Money Management

Owning a small business may be the right choice for me, but there are definitely challenges. Read on to learn about some of them. 

There are different benefits to owning a small business. I enjoy the freedom of running my own show and getting to make decisions about the work I take on. And there can be some tax breaks to enjoy in the course of owning a business.

Meanwhile, data from Incfile shows that 72% of small business owners say what they do is challenging but worthwhile. But 22% say that owning a business isn’t worth the hardship and sacrifice.

I have to admit that I sometimes find myself falling into the latter camp. While I generally like owning a business, there are also challenges that trip me up. Here are the things I dislike the most about owning a business.

1. I have to file extra reports and deal with extra paperwork

The more time I have to spend dealing with administrative tasks, the less time I can spend actually earning money. But when you own a small business, there are certain reporting requirements you have to adhere to that can be very time-consuming.

Thankfully, I’m able to outsource some of that reporting to my accountant. But then I have to pay for those services. So either way, I’m looking at either an expense or lost work time and income.

2. I have to pay for workers compensation insurance, even though I don’t have employees

In my state, it’s a requirement to have a workers compensation policy when you own a business. This holds true even if you’re the sole employee.

The purpose of workers compensation insurance is to protect companies against lawsuits filed by workers who get hurt on the job. I have no reason to sue my own company in the event of an injury. If I do, any “compensation” I get is coming out of my own business checking account. In spite of that, I still have to pay to maintain a policy to be in compliance.

3. I never really know what my annual income is going to look like

Not having a predictable income is something anyone who’s a business owner or self-employed individual has to deal with. And it’s actually not such a problem for me from a bill-paying perspective. My husband and I have arranged our finances very carefully so we’re paying our essential bills from his earnings alone. (I realize I’m very fortunate to be in this position. But we also took on low expenses relative to our total income to make this possible.)

Rather, the issue with not knowing what my annual income is going to be tends to arise with tax planning. I have to make estimated quarterly tax payments at the federal and state level. But I often end up overpaying or underpaying because it’s very hard to estimate my income.

And yes, I do have an accountant to help me run those numbers. But it’s still a hassle.

Go into business ownership carefully

All told, I still think it makes sense for me to own a business. But I can’t pretend it’s all rosy, either.

If you’re thinking of starting a business, be aware of the pitfalls you might encounter. You may be prepared to grapple with an income that fluctuates based on your company’s success. But you may not realize how much administrative work there is to tackle, and you might get tripped up by unexpected costs.

Before you start a business, talk to people you know who own one and see what their experience has been like. If you can talk to business owners whose ventures are similar to the one you’re thinking of, even better.

It’s also a good idea to sit down with an accountant before starting a business so they can review the costs and benefits involved. In some cases, starting a business won’t make sense because while there may be some tax savings involved, there can also be added fees you need to absorb. The more information you arm yourself with, the better equipped you’ll be to make a good decision.

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Nervous to put money into stocks? It’s understandable. But read on to see how you can move past those concerns to build a large portfolio. 

Keeping your money in a savings account might earn you a decent chunk of interest over time. But if you really want to grow a lot of wealth, investing in stocks is a smart bet.

Over the past 50 years, the stock market has delivered an average annual return of 10%, as measured by the performance of the S&P 500 index. This means that if you were to invest $10,000 today in S&P 500 stocks, sit back, and do nothing, in 40 years, you’d be sitting on almost $453,000, assuming that same 10% annual return.

But there may be something stopping you from buying stocks — fear. And that’s understandable.

The stock market can be extremely volatile. And you could easily see the value of your portfolio swing wildly from one day to the next. That’s an unsettling thing, since it’s your hard-earned money at risk.

But you might need stock investments to meet your long-term financial goals. So it’s best to work past your fears and start putting your money to work. Here are a few steps you can take.

1. Start slowly

If you were scared to ride a bike, would you start by signing up for a 15-mile ride or pedaling around in a vacant parking lot for a bit? You’d probably choose the latter.

Similarly, if you’re nervous about owning stocks, don’t go all in right away. Invest a few hundred dollars to start with and see how that goes. You may be less nervous about losing money when there isn’t as much to lose.

2. Buy fractional shares

You might feel better about buying stocks if you start by only owning pieces of them. Fractional investing allows you to do that.

Most brokerage accounts these days allow you to buy stocks on a fractional basis. So, let’s say you’re interested in buying shares of a company that are trading for $500 apiece. If the value of that stock falls by 10%, you’re out $50. If you buy one-quarter of a share of that company’s stock, you’re only putting in $125. If its value drops 10%, you’re out $12.50.

Of course, it’s worth noting that you’re never officially out any money in your stock portfolio until you actually sell your shares at a loss. But still, you may find that fractional shares are less of an initial commitment, which may be a good thing if you’re skittish about owning stocks.

3. Diversify

The more diverse a portfolio you have, the more protection you can buy yourself against market volatility. If you own a few dozen stocks and one loses value, it might have a negligible effect on your portfolio. But if you only own five stocks and one utterly tanks, the impact may be more noticeable.

Similarly, it’s a good idea to invest in different industries so that if one experiences a shake-up, you’ll have plenty of other investments on hand that may not be affected. An easy way to build a diversified portfolio quickly is to add some shares of an S&P 500 ETF, or exchange-traded fund. This way, you’re effectively investing in the 500 largest publicly traded companies.

It’s natural to be afraid to put money into stocks. But working past those fears could be essential to meeting your long-term goals, so do your best to get on board with the idea of becoming a stock market investor.

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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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Online banking is a revolution, but it’s not without risks. Learn how to keep your money safe while you bank online. 

Even just in my lifetime, the advances that technology has brought to banking and personal finance are absolutely staggering. When I got my first-ever bank account as a teenager, I had to visit a bank branch and sit down with a representative to open my account. And it took close to an hour. But the last time I opened bank accounts (a savings and checking account with an online-only bank), it took mere minutes and I could do it from the comfort of my home office, without even putting on shoes.

Thanks to the rise of the internet, you can likely do most or all of your banking completely online these days. The last time I visited a physical bank branch was a few months ago, and it was only to use the ATM to take cash out of the checking account I have with a traditional bank. Unfortunately, while online banking may be convenient, it is not without security risks. Here are a few rules to read and heed, so you can keep your money safe.

1. Use strong passwords and MFA

While it may be tempting to create an easy-to-remember password for your banking app or bank’s website, resist the urge. Instead, you want to use a strong mix of upper and lowercase letters, numbers, and special characters. The longer and more complex your password is, the harder it will be for some scammer or hacker to crack. If you struggle with remembering passwords, you might want to use a password manager, which is like a digital vault to keep your passwords secure.

Enable multifactor authentication (MFA), too. This means that in addition to entering your password, you’ll also need to give another piece of information that proves you are who you say you are (such as entering a code that’s been texted to you).

2. Don’t bank while on public wifi

If you’re chilling at the airport, waiting to board a flight, you might have the urge to check your bank account balance or maybe set up some bills to be paid. Don’t do this on the public wifi network — there’s no way to tell who can watch what you’re doing.

Wait until you’re on a secured private wifi network to check on your bank account, or use your phone’s cellular data connection rather than public wifi.

3. Enable alerts for suspicious activity

This is a super easy step to secure your bank account. Most banks will let you sign up to receive text or email alerts whenever a bit of suspicious activity pops up in your account, such as a larger-than-normal expenditure or a charge at an unfamiliar store.

Getting an alert about such an event allows you to confirm that it was in fact you who made the charge — and not some bad actor who got access to your bank account information.

4. Avoid clicking links

Phishing is a type of scam where you receive a link in an email or text message, prompting you to click and verify account details. Except it’s not a legitimate link, and you’ve just given some of your private information to a scammer, allowing them to access your money.

If you receive a message saying something is wrong with your account, don’t follow up via any links you may receive. Instead, reach out to your bank yourself and see what’s up. And while you’re at it, be sure you’re going to your bank’s legitimate web address. Phishing scams are very common — according to Forbes, there were over 500 million reported in 2022.

Managing your money and banking activity online means you can do it from anywhere, and at any time of day. But don’t forget to keep your security top of mind when you use your bank’s mobile app or website.

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Costco makes the majority of its money from membership fees. Read on to find out how to make the most of your Costco membership. 

My family recently signed back up for a Costco membership by snagging a great Groupon deal. We paid the usual $60 price for the Gold Star membership but received a $45 store gift card, essentially bringing the cost down to just $15.

We’re trying out the membership again, after not utilizing it fully the first time we had it. I’m curious to see if we can save on our groceries and other essential items, compared to shopping at other stores. Most members spend an average of $150 per Costco run, and while that may seem like a substantial sum, Costco may be less interested in your grand total than you might think.

That’s because the bulk of what Costco earns each year comes from membership fees and not its merchandise sales.

It’s all about the memberships

Costco earns significant revenue from sales of its food, clothing, electronics, and other products. For example, in Costco’s fiscal 2022, the company’s sales were over $222 billion, while its total expenses were about $219 billion.

Some basic back-of-the-napkin math shows that the company would only have about $3 billion in net income ($222 billion minus $219 billion) if that’s all that it earned for the year. Instead, Costco reported net income of $5.8 billion for the year. So, where did the extra money come from?

It came from more than $4 billion in membership fees Costco earned in the year.

While Costco does have costs associated with maintaining its memberships (so not all of the membership fees equal pure profit) it still generates most of the company’s profits because there’s minimal overhead Costco has to pay to acquire members and keep them.

The good news for Costco is that once it gets a member, they usually stick around — the company’s membership renewal rate was nearly 93% earlier this year. And to keep those membership fees coming in, the company began cracking down on membership sharing not that long ago.

How to save money with your Costco membership

While Costco may not be all that interested in how much you spend in its stores, you likely are. And if you’re looking to get your personal finances under control, there are a few ways that you can maximize your trips to the membership club:

Score a good deal on a membership: Costco memberships start at $60, but you can sometimes get a great deal through a coupon app. As I mentioned above, my Gold Star membership was $60, but I received a $45 Costco gift card when purchasing the membership through Groupon.Keep an eye on upcoming discounts: While Costco is known for its discounts on bulk purchases, the company also has specific deals each month. You can find out which are the best deals by looking through Costco’s monthly coupon book.Use a Costco credit card: You can earn cash back on your Costco purchases using the Costco Anywhere Visa® Card by Citi. The card gives you cash back on everything from gas and EV charging, in-store and online Costco shopping, restaurants, and other eligible purchases.

Keep this in mind when considering a membership

While Costco has the potential to save you money, a membership to the warehouse club may not be for everyone. I had a membership before and discovered it didn’t help my family save money because we weren’t using all of Costco’s perks.

I’ll be more strategic about how we use the membership now to maximize our savings, but you’ll need to figure out if the membership club will work for you. One way you can do this is by going to Costco with a friend and doing a test-run shopping trip.

I’ll be keeping a close eye on whether shopping at Costco saves me money, but considering that I’m already a member, it’s statistically likely I’m going to be sticking around for a while.

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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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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If you’ve always dreamed of a fairytale wedding, you might be inclined to get a loan to cover costs. Learn why this is a bad idea. 

While I am happily unmarried these days, I’ve been down the bridal path twice before, and had two extremely small and cheap weddings (and the second time, eloped in Las Vegas at a cost of less than $500). That said, I’m not here to judge or vilify anyone for wanting a big blowout party complete with a hundred guests, posh favors, and a big fancy venue. According to The Knot, in 2022, couples spent $30,000 on average for their weddings — that is a significant amount of money.

The trick is figuring out how to pay for it, if it’s what you want. And this is where you might run into trouble. A personal loan might seem to be a natural choice if you need to borrow money to cover wedding costs, but you should think twice before going that route. Here’s why.

1. The wedding is one day

Okay, if you have a big wedding weekend, you might stretch the festivities over a few days. But either way, a wedding is a short-term financial commitment. Does it really make sense to spend so much money in one fell swoop? Remember, you’ll pay interest on the money you borrow.

Just as it’s not a good idea to borrow money for a vacation or anything else that will not tangibly improve your life in the long term, borrowing for a wedding isn’t worth it. What kinds of costs are worth borrowing for? How about a mortgage loan to buy a home? Or a business loan to make your small business dreams a reality? Even borrowing money to buy a car can markedly improve your life, giving you the ability to get to work and school in a more efficient manner than relying on public transportation.

Yes, you’ll pay interest when you borrow money for any of these purchases — but the current 7.18% average mortgage rate for a 30-year loan (per Freddie Mac) is a little easier to swallow when you consider that you’re buying a stable place to live and an asset to build equity in.

2. You’re starting off married life with additional financial stress

Marriage is hard enough without adding more (and voluntary) money stress. A 2021 study from Fidelity found that 1 in 5 couples rate money as the greatest challenge in their relationship. And it makes a lot of sense — when you marry someone, you’re agreeing to wed your finances too, in at least a few ways. Making a long-term commitment to another person means you’ll likely have big financial goals as a couple. Maybe you want to own a home, or retire early, or if you have kids, cover their college costs.

These are wonderful goals, but the nature of life is such that you’ll likely end up with big unexpected and emergency expenses to pay for, too. It’s a much wiser move to save and plan for the big goals, and also build some savings in for the unexpected (in the form of an emergency fund). Owing money on a loan can make that difficult.

If you finance a $30,000 wedding over five years at an interest rate of 11.31% (the average rate on a personal loan as of this writing, per Bankrate), you’ll pay $657 a month, and when all is said and done, you’ll have paid over $9,400 in interest. That’s a lot of money, and it could do a lot of good for you — the interest alone might make a pretty solid emergency fund, for example. And if you end up unable to make those payments, the resulting credit score damage could also add a lot of stress to your finances, and to your marriage.

How should you pay for a wedding?

I absolutely get that not everyone wants to elope in Vegas on the cheap. You might want to celebrate with friends and family and wear a sweet tuxedo or gorgeous gown. How can you make that happen without taking on a lot of debt?

Think smaller: Do you need to have every person you know at your wedding? Perhaps not. Scale back your celebration, and consider having a small wedding for the most important people in your life, and plan an inexpensive backyard barbecue at a later date and invite everyone else to celebrate with you.Decide what’s most important: If you want the $5,000 dress, can you cut back on your favors or your venue? Get married outdoors for free, serve hors d’oeuvres instead of a sit-down dinner, or hire a DJ instead of a live band.Take advantage of another way to finance: A credit card with a 0% APR period might be a better way to finance some of your costs (if you can pay the card off in the time you’re allotted, which could be a year or longer). And some wedding vendors might be able to set up a payment plan for you.

It’s normal to want a special wedding day, and you’re not alone. But think twice before you borrow a heap of money to blow on a single day’s expenses.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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