Fixed income is an investment an individual can make that pays them back in interest payments until a set date, which is known as the maturity date. When the maturity date is reached, the investor is repaid the full principal amount they originally invested. Some common types of fixed income include Social Security, pensions, and savings accounts. Green Light Auto Credit is your one-stop resource for information on fixed income. Learn the basics with us, below!
Why is Fixed Income Called Fixed Income?
What does fixed income mean? And why is fixed income called fixed income? The answer is no more complicated than you may have already surmised on your own. Fixed income is referred to as such because it provides a reliable, fixed stream of income for a set period of time to the investor.
Common Types of Fixed Income
As we stated above, some common types of fixed income are Social Security, savings accounts, and pensions. As that last example might suggest, it is often retirees who live on a fixed income. Take a closer look at the details surrounding some common types of fixed income, below:
- Social Security – Social Security is guaranteed to you by the federal government and can start at age 62. The fixed payment amount you will receive is based on the payroll taxes you’ve paid throughout your life.
- SSI & SSDI – Supplemental Security Income (SSI) provides a fixed income to individuals who are 65 or older with low income and limited assets. Social Security Disability Insurance (SSDI) is a type of fixed income benefits available to people who are disabled and prevented from performing at a typical job. Consult our SSI vs. SSDI guide to learn more and find out how these particular types of income can affect your car loan eligibility.
- Pension – Some St. Louis employers offer their employees a pension, which is a type of fixed income you would start receiving at retirement. The fixed payments are guaranteed by your employer and are based on the number of years you worked for the company and your salary.
- Savings Account – Some individuals opt to open a savings account with their bank so that they may benefit from the fixed interest rate the bank pays them each year. Just like your checking account, you can add to or withdraw from a savings account at any time.
- Certificate of Deposit (CD) – A CD involves the investor depositing money for a fixed period with a bank that pays them interest. In short, you lend your money to the bank in exchange for the interest they pay you. You must keep your money invested with them for the entirety of the fixed period in order to receive your promised rate of return. The fixed period can be three months, six months, one year, or five years. The longer the time commitment you make, the higher the interest payment you can get back.
How to Save Money on a Fixed Income
If you are living solely on a fixed income, it’s important to budget thoughtfully. Check out our best tips for how to save money on a fixed income, right here:
- Know Your Income – In order to create a realistic fixed income budget, you need to understand your true income. Budgeting apps can be helpful here, as you can enter your financial information and they will show you a clear layout of how much money you have for the weeks and months ahead.
- Calculate Your Monthly Expenses – This should include all of your essential monthly expenses like mortgage payments, utilities, auto loan payments, groceries, and credit card payments. These are all things you can’t just cancel and stop paying for. Seeing them clearly laid out will help you to understand how you can budget your income better to pay for them.
- Be Mindful of Non-Essential Recurring Expenses – How many streaming subscriptions do you have? Could you part ways with your cable provider? Is there a cheaper gym membership available in Herculaneum? Even small changes in the amount you pay for things like this can make a significant impact on your savings. A good rule of thumb is that no more than 30 percent of your income should go to non-essential expenses.
Green Light Auto Credit Works With Fixed-Income Car Buyers
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