives is one of Xiaomi’s new endeavors, as it launched its first smart EV in March 2024. The new initiatives section of this segment is EV related activities and research. This segment generated ¥9,697 million in revenues and ¥1,660 million in income in Q3 2024 accounting for 10.48% of total revenues.

Xiamomi’s Recent Developments

In March 2024, Xiaomi launched its highly anticipated SU7 series of vehicles. Through the end of Q3 2024, the company produced 100,000 vehicles (in 230 days) and delivered 67,157. In 2024, it added more than 3,000 physical stores in mainland China, where consumers can purchase EVs and other products.

Xiaomi continues to add and upgrade products that connect with its AIoT (AI and Internet of Things) ecosystem, and its popularity is growing. In Q3 2024, one million users with five or more devices were added to the platform, bringing the total number of AIoT users with more than five connected devices to 17.1 million.

Examples of these devices are washing machines, air conditioners, refrigerators, wearables, tablets, and more.

In October 2024, Xiaomi launched its high-performance EV, the SU7 Ultra, reportedly capable of speeds of up to 350 km/h (217 m/h) and accelerating to 100 km/h (62 m/h) in 1.98 seconds. On October 29, the SU7 Ultra Prototype completed a lap challenge at Nürburgring Nordschleife in 6 minutes, 46.874 seconds (the current lap record for production super sports cars is 6 minutes, 29.09 seconds).

Is Xiaomi Sold in the US?

Several Xiaomi products are sold in the U.S., but many products are not.

Why Is Xiaomi Not Available in the US?

Xiaomi was temporarily added in early 2021 to the U.S. government’s blacklist of alleged Chinese military companies, but was removed in mid 2021. Some products are available in the U.S.

Who Is Better, Xiaomi or Samsung?

Both companies are similar in the products they manufacture. Xiaomi has ventured into the electric vehicle manufacturing industry, while Samsung has signed agreements with vehicle manufacturers to supply electric vehicle batteries. Each company is successful in what it does.

The Bottom Line

Xiaomi is a Chinese-based electronics manufacturer with a global presence. As far as tech companies go, it has only been around since 2010. Its youngness and success indicate the abilities of its founders and leadership, and it will be interesting to see where they take the company.

Reviewed by Eric Estevez

What Is the Limit on Bills of Lading?

The shipping industry standard is three original bills of lading, but you can have more than three as long as the number of originals is documented on each bill.

Key Takeaways:

• A bill of lading is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried.
• For air shipments, an airway bill acts as the bill of lading. However, an airway bill is not a document of title.
• Typically, there are three bills of lading: one for the shipper, one for the consignee, and one for the banker, but there is no limit to the number of bills of lading issued.
• Additional bills of lading increase the risk of fraud, theft, or the unauthorized release of goods.

How a Bill of Lading Works

A bill of lading is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried. It acts as a document of title, a receipt for shipped goods, and a contract between a carrier and shipper. The document must accompany the shipped goods and be signed by an authorized representative from the carrier, shipper, and receiver. If managed and reviewed correctly, a bill of lading can help prevent asset theft.

Typically, three bills are issued—one for the shipper, one for the consignee, and one for the banker, broker, or third party. There is no restriction on the number of bills of lading that can be issued, but the number issued must be stated on each bill. Because the bill of lading is a document of title, it is valuable. For security purposes, it is advisable only to request as many bills of lading as you actually need. If more bills of lading are issued, there is an increased risk of fraud, theft, unauthorized release of goods, or release to the wrong person.

Types of Bills of Lading

There are three ways to ship: land, sea, and air. Each mode has its own bills of lading: the ocean bill of lading, the inland bill of lading, and the airway bill, and there are different types used depending on various conditions. Determining which mode of shipping to use depends on time. Air travel is reserved for shipments that are time-sensitive or on a tight deadline, and it is usually more expensive. Travel by ocean and land is slower but more economical, which is why they are used more frequently. BOLs come in two general categories: negotiable and non-negotiable. Some of the types of BOLs are:

• Straight Bills of Lading: Non-negotiable, and must be marked as such. It can only be released to the person named on the bill.
• Order Bills of Lading: Negotiable, outlines any conditions that have been imposed by the shipper. A common example is when payment has been secured by a letter of credit, and the terms must be met before the delivery is accepted.
• Clean Bills of Lading: Given when everything in the shipment is in perfect order. Should any shortages of products or damages occur, a clean bill is not issued.
• Onboard Bills of Lading: Issued when the goods are loaded onto the ship and signed by the ship’s master. This type of ocean bill of lading is rendered when payment is contingent on a letter of credit.

Ocean Bills of Lading

Ocean bills of lading are used when shipments must be made via ship to international destinations. This BOL serves as the carrier’s receipt and a collection document.

Inland Bills of Lading

Inland bills of lading are used in the trucking and railway shipping industries. Often, shippers ship over land to a port of shipping, where goods are loaded onto a ship or plane. Inland bills of lading are not consigned directly to foreign buyers but to a third party, such as a forwarder or packaging company, to be shipped to an international carrier.

Airway Bills of Lading

The airway bill is issued by the air carrier of goods on receipt of goods after completion of export customs formalities. The shipper obtains the airway bill once the cargo is transferred to the air carrier. Since the transit time for air cargo is much less than the transit time for sea shipment, a set of airway bills is sent along with the cargo for immediate reference on transit and for import customs clearance at the destination port by the importer.

Once customs formalities are completed at the loading port customs location, the cargo transfer manifest (CTM) is issued by an International Air Transportation agent along with an airway bill and other required documents for transportation. Original airway bills are issued in quintuplicate, one for the carrier, importer, shipper, and additional copies. The main difference between a bill of lading and an airway bill is that an airway bill is not a document of title.

How Many Original Bills of Lading Can be Issued?

There are three bills of lading issued, but there is no limit on how many can be. However, the number of original bills must be documented on the bills.

What Is Legally Required on a Bill of Lading?

Generally, a bill of lading should have the shipper’s name, list any consignees, who the freight forwarder is, the name of the carrier, shipping date, purchase order number (or reference number), HS codes, shipping and payment terms and conditions, any special instructions, signatures, a description of what’s being sent, and a declared value.

Can I Make My Own Bill of Lading?

You can make and use your own bill of lading as long as it has all the required sections. Templates are available online. However, in some cases, you might need to purchase a bill of lading.

The Bottom Line

Bills of lading detail the type, destination, and quantity of the goods being shipped. A bill of lading acts as a document of title and a receipt for shipped goods and represents the contract between a carrier and shipper. You can have as many originals as you want, but they must be numbered on the bill.

Reviewed by Charlene Rhinehart

Widely regarded as the founder of value investing, Benjamin Graham’s principles have impacted scores of individuals, from Warren Buffett to Bruce Berkowitz. His 1937 book, “The Interpretation of Financial Statements,” guides the reader through the insights that can be gleaned from financial statements and financial ratios.

Here are seven key points of advice and the specific financial ratios in this essential guide to investing.

Key Takeaways

• Benjamin Graham is regarded as the founding father of value investing and mentored many famous value investors, such as Warren Buffett.
• Graham’s philosophy was to closely examine a company’s financial statements to identify undervalued opportunities.
• Graham notes key ratios and items, such as a company’s working capital ratio, current ratio, intangible assets, cash, notes payable, liquidation value, net asset value, and margin of profit.

Working Capital Ratio

Working capital is calculated by subtracting current liabilities from current assets. This ratio indicates the ability of a company to pay its expenses in the near future. This requires particular attention because, as Graham points out, it is useful in determining the strength of a company’s financial position. A healthy working capital number shields the company from being unable to meet demands, fund emergency losses, and helps with the prompt payment of bills.

Graham further advises that observations of working capital must be made over several years to watch its corresponding inclining or descending levels.

Current Ratio

The current ratio can be calculated by dividing quick assets (current assets minus inventory) by current liabilities. This ratio is also known as the quick ratio or acid test. Regarding current assets and liabilities, Graham states, “When a company is in a sound position the current assets well exceed the current liabilities, indicating that the company will have no difficulty in taking care of its current debts as they mature.”

Note

Each industry is different regarding what makes up a decent current ratio.

Intangible Assets

When looking at intangible assets on a company’s balance sheet, you should pay particular attention to how a company presents this figure. It should be recognized how high the value of goodwill is presented—if it is presented at all. Graham further explains that companies vary dramatically in how they present goodwill on their balance sheet. Often, companies exaggerate the value attached to the goodwill figure because it is difficult for analysts and auditors to determine—this can be telling. Conservative accounting practices can be revealed by presenting a low goodwill figure.

Essentially, Graham advises the reader not to look at the balance sheet valuation of intangibles but at their contribution to the company’s earning power.

Cash

It is noteworthy to observe how companies organize their cash accounts. In these cases, the key is to examine how the cash account is being represented.

In some cases, companies may liquidate a large portion of the inventory and receivable portion of their assets to store more cash in their cash account. If a company has a significant cash account, this can prove to be very attractive to some investors who believe large cash positions are good for a company. Why do they believe this? This excess cash may be distributed to the stockholders or invested back favorably into the business. However, if the company does not publish its intended uses for excess cash or it sits idle over long periods, it should raise a flag for the analyst.

Notes Payable

Graham informs the investor that notes payable is the most important item to watch among the current liabilities. Here, notes payable tend to represent bank loans or loans from other companies or individuals. In the case that the notes payable have increased at a faster rate than sales over the years, it could be bad for the company because it signals a possible overreliance on borrowings from the bank.

Liquidation Value and Net Current Asset Value

A high percentage of current assets over fixed assets can be a good sign when assessing a company’s liquidation value or net current asset value. The net current asset value is calculated by subtracting a firm’s total liabilities and preferred shares from its current assets.

This is important because fixed assets tend to suffer a greater loss than easily liquidated cash or cash equivalents in the current asset category.

Graham reminds the reader: “When a stock is selling at much less than its net current asset value, this fact is always of interest, although it is by no means conclusive proof that the issue is undervalued.”

Margin of Profit

As a crucial part of value investing, the margin of profit (also known as the margin of safety) can be calculated by dividing the operating income by sales. The margin of profit is significant because it informs you how efficiently the company is operating. For example, a ratio of 74% shows that the company would have $0.74 left for every dollar paid after paying all operating expenses. Here, you would be purchasing a $1 company for $0.74. A strong margin of profit is beneficial and adds a competitive edge to the company.

This is perhaps one of the most essential principles underscoring Graham’s investment principles. It not only helps minimize the downside risk of an investment but has been shown to produce higher-than-average returns as the market eventually realizes the fair value of the company.

Seth Klarman, another legendary value investor, has said, “There are only a few things investors can do to counteract risk: Diversify adequately, hedge when appropriate and invest with a margin of safety. It is precisely because we do not and cannot know all the risks of an investment that we strive to invest at a discount. The bargain element helps to provide a cushion for when things go wrong.”

What Were Graham’s 2 Rules of Investing?

Benjamin Graham published several rules for investing, some of which were to expect volatility and profit from it and always invest with a margin of safety.

Did Warren Buffet Know Benjamin Graham?

Buffet was a student at Columbia University, where Graham taught him value investing.

Is The Intelligent Investor Still Relevant?

Graham’s book “The Intelligent Investor” is still recommended by investors to investors for its principles on value investing.

The Bottom Line

When analyzing financial statements, the key figures to look for in determining the strength of a company are its earning power, asset value, how the company compares to its industry, and the company’s earnings trends over several years. The goal of “The Interpretation of Financial Statements” is to demonstrate how to assess these factors with the objective of achieving intelligent and reasonable results.

Reviewed by Amy Soricelli

Higher education costs in the United States have outgrown the rate of inflation, and getting an MBA has associated tuition expenses, along with rent and book costs. MBA graduates, especially those who attended private or well-known business schools, can accumulate between $100,000 and $200,000 in debt and expenses in about two years. Fortunately, those highly motivated to secure an MBA can explore alternative options to receive the degree and try to minimize the costs.

Key Takeaways

• MBAs offer the potential for career flexibility, enhancement, and advancement opportunities but can also come with a steep price tag.
• MBAs from private and public business schools can cost between $100,000 and $200,000 in debt and expenses in just two years.
• A part-time or evening MBA program can allow you to retain your full-time job.
• Some companies, especially Fortune 500 corporations, might assume partial or the entire cost of an MBA program.

MBA Costs Are More Than Just Tuition

Business schools market their programs in order to jockey for competitive positioning, mostly by way of attempting to secure higher rankings among peer groups. You might view the degree as a way to achieve greater career flexibility or as a way to open doors for new functions or industries. However, you should never assume that an MBA automatically means anything for your career. To be a meaningful investment of your time and money, it must enhance your experience and abilities, be an established step or boost in your industry and career, or be from a top school employers want to hire grads from.

Thus, it is important to assess a program beyond only tuition rates. Many schools have started publishing estimates of total attendance expenses to allow prospective students to financially, professionally, and personally prepare for their programs. For example, Harvard Business School provides expense estimates for single, married, and married students with children. The school estimates that a single MBA student attending Harvard could expect to pay about $118,800 per year in total expenses, of which about $76,400 is tuition (for the 2024-2025 year). Stanford, the University of Pennsylvania (Wharton), the New York University (Stern), and the University of Chicago (Booth) are even more expensive.

Note

Many schools have financial assistance programs or even full-time scholarships for certain students. It helps to investigate all MBA programs and schools to see what they have available.

You may want to find an MBA program with more acceptable costs. Programs at lesser-known public universities may offer a less expensive option. Exploring the full menu of public school MBAs allows you to cut your debt in half, especially if your state university has a business school. For example, the University of Georgia Terry College of Business’s tuition was $34,236 for non-residents and $13,918 for residents for the 2024-2025 school year. The full-time MBA (a two-year program) was more than $71,000 in tuition and fees (for a non-resident, plus any living expenses).

In comparison, its online MBA was more affordable for non-residents, at about $56,000 in tuition and fees for a 17-, 20-, or 22-month program.

Lost Salary or Wages

One of the least-often mentioned expenses of attending an MBA program is the time you’ll need to take away from earning to attend a full-time program. If you can’t afford not to work and go to school full-time, you’ll need to find a part-time program.

Part-Time Programs

You might be able to find a part-time or evening MBA program that allows you to retain your full-time job. These programs typically take three or more years to complete, but some online, executive, or professional MBA courses have compressed timelines. For instance, the Terry College of Business offers part-time programs of 20+ hours per week, split between in-person and distance learning. You can also choose from program durations of 17-, 20-, or 22-months. Many other schools will have similar program choices.

Your Company May Pay Help With the Costs

Some companies are willing to assume some of the costs of an MBA program. A few might even pay the full tuition. Others might pay for or contribute to a master’s degree in accounting or finance or help with the costs of attaining a CPA or CFA license.

Concerns About MBAs

If you have a family, you should exercise caution in undertaking a full-time job as well as an intensive part-time MBA program. It can be challenging to find time and attention for loved ones, household duties, and the curveballs life throws. With a family, your success depends on their support and understanding—you could easily dedicate 70+ hours per week to work and academics.

One risk of pursuing a graduate degree is that the lost wages and increased debt may not help you get a better-paying or more rewarding job. That’s why it’s essential to fully understand how an MBA is viewed in the field you’re in or want to get into and whether it will help you achieve your goals.

What Is the Total Cost of Getting an MBA?

It depends on the school you choose. Tuition and the cost of living in different areas vary, but generally, you’ll pay between $100,000 and $200,000 in tuition to attend the most reputable schools. It is much higher if you factor in the living expenses, lost wages, and fees.

Is an MBA Worth It Financially?

Many top businesses require prospects to have MBAs from top-rated business schools, which cost more. However, pay at a Fortune 500 company is much more lucrative than at other companies. Again, it depends on the school you attend, how much you pay, where you end up, and what you do with the degree after graduating.

Is an MBA Worth It After 40?

It can be, depending on what you have accomplished professionally. You’ll need to be confident that the benefits you receive from achieving an MBA outweigh the costs, such as a salary or employment timeframe that allows you to pay off any student debt and achieve the standard of living you prefer. Additionally, you should consider the lost opportunity cost to your retirement savings, if any—the money you spend on an MBA at 40 might be put to better use in your retirement accounts, depending on your circumstances.

The Bottom Line

Given that an MBA program is a capital-intensive endeavor, exercise the same level of diligence as if you were purchasing a home—it costs that much after combining expenses, lost wages, and tuition.

You can choose from various schools and programs tailored for working adults or online MBA programs that can lessen the scheduling demands. Consider the schools in your state, as they might charge you much less than a school in another state where you’d pay non-resident tuition.

Reviewed by Chip Stapleton

What Is an Impaired Asset?

In the United States, an asset is considered impaired when its fair market value unexpectedly drops to less than the book value, or net carrying value, recorded on the balance sheet.

If the loss is permanent, it must be reflected on the balance sheet and recorded on the income statement.

Impairment can occur for a variety of reasons including changes in market conditions, regulations, technology, environmental conditions, and more.

If any such change damages an asset, makes it obsolete, or otherwise causes a reduction in its value below book value that can’t be recovered, the asset is impaired.

Key Takeaways:

• An asset is considered impaired when its fair market value drops below book value permanently.
• The impairment must be reflected in the financial statements if the loss can’t be recovered.
• Impairment recognition and measurement are jointly regulated by the Internal Revenue Service (IRS), the Financial Accounting Standards Board (FASB), and the Governmental Accounting Standards Board (GASB).
• Tangible asset impairment might result from regulatory or technology changes or shifts in the market or usage rates.

Determining if an Asset Is Impaired

To determine, or test, whether an asset is impaired, a company:

1. Calculates an accurate fair market value for the asset
2. Compares that value to the asset’s book value recorded on the balance sheet

A value below the book value indicates an impairment while a value equal to or above the book value does not.

Importantly, the general threshold for impairment, as described under generally accepted accounting principles (GAAP), is the inability to recover the book value amount.

If the asset is determined to be impaired, it can be written down unless otherwise excluded by the Internal Revenue Service or GAAP.

Assets must be properly valued (fair market value) in accordance with GAAP. Groups of similar assets should be tested together, with the testing set at the lowest level of identifiable cash flows considered independent of other assets. 

FASB Statement No. 144

Long-term, tangible asset impairments are addressed in FASB Statement No. 144: Accounting for the Impairment or Disposal of Long-Lived Assets.

FASB 144 discusses the application of goodwill allocation to long-term assets, suggests a preferred method for estimating cash flow (probability-weighted), and recommends when assets should be held for sale.

Important

Impairment recognition and measurement are regulated by the Internal Revenue Service (IRS), the Financial Accounting Standards Board (FASB), and the Governmental Accounting Standards Board (GASB).

Identifying Assets to Value

As pointed to above, tangible asset impairment might result from regulatory changes, technology changes, significant shifts in consumer preferences or community outlook, a change in the asset’s usage rate, or other forecasts of long-term non-profitability. 

Intangible asset impairment is less clear. Many types of intangible assets are covered in FASB 144 and FASB 147.

It is often impractical to simply value every single asset for profitability in every accounting period.

Instead, businesses should take such action if an event or circumstantial change, such as those mentioned, signals a possibility of impairment and the prospect that a particular net carrying amount might not be recoverable.

Note

Long-term tangible assets are the assets most likely to become impaired. But it can occur to accounts receivable and intangible assets, as well.

Additional Signs of Impairment

Other more direct signs can point to potential impairment.

For instance, a business should test for impairment when accumulated costs are higher than amounts needed to construct or acquire an asset. In other words, when it is more expensive than once thought to obtain a business asset.

Other signs are correlative; an asset might be associated with a history of current period losses or operating cash flow losses. Perhaps the asset shows a pattern of declining market value.

In addition, adverse changes in legal factors and general economic conditions are both grounds for measuring an asset’s value (despite a broad range of possible interpretations of adversity).

What Kinds of Assets Become Impaired?

Many kinds. For example, machinery, equipment, trucks and other vehicles, land, facilities, systems hardware and software can all become impaired.

Does an Impairment Loss Always Get Recorded?

No, it’s only recorded on a company’s financial statements if the amount of the loss cannot be recovered.

What Can Alert a Company to Potential Impairment?

If a company experiences events that it suspects could damage the market value of an asset, such as seriously bad weather or natural disasters, changes in market conditions, a loss of asset functionality, new regulations, or innovative new technology, then it should be prepared to determine impairment.

The Bottom Line

Companies determine asset impairment by accurately measuring the fair market value of an asset and comparing it to the book value on the balance sheet. If the fair market value is less than the book value, then the asset is impaired.

Reviewed by David Kindness

Wanting to live well in the moment while saving for an enjoyable retirement can be a financial conundrum. The good news is, it is possible to do both. Balancing these two needs simply means making sure you are keeping your financial house in order while you are enjoying your lifestyle. Individuals can learn to balance these two often-conflicting aims—lifestyle goals and retirement goals—by using the following four-step process:

Key Takeaways

• In order to assess your financial situation, ask yourself questions about how happy your current lifestyle makes you and how you’re handling your money.
• Develop a new lifestyle and retirement goals if your current ones are incompatible.
• Design a strategy for ensuring our goals can coexist, and be sure to check and update your plan every three months.

1. Assess Your Situation

Begin with analyzing the way you live now. One way of doing so is to make a list of questions to ask yourself. This simple test might be called the “happiness barometer.” Examples include the following:

• Am I happy with my current lifestyle?
• Do I feel I have enough financial resources to sustain my lifestyle?
• Am I enjoying life?
• Are there things I want to be doing, but have not yet begun to pursue?
• Am I living where I want to live?
• Am I driving the kind of car I would like to drive and, if not, how important is that?

Then take a look at your finances, and add questions to your list such as:

• Am I saving enough for retirement?
• Am I able to pay my bills on time?
• Do I have enough disposable income?

If you answer “no” to a number of these questions, then you may need to revise some of your goals, change your lifestyle, or both. These revisions should focus on needs versus wants in your life.

2. Develop New Goals

If you find a disconnect between your lifestyle goals and your retirement goals, it very likely means you need to either develop new goals or revise your existing ones. Make sure that these goals are realistically based on your financial resources. Again, you will need to distinguish your wants from your needs.

Lifestyle Goals

To help you keep on track with your lifestyle goals, make a written list of the things you want to do—a list of things that could make your life more pleasurable. This “pleasure list” can include, but is not limited to: hobbies you’d like to pursue, places you’d like to go, restaurants you want to try, places where you want to live, the kind of car you want to drive, and charities you’d like to support.

10x

Experts at Fidelity recommend saving ten times your annual salary by the time you hit age 67. This will allow you to live in relative comfort without outlasting your savings.

Retirement Goals

Review and assess your retirement goals to determine whether you are on track with your projected financial needs and objectives. This includes reviewing your budget and making any necessary revisions.

If you have not yet established retirement goals, now is the time to do so. If you need help with this, seek out a qualified financial planner.

3. Devise a Plan

Once your lifestyle and retirement goals are in place, the next step is to determine whether they can coexist. Incorporate the two sets of goals into your budget and add dollar figures for each lifestyle goal. This is one of the key areas where you will begin to make any necessary adjustments by cutting out non-necessities.

Do not jeopardize your retirement goals. Instead, cut back on less-important budget items. For instance, a lifestyle goal may be to play golf one Saturday each month. If your finances fall short of allowing you to enjoy this hobby, don’t remove it from your list. Look elsewhere in the budget for a source of funding. For instance, you may find that taking leftovers to work instead of buying your lunch two or three days a week could increase your disposable income.

Review each lifestyle goal and determine what it is you need to do in your budget to make this goal achievable. The idea is to make your budget work for you and not vice versa.

4. Monitor and Reassess

After you have put your plan into action, check at least once every three months to ensure the plan is on track, and then reassess your goals, objectives, and budget at least once each year to determine whether you need to make any changes. Monitoring and reassessing may need to occur more often if you are falling short of your goals and objectives.

Make sure to determine what went well, what didn’t, and what you need to change. As you go through this process, you will find that your lifestyle and retirement goals may also change. Be willing to adjust, but be hesitant to abandon important goals. Be persistent in going after what you want.

How Much Should I Have Saved for Retirement?

While there are no hard rules, it is important to save as much as possible to ensure a comfortable retirement. As a rule of thumb, Fidelity Investments recommends aiming for saving ten times your annual salary by the time you turn 67. Aim to have about one year’s salary saved by age 30, three years’ salary at age 40, and six year’s salary by age 50.

What’s the Best Way to Save for Retirement?

The most important rule for retirement savings is to get started early, so that you can take advantage of compound interest. Assuming a 5% interest rate per year, each dollar that you save at age 20 will grow to eight or nine dollars by the time you turn 65. You should also invest as much as possible in tax-advantaged retirement accounts, such as IRAs and 401(k) accounts, which allow your savings to grow tax-free.

What Do You Do If You Can’t Afford to Retire?

Unfortunately, this is a common situation for many older workers who may not have had the opportunity to save much in their younger years. Retirement planners advise workers in this situation to seek out new skills and remain relevant in the job market. In addition, you should write out a detailed retirement plan, based on your expected income and any social security expected social security payments. You may also consider changing your lifestyle to reduce expenses, such as by moving to an area with a lower cost of living.

The Bottom Line

To balance living well now with retiring well, begin with an assessment of your current situation. Then develop a new set of lifestyle goals to achieve what you want. Put a plan in action by determining how you can achieve your goals within your budget, and finally, monitor your plan on an ongoing basis.

Over time, if you’re sticking to your goals and objectives, you should find that your quality of life—and the comfort factor of knowing you’ll have enough to retire—will improve.

Reviewed by Khadija Khartit

Bonds are rated according to their risk of default by independent credit rating agencies such as Moody’s, Standard & Poor’s, and Fitch. Those with lower ratings have higher risks associated with them that investors should consider. Due to increased risks, these bonds typically carry higher coupon rates. Issuers, such as consumers with less-than-perfect credit, must pay more for loans.

While investing in lower-rated bonds carries more risk when buying these junk bonds, do not completely write them off. There are opportunities among lower-rated bonds that can still prove to be good investments; you just have to know what to look for when investing.

Key Takeaways

• High-yield or “junk” bonds are those debt securities issued by companies with less certain prospects and a greater probability of default.
• These bonds are inherently more risky than bonds issued by more creditworthy companies, but with greater risk comes greater potential for return.
• Identifying junk bond opportunities can boost a portfolio’s performance, and diversification through high-yield bond ETFs can cushion any one poor performer.

Junk Bond Opportunities

Identifying good opportunities among junk bonds can be difficult for the average investor. For this reason, the best way to invest in lower-rated bonds is through a high-yield mutual fund, closed-end fund (CEF), or exchange-traded fund (ETF). Investing this way gives your portfolio better diversification across several issues of high-yield bonds. Also, holding shares of a high-yield fund gives you access to professional money management. These mutual fund managers have more knowledge and time to research each bond issue held within the portfolio than an average investor.

Furthermore, investing through a mutual fund, CEF, or ETF allows for the use of leveraging techniques, bulk discounts, and some bond issues that are only accessible to institutional investors like a fund. CEFs only issue a specified number of shares, and then the portfolio trades in the secondary market. If you can find a CEF trading at a discount to its net asset value, or NAV, you stand to profit not only from the high income payments but also from some growth on your principal investment.

More than 60 high-yield bond ETFs trade in the United States as of 2025. A few notable high-yield ETFs are the SPDR​ Bloomberg High Yield Bond (JNK) and the iShares iBoxx $ High Yield Corporate Bond (HYG). If you are set on choosing individual high-yield bonds to purchase for your portfolio, recognize that the necessary due diligence on your part will increase. Consider first selecting issues from companies deemed “fallen angels,” those companies that are historically reputable but have temporary financial problems.

Other Considerations

By choosing to invest in bonds from these companies, you are likely to find deep discounts and high yields, but you can rest assured that the chances of the company defaulting on the debt are not as likely as current ratings may reflect in the market. Peruse the company’s financial statements and sentiment toward the company’s stock. If the stock is still valuable, the bond issue is likely to also be fine.

Follow interest rate patterns and changes; you profit from owning high-yield bonds in a rising interest rate environment as prices increase, as yields align with new issues at prevailing higher rates.

What the Experts Have to Say

Advisor Insight

Donald P. Gould
Gould Asset Management, Claremont, California

High-yield bonds are not intrinsically good or bad investments. Generally, a high-yield bond is defined as a bond with a credit rating below investment grade; for example, below S&P’s BBB. The bonds’ higher yield is compensation for the greater risk associated with a lower credit rating.

High-yield bond performance is more highly correlated with stock market performance than is the case with higher-quality bonds. When the economy weakens, profits tend to decline and so does the ability of high-yield bond issuers (generally) to make interest and principal payments. This leads to declining prices on high-yield bonds. Declining profits also tend to depress stock prices, so you can see how economic news, good or bad, could cause stocks and high-yield bonds to move in the same direction.

What Is a Junk Bond?

Junk bonds are bonds that carry a higher risk of default than most bonds issued by corporations and governments. Junk bonds are also called high-yield bonds since the higher yield is needed to help offset any risk of default.

What Is a Mutual Fund?

A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities. A high-yield mutual fund is a type of mutual fund that primarily invests in high-yield bonds, also known as junk bonds.

What Is a Closed-End Fund?

A closed-end fund is a type of mutual fund that issues a fixed number of shares through an initial public offering (IPO) to raise capital for its initial investments. Its shares can then be bought and sold on a stock exchange, but no new shares will be created, and no new money will flow into the fund. A high-yield closed-end fund is a type of closed-end fund that primarily invests in high-yield bonds, also known as junk bonds.

What Is an Exchange-Traded Fund (ETF)?

An exchange-traded fund (ETF) is an investment fund that holds multiple underlying assets and can be bought and sold on an exchange, much like an individual stock. ETFs can be structured to track anything from the price of a commodity to a large and diverse collection of stocks. A high-yield ETF is a fund that primarily invests in high-yield bonds, also known as junk bonds.

The Bottom Line

High-yield bonds, also known as junk bonds, are debt securities issued by companies with less certain prospects and greater default probability. With their greater risk comes the greater potential for return.

Reviewed by Cierra Murry

When it comes to understanding the long and short of investing, most beginning investors must learn what seems like a new language. In fact, the phrase “the long and the short of it” originated in financial markets.

In this article, we discuss several key terms that will help you better understand and communicate with other market participants. These terms are used in the equities, derivatives, futures, commodities, and forex (or currency) markets. You will learn what buying, selling, and shorting really mean to investors and how they can use certain terms interchangeably with more confusing words like bullish and bearish. To compound the issue, options traders add in a few other terms such as “writing a contract” or “selling a contract.”

When you start to communicate about the markets more comfortably, you will be better informed and can make wise investment decisions.

Key Takeaways

• Learning several key terms will help beginning investors better understand and communicate with other participants in the stock (equities), derivatives, futures, commodities, and forex (or currency) markets.
• In the stock market, you can have a long position or a short position.
• “Long” and “short” also apply to trading foreign currency pairs.
• “Bullish” and “bearish” are terms to describe market sentiment.
• The derivative/options market comes down to calls and puts.

Long Positions and Shorting

The financial markets allow you to do a few things that are really common in everyday life and a few things that aren’t. When you buy a car, you own that car. In the stock market, also known as the equity market, when you buy a stock, you own that stock. You are also said to be “long” on the stock or have a long position. Whether you are trading futures, currencies, or commodities, if you are long on a position, it means you own it and hope it will increase in value. To close out of a long position, you sell it.

Shorting will likely seem somewhat foreign to most new investors, because shorting a position in the equity market is selling stock you don’t actually own. Brokerage firms allow speculators to borrow shares of stock and sell them on the open market, with the commitment to eventually return the shares. The investor will then sell the stock at the day’s price in the hope of buying it back at a lower price while pocketing the difference. Catalog companies and online retailers use this concept daily by selling a product at a higher price, and then quickly buying it from a supplier at a lower price. The term originates from a situation where a person tries to pay a bill but is “short” on funds.

You may be interested to know that some people consider shorting to be unpatriotic or “bad form.” The phrase “don’t sell America short” was attributed to John Pierpont Morgan Sr. (J.P. Morgan). The debate against short selling rages on to this day.

The Currency Caveat

When trading foreign currencies in the spot market (currencies and many commodities are traded in the futures or spot markets), you are usually long one currency and short another. This is because you are exchanging one currency for another, and therefore, various world currencies trade in pairs.

For instance, if you think the U.S. dollar is going to rise but the euro is going to fall, you could short the euro and be long on the dollar. If you feel the dollar is going to rise and the Japanese yen will fall, you could be long on the dollar and short on the yen.

Bullish vs. Bearish

Other terms that are often new to beginning investors are “bullish” and “bearish.” The term “bullish” is used to describe a person’s feeling that the market will go up, while “bearish” describes a person who feels the market will go down. The most common way people remember these terms is that a bull attacks by ducking its head and bringing its horns upward. A bear attacks by swiping its paws down.

Chicago is the home of commodity and futures markets; coincidentally, the professional basketball team is the Bulls and the professional football team is the Bears. Also, the mascot of the Chicago Cubs professional baseball team is a bear cub.

It is also common for investors to use the terms “long” or “short” to describe their market sentiment. Instead of saying they are bullish on the market, investors may say they are long on the market. Similarly, on the downside, investors may say they are short on the market instead of using the term “bearish.” Either term is acceptable when describing your market sentiment. It is important to remember that short and long usually imply that you have a certain position in whatever market you are trading, but, as you can see, this isn’t always the case.

Calls vs. Puts

The derivative market is also known as the options market. Options are contracts in which one party agrees to buy or sell a certain security (security is a generic term for any financial product) at a set price and set time from or to another party. Options are very common in the equities market but are also used in the futures and commodities markets. The forex (or currency) market is known for very creative derivatives known as “exotic options.”

For our purposes, we’ll refer to options in the stock market since it is most investors’ first introduction to derivatives.

Options come down to calls and puts.

Call options give the contract buyer the right, but not the obligation, to purchase stock shares at a set price on or before a set date. Usually, another investor will sell a call contract, which means they believe the stock will stay flat or go down. The person who buys the call is long on the contract, whereas the person who sells the contract is short.

A put option allows the contract buyer to sell stock at a set price before a set date. Like a call option, there is usually another investor willing to sell the option contract, which also means that investor believes the stock will either stay about the same price or rise in value. So the person who buys the option contract is long on the contract and the person who sells the contract is short.

Selling options while using the derivative dialect also gets more complicated because options traders not only use the terms “sell” or “short” regarding the contract, but also say they “wrote” a contract. Today, the contracts are standardized and no one really “writes” the contract, but the term is still very common.

Covered calls are often one of the first option strategies that investors learn—these involve the purchase of a stock and the sale of a call contract at the same time. The purchased stock acts as “collateral” in case the call is exercised by the option buyer and the seller can relinquish the shares while keeping the premium gained for selling the option. Since investors are buying a stock and selling a call at the same time, they use a buy-write order.

What Are the Markets?

• The stock market, also known as the equities market, is an exchange mechanism that helps investors buy and sell shares in publicly traded companies.
• The derivatives market is the financial market for derivatives, a type of financial contract between two or more parties whose value depends on an underlying asset, a group of assets, or a benchmark. Derivatives can be traded on an exchange or over the counter (OTC).
• The futures market is an auction market in which participants buy and sell commodity and futures contracts for delivery on a specified future date at a price set today.
• The commodities market involves buying, selling, or trading hard commodities (natural resources such as gold, rubber, and oil) or soft commodities (agricultural products or livestock such as corn, wheat, coffee, and pork) for immediate or future delivery.
• The foreign exchange (forex) market is where banks and individuals buy, sell, or exchange currencies.

Where Can I Learn More Investor Terminology?

More investing terms and definitions can be found at websites like Charles Schwab, the Investment Company Institute, Investor.gov, and J.P.Morgan Asset Management.

Where Can I Learn Investing Terms Daily?

You can learn a new financial term every day, and discover why it’s relevant in today’s investing news, by signing up for our Term of the Day Newsletter.

The Bottom Line

At this point, you may find yourself going back to reread some of the vocabulary that was just discussed. Let’s do a quick recap. Investors will either say they are bullish, or long, on the market—or bearish, or short, on the market. If we are long one currency in the forex spot market, we are short another currency at the same time. This can be confusing but not nearly as confusing as the options market.

In the options market, we can say we are bullish on a stock and then short a put, because while being bullish, we can either buy a call or sell a put. We can be bearish on a stock and long on a put because if we are bearish, we can either buy a put or sell a call. This may also mean that we are short on the market by going long on a put or long on the market by shorting a call. You can imagine the linguistic laughter that comes from a group of options buyers talking to each other.

In many cases, and not just in the financial world, overcoming the language barrier will be one of the vital keys to success. Investing carries with it its own language barriers that must be broken down by translating the terms and subduing the syntax.

You can, but you could end up paying a fee

Reviewed by Margaret James

If you have been arrested, no matter what for, one of the first things that happens during the booking process is the mug shot. States have different laws governing the public availability of criminal records, but many make mug shots publicly available almost instantly, and yours could be online in less than 24 hours. Once it’s posted, is there any way to get it taken down?

On the surface, posting mug shots might seem like a valuable community service, but an arrest doesn’t equal a conviction. You could end up never being charged with a crime, or your case could be dropped. Nevertheless, your published mug shot could be enough to cost you your job or reputation, for your name to be wrongly besmirched. In such a case, should you pay to have your mug shot removed from the Internet?

Key Takeaways

• Publishing mug shots online is a big business, which many call shady.
• More than a dozen states have enacted laws prohibiting publishing mug shots online and charging to take the photos down.
• In states that don’t have such laws once a mug shot becomes public record, any number of for-profit websites can publish them.
• Instead of contacting the sites directly, you can pay one company to remove the photos for you.

The Business of Mug Shots

In recent years, more than a dozen states have enacted laws to limit posting mug shots online. Measures include prohibiting publishing mug shots online altogether, prohibiting charging to take the photos down, and limiting access of mug shots in the private sector. But in states that don’t have such laws, once a mug shot becomes public record, any number of for-profit websites can grab the photos and post them for public view. Even local newspapers generate traffic by publishing photos on their websites.

A simple Google search of someone’s name may return links to these mug shot sites along with the image appearing at the top of the results. Even if the person wasn’t charged with a crime, was found not guilty, or had their records sealed, the images still appear.

The problem is much larger than a single website. Because mug shot images are uploaded to a searchable database, there’s no limit on how many websites could publish the photos. This problem gave birth to a complementary business that some critics say might be as shady as the sites that publish the mug shots.

Contacting all of the websites directly may be daunting, but you can simply pay a company to remove the images for you. Costs range from a few hundred dollars to thousands, depending on how many websites publish the mugshot. There are many companies offering mugshot removal services. However, since mugshots are still public records, there’s no guarantee that a mugshot will not surface again in the future.

Important

In most cases paying a fee will result in removal of the image, but that doesn’t guarantee that it is gone from the internet forever.

Should You Pay to Erase Your Mug Shot from the Internet?

Given that it’s possible to get your mug shot removed, the next question is whether or not you should pay to have it done. As it turns out, that depends on whom you ask and which sites you use for removal. Some will do what they advertise; others won’t. “For the most part the third-party sites are a waste,” says criminal defense attorney Jordan Ostroff. “They will send letters to the other sites and maybe follow up here or there, but it’s really [up to] the main sites that post the pictures to do something about it or not.”

Ostroff believes the most reliable way to get your mug shot removed is paying a fee to the actual site rather than using a third-party service. “The way for that [mug shot website] to make money is to take the payment and take the photo down, whereas the third-party companies just have to [make] a good [try] for you,” he notes.

Cleveland attorney Aaron Minc, who calls the industry “legal web extortion,” disagrees, saying that using a mug shot removal service to get rid of records from multiple websites works. Minc has used them on behalf of clients and found that they’ve done what they advertised. “They just want their money, and then they’ll go away,” he says. “In the past, if you paid one site, the mug shot might pop up on other sites, but that’s not often the case anymore.” As with everyone we asked, he cautioned that there is a history in the industry of scam sites.

In fact, there’s evidence to suggest that some of the removal websites work with the posting websites or, in some cases, may actually be the same company. In May 2018 Califonia’s attorney general charged four owners of Mugshots.com, which was partnered with Unpublisharrest.com, with alleged extortion, money laundering, and identity theft. At the time Mugshots.com would not remove criminal record information unless a fee was paid, usually $399, through Unpublisharrest.com, which has since been taken down.

Note

States that don’t allow mug shots to be posted online and/or companies to charge to take them down include: California, Colorado, Connecticut, Florida, Georgia, Missouri, New Jersey, New York, Oregon, South Carolina, Texas, Utah, and Virginia.

What If the Case Was Sealed?

If the case was sealed or expunged, you might be able to have the image removed free of charge. New York criminal lawyer Todd Spodek says, “[In New York] if you have a court order sealing the file, including mug shots, and present it to the actual website, they will have to take it down or face legal repercussions.… With the case sealed or expunged, it’s tough for anyone to follow up and confirm the arrest.”

How Do You Find Someone’s Criminal Record?

In the United States, you can look up conviction records on the website of your state’s Department of Corrections. For federal crimes, check the Public Access to Court Electronic Records (PACER) service. Although there is a fee on PACER, most state record searches are free.

How Do You Get Rid of a Mugshot?

Mugshots are public records, which means they are legal in many states to post online, whether or not you are ultimately convicted. However, some states prohibit this practice, or prohibit companies from charging a fee for removal. Your first step should be to contact the website posting your records—if your case has been dismissed, expunged, or acquitted, they may remove it without a fee. If that fails, try contacting Google and other search providers to have those pages removed from search results.

How Much Does It Cost to Remove a Mugshot?

There are many mugshot removal services offering to remove arrest records and booking photos from the internet. Prices vary depending on the number and type of the offense, with one site charging $250 to remove a mugshot and $1,595 to remove records from background checks. However, it’s not clear how effective these services are. There are also reputation management firms that can help bury arrest records so that they do not show up on internet searches.

The Bottom Line

Most experts use terms like “extortion” to describe these sites, but the practice isn’t illegal in many states. Anything posted to the internet is available somewhere. It becomes a matter of personal choice whether you want to pay a fee to have a mug shot removed from the internet. But paying to remove what is plainly visible will likely work.

Reviewed by Margaret James

Some people claim that owning and leasing residential rental property is a surefire way to make money. In reality, it can sometimes be more of a headache than it’s worth. The challenges start early, and they almost always involve time and money.

Here are six classic challenges that landlords face. Consider these before entering the residential real estate market.

Key Takeaways

• Investing in residential rental property can be lucrative, though it can come with many difficulties.
• Potential challenges include finding good tenants and maintenance issues.
• Hiring a property manager can lessen the burden of managing a rental property but will cut into your profits.
• Removing tenants can be a time-consuming and expensive task.

Challenge 1: Finding a Property

Finding a suitable residential rental property is crucial. Buy too expensive a place, and you’ll never make money. But trying to snag a bargain can be troublesome, too. Buying a fixer-upper requires that you have the skills, time, tools, and cash to make the necessary repairs and renovations.

If you’re in no hurry, this may be a way to get a bargain on your investment. If you already have a full-time job and a family, every minute spent repairing the rental is a minute not spent on a more profitable or enjoyable activity. However, nowadays, management companies can do a lot of this legwork—from locating a property to rehabbing it—for you, for a fee, of course.

Challenge 2: Preparing the Unit

Getting just about any piece of real estate into rental condition often requires fresh flooring and paint at a bare minimum, and both items require time and money. Window screens, deck stains, and lawn maintenance are other common needs. Every time a tenant departs, these issues need to be revisited, too.

Challenge 3: Finding Tenants

Rental listings sites provide a fast and inexpensive way to find prospective tenants. You can also sign up with a real estate company that will vet tenants for you. Some realtors will show an apartment on behalf of the landlord for a commission. Another way to find tenants is to share this information with friends and family members who may be able to make recommendations.

When you vet tenants yourself, you will need to conduct credit and background checks, which can be expensive, but is often a smart idea. Responsible tenants pay their rent on time, don’t abuse the property, and don’t require you to engage in the costly and time-consuming eviction process.

Challenge 4: Hassles

Even great tenants and perfect rental properties come with a host of hassles. There are broken pipes, stuffed drains, and pet stains, for example. Tenants will want your full and immediate attention when the sewage is backing up into their home, or the cable company accidentally cuts the telephone lines.

Certain tenants pose an even more significant challenge. Daily calls and late or unpaid rent can add to the hassles.

The move-out day is another challenging time. Damage to walls, floors, carpets, and other components of the home can lead to disputes and costly repairs.

Challenge 5: Maintenance

Maintenance of significant components and amenities is a big-ticket item. New appliances cost hundreds of dollars. A new roof or driveway can cost thousands of dollars. If the rent is $1,500 per month and the roof is $10,000, you can find yourself losing money fast. Add in carpet or new hardwood floors, paint, and a new stove, as well as tenants that don’t stay long, and the property could lose money for years.

Challenge 6: Interest Rates

What do interest rates have to do with anything? Plenty. When rates fall, it’s often cheaper to buy a home than to rent, and so the demand for your unit(s) might drop. Lowering the rent to remain competitive can damage your ability to make a buck.

Important

You’ll probably need to take out landlord insurance—no, your regular homeowner’s policy isn’t sufficient.

Hiring a Property Manager

Property managers can handle a variety of roles. What that is, exactly, is up to you to negotiate with your manager. It is essential to identify what their role will be and develop a list of duties and responsibilities. Will your property manager find tenants? Or will they handle day-to-day maintenance and collecting rent?

A property manager can be an independent contractor or an employee. You should speak with your tax accountant to determine the most favorable approach and determine specific obligations you may have.

You can also hire a property management company, a firm you contract with, to deal directly with all aspects of the rental property. This can be expensive, but it may be ideal if you have multiple rental properties.

Make sure any property manager who you’re considering meets the appropriate local and national licensing requirements.

An experienced manager should help you with advertising, marketing, tenant relations, collecting rent, budgeting, leasing, and maintenance. A good property manager will also be knowledgeable about local and state laws. As the property owner, you can be held liable for the acts of your manager, so you can be sued if your manager violates any fair housing laws. 

Once you decide on a property manager and the terms of the arrangement, you should write a property management agreement that identifies the manager’s duties, compensation, and termination conditions.

A rental property provides you with the flexibility of when to sell a property. You can avoid a weak real estate market by renting the property and waiting to sell it.

Can Owning Rental Properties Be a Full-Time Job?

Yes. Some landlords treat their rentals like a full-time job. They incorporate, buy multiple buildings, and do a significant portion of the work themselves. It’s a business that requires time and energy, and a mastery of tax strategies such as rental property tax deductions and the 1031 exchange.

What Does a Property Manager Do?

A property manager can handle many of the duties of running a rental property. This includes marketing, selecting tenants, maintenance, budgeting, and collecting rent. You may consider hiring a property manager if you want to delegate these tasks, though it will cut into your profits.

What is House Hacking?

House hacking is sharing residential space by purchasing a duplex (or other easily divisible structure). It’s often a profitable undertaking. Since you are on-site and plan to take care of the property anyway, the extra cash is a bonus. Of course, living on-site means that you are always available and will be in close contact with your tenants. Plan appropriately and screen carefully.

As a Landlord, What Do I Need to Know About Section 8?

One way to earn money is by leasing to Section 8 tenants through a voucher program administered by the U.S. Department of Housing and Urban Development. Through the program, the government pays for 70% of the rent. It’s a way for you to provide housing for families in need.

The Bottom Line

Is becoming a landlord worth the effort? Only you can decide. Just be sure to look before you leap and go into your new endeavor with realistic expectations and a solid game plan. If you know what you’re getting yourself into, you’re more likely to enjoy the experience.