Money Management

Want to grow a lot of wealth? Read on to see how — even if you have zero stock-picking experience. 

Warren Buffett is considered one of the most successful investors of our time. And much of his success has been rooted in identifying strong businesses and investing in them accordingly.

But let’s face it — if all of us had the same stock-picking ability as Buffett, we’d be millionaires. And while there are definitely steps you can take to become a more educated investor and get better at picking stocks, that may just not be in your wheelhouse. And that’s okay.

In fact, Buffett himself says that you don’t need to be a wiz at picking stocks to build a lot of wealth over time. All you need to do is stick to one simple strategy.

Put your money into the broad market

The stock market’s average annual return over the past 50 years has been 10%. Now when we talk about stock market returns, we’re generally referring to returns generated by the S&P 500 index, which consists of the 500 largest publicly traded stocks.

What this means is that if you consistently invest in S&P 500 stocks over time, there’s a good chance your portfolio will enjoy a similar return. And there’s a very easy way to invest in the S&P 500 without having to actually go out and buy shares of 500 different stocks — load up on S&P 500 index funds instead.

Index funds are passively managed funds that aim to invest in and match the performance of different market benchmarks. So an S&P 500 index fund will have the goal of performing comparably to the S&P 500 itself.

The nice thing about index funds is that they’re passively managed. You’re not paying for a fund manager to actively choose investments and devise a strategy, like you are when you buy mutual funds. Because of this, the fees associated with index funds tend to be very low. And you want to keep your fees low so they don’t eat into your returns.

Meanwhile, Buffett recommends S&P 500 index funds for the typical investor. He was even quoted as saying, “Consistently buy an S&P 500 low-cost index fund. Keep buying it through thick and thin.”

To be clear, Buffett doesn’t necessarily follow this advice himself. But he doesn’t have to, because he knows how to pick stocks. But for the average investor with limited knowledge, S&P 500 index funds are a solid choice.

Could S&P 500 index funds be your ticket to a $1 million portfolio?

We just learned that you might end up with a 10% average annual return if you load up on S&P 500 index funds. So, let’s say you invest $200 a month in those funds over 40 years and end up with that return. You’ll also end up with a portfolio worth over $1 million. Make it $500 a month, and you’ll be looking at over $2.6 million.

But to be clear, Buffett’s advice isn’t to just buy S&P 500 index fund shares and hold them for a few years. Rather, the key is to hold them over a long period of time. If you’re willing to do that, you may be surprised at how much wealth you’re able to grow — even if you feel you know nothing about picking stocks.

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More people could qualify for EV credits, and they’re set to become instant instead of buyers having to wait until tax time. Find out what you need to know. 

Electric vehicle tax credits are among the most lucrative tax breaks in the United States tax code, and have been around for years. However, there are two big changes coming in 2024 that could open the credit up to many more potential EV buyers and make these vehicles more immediately affordable. Here’s what you need to know.

EV tax credits will come at the point of sale

I won’t go too deep into the weeds on the details behind the electric vehicle tax credit, but the general idea is that it can be worth up to $7,500 for new electric vehicles that meet certain criteria, and as much as $4,000 for used electric vehicles.

In 2023 and previous years, the credit was claimed on the buyer’s tax return. In other words, if you bought a qualifying EV in 2022 and were entitled to a $7,500 tax credit, you would have to wait to claim the credit until you filed your 2022 tax return in 2023.

As part of the Inflation Reduction Act, the credit is becoming a point-of-sale credit. Customers can choose to have the credit applied to the vehicle purchase as a down payment at the point of sale (but could still choose to wait until they file if they want to). So, if you buy a $50,000 new electric vehicle and get a $7,500 credit, you could apply that toward the purchase price and only have to pay (or finance with an auto loan) $42,500.

The credit won’t depend on your tax liability

Under current tax law, the EV credit isn’t a refundable one. This means that if the amount of your tax credit exceeds your tax liability, you won’t get the difference as a refund. For example, let’s say you qualify for a $7,500 EV tax credit in 2023 but when you fill out your tax return, your total tax liability for the year is $4,000. In this case, your credit would just be $4,000 to offset your tax liability — the extra $3,500 won’t be given to you.

This is changing as well. While we knew that the credit was becoming a point-of-sale tax break already, it was previously unclear whether people with little or no tax liability would be eligible to get the credit at the time of purchase.

The U.S. Treasury Department has now clarified that customers can choose to take the full value of the credit at the point of sale “regardless of their individual tax liability.” This means that even if you owe no federal taxes for 2024, you can still get the EV credit of up to $7,500 applied to the purchase price of your qualifying vehicle.

What it all means to you

In a nutshell, you’ll be able to buy a qualifying electric vehicle in 2024 and get a tax credit of as much as $7,500 before you even drive away from the dealership, even if you have little or no tax liability for the year. It’s fair to say that these changes will open the EV credit up to many potential buyers who previously didn’t qualify, and the instant nature of the credit could incentivize many people who are currently on the fence to go electric.

While a tax credit isn’t a good reason to buy a new car all by itself, these rule changes are certainly worth knowing if you plan to eventually buy an electric car. And if you previously couldn’t qualify because of your overall tax liability and are in need of a new car, 2024 could be a good year to go car shopping.

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Workers who learn new skills can earn up to $8,000 more than those who don’t. Discover why Skillshare may be the right avenue to build new skill sets. 

There are many ways to learn new skills online, from in-depth YouTube videos to short clips on TikTok. And while there’s no shortage of video content, not all are helpful.

That’s why many people are turning to online platforms that teach courses on how to develop specific skills. And doing so could be very beneficial for workers’ personal finances.

A Gallup survey shows that workers who participate in programs that increase their skills — either through their employer or on their own — earn an average of $8,000 more annually than those who don’t.

If you’re considering broadening your skillset and potentially boosting your earning potential, here’s why you may want to consider the online learning site Skillshare.

What is Skillshare?

Skillshare is an online learning community with 25,000 video classes taught by 8,000 teachers. The platform mainly focuses on creative topics, including:

WritingGraphic designVideo creationIllustrationWeb development

There are some free courses on the platform, though most classes are part of Skillshare’s paid subscription. The annual cost is $165, but when I researched the site, there was a deal for one free month and 40% off the yearly subscription price.

A subscription allows you to watch all the courses on Skillshare, offline viewing of courses, and access to the Skillshare online community.

Why you might want to use Skillshare

There are some practical reasons to spend time learning a new skill or developing your skill set, particularly in the current employment landscape.

LinkedIn research shows job skill sets have changed 25% since 2015 and will change by 50% by 2027. In short, what companies are looking for from employees is changing quickly.According to Gallup, the average salary increase for a worker who participated in an upskilling program was 8.6% (that $8,000 average mentioned above).

While learning a new skill on Skillshare doesn’t guarantee that your salary will increase, these statistics show how important it is for workers to continue developing their skills.

Skillshare may be worth it for these reasons

There are lots of reasons to consider learning a new skill, but here are three that might make getting a Skillshare subscription worth it for you.

1. To boost your earning potential

As I mentioned earlier, employees who learn new skills have more opportunities to earn more money. If you’re looking for a way to convince your boss to give you a raise or you want to change jobs, taking some Skillshare classes could be a good option.

2. To start a side hustle

Skillshare has many classes focused on creative topics, which can be great for side hustles. Spending some time going through several courses could help you launch side projects in web development, graphic design, photography, or other freelancing avenues.

3. To develop new skills just for fun

Learning new skills or trying out a new hobby can be good for your mental health, and it doesn’t have to be focused on increasing your savings. Skillshare’s classes could be a great way to develop a creative hobby or explore new skills you’ve never thought of before.

Ultimately, paying for a Skillshare subscription will be worth it for some people and not for others. But with thousands of courses to choose from — and a free trial — there’s no real downside to testing out the platform to see if it’s right for you.

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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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The best way to use an HSA is actually to not tap it at all during your working years. Read on to see why. 

Healthcare is an expense that can be burdensome at any time in life. And so it’s important to save for it in some shape or form.

Now in this regard, you have options. You could simply pad your savings account and take withdrawals to pay for medical bills as needed. Or, you could open an HSA (also known as a health savings account) and enjoy a tax break on the money you’re setting aside for healthcare costs.

During the second quarter of 2023, almost 40% of HSA holders contributed more to their plans than they withdrew, reports Bank of America. And that’s a very positive trend.

The best way to use your HSA

It’s true that the point of having an HSA is to have money to tap for medical bills. But it’s also a good thing to have more money going into your account than coming out. In fact, if you’re able to avoid taking HSA withdrawals during your working years, you can benefit from an HSA the most.

Not only do HSAs give you a tax break on the money that goes into your account, but you’re allowed to invest funds you don’t need to withdraw right away. That money then gets to grow tax free, and HSA withdrawals are tax free as long as they’re taken to cover qualifying medical expenses, like copays for doctor visits.

If you tap your HSA every time a medical bill comes up, you won’t be left with as much money to invest. And that means you won’t get to capitalize on tax-free growth in your account.

On the other hand, let’s say you put $300 a month into an HSA over a 20-year period and never take withdrawals during those two decades. Let’s assume that instead, you take money out of your regular savings to pay for medical bills.

Over the past 50 years, the stock market’s average yearly return has been 10%, as measured by the S&P 500 index. Even if your HSA doesn’t do quite as well — say, you only average an 8% annual return — you’ll be left with a balance of about $165,000 in that scenario. That’s a nice balance to carry into retirement, when healthcare expenses might really eat into your income.

Not only can medical issues arise with age, but during retirement, you’re not working (generally speaking) or earning a paycheck. Rather, you may be living on just savings and modest Social Security benefits. So while you may be tempted to tap your HSA during your working years, try to remember that you’re better off reserving that money for retirement, because you might need a large balance at that stage of life to cover your medical bills and avoid financial stress.

Try to leave your HSA alone

If you’re eligible for an HSA, don’t just put money into that account for medical bills and assume you’re all set. Rather, if you can, also put extra money into your savings account so you can keep your HSA invested and simply withdraw from your bank account to cover your healthcare costs.

Of course, for some people, this isn’t possible. And if you can’t afford to contribute to an HSA plus a regular savings account for medical bills, then definitely prioritize the HSA because it gives you the tax break. But if you are able to do both, then you’ll really get to maximize your HSA — and potentially set yourself up to cover healthcare expenses with ease as a retiree.

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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.Bank of America is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.

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It’s not too late to change your current financial situation. Saving an extra $100 per month can improve your finances. Read on for three options to consider. 

Many of us are working hard to meet goals that will help us improve our finances. For many people, saving for the future is an important personal finance goal.

If you have limited extra funds left in your checking account at the end of the month, saving or putting extra money toward your goals may feel impossible. But even a small amount of money can make a difference and add up over time.

Do you have an extra $100 each month to put to good use? It’s never too late to improve your finances. Let’s look at three ways you can improve your finances with $100 a month.

1. Earn interest while you build an emergency fund

If you have an extra $100 per month and are looking for what to do with it, one option is to stash it in a bank account that earns interest. Some of the best high-yield savings accounts offer annual percentage yields (APYs) of 4.5% or more.

A bank account’s APY is the amount you can expect to earn by keeping your cash in the bank for a year. The longer you keep your savings in the bank, the more you’ll earn.

If you save $100 monthly for an entire year, you’ll have $1,200 in the bank. But if you keep your savings in a savings account, you’ll also earn interest. After one year of keeping $1,200 in a high-yield savings account with a 4.5% APY, you’ll earn $54 in interest.

The nice thing about this type of bank account is that you can quickly access your money without penalties, so you’ll be prepared for an emergency. This option could be a great place to start for those without an emergency fund.

2. Prioritize paying down high-interest debt

If you have debt, especially high-interest debt, don’t ignore it. High-interest debt, like credit card debt, can quickly grow out of control and become a much bigger issue. If you can afford to put an extra $100 monthly toward your debt, it could help you get out of debt faster.

First, you’ll need to decide whether the debt snowball versus debt avalanche debt payoff strategy is best for you. But if you have a loan or credit card with a high interest rate, you may want to follow the debt avalanche method to get rid of your debt with the most costly interest rate first.

Then, set and follow a debt payoff plan. If you need help, check out the best debt payoff apps. As long as you have some emergency savings, it’s likely best to prioritize using your extra cash to get out of debt rather than throwing it all towards your saving or investing goals.

3. Invest your money for long-term growth

Investing your extra money during your working years is another way to put $100 per month toward bettering your finances. Investing involves risk, and there are ups and downs. But investing can be an excellent way to set yourself up financially for your non-working years.

The key is to remember that investing is a long-term strategy. You’ll earn compound interest. The longer your money is invested, the more your money will grow. When you invest, there’s no guaranteed rate of return. But over the last thirty years, the stock market has had an average annual return of around 10%, as measured by the S&P 500.

Curious how much your money can grow? Let’s imagine you decide to invest $100 per month for the next 30 years. Here’s a breakdown of the potential account growth after 10, 20, and 30 years with an 8.5% rate of return using the compound interest calculator from Investor.gov.

If you’re focused on long-term growth, investing $100 each month could be a good move for you. Many people invest through an IRA account. Check out our list of the best IRA accounts to learn more about how these investment accounts function.

Don’t put off taking action because you have minimal extra cash

Life is expensive. The cost of housing, groceries, and everyday essentials is much more than it was a couple of years ago. Many people are struggling to save money due to having limited extra funds. But don’t let your current financial situation get you down.

Setting aside a small amount of money each month can get you much closer to your goals. Being able to set aside $100 each month is a fantastic accomplishment. Whether you can save $25, $50, or $100 monthly, don’t delay thinking about your financial future.

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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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Starting a business involves a huge learning curve. Take a look at six tax considerations for business owners. 

There are 32.5 million small businesses in the U.S., with small businesses accounting for 64% of new jobs each year. If nothing else, the number of small businesses indicates how many of us want to be the captains of our own destinies. And while jumping into business headfirst can be exhilarating, it can also be risky — especially if we don’t know enough about what’s legally expected of us.

Here are six basic tax-related issues all small business owners should know.

1. You need an EIN

All business owners need an Employer Identification Number (EIN), even if they don’t plan on hiring employees. The IRS assigns EIN numbers that are used precisely like Social Security numbers when it’s time to file taxes, make tax payments, or open a business bank account.

Action: Apply online for a free EIN. If you’re ever asked to pay for this service, you know you’ve stumbled onto a for-profit business site. Navigate to the official IRS site instead.

2. You should never commingle personal and business income

The easiest way to short the tax man is to mix your business income in with your personal income. If you’re someone who mixes business and personal income, don’t be surprised if the IRS decides to take a closer look at your personal accounts to make sure it’s getting everything it’s owed.

Action: Open a separate bank account and business credit card for your business expenses.

3. Sometimes, your best bet is to hire tax help

If you aren’t familiar with the ins and outs of taxes, make sure there’s money in your business account to hire an accountant with experience in small business taxes. This person should stay in contact with you throughout the year to track income and expenses, monitor your gross and net profits, and ensure you don’t run into a cash flow problem.

Action: Interview a few accountants who specialize in business accounting.

4. While you’re at it, hire payroll help

If you have employees, consider also hiring a reputable company to assist with payroll. A top-notch payroll company will remit payroll taxes when they’re due and make sure you’re not on the hook for more money at the end of the year.

Action: Ask other small business owners if they work with a payroll company they’re happy with. Interview two or three before deciding which one you can trust your payroll details to.

5. It doesn’t pay to get messy with finances

All income must be reported to the IRS. It’s that simple. Any hints that you’ve failed to report income raises a red flag with the IRS.

Action: Keep careful records throughout the year. It’s easy to get busy and legitimately forget about a job you did, but careful recordkeeping can help you avoid those lapses.

6. You need to know your business classification

Small businesses can be classified as a C Corporation, S Corporation, Limited Liability Partnership, Limited Liability Company, Single Member LLC, or Sole Proprietorship. Here’s the deal with all of these different classifications: They are each taxed differently. Failing to properly classify your businesses at tax time may result in overpaying or underpaying, and you certainly do not want to do that.

Action: Be clear about which classification your business belongs under.

Few things are more satisfying than getting your own business off the ground. However, entering into that business with a solid understanding of your tax obligations can only make the road ahead a little smoother.

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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.Dana George 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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