Money Management

Do you know what percentage of rich Americans are truly self-made? Keep reading for myths about wealth you’ll hear from the 1%. [[{“value”:”

The wealthiest 1% of Americans have gotten a lot wealthier in the past few decades, while many other Americans struggle with higher prices for groceries and car insurance. Money is power, and the richest Americans have often manipulated the public conversation about wealth in ways that serve their best interests.

Let’s look at a few big myths about wealth that the top 1% want you to keep believing.

1. “We got all our money from hard work”

Only 27% of rich people are self-made. Lots of rich people inherited their money. Or they inherited privileges — education, connections, social capital — that enabled them to make more money. Or they got lucky from a one-time score — like cashing in stock options as one of the first employees at a billion-dollar tech startup.

Some got rich from crime (er, let’s say “ethically dubious activities”). The Sackler family (who founded Purdue Pharma) got billions of dollars from selling addictive opioid painkillers, the likes of which have killed hundreds of thousands of people in America.

2. “Paying taxes is the worst thing to happen to anyone ever”

Taxes buy civilization. I’m grateful to pay taxes. I keep voting to raise my taxes, but no politician will. My income tax bill has never been a burden, because I only owe more tax if I make more money. And America’s top tax rates are much lower than Europe and other wealthy democracies.

OK fine, rich Americans: let’s say you made $500 million last year and you have to pay 50% of that in tax (you’re probably not actually paying that much) — you still get to keep $250 million!

America has a pretty high rate of tax compliance compared to other countries — people willingly pay their taxes in America, and it matters. There’s an ancient concept called “noblesse oblige,” the idea that people who are wealthy should be generous, and that with great privilege comes great responsibility. I’d like to see more of this noble spirit from the top 1%.

3. “More money won’t solve your problems”

Reality: money can solve lots of people’s problems. Money can buy food, car repairs, and therapy. Money can keep a roof over your head and get your child’s worrisome, persistent cough looked at by a doctor. Money can buy time, comfort, and peace of mind.

America mostly solved child poverty during the pandemic through the temporarily expanded Child Tax Credit in 2021. Giving more money to lower-income families helped them pay their bills and take care of their children. Being a parent, and just a person in general, is much less stressful when you have enough money.

It’s completely baffling to me that in a country where most people don’t have enough money, the wealthiest people on Earth have convinced so many others that “money is not the answer.”

4. “A rising tide lifts all boats”

Economic growth ideally should make everyone richer, but that’s not happening in America — wealth inequality has risen in the past 30 years, and the top 1% of Americans now have more wealth than the bottom 90%.

Some amount of wealth inequality is perhaps inevitable, and may have good effects, because it gives people an incentive to invest, take financial risks, and build hugely successful companies. But America has levels of wealth inequality where a few guys have hundreds of billions of dollars, and 63% of people don’t have $500 for an emergency expense.

When wealth inequality gets too severe, even aside from the moral and ethical issues, it can hurt economic growth. Consumer spending is 70% of America’s economy. If middle class people can’t afford to buy homes and cars and groceries while the top 1% get even richer, ultimately we are all going to be made poorer for it.

Warren Buffett, to his credit, is speaking out about the problem of wealth inequality. He’s also talked about tax reform, and how he believes it’s important for people like him who make billions of dollars from investments to pay a higher tax rate than their secretaries.

5. “We’re not rich”

Even the world’s wealthiest people still worry about their personal finances. I was listening to a podcast the other day with a successful entrepreneur and investor who said his net worth is over $100 million, and he still feels financially insecure.

Good for him for being so vulnerable and honest. But what’s the point of having all that money if you’re still living in fear?

Bottom line

I’m not trying to sound harsh, bitter, and conspiratorial about wealthy people. We’re all human beings, and most people are doing the best we can within our own limitations, biases, and cultural bubbles. Lots of people — including me! — have some degree of unearned privilege.

I believe in economic growth and hard work and hustle, of the dignity of labor and human potential. I want human ingenuity and enterprise to be richly rewarded. I love creativity and entrepreneurship, and I love making money, spending money, investing money, and donating money. I don’t want to live in a gray, sclerotic, bureaucracy-choked Socialist dystopia.

But I believe that America’s economy has gotten so far out of balance, with so much wealth going to the top 1%, that it’s endangering our entire economic system (and our democracy). The world is crying out for help. We’ve got to pay for climate change. Formerly middle-class Americans are dying younger from disease, drugs and despair — U.S. life expectancy has declined, while the rich get richer. None of this is sustainable or healthy or “good.”

We need generosity and shared prosperity, not tech billionaires buying private islands. I want to live in a beloved community of relative equals, not a nightmarish oligarchy. People who are fantastically fortunate should be humble leaders and good citizens — and pay their taxes.

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You can be completely clueless about investing and still build a lot of wealth. Read on to see how. [[{“value”:”

A friend of mine recently started funding an IRA for retirement savings purposes. And one of the first questions he had for me was, “What investments should I choose?”

It wasn’t the easiest question to answer. See, my personal portfolio consists of a large variety of stocks. But those are stocks I’ve chosen for different reasons. And just because those are the right stocks for me doesn’t mean they’re the right stocks for my friend, or someone else.

So instead of telling my friend to simply copy my list of stocks, I reassured him that he’s not alone in feeling like he’s in the dark when it comes to investing money. Many people aren’t well-versed in researching stocks, and many don’t know what metrics to look at.

That’s why I told my friend his best bet may be to load his portfolio with S&P 500 ETFs. And if you’re not sure how to invest your money, you may want to do the same.

When you fall back on the broad market

Exchange-traded funds (ETFs) tend to be a good choice for people who are new to investing. You’ll often hear that it’s important to maintain a diversified portfolio at all times. With ETFs, you’re buying a bucket of stocks instead of shares of individual companies. That makes it so you’re not putting all of your eggs into a single basket.

Meanwhile, the reason I’m a fan of S&P 500 ETFs is that they really allow you to diversify nicely. The S&P 500 index is commonly used as a benchmark for tracking the stock market’s performance. In fact, when you hear on the news that the stock market was up or down, often, the person saying that is referring to the value of the S&P 500 index.

If you buy shares of an S&P 500 ETF, you’re effectively investing in the 500 largest publicly traded companies. That should give you some comfort, because if some of those companies lose value, others might gain value to compensate, thereby sparing you from significant losses. Also, you’re generally investing in established companies, which may inherently carry less risk.

How much wealth can you grow with S&P 500 ETFs?

Over the past 50 years, the S&P 500 has rewarded investors with an average annual return of 10%. So let’s say you invest $250 a month over 40 years. If you can score that same return, you could end up with over $1.3 million to your name. All told, you’re looking at gains of well over $1 million (because $250 a month x 12 months x 40 is only $120,000 of your own money going into your account).

You do not have to be an expert in investing to do well in the stock market. If you load your portfolio with S&P 500 ETFs, you can take a lot of the guesswork out of investing, all the while potentially setting yourself up with a lot of wealth.

Now to be fair, investing in individual stocks could result in a return that’s greater than what the S&P 500 itself delivers. But if you’re not willing to do the work involved in learning how to research stocks, or you feel that it’s too overwhelming, know that there’s nothing wrong with sticking to a strategy that basically has you investing in the broad market.

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Busy parents need all the help they can get. Find out how Costco can help parents on a time crunch add some hours back into their weeks. [[{“value”:”

Busy parents, I get you. Although I just began the busyness of parenting six months ago with our infant daughter, I already feel I have a great deal more to do. Between days of cleaning bottles to nights of changing diapers and helping her find her pacifier, I definitely don’t have as much time for myself, barely enough to even get the groceries each week.

Thankfully, we have a Costco within a fifteen-minute drive, and it’s been amazing for our lives (and personal finances). Not only do we save money, but we’re also saving time. While I know it’s not for every busy parent out there, here are five ways Costco might help you add some time back into your schedule.

1. Buy your staples in bulk

Busy parents don’t have time to shop at the grocery store every week, let alone multiple times for certain goods they consume quickly. This is where Costco really comes in handy. Because Costco sells most goods in bulk, parents can stock up on necessities, helping them cut down on trips to other stores.

For my family, we typically visit Costco once a month, and we buy enough diapers, baby wipes, toilet paper, paper towels, olive oil, eggs, bread (which we freeze), cat food, seltzer, and other non-perishable goods to last as much time. Because we stock up on these essentials, we hardly make surprise trips to other stores, reserving those visits for items we can’t buy at Costco, like frozen dinners from Trader Joe’s. It also helps that we have a storage closet in our apartment, because, otherwise, we’d be navigating around towers of diaper boxes.

2. Pre-made meals

Costco sells prepared meals, like macaroni, rotisserie chicken, Caesar salads, and chicken noodle soup, at super low prices. These are perfect for busy parents on a budget. Not only do you get to skip meal prep altogether but you’ll also spend less than if you had ordered takeout or picked up fast food. Just be mindful of the expiration dates, as these meals typically expire within a few days of purchasing them.

3. One-stop shopping

Costco sells pretty much everything. It’s one of the only stores where you can shop for groceries, clothes, new appliances, and electronics, while also having your tires replaced and getting your dog’s medication. You can also find several home services through Costco, like gutter cleaning, custom cabinetry, and even solar panel installation.

This near-comprehensive list combined with Costco’s low prices makes it easy for busy parents to decide where they’ll purchase certain services, as they can get most things done at Costco for a great price.

4. The food court

Costco’s food court is perfect for the family who just managed to squeeze in some time to take a trip to the grocery store. Plus the prices are unbeatable. With its $1.50 hot dog and soda combo and $1.99 pizza slices, you can easily feed your family for $10 to $30. Of course, cheap prices attract crowds, which is why it’s best to plan ahead if you want to buy lunch at the food court. For example, my spouse typically orders at the food court while I check out with our groceries, so that, by the time I’ve checked out, she already has our lunch.

5. You can order online

You don’t even have to go to Costco in person to take advantage of its deals. You can order groceries through Instacart or through Costco.com. To be sure, Costco has a small surcharge for items ordered online. But if you’re in a time crunch, paying a little extra to have your goods delivered might be worth the money.

All in all, Costco can save you time by helping you stock up on groceries, thus cutting down the trips to other stores. It can also save you money, especially if you’re an Executive member ($120 per year), as you’re earning 2% cash back on all your purchases. Give a Costco membership a try and see if it can add some hours back into your busy week.

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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 Costco Wholesale. The Motley Fool has a disclosure policy.

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Filing taxes as a single person can feel complex and expensive — but single people can still get good tax breaks. See how to reduce your tax bill. [[{“value”:”

Sometimes filing taxes as a single person can feel like cooking for one: not a lot of easy savings. But there are still some good tax breaks for single people.

Let’s look at a few tax strategies that single filers can use to reduce their federal income tax bill.

1. 401(k) contributions

If you qualify for a 401(k) or other employer-based retirement savings plan like a 457 or 403(b) account, be sure to put money into it! Saving for retirement is always a good idea, and by putting money into a tax-deferred retirement account, you will also get an immediate tax break.

401(k) contributions aren’t technically “tax deductions,” because the money just doesn’t appear as taxable income on your tax return. But by putting money into your 401(k) or other employer-based plan, you are effectively reducing your income that can be taxed by the IRS.

For example, if you earn a salary of $60,000 per year and you contribute 10% of that salary ($6,000) to your 401(k), your gross income for tax purposes is now only $54,000. Assuming that you’re in the 12% tax bracket, a $6,000 401(k) contribution saves you about $720 in income taxes.

For 2024, you can contribute up to $23,000 to a 401(k) or other qualifying retirement plan; people who are age 50 and over can put in a catch-up contribution of an additional $7,500, for a total of $30,500. If you’re a high-income single taxpayer, maxing out your 401(k) can be one of the best ways to reduce your tax bill.

2. Traditional IRA

Single people are allowed to contribute up to $7,000 for 2024 to a traditional IRA. If your income qualifies, you can deduct that entire $7,000 amount from your taxable income. People who are age 50 and over can make a catch-up contribution of an extra $1,000 to a traditional IRA — for a total of $8,000.

If you already have a 401(k) or other retirement plan at work, you might not also be able to use a tax-deductible traditional IRA. There are some limits based on income. For example, if you’re a single filer, your adjusted gross income (AGI) must be less than $77,000 to be allowed to take a full tax deduction on your traditional IRA contributions for 2024.

Not everyone has room in their budget to put money into a 401(k) and a traditional IRA. But if you’re a single person who’s trying to supercharge your retirement savings while reducing your tax bill, this is a good way to do it.

3. Health savings account (HSA)

If you have a high-deductible health insurance plan, you might be able to use a health savings account (HSA), a special tax-advantaged account to save money for healthcare costs (and possibly for your future retirement). Single people with health savings accounts can make tax-deductible HSA contributions of up to $4,150 for 2024.

HSAs offer an excellent “extra” income tax break that more single people should try to get. And unlike the traditional IRA, there are no income limits — even if you’re a high earner who doesn’t qualify for lots of other tax breaks, you can get a federal tax deduction for every dollar of your HSA contributions.

4. Itemized deductions (greater than $14,600)

If you’re a single homeowner, one possible tax advantage is that it might be easier for you to itemize deductions. Itemized tax deductions are a good way for higher-income taxpayers to reduce their taxable income by deducting charitable donations, home mortgage interest, and state and local taxes. However, with the recent increases in the standard deduction since 2018, most taxpayers cannot itemize.

The standard deduction for single filers for 2024 is $14,600. So if you own your home, and pay a mortgage, and live in a state with income taxes, you might be able to itemize. Here’s an example of how itemized deductions might look for a single taxpayer.

Rebecca is a single filer who lives in Illinois, a state that charges state income tax. Rebecca owns her home and paid $6,000 of mortgage interest and $5,000 of property taxes; she also paid $4,000 of Illinois state income taxes. Rebecca also made donations to charity of $3,000.

Rebecca’s itemized deductions would look like this:

Because Rebecca’s itemized deductions add up to more than her (single filer) standard deduction of $14,600 for 2024, she can take itemized deductions instead. And itemizing reduces her taxable income by an extra $3,400.

Bottom line

It’s true that married couples filing jointly sometimes get some extra tax advantages, but don’t assume that there’s no hope of getting tax breaks as a single person. Single people have options for how to handle tax planning. Try to maximize your 401(k) or other tax-advantaged accounts. And don’t forget to take itemized deductions — this is a big tax break that is sometimes easier for single people to get.

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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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