Money Management

Sometimes, the best way to tackle the gig economy is to venture out on your own. Read on to learn more. 

A friend of mine worked her way into a notable amount of credit card debt a few years back through a series of unfortunate events. First it was an issue with her car. Then she had to move to a new home and her final bill came in way higher than the estimate her movers had given her.

Since she’s an animal lover, she signed up to pet-sit on Rover, an app that connects pet owners with pet caregivers. But there was one thing that got in the way of her earning a pretty penny — fees.

When you consistently lose a chunk of your earnings

It costs $35 to set up a profile on Rover, and that’s not so bad. What really hurt my friend’s earning potential, though, was losing 20% per gig to the ongoing fees she had to pay.

To be fair, a lot of people wouldn’t be able to connect with pet-sitting clients if it weren’t for a service like Rover. But my friend found paying those fees frustrating. And it’s worth noting that they don’t cover things like damage to a pet sitter’s home or injuries sustained by a pet sitter in the course of caring for a pet through Rover. So all told, my friend began to feel as if she was really being ripped off.

Going solo was a better bet

After a while, my friend decided to stop pet-sitting through Rover due to the fees and instead she branched out on her own. She made connections in a few different ways.

First, she made a point to chat up dog owners in her apartment complex and encouraged them to call her when they needed help. She also did a great job caring for pets, so much so that her clients were inspired to refer her to other people.

Should you go it alone?

If you’ve been trying to build up a pet-sitting business through a site like Rover and have been struggling with the hefty fees, then it could pay to venture out on your own, too. But you may want to wait until you have an established profile on that or a comparable site with rave reviews. And you may want to also wait until you’ve established relationships with a few clients who might be willing to serve as references.

For a lot of people, leaving a pet in another person’s care is difficult. So it’s really important to have a history of positive experiences to point to, and a list of people who can attest to how thorough you are with their pets.

Also, keep in mind that you might bear certain costs when you open your own pet-sitting service. You may need to buy extra insurance, and you may need to spend some money to advertise your business. But all told, you might still come out ahead financially by virtue of not losing something like 20% of every gig you take.

My friend no longer watches dogs for money, partly because her financial situation has improved and partly because she now has her own dog who’s a handful. But the time she spent caring for pets really helped her get to a better place and build her savings account balance.

Whether you’re trying to build a pet-sitting business as a side hustle or a full-time job, know that patience is really key. It may take time to build up a solid client base. But if you go about it strategically, you may find that you’re able to excel on your own — even if you don’t have a profile on a popular app.

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Cash is king for the ultra-wealthy right now. Read on to find out where else the rich store their financial assets. 

With inflation still elevated, credit card debt rising, and housing costs skyrocketing over the past few years, many Americans are trying to hold onto the money they currently have and hopefully find a few ways to grow it.

That’s why it’s worth looking at what the ultra-wealthy are doing with their money right now. There’s not tons of hard data out there on how billionaires manage their money. But a recent report from Capgemini Research, a global think tank, sheds some light on where high-net-worth individuals (HNWI) — people with $1 million or more in financial assets — keep their money.

Here are the top five places wealthy individuals invest their assets and a few suggestions for storing your money, no matter how much you have.

1. Cash and cash equivalents

It might seem contrary to some people’s assumptions about the wealthy, but the Capgemini report found that HNWI keep a large and growing portion of their assets in cash and cash equivalents, like short-term mutual funds or certificates of deposit.

The data shows that wealthy people have 34% of their assets in cash — the largest percentage of all the asset allocation categories — and that it’s becoming an increasingly popular place to put it.

In the previous five years, just 25% of financial assets were kept in cash, but with interest rates rising and inflation up over the past few years, HNWI have opted for a less risky place to put their money.

You don’t have to be rich to make a similar move with your money. Many banks currently offer high-yield savings accounts, making them an attractive option for safely growing your money.

2. Stocks

Not surprisingly, owning stocks is one of the main categories where millionaires and billionaires prefer to keep their money. The survey shows that 23% of wealthy people’s money was in stocks.

Interestingly, HNWI have retreated from stocks slightly over the past year. Capgemini data showed that rich investors put 29% of their assets in stocks in 2022, before paring their allocation back this year.

The types of stocks they invest in have changed, from buying riskier technology stocks to owning more value stocks.

3. Real estate

Wealthy individuals currently have about 15% of their financial assets in real estate. That’s roughly the same percentage the affluent have allocated to the financial segment over the past five years.

Rising mortgage interest rates are keeping many people from putting more into the real estate market. Collapsing commercial real estate values across the country will likely keep some investors away from that market as well.

4. Fixed income

Wealthy individuals put about 15% of their assets into fixed-income investments. These are stable investments, like bonds, that earn income over a set period of time.

For example, some bonds, like Series I Savings Bonds, pay 4.3% right now and pay out the interest every six months. Typically, you have to leave the money in the bond for at least one year and you’ll receive an interest penalty if you try to cash it in before five years.

5. Alternative investments

The lowest allocation among high-net-worth individuals was for alternative investments, including digital assets like Bitcoin or commodities like gold and silver.

High-net-worth individuals may also have alternative investments that include venture capital endeavors, private equity investments, and art collections.

This category made up just 13% of a wealthy person’s assets, but that’s still up from 9% in 2018.

Where to put your money

You don’t have to match the ultra wealthy when it comes to where you put your money, but you should have a strategy in place. For example, if you want to build your emergency fund and need a safe place, opening a high-yield savings account is a good choice.

On the other hand, shifting some money into a brokerage account where you can buy stocks may be best if you’re trying to grow your assets. Fortunately, you don’t need to be good at picking stocks to invest in the stock market. Choosing a low-cost index fund can be a great way to passively grow your money over time.

The important thing to remember is to have a plan in place for what you want to accomplish with your money, whether you have $1 million in financial assets or $1,000. If you’re unsure where to get started, you may want to consider online robo-advisors, which have low fees, low minimum investment requirements, and can automatically reallocate your investments.

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Get paid in stock as well as cash? Read on to see why that could become problematic — and what to do about it. 

Many people who work collect a salary and nothing more. But if you work for a company that’s publicly traded, you may be entitled to shares of its stock as part of your compensation.

To be clear, this isn’t the same thing as having stock options, where you get the option to buy stock at a certain price. Rather, some companies actually open a brokerage account for their employees that they deposit shares of stock into regularly, sometimes monthly.

Now, getting some of your pay in the form of stock can be a good thing. That’s because your shares could gain value over time. And if you’re able to pay your bills on your salary alone and let your shares rise in value, you might end up with a large amount of money down the line. But getting paid in stocks could also backfire on you for one big reason.

When your portfolio becomes imbalanced

You’ll commonly hear that your investment portfolio should contain a nice mix of assets. And if you’re going to go heavy on stocks, it’s important to diversify and load up on shares across a range of market segments.

But if you’re paid in the form of company stock and those shares keep coming in, what might happen in time is that those shares comprise a larger portion of your portfolio than what’s healthy. And that could lead to an unfavorable situation if those shares then lose value.

Let’s say that due to your company shares that keep coming in, 50% of your portfolio ends up being in a single company. If that company then misses expectations for earnings or suffers another negative event, the value of its shares could plunge, taking your portfolio down with it.

As a general rule, you probably don’t want a single stock to comprise more than 5% to 10% of your portfolio. So you’ll need to keep tabs on the company stock you keep getting and make plans to unload some of those shares as it makes sense to do so.

Sell with a strategy

Because you don’t want too much of your portfolio in just one stock, it’s a good idea to sell some shares of company stock if you start to accumulate a large position there. But you’ll need to be careful about when and how you sell those shares.

If you sell stocks at a profit after holding them for a year or less, you’ll be liable for short-term capital gains taxes. If you wait at least a year and a day before selling shares, you’ll be bumped into the long-term capital gains tax category, which has you paying a much lower rate of tax on your profits.

When you go to sell your shares, it’s important to see if your brokerage offers the option of FIFO, which is short for first in, first out. Using the FIFO method to sell your shares could help keep your tax burden to a minimum.

So for example, let’s say that as part of your compensation, you get 10 shares of company stock monthly, and you got your first 10 shares on Jan. 1, 2023. You’ll want to wait until at least Jan. 2, 2024 to sell those shares to avoid short-term capital gains.

But you’ll also need to make sure you’re using the FIFO method to sell. What you don’t want to do, for example, is sell the shares you received on Oct. 1, because then you’ll be looking at short-term gains.

Getting paid with stock on top of cash can be a good thing. But be aware that it could lead to a less diversified portfolio, and plan around that by selling shares strategically once they start piling up.

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.

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You lose thousands of dollars of buying power by leaving your money in a zero-interest checking account. Here’s how to change that. 

I’m getting to the age where my friends are starting to wonder if they should be doing something with their money. They perk up at mentions of the stock market, but they don’t know where to start.

To be fair, it’s complicated. But dipping your toes into the personal finance universe is worth the time spent. Though “doing nothing” often seems the safest, the truth is there’s a huge cost to doing nothing with your money. It has to do with two important things: inflation and opportunity.

Inflation shrinks the worth of $10,000 in 23 years

Each year, inflation lowers the value of U.S. dollars. The Federal Reserve tries to keep inflation around 2%, but inflation has historically averaged 3.28%, as measured by the Bureau of Labor Statistics. That inflation number doesn’t seem like a lot, but it’s more than you think.

Example: Say you had $10,000 saved in January 2000. You stuck that money in a checking account earning 0% APY and left it there. As of January 2023, you still have the $10,000. But now you can buy much less with it. According to the CPI inflation calculator, you’d need over $17,000 saved to match your old buying power. Your money doesn’t go as far as it used to.

By keeping your money in a zero-interest account — or as cold, hard cash — you invite inflation into your life and your finances in a direct way. Your dollars remain, but as the years pass, your buying power declines.

You can combat this by keeping some savings in a high-yield savings account. The best high-yield savings accounts protect the value of your deposits. But there’s more: the real missed opportunity is the money you could have made from the stock market.

You miss a long-term opportunity to grow your money

Thousands of Americans are putting their money to work. Unfortunately, financial literacy education is spotty, so many Americans must figure out how to invest on their own. But if you can stomach the plunge — or a quick dip — you can make your savings last decades longer.

Example: The stock market has returned an average of 10% per year over the past 50 years. Had you stuck $10,000 in the S&P 500 index in 1992, you would have $114,300 after 30 years. After adjusting for inflation, that’s a whopping $56,500 worth of buying power. That’s more than five times the buying power you started with!

It’s easy to let opportunity pass you by. When the stock market is down, it’s downright tempting to avoid investing. However, following a simple investment strategy is one of the best ways to make enough money to retire, assuming you have enough time, savings, and risk tolerance.

Put your money to work

I started investing when I realized that I’d need to invest to make enough money to retire at 65 or so comfortably. I now invest at least 20% of my earnings in the stock market. It gives me hope for the future. When I turn 65, I may have enough money to retire.

Though nothing is certain, history shows that investing in the stock market is one of the best ways to grow your money long term. The earlier you start investing, the longer your money has to earn money — and the more compound interest can work its special brand of magic.

Be easy on yourself, but know that “doing nothing” with your money is sometimes the riskier option. It can come at a huge cost to your long-term savings.

Interested in doing something with your money? Check out The Ascent’s expert, all-in-one beginner’s guide to brokerages so you can put your money to work.

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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 a lot of great credit cards out there. If you’re tempted to apply for all of them, read on to find out what might happen to your credit score. 

Spoiler: Applying for too many credit cards can have a major impact on your credit score. But there is a way to smooth out the impact. Let’s take a look at why applying for too many cards can hurt your score and what you can do to avoid damaging it.

Applying for too many cards at once will hurt your credit score

Every time you apply for a new credit card, you authorize the credit card issuer to run a hard iniquity on your credit report. Hard inquiries can cause your credit score to drop by five to 10 points. What’s more, the hard inquiry will stay on your report for two years. Depending on how many hard inquiries you have, this could cause a significant drop to your credit score.

To be fair, hard inquiries make up the smallest portion of your credit score pie. For instance, your FICO® Score — the most widely used credit score model among lenders — has the following five components:

Payment history (35%) Amounts owed (30%) Length of credit history (15%) Credit mix (10%) New credit (10%)

A hard inquiry would fall under “new credit.” Since it is a low percentage, opening one or two cards typically won’t sink your score. But opening a slew of cards at once could lead it to drop five to 10 points each time, which is a much heavier chunk. What’s more, applying for numerous cards in a short period is often perceived as a sign of financial distress. This could alarm credit score analytics companies and cause more damage.

In addition to putting hard inquiries on your credit report, opening new credit cards could impact your score in two other areas: your length of credit history (15%) and amounts owed (30%).

New credit cards will make your average credit history seem younger. In this case, being younger is not positive (is it ever?) and could ding a few more points off your credit score.

At the same time, new credit cards will increase your total credit. This could be positive. More available credit could improve your credit utilization ratio. And in the FICO scoring model, it makes up a whopping 30%. Of course, this assumes you’re not going to max out each card, or at least charge a significant amount. Keep the balances low and more credit cards could soften some of the impact done by hard inquiries.

How to apply for numerous credit cards without hurting your credit score

No matter what, applying for a new credit card will cause a slight ding to your credit score. But if you want to avoid absolutely crushing it, the best thing to do is space out your applications. Generally speaking, it’s wise to wait six months after applying for a credit card to send in a new application for another.

Why six months? Well, in my experience, it’s best never to exceed four hard inquiries on your credit report at a time (five is the maximum). Remember that hard inquiries stay on your report for two years. If you apply for one new credit card in six month intervals, you should never have more than four hard inquiries at a time.

Sometimes, even four hard inquiries is too many. For instance, recently I applied for an Amex card and was denied — even though I had three hard inquiries and an 811 credit score.

All in all, if you want to apply for numerous credit cards (like more than three), prepare yourself for a hard impact on your score. It’s only temporary, of course, but it could affect your ability to use your credit to get cheaper car insurance and apply for new loans. Try to use the credit line that you have, and if you need to borrow more money, apply for something that has higher borrowing limits, like a personal loan.

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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.American Express is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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I didn’t earn a dime during my three months of maternity leave. Here’s how I kept myself from landing in debt. 

There are a lot of things I love about being a freelancer — the flexible working hours, getting to choose which projects I want to work on, and spending the day in my pajamas to name a few. But one less glamorous aspect is that there’s no paid time off. When I’m not working, I’m not making money.

I recently had my second child and took three months off for maternity leave. We still had my husband’s income to rely upon during that time, but our budget was definitely a lot tighter than we were used to. Here’s how we got through it.

We planned ahead

Fortunately, an unpaid maternity leave is an expense we could plan for. We knew roughly how long we had until our baby arrived and we used that time to save as much as possible so we’d have something to live off of during those months when I wasn’t working.

We kept this money separate from our emergency fund, because the two serve different purposes. Emergency funds are supposed to be for unplanned expenses. We wanted to reserve those funds in case something unexpected came up either while I was off work or after I went back.

We cut back our expenses

Trimming our budget wasn’t easy with a newborn in the house. Not only did we have doctor bills to pay for, but we also needed diapers, clothes, and all the other baby supplies. Since those were necessary, I didn’t have any problems buying them. However, I did my best to shop around and make sure I was getting the best possible deal first.

We tried to keep unnecessary purchases to a minimum, though. We avoided activities that cost a lot of money and steered clear of online shopping as much as we could. If there were things we really wanted but didn’t need, we made a mental note of them for later.

We used our credit card rewards points to pay our bills

Usually, I like to treat myself by spending the cash back I earn from my credit cards on things I enjoy. But given that money was tight for us, I chose to put that cash back toward my credit card bills instead. It didn’t make a huge dent, but it did save me a few hundred dollars.

We couldn’t count on a ton of credit card rewards every month, though. Primarily, we had to rely upon our savings and budgeting strategy to keep our costs manageable during this time.

Find what works best for you

I’m comfortable with the financial choices we made during my time away from work, but I know they weren’t the only things we could have done to keep our costs down. For example, we could’ve gotten rid of some of our streaming services temporarily to get a few bills off our plate. But we didn’t feel this was necessary, so we didn’t.

And if things had gotten really bad, we could’ve fallen back on our emergency savings or taken out a personal loan. But again, we found this wasn’t necessary for us. That doesn’t mean they’re not good strategies for some people, though.

When you find yourself in a tight financial spot, it’s best to weigh all your options before deciding how to proceed. You might be able to solve the problem by finding ways to increase your income without cutting spending at all. The typical side hustle generates about $483 per month and some can rake in well over $1,000 per month. Or maybe you can shop around a little more before you buy anything, to make sure you’re getting the best price possible.

There probably won’t be any one move that’ll solve your problems. It usually takes a combination of strategies to get your finances back on track. It can take time as well, so don’t get too frustrated with yourself if your savings account balance isn’t growing as quickly as you’d like.

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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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