Money Management

Carrying credit card debt could really cost you. Read on to see just how much. [[{“value”:”

Credit card companies don’t allow consumers to rack up balances and pay them off over time out of the goodness of their hearts. Rather, credit card companies make money off of the interest customers pay. And depending on your specific credit cards, that interest could be substantial.

Over the past 10 years, the average APR on credit cards almost doubled from 12.9% in late 2013 to 22.8% in 2023, according to the Consumer Financial Protection Bureau. If you owe money on a credit card with an APR like that, you may be shocked at what it costs you in interest.

You could end up spending quite a bundle

It’s easy to see why you might end up with a credit card balance you can’t cover in full. Your car might break down at a time when your hours at work (and paycheck) have been reduced and you don’t have emergency savings to cover an unplanned bill.

In that situation, the bill in question might have to go on your credit card. Then, another bill might have to go on another credit card a few months later when your paycheck can’t handle it.

The problem, though, is that credit card companies are notorious for charging large amounts of interest on carried balances. And so over time, the amount of money you lose to interest could be significant.

Let’s say you owe $10,000 on a single credit card with an APR of 22.8%. If it takes you five years to pay that balance off, you’re looking at losing over $6,800 to interest charges alone. That’s more than two-thirds of the initial balance you racked up.

That’s why it’s best to do what you can to avoid credit card debt. And one good way is to make sure you have a well-stocked emergency fund. But if you’ve already missed that boat and are loaded up with credit card debt, there’s another tactic you may want to employ.

Set yourself up to accrue less interest on your debt

When your credit card charges you an exorbitant interest rate, it’s hard to dig your way out of that hole. So if you owe money on your credit cards, one thing you may want to consider is consolidating your debt into a fixed-rate personal loan. You’re likely to be looking at a much lower interest rate on a personal loan than a credit card balance, though the rate you qualify for will depend on factors such as your credit score.

In fact, let’s say you sign a five-year, $10,000 personal loan at 10%. If you make your payments on time, you’ll accrue about $2,750 in interest. That’s not a negligible sum. But it’s also nowhere close to the amount of interest you’d be paying at 22.8%.

If you’re going to put expenses on your credit cards, your best bet is to try to pay your balances in full each month. And if you’re faced with an emergency expense, consider taking out a fixed-rate loan to cover it before turning to a credit card or two. You may find that going this route costs you a lot less money all in.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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There’s no perfect way to build a successful 401(k). But read on for three habits that can put you in a position to succeed. [[{“value”:”

According to a study by Fidelity, out of more than 45 million retirement savers with Fidelity accounts, about 422,000 401(k)s and 392,000 IRAs have million-dollar balances. That’s less than 2% of the total.

There’s no magic formula when it comes to building a million-dollar 401(k), and the paths to retirement savings success look different for different people. However, there are some common habits among 401(k) millionaires. Here are three that could help you build a seven-figure account balance of your own.

1. 401(k) millionaires contribute more than most to their accounts

This probably won’t come as a big surprise, but one of the common traits of 401(k) millionaires is that they contribute a lot to their accounts.

The Fidelity study found that the average 401(k) millionaire contributes 17.5% of their pay to their 401(k), and that’s not including employer matching. Including matching contributions, the average person with a seven-figure Fidelity 401(k) account has more than 26% of their annual salary flowing into it.

There are two main factors that contribute to your eventual 401(k) balance — time and the rate at which you contribute. There is obviously no better time to get aggressive with your retirement savings than right now. But the savings rate is the x-factor that you’re in control of, and one that most 401(k) millionaires use to their advantage.

2. 401(k) millionaires aren’t afraid of the stock market

One of the most common mistakes people make with their 401(k) is being too conservative with investments. Many plans offer “safe” retirement investments, such as money market funds or fixed-income (bond) funds. But the best place for most of your retirement savings — especially if you’re still a decade or more away from retiring — is in the stock market.

In fact, the average 401(k) millionaire keeps three-fourths of their account in stocks and stock-based mutual funds. Stocks will go up and down over time, but over the long term they almost always do well. In fact, since 1965, the S&P 500 has delivered average annualized returns of more than 10%.

3. 401(k) millionaires almost never take out loans from their accounts

Most 401(k) plans allow active participants to take loans from their accounts, with amounts of up to $50,000. And at first glance, it might seem like a pretty good way to borrow money — after all, the interest rates on 401(k) loans are typically very low, and not only that, but you are paying yourself back.

However, there’s one big problem with this logic. The stock market has historically generated returns of 10% per year (or close to it) over long periods of time, and it isn’t rare to see the S&P 500 rise by 20% or more in a given year. By taking money out of your retirement account and paying yourself back, you’re setting yourself up for a much lower return on investment than you’re likely to get by simply leaving it in the account.

In fact, 17.6% of 401(k) participants have an outstanding loan on their account, according to Fidelity’s data. And while the ability to take a 401(k) loan is certainly a nice safety net to have in a financial emergency, it should be more of a last resort than many people treat it as.

Not an exhaustive list

These are just a few of the best practices you can put in place to help build a million-dollar 401(k) account of your own. It can also be beneficial to start as early as possible, invest in IRAs and other brokerage accounts, and avoid early withdrawals at all costs.

Having said that, there’s no magic formula or incredible luck involved. The best things you can do to build a million-dollar 401(k) are quite simple — start saving as soon as possible, invest a double-digit percentage of your pay, and avoid taking any money out of your account before you retire.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Your hobbies can improve your bottom line. Learn how selling crafts on Etsy, teaching online, and even earning photo royalties can generate income. [[{“value”:”

In a world where the hustle culture is often glorified, finding joy in what we do can sometimes seem like a luxury. However, what if I told you that your after-work or weekend hobbies could potentially add a nice chunk of change to your bank account? Yes, you heard that right. That thing you do for fun, relaxation, or to unleash your creativity can also be your ticket to earning extra income and boosting your personal finances.

Let’s explore a few lesser-known ways to turn your hobbies into a source of earnings. Remember, figures can vary based on your skill level, dedication, and market demand.

1. Crafting custom pieces

Are you someone who loves working with your hands? Be it knitting, woodworking, or painting, the world of custom-made items is vast and full of opportunities. Platforms like Etsy have made it easier than ever to reach customers looking for that personal touch.

But here’s a little twist: focus on niche markets. For instance, custom pet portraits can fetch anywhere from $50 to over $300 a piece, depending on the complexity and medium. Similarly, handmade jewelry tailored to specific fandoms can earn you a loyal customer base willing to pay premium prices for your unique creations.

2. Hosting workshops or online courses

If you’re passionate about your hobby and have a knack for teaching, consider hosting workshops or creating online courses. Whether gardening, photography, or baking, there’s always someone eager to learn. Platforms like Skillshare or Udemy allow you to reach a global audience. You could earn anywhere from a few dollars to several thousand per month, depending on how many students enroll in your courses.

The key? High-quality content and a little bit of marketing savvy. Remember, you don’t have to be a world-class expert. You just need to be a step ahead of someone who wants to learn.

3. Starting a niche blog or YouTube channel

In the digital age, content is king. Starting a blog or YouTube channel about your hobby can be a fun way to share your passion with the world. And yes, it can also be lucrative. The trick is to focus on a niche that’s both interesting and not overly saturated.

For example, instead of a general cooking vlog, how about one focused on vegan meals for families? With ad revenue, sponsored posts, and affiliate marketing, bloggers and YouTubers can earn anywhere from a few hundred to several thousand dollars monthly. The key to success? Consistent, high-quality content that genuinely adds value to your audience’s life.

4. Stock photography

Photography is an incredibly versatile hobby that can open numerous doors for generating income. The possibilities are vast, from selling prints of your work to offering your services for events, weddings, or portraits. Moreover, stock photography websites like Shutterstock and Adobe Stock allow photographers to earn royalties on their photos. In fact, you can earn up to 40% commission on Shutterstock. With the right eye and a bit of marketing, photography can transform from a passion project into a profitable business.

5. Garden design and plant propagation

Gardening might seem like a quiet, personal pastime, but it too can generate income. Specializing in propagating rare or organic plants and selling them at local markets or online can attract a niche market willing to pay premium prices.

Furthermore, offering landscaping design services or creating a blog sharing gardening tips and tricks can be lucrative. Gardening not only provides the satisfaction of growing something from the ground up, but also the potential for more green in your wallet.

Earning income from your hobbies is more than just making money; it’s about connecting with others who share your passions and finding fulfillment in your creativity. The amounts you earn can vary widely, but with persistence, creativity, and a bit of business sense, your hobby can become a significant income source and boost for your budget.

Who knows? What starts as a small side hustle could evolve into your main source of earnings, allowing you to live that dream of doing what you love for a living. So, go ahead, dive into your hobbies with a new perspective, and start exploring these little-known paths to financial rewards.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends Etsy. The Motley Fool has a disclosure policy.

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Credit card debt can be a huge problem. Keep reading to learn about why it’s so bad for your finances. [[{“value”:”

Credit card debt is bad news. You’ve most likely heard this many times from financial experts and there’s a reason for that. Carrying a balance on your card can be a very bad way to borrow money, and it can wreak havoc on your personal finances.

But just how bad is it really to have a balance on your credit card? Here’s what you need to know about the serious downsides of credit card debt.

Credit card debt can be really expensive

The biggest reason why credit card debt is so bad is because it is so expensive. The average interest rate on a credit card is 21.47%, but some cards charge even higher rates. That’s a lot of money to spend for the privilege of borrowing. If you have a $2,500 balance on your card and you pay the average rate, you’d pay around $45.99 a month in interest charges. Over the course of the year, that would be over $550 in interest charged.

The higher your balance, and the longer you carry a balance, the more your cards will cost you. These interest charges take money that you could be using to save for emergencies or for retirement — or even that you could use for more fun things like vacations.

It’s easy to fall into the minimum payment trap

Another big downside of credit cards is that the minimum payment is typically really low — and it’s tempting to just pay those minimums for months or years on end. After all, you may feel like as long as you can afford to keep up with your payments, you’re doing fine.

Unfortunately, if you are paying only the minimum, most of your payment goes to interest and you don’t make progress on repaying your debt. You could be in debt for years. Say, for example, you have a $2,500 balance at 21.47% interest and you make minimum payments equal to 2% of your balance. You’d end up paying $13,833.63 over time, and it would take you more than 30 years to be debt-free.

You could cost yourself future opportunities

If you have credit card debt, you have monthly payments you must make for as long as you’re carrying a balance. This means that you’re going to be paying for past purchases for a long time to come — potentially for decades.

During this whole period of time when you’re sending off interest and small principal payments to your card company, you won’t have that money to do things like cover the bills or invest in a brokerage account. This can make it harder to save for future goals, or even to live within your means. If a good portion of your future income is still paying for the past, it will be harder to live within your means in the present.

For all of these reasons, you should do all you can to avoid credit card debt. Usually, this means living on a budget to ensure you only charge an amount on your cards that you can fully pay off. If you are already in credit card debt, make a plan to pay it off as soon as you can. You may want to look into using a balance transfer credit card to lower your rate and then making extra principal payments to pay down the balance ASAP.

It’s really not a good thing to be in credit card debt. And if you are in it, you should start working on your debt payoff plan now so you can avoid these undesirable consequences and build a more secure future.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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