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NAV is ‘Useless’ when investing in a Mutual Fund Scheme



NAV or the ‘Net Asset Value’ is the price that you pay (or get), for each unit, when you buy (or sell) any mutual fund scheme.

However — and this is VERY IMPORTANT — NAV is a ‘completely and absolutely Irrelevant, Immaterial and Inconsequential’ aspect to consider when investing in mutual funds.

You will earn the SAME returns, whether you buy a fund with NAV of Rs.10 or one which has the NAV of Rs.1000 (assuming, of course, that both have the same underlying portfolio).

Let me demonstrate this with a real example:

Investment A

Fund: Aditya Birla Sun Life Index Fund – Growth

Amount: Rs.10,000

Date of purchase: May 25, 2015

NAV: 81.9773

Units alloted: 121.985 (= 10,000 / 81.9773)

Date of sale: May 23, 2018

NAV: 101.7568

Value: Rs.12,413 (= 121.985 * 101.7568)

Profit Rs.2,413

Investment B

Fund: Reliance Index Fund – Nifty Plan – Growth

Amount: Rs.10,000

Date of purchase: May 25, 2015

NAV: 13.9047

Units alloted: 719.181 (= 10,000 / 13.9047)

Date of sale: May 23, 2018

NAV: 17.3527

Value: Rs.12,480 (= 719.181 * 17.3527)

Profit: Rs.2,480


At Rs.81.9773, the NAV of Aditya Birla Sun Life Index Fund was almost 6 times more than the Reliance Index Fund NAV of Rs.13.9047 only… and, therefore, supposedly lot more expensive.

Yet, both gave ‘almost’ the SAME returns.

The reason why the returns are same — irrespective of the vast difference in their NAVs — is because the underlying portfolio of stocks is the same in both the funds. They own the same fifty stocks that comprise the Nifty Index, and in the same proportion.

In other words, the returns depend on the underlying portfolio of any mutual fund scheme and not on(I repeat, not) its’ NAV.

Not convinced? Want some more proof?

Investment C

Fund: UTI Nifty Index Fund – Growth

Amount: Rs.10,000

Date of purchase: May 25, 2015

NAV: 52.4388

Units alloted: 190.698 (= 10,000 / 52.4388)

Date of sale: May 23, 2018

NAV: 67.186

Value: Rs.12,812 (= 190.698 * 67.186)

Profit: Rs.2,812

The NAV of UTI Nifty Index Fund was nearly 4 times more than the Reliance Index Fund NAV and about 0.35 times less than the Aditya Birla Sun Life Index Fund NAV.

Yet, all three funds delivered nearly the same returns. In short, if you had to invest in an Index Fund, you could have chosen any one of them. It did not matter AT ALL whether it cost you Rs.13 per unit or Rs.52 per unit or Rs.82 per unit.

[Note: The small difference is primarily due different Fund Management Expenses of 0.2% in case of the UTI fund, 0.85% in the Reliance Fund and 0.75% in Aditya Birla Fund. Other reasons for MINOR differences that you may observe include (a) tracking error and (b) the cash balances that the respective funds may have maintained during this period].

In short, NAV is a Not Applicable Value when you are deciding whether to invest in a particular mutual fund scheme or not.


Because, unlike the prices of say onions, potatoes or equity shares, NAV is not the “price” in that sense!

Rather, it is an “average number” based on the prices of the underlying stocks in the portfolio and the total corpus of the fund. And, two average numbers cannot be compared in the same manner as you compare two prices.

For example,

Average of 5, 5, 5, and 5 is 5.

And Average of 10, -2, 4 and 8 is also 5.

Yet, the two underlying series are quite different, even though the averages are the same.

For example,

Average of 5, 5, 5, and 5 is 5.

And Average of 50, 50, 50 and 50 is 50.

Yet, the two underlying series are the same, even though the averages are quite different.


… it is meaningless to say that Rs.10 NAV Fund is cheaper than Rs.400 NAV Fund. It is like saying that Sachin Tendulkar is better than Albert Einstein. The two simply cannot be compared at all.


… two funds with the same portfolio, will deliver exactly the same returns; no matter what NAV you invest at.


… what is relevant is the “Portfolio” of the Scheme.

… what is relevant is the “Performance” of the Scheme.

… what is relevant is the “PE Ratio” of the Scheme.

… what is relevant is the “Fund Manager” of the Scheme.

… what is relevant is the “Corpus” of the Scheme.

… what is relevant is the “Asset Management Company” of the Scheme.


… these are the parameters that you must focus on when choosing which fund to invest in; and forget the Net Asset Value.


… if anyone sells you a fund saying it is “cheaper” at Rs.10 NAV, he is MOST DEFINITELY cheating you. Beware of such people trying to make a fool of you.

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A 31 Year Old’s Journey to $5,000,000 in Rental Property Value



Today, I have a great article to share with you from Kyle Kroeger on how to invest in real estate. He has a goal of reaching $5,000,000 in rental property value, and is sharing his plan today.

The prospect of retiring early on real estate is highly intriguing to me. It should be for a number of people and I’ll highlight a bit more below.

For millennials, like me, we don’t have it easy. Despite the mainstream media’s thoughts, millennials have faced a Great Recession, massive student loans and a global pandemic already at a young age.

We’ve seen a lot but that can be used to our advantage for financial planning and life goals.

That’s okay if things are a bit harder for millennials financially. It’s a bit more fun when things are hard.

Here I’m ready to show you why real estate investing can be a great asset class.

Related content:


My Background

I’m the prototype millennial that loves buying expensive coffee, avocado toast, iPhone apps, blah blah.

So what? Life is short, so enjoy what you love.

I went to a large public university for undergrad and come from a very much middle of the road family in the Midwest. I knew I wanted to study finance in undergrad as I had more of an analytical mindset and liked numbers.

When I graduated from college, I had a decent amount of student loans. The total amount was somewhere over $60,000 worth of student loans. While I was at school, I really didn’t realize how much student debt I had and how that would impact my financial future.

My family has always had a hardworking mentality, so I worked part-time while attending undergrad (each year).

The problem was that money went to keeping the lights on and paying bills. Not tuition.

Upon graduating, I landed a job in investment banking in Chicago. It was tough to crack into, but the pay was intriguing and the opportunity to get some great experience was invaluable. Even if it meant dealing with unique personalities and long hours.

If I could slug it out for 3 years, I knew I could focus on working, saving and paying off my student loans. I followed a disciplined approach of prepaying my loans as much as possible.

After 5 years of working in finance, I was able to successfully extinguish my $60,000 of student loans. Following my student loan repayment, I quickly saved to purchase my first house. That became my first foray into my comforts of using real estate to build wealth.


Why Invest in Real Estate?

Working long hours and being chained to my desk made me realize quickly that there is so much more to life than work and making a ton of money. After my first house purchase, I realized that investing in real estate is very straightforward and manageable.

I believe the minor fixes, capital costs for repairs, etc. are generally overblown.

If you do it right, you can manage through those costs and use low cost of capital (mortgages) to build wealth over the long-term. The key thought here is long-term.

Real estate investing is a marathon, not a sprint. Multi-generational wealth can be built through real estate. There are plenty of case studies to back it up. The fact that real estate is illiquid actually works to your benefit.

If a macroeconomic event occurs, you simply can’t panic sell. You’ll have to stick it out and work through the issues firsthand. The best part is you are in control, so you can control your destiny in a way.

When you invest in index funds or stocks, you have no control. You can analyze and make decisions that may improve your odds of generating an attractive return, but you are not making the day to day decisions.

To me, the pros outweigh the cons on whether or not you should invest in real estate.

Here are some pros of real estate investing:

  • You maintain full control of your holdings.
  • There are multiple types of real estate (single-family, multi-family, apartment).
  • There are income-oriented markets like providing options for low-income, suburban and urban communities.
  • You can invest in specific markets. So specific that you can invest on a particular street that piques your interest.
  • Real estate is simple. We aren’t investing in the next Facebook or Instagram.

Here are some cons of real estate investing:

  • It can be time-consuming.
  • The debate is out there whether real estate outperforms alternatives.
  • It requires a learning curve. Even the most experienced investors are still learning.

Finally, there is no one-size-fits all approach to real estate investing. In fact, there are plenty of strategies out there that can tailor to your risk tolerance.

Related content: Renting or Buying? What’s the better decision?


Real Estate Investment Strategies

Here are some general investment strategies to help you understand the risk profile (in order of least risky to most risky). Generally, higher risk can lead to higher expected returns.

1. Core Real Estate

Think of core real estate as purchasing a property for cash flow. The property is in great shape, needs limited repairs and is fully leased. This is one of the most common forms of passive real estate investing. Core investing will end up being the least risky and lower returns.

2. Core Plus

Core plus has a little more risk. Think of core real estate as a base, but it requires you to provide some additional value to the property. For example, you are looking at a property that has 50% of the units in a 4-plex that are renovated. The other units need to be renovated and leased out at higher rates.

You can come in and provide additional value by renovating and finding new tenants. This is the in-between on the risk scale. There is an opportunity for improvement albeit at not too much risk.

3. Opportunistic / Distressed

For simplicity, I’ll group opportunistic and distressed together. This is usually the higher risk and higher return investing within real estate. You’ll likely need some significant expertise in real estate and some sort of angle. A common example is a fix and flip strategy. You seek out properties that are dormant and attractively priced. You already know plenty of contractors and resources to fix the property for an eventual sale.

There are plenty of other strategies and subsets of these but the above should give you a general feel for high-level strategies.

For me, I like core plus because it’s straightforward enough and offers attractive risk/reward. You don’t need to know how to fix a water heater or know every nut and bolt of a house. You simply look for cash flow improvement opportunities in high-demand markets.


Journey to $5 Million in Real Estate Value

The main goal with direct real estate investing is to make cash flow passive while still maintaining as much control as possible. You can do things like real estate crowdfunding or invest in REITs, but you’ll lose control and have less flexibility if you are trying to create generational wealth for your family.

If you own a ton of stock and want to pass it down to your family, what’s stopping them from selling? If you do real estate investing right, you can pass a full-fledged business down to your family that also provides consistent cash flow.


Why $5 Million in Value

$5 million isn’t a hard number but rather a goal. This number also seems like a lot on it’s face and it is. But this is a total aggregate value of property. Not equity.

It doesn’t happen over the course of a year or two. It’s a multi-year process that takes time and patience. This amount of property value presents a great opportunity for income and scale without too much hassle.

You can remain a “small business” in the real estate space and not overload your life with stress.


The math of real estate investing for beginners

The math to why $5 million in rental property value is pretty straightforward. I’d like a six-figure ($100,000) income into perpetuity as a baseline. This would allow me to live comfortably from real estate only while also holding a substantial equity position.

So, the math is as follows:

Targeted Income divided by Cash Yield = Equity Value in Real Estate

Targeted Income = $100,000

Cash Yield = 8%

Cash yield represents the annual cash flow from rental properties relative to your equity position. For example, a rental property earning $8,000 per year of income to you on a $100,000 downpayment would equity to a cash yield of 8%.

This would equate to an equity value of $1.25 million in a real estate portfolio ($100,000/8%). So, if you can meet that bogey of a cash yield you are in good shape. If you exceed it (8+%), you can potentially reach your income goal faster.

So how do I get from $1,250,000 of equity in real estate to $5,000,000?

Well, for investment properties you should have a downpayment of 25% to purchase the property. So, $1.25 million of equity implies $5 million of real estate value ($1.25M/25%).

I built a rental property spreadsheet to help me stay accountable when pricing out real estate transactions. The model serves a number of purposes. Most importantly, I use it to:

  1. ensure I’m putting an offer on a property that meets the above criteria (realistically), and
  2. use it as a budget to track my forecast to what was actually received. The model can become a glorified 5-year forecast for each investment.

I walk through how I use the rental property spreadsheet here while walking you through an exact case study.

I hope you find the complete walkthrough helpful.

How to Get There / How Long It Takes

$1.25 million of equity is a lot of money. Absolutely, but you can get there over time. People do it everyday with their 401(k) and Roth IRA contributions.

It will absolutely take time.

Like your retirement contributions, you should have a full roadmap of how you plan to get there.  I have 3 real estate properties right now so I’ve already gotten started on the plan.

With much more work to go, however.

Here is a plan for 8 years to get to the desired income goals and a $5 million rental property value. The assumptions include:

  • Starting income of $120,000 with a 5% income increase each year.
  • Focus on saving 35% of your pre-tax salary each year for real estate investing.
  • Reinvest any cash flow earned from existing rental properties.

Financial Wolves’s Retire on Rental Income Plan:

These are not my exact income and checking account balances but they are a somewhat close representation.

So, as a 31 year old millennial it should take me about 8 years of hard work to eventually retire on real estate. That would put me in a position to earn a steady living from real estate before I’m 40 years old.

There are a few interesting things that stand out from this plan:

  1. Income is very important: Increasing your income is crucial with real estate investing. Without a continuous flow of reinvestable cash, it becomes harder to acquire more real estate.
  2. Compound interest is no joke: Compound interest from the cash flow of your properties is a huge value driver. When you are in property acquisition mode, you should harvest as much cash as possible to continually make acquisitions. The sooner the better as the cash flow snowball benefits are massive. Finally, you can see at the tail end of the investing cycle you can start investing in larger properties. Once you start dealing in larger dollar amounts, you are in the big leagues.
  3. Rental properties cash flow can be substantial: If you can do real estate investing as a side hustle to your ordinary income, the cash flow benefits can be exponential. Look at the cash balance build up during the back end years (years 5-8). You simply can’t acquire enough property.

Once you achieve scale, you’ll have a ton of financial flexibility. Plus, the above assumes no amortization on the loans so your equity balance will likely be compounding along the way. This will give you extraordinary residual value to work with.


Tips for Getting Started In Real Estate Investing

Here are some tips for getting started with real estate investing.

1. Just Start

One of the best pieces of advice I received was from a savvy real estate investor. They said you simply just need to give it a go. It’s true.

If all goes wrong or you don’t like it, at least you can cross it off your bucket list… Hey, I was a real estate investor once.

Not only should you just start. You should start by trying to manage your real estate properties without an asset management firm helping you. This will help you understand your properties. You’ll get used to the ins and outs of repairs, requests and leasing.

With technology now, you should be able to efficiently manage everything.  As you scale, start thinking about how an asset management firm can help you. Yeah, back to the reduce time without sacrificing too much income point.

2. Use Technology

Technology continues to be a very underrated component of real estate investing. Back in the day people would have to manually account for everything.

Some old-time real estate investors still think that you need to take 2 am calls about a leaky pipe… Or, you need to manually collect checks from tenants to bring them to your bank. Reduce your time by using resources like Landlord Studio to do all the required bookkeeping.

Or, a tool like Cozy to manage rent payment with multiple tenants in one unit. You’ll get paid instantly and Cozy even sends out rent payment reminders. What’s not to love?

3. If You Struggle That’s Okay

If you struggle with your property and it requires capital contributions from you right away, that’s okay. Let’s be honest. No one invests to lose money. A property can require a ton of work one year but then nothing for the next 5 years.

Just because something bad happens in the short-term doesn’t mean you completely messed up the long-term. At the end of the day, things can get resolved. When I sold my first property, I realized that anxieties and the stress that I had about the property at the onset were definitely not worth it.


Conclusion – Is Real Estate Investing Worth It?

At the end of the day, real estate is not for everyone. However, you can use this as a baseline for whatever asset class you are interested in. To me, real estate provides the optimal solution for building long-term wealth that requires limited time.

You can build a fully operating business out of your real estate holdings that will give you the flexibility to do the things that you enjoy in life. Here are a few tips that I will try to follow along the my real estate investing journey:

  1. Stay disciplined with your investing. Stick to one strategy and be excellent at it.
  2. Focus on the long-term.
  3. Scale your time and don’t be afraid to outsource.
  4. Build a team of people you trust.
  5. Retire early and enjoy life.

It’s not that simple and will take a ton of work to get there, but my early estimations is that it will be totally worth it. Between blogging income and a small real estate business, I should be able to work where I want and when I want.

Have you or will you try real estate investing? Let me know in the comments below. I’d love to answer any questions.

Author Bio: Kyle Kroeger is the owner of Financial Wolves is a blog focused on helping you make more money to achieve financial freedom. After repaying student loans, I’ve shifted my focus to make more money from side hustles, real estate, freelancing, and the online economy. Follow us on Pinterest, YouTube, Twitter, and Facebook.

The post A 31 Year Old’s Journey to $5,000,000 in Rental Property Value appeared first on Making Sense Of Cents.

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Eco-Friendly Home Modifications That Impact Your Home Insurance



Table of Contents

As the green revolution continues to gain popularity, homeowners are discovering practical ways to reduce their carbon footprint. One of the most meaningful ways is by making eco-friendly modifications to your home and making sure your homeowners insurance takes them into account.

Benefits of eco-friendly home modifications:

  • Lower utility costs
  • Reduced carbon footprint
  • Save money on energy costs
  • Potential tax credits

Whether you’re on the market for a new energy-efficient home or interested in upgrading your current space, you must make sure your policy is ready to accommodate those changes. While many insurers are extending their coverage to include green renovations, not all offer this additional coverage.

We’re here to guide you through how typical eco-friendly home modifications impact your home and your homeowners insurance. We’ll break down four home improvements you can make to your home, the benefits, installation considerations and insurance implications.

Solar energy

One of the most common eco-friendly home modifications, solar energy is the cleanest and most abundant resource available to us. A big investment, solar energy gives homeowners a way to save money and generate their own electricity.

Benefits of solar energy

Lower energy costs

In the U.S., the demand for solar energy is at an all-time high. As the prices of installation have dropped, solar energy has become an economical choice for many homeowners. The lifespan of solar panels is typically around 25-35 years, so they are a long-term investment that will continue to pay off.

Increased home value

In addition to saving money, installing solar equipment to your home can increase its value, sometimes by tens of thousands of dollars. While a solar upgrade can be an expensive investment, the increased home value can help you earn back what you spend.

Reduced environmental impact

Besides the potential tax breaks, solar energy has a positive impact on the earth. Solar energy doesn’t produce air pollution or carbon dioxide, which helps reduce emissions and the negative impact on the environment. Solar panels help homeowners take control of their energy consumption and also contribute to the reduction of U.S. dependence on other energy sources.

Solar energy installation considerations

Roof stability

Not every roof can support a solar energy system. Hardware options will differ by weight and sizes, so make sure you understand what a roof needs to be able to support them. Even for roofs that are designed to support solar panels, installation can have unintended consequences. If your roof is damaged during the installation process, your insurance policy may not cover it. Make sure you contact your provider to discuss your coverage and avoid being forced to pay out of pocket to cover damages.


While the hardware cost continues to drop, the soft costs associated with solar installation aren’t dropping nearly as fast. At the end of 2018, the average price of a residential rooftop system was around $18,000, before tax credits or incentives. Approximately 64% of the total cost of residential systems. These costs include, but are not limited to:

  • Permits
  • Labor
  • Sales tax
  • Indirect corporate costs
  • Supply chain costs
  • Transaction costs

Even though solar energy is much more affordable than it once was, it is still out of reach for some. Thankfully, there are financing options for homeowners.

Solar power financing options
Third-party ownership 40% of homeowners with solar energy systems use third-party ownership. Under this type of agreement, homeowners spread out their payments over time and share the responsibility of maintenance with the third party.
Solar lease A solar lease requires the homeowner to pay fixed payments to the solar leasing company. The homeowner will pay any electricity usage that extends beyond what the system generates.
Loan financing Solar loans are designed to help homeowners stretch the system’s cost of the system over the length of the term while directly owning the panels and all the benefits that result from them.

Tax incentives

As a way to reward homeowners for choosing solar energy, the U.S. government offers tax breaks and incentives.

  • Tax credits — There are both federal and state tax credits given to homeowners, allowing them to deduct a percentage of their solar costs from their taxes.
  • Solar renewable energy certificates (SRECs) — If you live in a state which requires that a certain amount of their allotted yearly energy has to come from solar power, you will collect SRECs. You can sell SRECs to supplement your income.
  • Performance-based incentives (PBIs) — PBIs are paid to homeowners (per kilowatt-hour) for the energy that’s produced by their systems. The rate is set at the time of installation.

Solar energy insurance implications

Most homeowners insurance policies cover rooftop panels, though you may consider increasing your coverage to include the cost of the entire system. Remember, all insurance policies are different. Examine your policy and contact your provider to see what your needs are since other options like ground-based and carport systems are not always covered.

Shamor Paul, co-founder of Sunly said, “A solar power system, if designed and installed by a professional, and carrying all necessary approvals and inspections, should not be an issue to get insured. As it is an added asset to the home, the premium may increase to cover the replacement cost.”

If you plan to sell the extra energy you generate, consider additional liability through Green Energy Insurance. This coverage would protect you in case of a net-metering accident that damages property or harms the employees of the municipality.

Geothermal heating and cooling

One of the lesser-known energy options, geothermal systems use the earth’s heat to warm and cool your home. There are three main types of geothermal technologies: ground source heat pumps, direct use geothermal and deep and enhanced geothermal systems.

Geothermal heating and cooling benefits

Lower energy costs

Geothermal systems yield substantial energy savings for homeowners. Up to 65% more effective than regular HVAC systems, installing a geothermal system in your home can reduce your energy costs by approximately 70% per year.

Another advantage of this method is its single system design. You can avoid worrying about multiple components that can break at any point and reduce maintenance costs. These systems also have an extremely long lifespan, so there won’t be a need to replace parts regularly.

Increase home value

Geothermal energy is a long-term investment that results in considerable savings. Even though installing a geothermal system is expensive, you are adding a significant amount of value to your home. Unlike solar energy, which requires visible hardware, most of the geothermal components are buried underground. This not only protects the investment but also means that the curb appeal is high.

Reduced environmental impact

An effective way to reduce your carbon footprint, geothermal systems use 25% to 50% less electricity than conventional options and don’t contribute to the burning of fossil fuels or greenhouse gas emissions. As an added bonus for your family’s safety, this type of energy eliminates the chance of a carbon monoxide leak in your home. Choosing to pursue geothermal energy is one of the most environmentally-clean home improvements you can make.

Geothermals installation considerations

Property suitability

While geothermal technology can thrive in any environment, it doesn’t mean that any home is suited for it. When evaluating your home for a geothermal system, your provider will consider three things:

  • Soil properties
  • Groundwater available
  • Available land


The installation cost of a geothermal heat pump generally ranges somewhere between $10,000 to $25,000. The upfront cost is noticeably higher than traditional options, but the savings over the lifespan of your system can be worth it. Low operating and maintenance costs also supplement the initial costs, leaving you to break even on the entire system in under ten years.

Like solar energy, there are federal and state tax incentives and select financing options available to help mitigate the cost. Figure out what incentives you’re eligible for here.

Geothermal systems insurance implications

With such an expensive system, making sure your insurance covers your investment is crucial. Start by contacting your provider to see what is included. If you have an extensive system, you may need additional coverage. Most components of a geothermal system are buried underground, which means they are safe from external dangers like vandalism, hail or wind damage. But if you live in an area that is prone to earthquakes, be wary. Since homeowner insurance policies do not cover earthquakes, you should take out an additional policy to cover your investment.

Rain harvesting

Rain harvesting is one of the easiest eco-friendly home modifications. Collecting water for future use, it also reduces storm water pollution. You can use the rainwater you harvest for outdoor irrigation or utilize it in your home for laundry, cleaning or purified human use.

Benefits of rain harvesting

Lower water costs

Collecting rainwater allows you to be less reliant on water companies. And if you have enough to meet your daily needs, it will drastically reduce your water bill. Another great benefit about harvesting rainwater is its storage life. Since rainwater is not always consistent — and in some areas scarce. having a reservoir of rain can help you get through dry seasons.

Rain harvesting systems generally have low maintenance costs, especially if you are collecting water for outdoor use with no purification requirements. After installation costs, you shouldn’t expect to dedicate funds for regular maintenance.

Increased home value

Having a well-maintained rain harvesting system can have a positive effect on your property’s value. If you plan to sell your home, most potential buyers might find the eco-friendly system attractive and vital as the demand for clean water continues to grow.

Reduce environmental impact

Harvesting rainwater impacts the environment in multiple ways. Collecting rainwater allows you to lessen your reliance on companies and reduce the demand for groundwater, which keeps increasing every year.

Collecting rainwater also reduces the chances of soil contamination. Runoff water can pick up contaminants from pesticides and other pollutants and spread them to the surrounding water sources. Eliminating the chance for excess water to run off by collecting and reusing it is a way to mitigate the negative impacts of pollution. In addition to increasing your home value and reducing an environmental impact, rainwater harvesting systems give your home an emergency water supply.

Rain harvesting installation considerations

Property suitability

Rainwater harvesting systems can be easily integrated into most homes, though some things can rule out suitability entirely. Your roof and gutters are at the center of property compatibility. Depending on the material they are made of, they could potentially introduce contaminants into your water supply. Older pipes or galvanized roofs may cause lead, copper or zinc contamination. So before installing any system, make sure you identify what materials your roof and gutters are made of.

Not every climate is a match either. Infrequent rainfall negates the purpose of rain harvesting systems altogether. If you live in a particularly arid climate, for example, you would not see a quick return on investment.


You decide how intricate you want your water harvesting system to be. It can be as simple as one tank or more complex with pumps and purification technology. The price of these systems can range from hundreds to thousands of dollars, depending on which system you choose. The initial cost of setting up a water harvesting system is high, and the return isn’t as quick as what you see with geothermal systems.


A rainwater harvesting system requires a big time commitment from homeowners. You’ll have to regularly check your tanks and make sure they are clean. So while it won’t cost as much some of the more involved home modifications, it requires more of your time.

State and local restrictions

There are no federal laws concerning rainwater harvesting, though some states do have restrictions on how much rainwater you can collect. States also specify where and when you can collect rainwater and limit how it can be used. For example, there are generally stricter guidelines if the water is intended for drinking.

In climates where rainfall is not frequent, states may restrict collection to ensure that the water that does fall flows to its rightful water drainage system and is not limited to a number of people. Read more about the laws and legislation of states here.

Rain harvesting insurance implications

Contact your broker before installing a system to make sure your home insurance policy will cover it. Much like solar panels, rainwater harvesting requires above ground, outside fixtures. This means that the equipment is susceptible to damage. When going over your current policy, make sure you consider potential damage to the system, as well as to your home. Leaks or floods as a result of your rainwater harvesting system may not be covered under every policy, so adding coverage is always a good idea.

ENERGY STAR products

ENERGY STAR appliances and products use less energy than the traditional options on the market. To be considered an ENERGY STAR product, it must meet the energy requirements set by the U.S. Environmental Protection Agency (EPA). As a homeowner, choosing appliances and products with an ENERGY STAR will help you save money, energy and contribute less to harmful emissions.


Lower energy costs

The average homeowner can save hundreds of dollars on their energy bills by choosing products with the ENERGY STAR. Designed to be energy efficient, the appliances you replace will impact how much money you save on your energy bills. For instance, a traditional clothes dryer can use the same amount of energy as an ENERGY STAR model dishwasher, refrigerator, and washing machine combined.

Beyond just certified appliances, ENERGY STAR also offers installation of doors and windows designed to control air leakage and sunlight transmittance.

Increase home value

There is no denying that replacing appliances with ENERGY STAR models is a significant investment. But once the installation process is over, you’ll be rewarded with incremental home value ranging from hundreds to thousands of dollars. While the increase may not be as substantial as installing solar panels, energy efficiency is a selling point for many buyers on the market.

Reduced environmental impact

ENERGY STAR’s mission is to reduce the impact we have on the environment. Since 1992, the label has helped reduce greenhouse gases by more than 3.5 billion metric tons, which is proportional to the yearly emissions 750 million cars would produce. While saving money on electricity bills directly benefits homeowners, the environmental impact ENERGY STAR products reduce cannot be ignored.

ENERGY STAR Installation considerations


The benefits of switching to ENERGY STAR certified products cannot be overstated. But updating your home with these types of appliances will require a considerable amount of money, especially if you plan to make replacements all at once.

Depending on the appliances you want to replace, your energy savings may not be as significant at the beginning. For example, a dishwasher will most likely yield fewer savings than a refrigerator because it uses less energy by default. If updating all of your appliances is unrealistic for your budget, create a long-term plan to gradually switch to all ENERGY STAR products.

To help offset some of these costs, the government offers federal income tax credits for making energy-efficient improvements to your home. However, to claim the tax credits, the improvements must be made to your home before 2021.

ENERGY STAR Insurance implications

Adding ENERGY STAR appliances and updates to your home generally doesn’t impact your insurance. Most homeowners insurance policies have coverage for energy-efficient appliances. Contact your insurance provider to better understand what type of coverage you need and what incentives they provide.

Final thoughts

Eco-friendly home modifications are considerable investments but benefit homeowners with savings, increased home value and tax credits. More than that, these home modifications are changes homeowners can make to help the environment. Personal responsibility for your carbon footprint is part of living in the global community. No matter how many changes you are able to make, every bit makes an impact.

The post Eco-Friendly Home Modifications That Impact Your Home Insurance appeared first on The Simple Dollar.

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How to Talk with Your Parents About Their Finances



Talking to your parents about their finances probably seems like one of the most awkward you conversations you could ever have. I’ll bet it ranks right up there with the sex talk your parents gave you when you were a kid — or that you’ve had with your own children.

I grew up in the South, where we don’t talk about money or sex. So when I asked my mom where babies came from, she told me a man and woman “make love”. That’s it. That was the extent of the conversation.

I have three kids, so clearly I figured out where babies come from. When my oldest was 10, she asked me where babies came from. I didn’t say something vague like, “A man and woman make love.” I simply told her the basics. She then looked at me – and remember, I have three kids – and said, “Ooh, you did that three times.”

I decided to be upfront with my kids because I wanted them to know they could feel comfortable talking to me about a topic that many people consider taboo. Like the money talk with parents, it’s only as awkward as you make it.

However, unlike the birds and the bees talk, you cannot figure out your parents’ finances unless you actually get the details.

I learned this the hard way.

Why You Need to Talk to Your Parents About Money

Years ago, I suggested to my mom that she look into getting long-term care insurance. She was sixty years old and living on her own because she and my dad had divorced. As a personal-finance journalist, I knew it would be good for her to have an insurance policy to pay for long-term care if she ever needed it.

She took my advice and met with an insurance agent. But, unfortunately, she had a pre-existing health condition – a benign tumor behind her left ear — that made her too much of a risk to insure. If I’d been smart, I would’ve used that opportunity to start talking to her about her finances to figure out how she would pay for long-term care if she ever needed it.

But I wasn’t smart.

I didn’t realize how important it was to have a conversation with my mom about her finances at the time.

A few years after my mom found out that she couldn’t get long-term care coverage, she started having trouble remembering things. I knew I needed to act quickly to get her to meet with an attorney to update her legal documents. She agreed, and the attorney drafted a will, living will, and power of attorney for her.

It was especially important to get those latter two documents drafted. Her living will named my sister and me as her health care surrogates and gave us authority to make health care decisions for her. And we both were named her power of attorney, which gave us the right to make financial decisions for her.

Here’s the thing. You must be mentally competent to sign those documents. If I had waited any longer to get my mom to meet with an attorney, the attorney might not have allowed her to sign her power of attorney and living will documents. I wouldn’t have been able to step in and start making financial decisions for her without going through a lengthy and expensive court process to become her conservator and guardian.

If something were to happen to your parents – say a stroke – and you needed to access their bank account to pay their hospital bills or talk to any of their financial institutions, you couldn’t unless your parents had already named you their power of attorney and you had the document. And you can’t make health care decisions for them unless they’ve named you their health care proxy.

If you wait until a health emergency to talk to your parents about their finances, it could be too late. They might not have the legal documents in place to allow you to step in and help. You won’t have a plan for dealing with the emergency. And emotions will be running high. You and your parents won’t be thinking rationally, and the last thing any of you will want to discuss are finances.

It might not be a health issue that forces you to get involved with your parents’ finances. They might not have saved enough for retirement and will need support from you. They might die without a will, and you’ll have to deal with what’s left behind while family members fight over who gets what.

As scary as having a conversation with your parents about their finances might seem, the consequences of not talking to them can be much worse.

How to Talk to Your Parents About Their Finances

So now that I’ve sufficiently scared you, you’re probably thinking: “Okay, I get that I need to have this conversation. But I don’t know how.”

First, realize that the scenario you’re playing out in your head about your parents flying off the handle because you tell them you want to talk about their finances probably won’t happen. In fact, they might even be grateful that you’re looking out for their well-being – that is, if you approach the conversation out of respect and concern for their best interests.

What you don’t want to do is be condescending. The fastest way to shut down a conversation with your parents is to talk down to them.

You’ll also scare them away if you appear to have selfish motives. These conversations are not about you and what you might hope to inherit someday. These conversations are about letting your parents know that you want to know what their wishes are so you can follow them.

And don’t issue ultimatums. Telling your parents you won’t help them as they age if they don’t talk to you about their finances won’t work. They’ll just resist your efforts even more.

Instead, choose a time when your parents are relaxed and there aren’t other people around who don’t need to be part of the conversation. (Hint: A holiday meal isn’t the ideal time for this talk.) Then try one of these tactics to get the conversation started:

  • Share your own financial planning experience. For example, if you recently drafted a will, tell your parents that you want them to know where it is in case of an emergency. Then you could ask what sort of estate planning documents they have and where they are. The goal isn’t to find out whether they’ve included you in their will or how much money you’re getting, but to know if they even have their financial wishes in writing.
  • Use current events. You could let your parents know that you’re concerned about their well-being during the current coronavirus pandemic and want to know whether they’ve taken any steps to plan for a health-care emergency. For example, you could ask whether they have an advance directive or living will that names a health care proxy for them – someone to make medical decisions for them if they can’t.
  • Offer to lighten their load. You can get a glimpse into your parents’ finances by offering to take over a money task for them – such as setting up automatic bill payments – so they have more time to do things they enjoy.
  • There are plenty of other ways to start the conversation, from sharing a story about someone you know who had to get involved with a parent’s financial life to sending them an actual invitation to talk. If one approach doesn’t work, try another.

    What to Do If Your Parents Are Reluctant to Talk About Money

    It might take time for your parents to get comfortable with the idea of sharing information about their finances with you. If you’ve made several attempts to start the conversation and haven’t had luck, you might benefit from getting a third party involved.

    Reach out to a family friend, a member of the clergy or your parents’ attorney or accountant for help. That person might be more successful in persuading your parents to start talking to you because parents can be reluctant to take the advice of their own children.

    Another option to get your parents to share information with you is to ask them to write it down rather than tell you. Ask them to make a list of their financial accounts, store that list someplace safe, and tell you how and when you would be able to access it.

    This can be a tricky situation, but it’s important not to give up. If those approaches don’t work, here are a few other strategies for speaking with reluctant parents.

    What Information to Gather

    If your parents are willing to talk, start with the basics.

    You don’t need to know how much they have in the bank, but you need to know where they bank. Also find out how they pay their bills – by automatic bill pay or by check. If it’s the latter, suggest that they set up automatic payments to ensure their bills get paid if, say, they are injured and have to be in the hospital for a while.

    Find out whether they have a power of attorney who can make financial decisions for them if they can’t — and a health care proxy to make medical decisions for them if they can’t. Also, ask if they have a will that spells out who gets what when they die. An attorney can draft all of these documents. Without them, state law will determine who gets your parents assets, and a judge will likely decide who can make financial or health care decisions for them if they become incompetent.

    Over several conversations (that’s right, you don’t need to do this all at once), dig deeper to find out what sources of income your parents have and where they stand financially.

  • Do they have debt?
  • What sort of insurance policies do they have?
  • Do they have enough saved for a comfortable retirement?
  • Do they have a plan for paying for long-term care if they need it?

Gather as many details as you can about the financial accounts they have, the bills they regularly pay, the investments they have, the professionals they work with and their financial wishes. Again, you could ask them to write down this information – including usernames and passwords – so you’ll have it in case of an emergency.

I can’t promise that if you use any or all of these strategies that the conversation will go so well that you and your parents will pop open the champagne and celebrate when you’re done talking. It might take several attempts and several conversations.

But if you don’t try at all, you won’t get the information you need, and you won’t be prepared to help your parents as they age. Really, that’s what this is all about – being there for your parents when they need you most.

J.D.’s note: Cam and I are in similar situations, and we’ve chatted about our shared frustrations before. Both of our mothers are aging and have memory issues. As a result, we’ve both taken charge of their finances.

One thing that I’ve learned is that some of this stuff is really very easy. Many institutions will work with you as long as you have the proper documentation. In some cases — as with my mother’s bank — the organization will work with you, but there are hoops to jump through.

Believe it or not, the greatest difficulty I’ve had in managing my mom’s money is with the Vanguard Group, and it’s not because they’re being jerks. They’re very serious about security — as they should be — but as a result, it’s a total pain in the ass to take care of my mom’s retirement accounts — including required minimum distributions.

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