Money Management

Since I’m a freelance writer, I don’t make the same amount of money all the time. I like to prepare for when I’m not making money. Find out how I do that. 

Freelancing allows me to live a more flexible lifestyle. I control my work schedule, and I can prioritize interests and activities that matter to me, like traveling. But when it comes to my finances, things look very different than when I worked a traditional job, and I’ve had to adjust how I manage my money.

If I’m not working, I don’t get paid. My income can also be inconsistent, especially when I take time off or decide to lessen my workload. If you hope to become a freelancer, it’s essential to consider how your finances may change so you can adjust your money management strategies. Here’s how I manage income fluctuations as a freelance writer.

I take on extra projects before a planned vacation

If my schedule allows, I do extra work before taking time off. Spending the month before a vacation working extra hard ensures I can fully enjoy my upcoming vacation without worrying about answering emails or writing content. Instead, I can truly enjoy my travels and give my brain a much-needed break.

This also allows me to increase my checking account balance before I go on vacation so I can continue to pay my bills without stress.

I continue to save regularly

I like to prepare for the unexpected; having extra cash in the bank is one way to do that. Throughout the year, I regularly contribute to my savings account. I save for upcoming travel, taxes, and planned upcoming expenses like car registration fees and yearly membership dues.

But I also continue to stash cash in my emergency fund because I never know when an unexpected bill will come my way. Another reason I continue to contribute to my emergency fund is to have extra money available when my income fluctuates. This way, if I’m not working or don’t have payments coming in soon, I have money that I can use to pay my bills. I don’t want to risk taking on credit card debt.

I automate the savings process to cope with forgetfulness. I set up automatic withdrawals through my bank so money is transferred from my checking account to my savings account automatically. Since I keep my extra money in a high-yield savings account, I also earn interest.

Here’s what I’m changing in 2024

I’ll be starting my eighth year as a full-time freelance writer in January. I’ve learned a lot throughout my journey and made my fair share of mistakes. When I discover a better way to do something, I make a change. One adjustment I’ll be making in 2024 is to change my savings strategy.

I’ll add another savings bucket to my Ally Savings. I plan to set aside money bi-weekly to cover my pay when I’m on vacation or off work due to sickness. This strategy can help me avoid doing extra work before I leave for a trip and will ensure that I still have money to pay for my regular expenses. It’ll help me keep my work-life balance in check, too.

Here’s how I’ll calculate how much money to save: I’ll take my usual weekly income goal and then estimate how much vacation time I plan to take. For 2024, I plan to spend five weeks away from work. So I’ll save enough money to pay myself for five weeks. I’ll divide my total goal by 26 weeks, and that’s how much I’ll stash in my savings account bi-weekly.

This change will allow me to prepare for my time away from work and help provide more consistency with my pay. When I take a week or two away from work, all I have to do is transfer some savings to my checking account. Even if I don’t take all five weeks of vacation, extra pay will be there if I need a mental health day or sick day or if a work project slows down.

Keep your finances in mind

If you’re considering starting a small business or becoming a freelancer, keep your finances in mind. Your money habits will likely need to change. If you experience income fluctuations, you’ll want to have a plan for how you will cover your bills when work or money isn’t as plentiful. For additional money management tips, check out our personal finance resources.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Ally is an advertising partner of The Ascent, a Motley Fool company. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

 Read More 

Starting a business means taking on risk — and a lot of work. But read on to see why you may want to give it a go. 

Some people dream about starting a business, but never really go beyond that point. They think about what it might be like to run a shop, a cafe, or other venture, but it’s mostly a pipe dream.

But if you have a serious, well-thought-out idea for a business, then you may want to take the leap into small business ownership. Doing so could be a good way to grow your personal wealth, and that of your family.

The financial upside of starting a business

Recent data from the Federal Reserve found that families that owned a business in 2022 were considerably wealthier than those that didn’t. The average net worth of families without their own business that year was about $570,000, compared to nearly $1.1 million among families that did own a business. To put it another way, families with businesses had almost twice the net worth of those without.

Now, let’s get one thing out of the way. Just because you start a business doesn’t automatically mean your wealth is going to soar and outpace that of your salaried friends. Not every business venture is successful, and it can take a long time to reach the point where a business increases your net worth and you have a flush business bank account.

What you should take away from this data, rather, is that starting a business could potentially set you up to grow your wealth over time, especially if you’re willing to work hard at it. So if starting a business is something you’re already interested in doing, then it could be worth mapping a plan to make that a reality.

Are you ready to start a business?

Starting a business is a big commitment. And there can be risks involved. It could take months or years for even a great business to turn a profit. So you’ll need to be aware of that, as well as the fact that starting your own company might, at least initially, result in a less optimal work-life balance.

You may have to put in a lot of time to get your business off the ground and oversee operations until you’ve staffed up. But if you’re willing to accept those risks and drawbacks, then you may be in a good position to start a business if the following applies to you.

You have enough money in savings to cover about a year’s worth of living expenses

You’ll need a way to pay your bills until your business starts generating revenue, and that may not happen for a while. A good bet is to go in with a cushion — about a year’s worth of essential bills in your savings account.

You may, however, be able to get away with less savings if your spouse or partner has a steady job they’re holding onto and you can manage on their income alone. For example, if you currently make $70,000 a year and your spouse makes $80,000, and you already live comfortably on just their salary, then you may be okay to start your business with less money in the bank.

You have an actual business plan

Maybe you want to open a cafe that features local artists who perform and teach classes. Or maybe you want to start a pet-sitting business.

Ideas like these could take off in a big way, but don’t just think of the big picture. Rather, map out the finer details. How will your business be funded? Where will it be located? What costs will you be looking at? Write up an actual plan you can work with.

You’re not expecting to undergo major life changes soon

If you’re having a baby in a few months or moving to a new home, then it’s probably not the best time to start a business. Your business is likely to need your full attention. It’s smarter to make that move when your life is stable and you can really afford to put in the time.

Starting a business could be your ticket to growing your net worth and setting your family up to be more financially stable. But make sure you’re really in a good position to dive in. Also, make sure you’re aware of the risks and challenges you might face, especially in those early days.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

Paying only the minimum on a $5,000 card balance would leave you in debt for decades and cost thousands in interest. See just how much you’d pay here. 

Credit cards can be a great way to buy things. Unlike when you pay out of your checking account, you can get all kinds of perks for using a credit card — such as extended warranties and rewards that give you points, miles, or cash back.

What you don’t want to do, though, is carry a balance on your credit card. You’ll want to pay the card off in full when your statement is due so you don’t get stuck paying credit card interest. Otherwise, you could find yourself spending an absolute fortune.

Say, for example, you had a $5,000 balance on your card. How much exactly would this cost you if you only made the minimum payment?

Making only the minimum payment is expensive

If you owed $5,000 on your credit card at the average interest rate of 21.19% (as of August 2023), and you made a minimum payment of 2% of your card’s balance, it would take you 878 months (more than 73 years) to pay off your debt. And during that time period, you would pay a shocking total of $30,797.65 in interest.

You may be wondering how it is possible that this could happen. How could you end up in debt for 73 years and spend more than six times the amount you initially charged? It’s very simple: Your minimum payment would almost entirely go toward covering the financing charges that you owe to your creditor.

Your first payment on your $5,000 balance, for example, would be for $100.00. Of that amount, $87.50 would go to interest and just $12.50 would go to actually lowering the balance outstanding on your debt.

You would bring down your balance so slowly that it would take you many decades to actually end up owing nothing. And with such a high interest rate, you would be paying your credit card company tons of money out of your bank account without making much progress.

How to deal with your expensive credit card debt

Obviously, it is not sustainable to get stuck paying a credit card balance for 73 years. You don’t want to be paying off today’s purchases as a retiree. So, you’ll need to either:

Pay more than the minimumsRefinance your debt

Ideally, you’ll consider doing both of those things. If you can refinance to a personal loan, you may be able to drop your interest rate dramatically. Plus a debt consolidation loan would come with a fixed repayment schedule so you’d become debt-free in a few years. You would have higher monthly payments, but save a fortune over time.

You could also explore options such as moving money to a balance transfer card. This would allow you to reduce your rate to 0% on the transferred balance for a limited period of time (although you’d usually have to pay an upfront balance transfer fee of 3% or 5%).

Paying more than the minimum on your current card could also help, although the high rate credit cards come with is always going to make paying off a balance more difficult if you can’t refinance. Still, any extra you can pay will bring that balance down much faster since it will all go toward your principal balance instead of being applied to interest owed (and leaving you with nothing to show for it). So it’s worth making the effort to pay more than the minimum due.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

It’s a great thing to invest in your 20s. Keep reading to learn how to approach it. 

Many people don’t start investing — for retirement or otherwise — until their 30s or beyond. And that’s understandable.

When you’re in your 20s, you may be living on an entry-level salary that isn’t much to write home about. You might also be grappling with a world of expenses, like lingering credit card debt from college.

As such, you may not have a ton of money to invest with. And you should know that’s totally OK. Even if you only manage to invest a small amount of money in your 20s, it could go a long way. So the key is to simply get started. Here’s how.

Go big on stocks

Some people are hesitant to invest in stocks because doing so can be risky. But if you’re in your 20s, your age alone minimizes that risk in the context of saving for a far-off milestone like retirement.

Over the past 50 years, the stock market has averaged an annual return of 10%, as measured by the performance of the S&P 500. During that period, there were times when the market lost money. That 10%, however, represents its average return overall.

What this tells us is that if you’re able to start investing in your 20s, you might have close to a 50-year window before retirement starts. And that means you’re likely to make money by investing in stocks, even if you happen to take some losses temporarily.

Go broad at first

It can take some time to get comfortable with the idea of buying individual stocks. And it can also take time to build up the skills needed to research stocks thoroughly. So if you’re first starting to invest in your 20s, a good bet may be to load your portfolio with S&P 500 ETFs, or exchange-traded funds.

The S&P 500 is an index that consists of the 500 largest publicly traded stocks. When you buy into the S&P 500, you’re basically putting your money into the broad stock market. That means you get the benefit of instant diversification, and you don’t have to take on the stress of vetting companies individually.

Investing in your 20s can go a long way

You may only be in a position to invest $100 a month here and there in your 20s. You might think, “Why bother?” But here’s why you absolutely should bother.

Let’s say that by age 25, you have $500 in a brokerage account that’s loaded with S&P 500 ETFs generating a 10% yearly return. Even if you don’t contribute another dime, by age 70, that $500 investment will be worth almost $36,500.

Meanwhile, let’s say you get into the habit of investing $100 a month at age 25 and do so until age 70. Assuming that same 10% return, you’re looking at a total balance of $863,000. That could make for a very nice retirement nest egg.

One of the most important things you can do in the course of your investing career is just get started. And if you’re able to make that happen in your 20s, you can set yourself up for a very comfortable retirement down the line.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.

 Read More 

Many companies wait until the end of the year to do performance reviews. Read on to see why you should have yours take place sooner. 

Performance reviews have long been a mainstay in the world of businesses large and small. And while some human resource professionals might argue that they’re nothing more than a waste of time, it’s also easy to see why these exercises offer value.

For one thing, a performance review can help employees build on their strengths and work on their weaknesses. These reviews also tend to encourage employees to set goals — goals that have the potential to not only further their careers, but make your company more money.

As of August 2021, 63% of U.S. employers were still in the habit of conducting formal annual performance reviews, according to data from XpertHR. So if you’re still upholding that practice, you’re in good company.

But if you normally wait until the very end of the year to do your performance reviews, you may want to rethink that practice. A much better bet could be to conduct those reviews ASAP.

Why you don’t want to wait until December

December is a popular time to conduct performance reviews. But it’s also a month when a lot of employees tend to be distracted and mentally checked out due to the holidays. So if you do your reviews then, they may not be so effective. Your employees may not be in the best place to absorb the information you’re giving them when they’re mentally focusing on finishing their Christmas shopping.

Also, people tend to travel at the end of the year, which can disrupt their work schedules and make it difficult to act on solid advice. But if you give your performance reviews now, they might be more effective. Your employees may be more focused on their jobs now than in the days leading up to Christmas, and they may be more eager to act on your suggestions for improvement.

Also, if you give those reviews now, there’s time to act on your advice before the end of the year. That could result in a near-term uptick in productivity and efficiency — and actually improve your company’s bank account balance before 2023 comes to a close.

Finally, if your policy is to give out raises on the basis of merit and not just inflation, then you’re better off having your reviews now. That way, if a given employee learns they won’t be getting a raise at the end of the year, it won’t come as a shock, and you’ll likely have less pushback. (Also, you wouldn’t want an employee to potentially be banking on a raise that isn’t coming their way.)

It pays to get moving on performance reviews

All told, there are plenty of benefits to conducting employee performance reviews now, and not waiting until the end of the year. Plus, think about it this way. If the news you have to share isn’t all positive, do you really want to ruin your employees’ holidays by stressing them out over their performance? Probably not.

Do yourself a favor and schedule those performance reviews now. If anything, you might feel good about getting one time-consuming task over with.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More