5 financial hacks we wish they taught us in school

Hey, teacher – leave those kids alone. Or at the very least, maybe teach them something that will be useful in the real world? Financial hacks to keep them out of a lifetime of living paycheck to paycheck and debt might be a good place to start.  

stat about financial literacy in America - financial hacks
Source: National Financial Educators Council

One thing an overwhelming amount of Americans agree on is that financial literacy should be taught in schools.

A hard majority – 85% according to a recent study by National Financial Educators Council – think so.

Surprisingly, despite this widespread agreement, personal finance coursework is only required in less than half of states.

It’s puzzling, isn’t it? You would think that budgeting, understanding the true costs of loans and interest rates, and real wealth-building strategies might generate more productive, law-abiding, tax-paying members of society. And that’s the goal…isn’t it?

Whatever the backstory on that mystery, the bottom line is that many of us were never properly taught how capital works. To cover some of that lost ground, we’re sharing some financial hacks that can help you get off the paycheck-to-paycheck treadmill. 

So if you want to do your homework on real-world financial hacks, this in-depth lesson will get you in the right mindset.

But for those of you just looking for the cliff notes, here’s a 1-minute video featuring HappyNest CEO and founder Jesse Prince giving you the TL;DR.

 

Financial hack 1: Pay yourself first

You put in the work, you should get the reward. Everything else is secondary – period. 

One of the most common mistakes people make when they get their paycheck is getting squared up on bills, rent, loans, etc. first. They then try to get to their next paycheck on whatever’s left over. 

Sure, it seems like the responsible thing to do. But with this approach, the check that takes two weeks (or whatever payout cycle you’re on) to earn is spent within hours of hitting your bank account. By the time the next paycheck rolls around, it can’t come soon enough. The goal of saving and investing gets put off once more. 

Not anymore. From now on, the first line item on your paycheck to-do list is paying yourself. This is the single most important wealth building financial hack. get rich slow turte, happynest real estate investing

Your nest egg is now priority number one. If your goal is to save $250 per paycheck, then the first withdrawal from your paycheck should be $250 for your nest egg.

Feeding two birds with one scone: This nest egg account should have some safeguards in place to prevent you from tapping it too easily. For example, a savings account is not an ideal nest. Not only because saving account interest rates are a joke and inflation is eroding the purchasing power of your money while in one, but also because it’s just a little too easy to dip into. 

Keeping it in stocks, bonds, REITs, or other alternative investments makes them less liquid. Having to process a transaction and wait for the transfer builds in some natural friction to curtail dip slips. (Hey, it happens to the best of us).

Financial hack 2: Automate your nest building with robo investing

In fact, paying yourself first is so important, you may want to take some extra precautions to eliminate room for human error. Enter: Robo deductions. What a time to be alive. 

If your bills are set up on auto-draft, no reason why your nest building shouldn’t be, too. Set up a monthly automatic deduction that goes straight into your net worth. 

If the insurance company and your landlord get their cut of your paycheck, your long-term portfolio value deserves an auto-draft too. 

HappyNest offers monthly deductions from your funding account and redirects the funds into your investment account. 

Financial hack 3: Cut the zombie subscriptions and redirect funds into your nest egg

Ever get notices that a magazine subscription you’ve been meaning to cancel for 10 months just renewed? Or that a video editing app you downloaded one time to cut out that would-be career-ruining contraband that rendered an otherwise hilarious video unpostable over a year ago and never bothered to cancel?

As life itself moves to an increasingly subscription-based model, be sure to do a scrub of memberships and auto-renewals. These sneaky expenses can really pile up over time. All those those “try it for free” sign-up forms or free trails are fully counting on you to forget about them where they can quietly drain your portfolio undetected. Too much weight makes the boat go slow. 

To implement this financial hack, review your bank and centralized payment accounts such as PayPal or ApplyPay. These central payment stations offer the best birds’-eye view of auto nest killers. 

Better yet, cut a few dead-weight subscriptions and tally the total monthly savings. Then, redirect that draft amount into an investment account for nest building. This action has a net impact of zero on your day-to-day spending. 

Be sure to check in on your subs at least twice a year. Take the time to comb through for annual renewals too – those sneaky scoundrels will creep up out of no where with a  hefty draft that leaves you feeling violated. 

Beat them to the punch.

Financial hack 4: Sleep on it before you buy it

The internet is a fluid place, and one thing can rapidly lead to another. Next thing you know, your out a few hundred bucks on some impulse buys that sounded life-changing at the time but just lead to more clutter in your pad. 

It can be hard to fight the “you deserve it” devil on your shoulder on a late-night treat yourself. The truth is, you do deserve it, and heaven knows we all need a little self-love and care. We all do it – there’s no judgment here. 

The best tool in your financial hacks toolbox for separating the quality “treat yoselfs” from the empty depths of mindless consumerism is to sleep on it. 

If you really do deserve it – and you probably do – you’ll still deserve it in the morning.

All the glory, none of the guilt. 

Financial hack 5: Get your children’s financial beaks wet early

Can you imagine how much money you would have saved if you had been properly taught about managing finances? You know, the things you learned the hard way – whether that means cleaning up a bad credit score, climbing your way out of student debt (not terribly unlike climbing out of the pit in Buffalo Bill’s basement), or even the helpful things you learned on your own time via late-night YouTube binges of Rich Dad, Poor Dad videos? You can give your kids a head start by teaching them what you learned in the school of hard knocks. 

Before they swan dive into the real world, give them some floaties. But if you just can’t get around to it, maybe the collections agent will be interested to hear about the Alamo, which was, of course, covered extensively in the classroom. 

Spare your kids the same fate.

Feeding two birds with one scone: Because we all know someone’s got to pay their way for the first round of the world slapping them up with late fees and the joys of collection accounts. Odds are, as their parents, you’ll have to bail them out of at least one or two of these financial boobie traps. That makes investing in your child’s financial literacy early on a win-win for both of your nest eggs.

Building up your financial literacy is a years-long journey. These five financial hacks are good starting points to get the ball rolling. 

7 advantages REITs have over owning investment properties

The advantages of REITs greatly outweigh those of owning investment properties.

Own an investment property, collect rent on it, let your equity stake appreciate over time, be someone’s landlord (‘landlord’ has a royal ring to it, doesn’t it?) – it all sounds great – on paper. 

But owning property comes with a lot of responsibility, hidden costs, and fine print catch-22s that most beginner landlords often don’t consider at the outset. 

These pitfalls can be expensive by many measures including time, money, and stress.

Enter REIT investing, where you get all the upside of real estate investing (and then some) while foregoing the drawbacks. 

Here are seven reasons REIT investing is a better alternative than buying investment properties. 

REIT Advantage 1: No mortgage required

Most of us don’t have a few hundred grand to drop on investment properties. That means in order to finance one, we need to get a mortgage. 

Mortgages aren’t cheap. 

A $350,000, 30-year mortgage with a 3% interest rate (doesn’t sound so bad, right?) will cost you over $180,000 in interest over the lifetime of the loan. That’s more than 30% of your capital – or ten years’ worth of mortgage payments – evaporating into thin air.

pizzanomics financing an investment rental property

By contrast, every dollar you put into a REIT boosts your equity stake and dividend payout. 

REITs sometimes finance properties when they acquire them, but usually only if it’s strategic in optimizing returns. 

Oftentimes, they have enough capital to buy the property outright, saving hundreds of thousands in mortgage interest rate costs. 

As a REIT investor, those savings get passed right on back to you. 

REIT Advantage 2: Shorter path to profitability

It might seem like as long as you have a tenant whose monthly rent is higher than your mortgage payment, you’re in the green. 

That’s only partially true. 

The rent on your investment property needs to not only cover your mortgage payment, but also costs of home insurance, HOA fees, property taxes, possibly water and trash, maintenance (which can be an unwelcome dark horse), and property management fees if you’re not managing the property yourself. 

But, maybe you’re a P&L expert who can successfully calibrate your rental rate just right. Every month, you effectively cover both the mortgage payment, and all the side expenses, without interruption.

In these ideal circumstances, your first truly ‘in the black’ profit will be when your mortgage is paid off. 

The average mortgage term in the U.S. is 30 years – 15 if you’re on the fast track. If you start today, and everything goes swimmingly, 2051 will be a great year. 

If things don’t go perfectly for 30 years straight, maybe 2055 will be a great year? Time will tell. 

As a wise woman once said: “Ain’t nobody got time for that.”

Say you were considering buying an investment property for $350,000. You’d need $70,000 for the down payment, plus a few thousand for other closing costs. You are now the proud owner of a mortgage, and just 29 years and 364 days away from profitability. 

Alternatively, you could invest that capital into a REIT like HappyNest and at current rates, make approximately $1,575 return per quarter, starting about three months from now.  That’s 29 years and 275 days sooner than buying an investment property.

REIT Advantage 3: Passive income

If a landlord receives rent payment but immediately hands it over to the bank, was the payment ever really income at all?

It’s a head-scratcher. Luckily, you can avoid this conundrum by investing in REITs instead.

Most REITs pay out dividends monthly or quarterly. Instead of that $350,000 property you were considering, you could instead invest the would-be downpayment and start collecting a $1,125 dividend every quarter. 

Best of all, no need to turn right around and give it to your mortgage holder – because there isn’t one. That money is free to tuck away for retirement or go to Vegas and put it all on red at the roulette table. 

Alternatively, you can reinvest that dividend and witness the wealth-building

magic of what Albert Einstein once called the ‘8th Wonder of the World’: Compound interest. 

einstein

You see, if you practice delayed gratification, you could add that $1,100+ to your nest egg so that your next quarterly dividend payment would be approximately $1,200. Keep that going for a couple years and you’ll get yourself a nice little egg going.

Personal finances are dynamic – your needs can change over time. 

With a financed, private investment property, your mortgage needs to get paid whether or not your primary residence needs a new roof. 

But you can elect to have REIT dividends deposited directly into your bank account to help cover unexpected expenses, then go back to reinvesting as your financial situation stabilizes. 

It’s passive income at its finest. 

REIT Advantage #4: Liquidity

There comes a time in every investor’s journey in which they’ve reached their financial goals (or need the money) and are ready to cash out.

As the owner of a private investment property, there are some hoops to jump through to make that happen. 

water-droplet-fast-fresh

The real estate market conditions are a variable – no one wants to sell in a downturn. You’ll probably have to shell out a percentage to a realtor, possibly fund buyer contingencies, and pay for a lawyer to review documentation (who aren’t exactly known for their thrifty rates). 

With a REIT investment, that’s not the case. If you’re invested in a public REIT, you could have the funds in your account in a matter of days. (But consider the pros and cons of investing in a publicly-traded REIT in current market conditions). 

Withdrawals from a private REIT usually take longer compared to publicly traded REITs and generally require a written request. 

Still – no realtors, lawyers, or contingencies required, all of which eat into your profits. 

REIT Advantage 5: Access to better resources

How does a Sunday morning call about a broken toilet sound? You shelled out $150 for it last week, but the guy you hired didn’t do the job right and now he’s not answering. You’re going to have to hire someone else. 

Your tenant is laid off from their job and has to break the lease four months earlier than expected. Can you go a few months without their rent? Do you have the time to find a new tenant? 

Someone slipped and fell on your property. They’re suing you. Hopefully, the attorney you paid for out of pocket can get the settlement down to below your insurance policy’s liability limits. 

If the above scenarios sound like something you’d enjoy, then private ownership of real estate investment property is for you. Or you could outsource these responsibilities to someone else – but of course, it’ll cost you. 

Any of the above scenarios could fall onto your plate, and more often than not, will do so unexpectedly.

If that doesn’t sound like a good time, you might be a ‘hands-off landlord. And REITs are a hands-off landlord’s dream come true. 

That’s because REITs allocate a portion of their funds to handling these situations.

Additionally, because of their scale, they often have access to better contractors, lawyers, realtors, accountants, and property management companies. Tenants won’t even know your name, let alone phone numbers – every hands-off landlord’s dream come true. 

REIT Advantage #6: Access to otherwise out-of-reach investment properties

In addition to saving you time, REITs provide the opportunity to invest in properties that are completely out of reach for the 99.9%. That includes apartment buildings, commercial real estate, and industrial properties. 

These kinds of properties often have a higher return on capital than your garden variety rental property. But the cost of entry is prohibitive to most individual investors. 

Because REITs pool capital from many investors, they are able to add these investment jewels to their portfolios. Shareholders get to reap the benefits of high return on investment properties that would have been out of reach. 

REIT Advantage #7: Invest as much – or as little – as you want

In addition to the responsibilities and liabilities that come with being a landlord, buying an investment property privately is a huge financial commitment. 

Whether buying the property with cash or by financing it, buyers commit to the property’s sales price – and then some. 

REITs offer investors flexibility in terms of how much of their capital they want to commit to investing. HappyNest, for example, lets investors get started for as little as $10. That’s less intimidating than committing to hundreds of thousands, if not millions of dollars. 

Investors can add one-time boosts to their nest eggs, or skip adding to their principles if financial challenges come up. Mortgages and tenants aren’t quite so flexible. 

That makes REITs an attractive investment for smaller-scale investors who may have some disposable income to invest, but aren’t trying to make huge financial commitments. 

Investing in the right REIT

For all the time, money, and commitment REIT investing saves, return on investment is a direct function of the performance of the properties in its portfolio and its management. 

Don’t skip your due diligence: Check out the REITs portfolio properties, lease terms, and tenants, and consider their long-term prospects. 

HappyNest, for example, has two commercial properties and tenants with 8- to 10-year commitments. That means rental income is unlikely to be interrupted.

Even if the tenants break the lease early, there would be an advance notice to find a new tenant and avoid income interruption.

The good news is, once you find the right REIT, growing your nest egg becomes fairly hands-off. 

All the glory, none of the work. 

Meanwhile, back on Earth, Jeff Bezos wants to be your landlord

Jeff Bezos just can’t get enough. 

The king of e-commerce has partnered with Salesforce CEO Marc Benioff in the Space Race. There is formidable competition. Virgin Galactic founder Richard Branson, already a legend in air travel, has his own space ambitions, as does Tesla Founder and CEO, Elon Musk.

But back at mission control, Bezos is moving in on a neighborhood near you. 

Fintech enters the housing market

Arrived Homes is the latest fintech app that aims to remove obstacles between individual investors and wealth-building opportunities. 

At first glance, Arrived Homes seems like it’s lowering the barrier of entry to the real estate market. This will ring like a siren call to Millennials and Gen Z, already significantly behind where the Boomers were at this stage in their lives by measure of property ownership. 

But things aren’t always what they seem. Peeling back just one layer reveals that Arrived Homes could lock Millennials and Gen Z out of homeownership for good. 

Moving the goalposts

The cost of housing in the United States is primarily a function of supply and demand. As Millennials pay off student loans and negotiate salaries that resemble progress on paper, the cost of homes is always one step ahead. The price tag is always increasing a little faster, always just out of reach

FRED data on median home proce
Data source: FRED St. Louis

Raises and promotions never seem to keep pace with the rising cost of living, creating a confusing life conundrum that has resulted in postponement of marriage and a free fall in birth rates.

Millennials are now in their late 20s and their 30s, and Gen Z is on the shores of adulthood. Both cohorts rightfully want their share of the proverbial pie. 

Supply and demand, demand, demand

The pandemic brought on a Millennial wave of Urban Flight, as lockdowns made city dwellers realize just how small their living spaces really were. The influx of buyers in the already-tight liquidity market has led to home sales closing over asking prices by double digit percentages. According to Redfin, 70% of buyers faced bidding wars in May of 2021 – up from 52% of buyers in May 2020.

home buyers got in bidding war stat
Source: Redfin

Juxtapose that against a market whose supply stock has been stunted by city ordinances and permits, largely reserved for large developers with deep pockets. Not-so coincidently, those same developers also happen to be the benefactors of the housing subscription model

Another sneaky force adding pressure in the mix is the rise of AirBnB. The short-term rental app took even more housing chips off the table. Its platform further incentivized the mindset that houses are investment assets to capitalize on – not homes that people need to live in. 

These pressurized dynamics were already driving double digit ‘appreciation’ in real estate. According to a June S&P Global report, the U.S. housing market gained 14.6% in value year over year between April 2020–2021. At time of press, that trend is showing no sign of slowing.

Changing lenses

The real estate market’s ‘appreciation’ percentage gain is one way to present the fact that renting Millennials and Gen Z are now 14.6% further behind the American Dream, which for our intents and purposes here, starts with owning a home. It also loosely translates to “rent is probably going up soon.” 

That makes for two demand-side pressures contributing to the price increase in the housing market, while the supply side has remained stagnant. How will we solve this problem?

One solution that definitely won’t work: Jeff Bezos’ latest project, Arrived Homes. Presumably, it’s about to throw gasoline on an already overheated market.

Jeff Bezos is a man of profound talents. But great talent can be applied to bad visions with harmful ramifications. Indeed, misguided ambition can amplify the fallout of a small-context vision. 

American Dream for sale

Arrived Homes will accelerate the transformation of the American Dream into an ‘investment class’ that appreciates. That’s a big change from its place as a milestone of “making it,” and symbolism of freedom and independence.

The housing market’s assetization is reminiscent of the successful conversion of higher education into an investment, which learned everything it knew from the capitalization of health care.

Arrived Homes creates an access point for investment capital to flow into the pressure cooker that is the American housing market. It creates more demand without a corresponding supply expansion. You don’t need a finance degree to understand that when demand exceeds supply, prices will continue their exponential climb. 

Getting buy in

As material wealth continues to consolidate into fewer hands, young adults will continue to find themselves in perpetual debt without ever owning anything. 

world economic forum, you'll own nothing and you'll be happy
Still from World Economic forum YouTube channel for editorial commentary purposes

 In fact, the World Economic Forum came right out with recommendations to get comfortable with the idea of perpetual serfdom. What a message. But don’t worry: We’ll be happy. The economists at the World Economic Forum, who are much smarter than us, said so. Apparently, their cum laude is supposed to mean we’ll believe anything they say is true. 

Intentionally or not, Arrived Homes deceptively positions itself as granting access to a market that it is actually shutting people out of. Americans don’t need partial ownership in rental properties: They need a primary residence. The number of renters officially eclipsed the number of homeowners in 2018, and the divide has been growing ever since.

The math isn’t hard: Every property added to Arrived Homes’ portfolio is one house’s status going from owned to rented.

Collective commercial real estate investing

But it doesn’t have to be this way. HappyNest is a collective investing, real estate fintech app that, first of all, arrived to the market before Arrived Homes did. Our platform gives real people access to a market they never could realistically consider – the literal inverse dynamic that Arrive Homes creates.

HappyNest seeks to help people grow their primary nest egg, by opening doors to wealth-generation opportunities without slamming the doors on other future prospects. That’s because HappyNest’s investment portfolio consists of commercial and industrial properties, a lucrative asset class that has historically only been available to the wealthy and connected. 

But by pooling capital from real people, we can cultivate access to possibilities we couldn’t accomplish individually. By teaming up with HappyNest, investors aren’t indirectly driving up living costs and minimizing their homeownership prospects in the future.

Jeff Bezos’ next move

Wouldn’t it be wonderful if Jeff Bezos instead applied his incredible gifts and talents to something that enriched communities, not just board members? The man has the world at his fingertips – any further personal wealth accumulation at the expense of others is no longer ethically justifiable by ambition alone. It’s hard to imagine there would be a tremendous change in his living standard compared to what he’s established after his first few hundred billion. 

We already know Jeff Bezos can accomplish whatever he sets his mind to, for better or for worse. Who will be impressed if he makes another successful business? At this point, it’d be more surprising if he didn’t. Any more wins in this arena are expected –  boring, even.

Dramatic Crossroads Yu-Gi-Oh Card by AlanMac95 on DeviantArt
Dramatic Crossroads Yu-Gi-Oh Card by AlanMac95 on DeviantArt

Perhaps Bezos should consider expanding his definition of value and worth. He could challenge himself to look beyond dollars, patents, property, and copyrights. He could focus on drawing up the blueprint for more conscious capitalism – one that is focused on ‘win-win’ as opposed to ‘win-more.’ 

Can Bezos sell the vision of a cleaner, more equitable world? Could he work out the operational inefficiencies in energy production and consumption? Can he set up the infrastructure for every American to get quality health care with Prime-level speed? How about cut the cost of lifesaving products like insulin while still maintaining enough margin to support a healthy business? 

Can he change gears now, from building an empire, to investing in a legacy?

We hope we live to see it. If Jeff Bezos were to pursue a venture like that – we’d buy the first share. 

Thinking two steps ahead

But with this next venture – Arrived Homes – the answer appears to be ‘not for now’.

Perhaps the allure of becoming the world’s first trillionaire is something he simply cannot resist. It almost seems that the biggest weakness of the world’s most successful man is one most of us can relate to in some way or another – our own egos

Once he’s conquered the real estate market to his liking, he might still have time to achieve his greatest feat yet – merging aptitude with empathy, while Millennials and Generation Z sort through the damage his monumental success has inflicted upon their lives. 

Until then, we invite you to think not just one, but two steps ahead in your investing journey. Together, we can get our share of the American Dream, too.  

And some things are worth fighting for.