Money Management

Shopping online has become more convenient with technology. However, this convenience also comes with some risks. Read on to learn why. 

Online shopping has become more and more popular in recent years, and it’s easy to see why. It’s convenient, quick, and often offers a wider range of products than traditional brick-and-mortar stores. While online shopping is convenient, there are also reasons why you may want to reconsider it. If you are addicted to online shopping and are constantly in debt, it may be time to give your credit cards a rest until you get your personal finances in order.

Growth of online shopping

E-commerce exploded due to the pandemic and the trend is expected to continue. In 2021, it accounted for $5.2 trillion U.S. dollars worldwide, making up nearly 19% of all retail sales. By 2026, online shopping is expected to make up close to a quarter of total global retail sales, reaching $8.1 trillion dollars, a growth of 56%.

The biggest advantage of online shopping is its convenience. You can shop from the comfort of your own home, without having to worry about parking, standing in line, or carrying heavy bags. You can also shop at any time of the day or night, and since online retailers are available 24/7, you don’t have to worry about store closing times.

Another advantage of online shopping is the vast selection of products available. You can buy items from all over the world, and you are not limited to the stock of a single store. Additionally, you can compare prices and features of products from multiple retailers, which is easier than physically visiting different stores. But these advantages come with some downsides. Here are three reasons why you should stop shopping online.

1. Online shopping can be addictive

The ease of shopping online can lead to impulsiveness and addictive behavior. Shopping is meant to be a utility, not a hobby. It’s easy to spend hours browsing online stores looking for the best deals or just refreshing the page to see if a product has gone on sale. These habits can quickly become addictive, leading to a negative impact on your mental health and checking account.

Why is it so addictive? Shopping is often seen as a form of therapy, where it makes us feel good about ourselves. Buying that item can provide a quick mood boost by releasing dopamine in our brains. This makes us feel pleasure and happiness. Plus, we imagine a better future by buying new things, even if it’s just a temporary sense of security. Unfortunately, this only provides a short-term boost and those good feelings quickly fade away.

That is why we quickly move on to the next item we want to buy. Before you know it, you’re left with a purchase that you don’t really need and a huge dent in your savings account. The short-term boost can result in long-term debt, which can be disastrous for your finances.

2. You can get further into debt

One of the main drawbacks of online shopping is its potential to put you into debt quickly. The convenience of online shopping can sometimes make you overspend, as it’s easy to add items to your cart without realizing how much you’re spending. One-click purchase options and product suggestions, as well as social media influencers, can cause you to make impulse buys, quickly increasing your totals.

With credit card interest rates at an all-time high, this can add to your debt. If you can’t pay off your card each month, then this will cause debt to pile up fast, leading to a vicious cycle of borrowing money and struggling to pay it back.

3. There is a higher chance of identity theft

Online shopping is convenient, but it comes with a risk of identity theft and fraud. When you shop online, you are sharing your personal and financial information with unknown parties. Cybercriminals can access your credit card information, steal your identity, and leave you with significant financial losses.

If you shop from unreliable websites or use public wifi, hackers can intrude your account and steal your personal information. Sometimes, you might end up purchasing counterfeit products or fall for attractive but fraudulent schemes that can cost you a lot of money.

What you should do instead

Online shopping can be a convenient and enjoyable experience, but it also has some risks. It is important to be mindful of your purchases and make sure they align with your values and needs. It is important to set a budget for yourself and stick to it; otherwise, you might find yourself with a hefty credit card bill.

Emotional spending and impulsive purchases become easier to succumb to when you’re shopping online. If it is an addiction that is difficult to break, then stopping online shopping may be the best option. You can take better control of your spending habits by also setting limits on your online shopping. Consider deleting saved payment information from online retailers and only shopping with a predetermined list of items. By taking these simple steps, you can avoid the pitfalls of emotional spending and start working towards a healthier financial future.

While there are certainly advantages and perks to shopping online, there are also compelling reasons to consider breaking the habit altogether. Remember, just because something can be bought online doesn’t mean it should be.

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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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You can tap an IRA penalty-free to help buy a home. But read on to see why that’s not the best strategy. 

These days, many first-time home buyers are struggling to break into the real estate market. We can thank higher mortgage rates and home prices for that.

If you’re eager to buy a home but are short on down payment funds, you may be thinking of tapping your IRA. Normally, taking an IRA withdrawal prior to age 59 1/2 means facing a 10% early withdrawal penalty. That’s clearly not something you want. However, there’s an exception for first-time home buyers.

If you fall into that category, you’re allowed to take a penalty-free IRA withdrawal of up to $10,000 to purchase a first-time home. And if you’re married to someone with an IRA in the same boat, that $10,000 limit applies to each of you individually. So, collectively, you’d be able to withdraw a total of $20,000 from your IRAs penalty-free to fund a home purchase.

You may be tempted to fall back on your IRA for a home down payment. But here’s why that’s not such a great idea.

You may not get very far

In March, the median sale price for an existing home was $375,700, according to the National Association of Realtors. Now it’s a good idea to make a 20% down payment on a home to avoid private mortgage insurance, a costly premium that makes your housing costs rise. But mortgage lenders will commonly accept a 10% down payment.

But let’s say you’re aiming for 20% down. For a home priced at $375,700, you’ll need around $75,000. For a 10% down payment, you’ll need about $37,500. Tapping your IRA for $10,000 won’t get you to where you need to be. The same holds true even if you’re married and you and your spouse can each withdraw $10,000 from an IRA for home buying purposes.

You might end up short on retirement funds

The main purpose of funding an IRA is to have money available for retirement. It’s not to buy a home. If you take a withdrawal from your IRA for something having nothing to do with retirement, you’ll risk ending up short on funds when your senior years actually roll around.

Now, you may be thinking, “What’s the big deal if I wind up with $10,000 less in savings?” But remember, when you take an early IRA withdrawal, you don’t just lose out on that principal sum. You also lose out on growth.

So, let’s say your IRA is heavily invested in stocks and therefore generates an average annual 8% return, which is a bit below the stock market’s average, as measured by the S&P 500 index. If you remove $10,000 from your IRA at age 35 to buy a home and you don’t retire until 65, that $10,000 withdrawal will end up costing you about $100,000 in retirement savings. That’s a much bigger deal.

All told, it’s easy to see why you might look to turn to your IRA when you need money to buy a home. But a much better bet is to leave your long-term savings alone and find another way to come up with the funds you need for a down payment.

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Renting can be a good way to keep your housing costs low. Keep reading to learn why one writer is yearning to buy a house, even though it’ll be expensive. 

I’ve been a renter for most of my adult life, save for the two years when I lived in the house I shouldn’t have bought. As a 20-something, I wasn’t at all qualified or prepared to be a homeowner, and after I finally got out from under that house by convincing my lender to short-sell it, I vowed to never buy again. But here I am eating crow, because I’ve spent the last year and change thinking a lot about becoming a homeowner, alongside paying off debt and getting my finances into better shape than they’ve ever been in.

While I am currently in a better position to own a home, I’m definitely thinking hard about the costs I’ll be facing. Research from The Ascent notes that in 2019, homeowners paid an average of $8,609 more annually than renters did. Owning a home means shelling out money not just for a mortgage payment, but also for homeowners insurance, maintenance/repairs, and property taxes.

As a homeowner, I might pay more for utilities than I do now, and it seems likely that in the first year of owning, I’ll have to pay for some unpleasant surprise or other. I have friends who have faced multiple expensive repairs to their homes, and it convinced me of the importance of building a home maintenance emergency fund.

Despite all these considerations (not to mention the difficulties inherent in finding the right home at the right price and qualifying for a mortgage as a freelancer), I’m still dreaming about the day I can wake up in a house I own. Here’s why.

I’m tired of moving so often

I’ve moved houses a truly ridiculous number of times: 35 at last count. That involved everything from moves in the same neighborhood all the way up to cross-country moves. The longest I’ve gone without moving is four years (and that was when I was a teenager). I’ve had rental homes sold out from under me, forcing me to move, and I’ve had to move of my own accord due to changing jobs or getting stuck with a terrible rental. In short: I am aching for a stable living situation.

Now I’m a fully remote freelance worker, meaning I manage my own employment situation and am not tied to any one area for work. I hope I never have to work at an in-person job ever again, thereby enabling me to buy a home and not worry that I’ll have to move for work and sell it. Buying will mean I get to settle in for at least five years or more (it generally takes at least this long for a home to appreciate enough that you won’t lose money by selling). And that sounds pretty wonderful at this point.

I want to build equity

While I don’t believe that renting is “throwing money away,” I do think it will be great to make payments on my own mortgage and build equity in a property for myself, rather than for a landlord. When you buy a home and make payments, you’re building equity in an asset that is likely to appreciate. If you need money at any point while you own the house, you may be able to take out a home equity loan or open a HELOC. And when you sell, if your home has appreciated, you can walk away with some extra money in your bank account.

I want the freedom

It feels a bit weird to think about owning a home as a form of freedom, especially as I’ll be committing to making payments for a long time, likely 30 years. But it will be freedom to do whatever I want with a property. If I hate the 1970s-era bathroom or want new energy-efficient windows, I get to make those changes. If I want to build a world-class catio for my spoiled cats, I can. And if something breaks and needs to be fixed or replaced, that’ll be on me, too. I’ll have to cover the costs, of course, but I’m actually looking forward to being the person making those decisions about a property.

If you’re hoping to save money on your housing costs, renting is often a better move than owning a home, especially if you live in a cheap area like I do. Despite how little I currently pay for rent and related expenses (like renters insurance), I’m hoping to trade these low costs for higher ones by buying a home.

If you’re wondering whether to buy or keep renting, I’d encourage you to have an honest conversation with yourself (as well as anyone you’d be buying a home with) to figure out what’s important to you.

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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.
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The freelance life can be pretty sweet, but watch out! Keep reading to learn what not to do if you’re your own boss. 

I never intended to become a full-time freelancer, but looking back on the process now, it was perhaps inevitable after I left my museum career and found continued frustrations with a salaried job in a new field. I started freelancing as a means to an end (initially, that end was paying off debt and being able to afford to buy a home), but came to love it so much that I quit my salaried job at the beginning of 2023.

If you’re dipping your toes into the freelance world and wondering if you’ve got what it takes to succeed, here are a few moves NOT to make. Avoiding these pitfalls won’t guarantee a happy freelance existence, but it’ll sure make it easier for you to build one.

1. Neglect your taxes

This first one is major. If you are self-employed, you will owe taxes to Uncle Sam four times a year, in January, April, June, and September. It is imperative that you not forget to make those estimated quarterly tax payments, because if you do, you’ll be penalized. Remember, as a W-2 employee, your employer takes taxes out of your paycheck, but if you’re a freelancer, your clients will not. You’ll receive a 1099 form at the end of the year showing all that you were paid by that client, and the IRS gets a copy of it, too, so don’t think you can pretend you didn’t earn that money and dodge out on the taxes you owe.

I recommend hiring a good accountant to help you calculate how much you’ll owe and prepare your tax return for you, as you get different deductions and write-offs than you would as a salaried employee. And keep track of your business income and costs — I record every bit of money I earn and all my work expenses in a spreadsheet. This makes handling those taxes far easier.

2. Stop growing your skills

When you were a salaried employee, you may have had the opportunity to learn and grow in your career field by way of professional development encouraged and funded by your employer. This was the case for me in museums — I often got to attend workshops, presentations, and industry conferences, and I enjoyed these chances to network and pick up new skills.

If you’re a freelancer, you’ll have these same opportunities, but you’ll have to do more of the legwork. Join groups on social media (such as Facebook and LinkedIn) for your profession or area of expertise. Seek out connections with industry leaders (LinkedIn, again, is great for this), and if you can fit workshops and conferences (virtual or in person) into your schedule, you definitely should.

Staying on top of trends and new knowledge in your field will keep you fresh and employable, and you can more easily market yourself to new clients. Investing in yourself is even more important as a freelancer.

3. Live without cash savings

If you’re preparing to quit your salaried job, one of the best things you can do for yourself first is to make sure you have a solid cushion of cash saved up. Commonly held wisdom for an emergency fund is to save three to six months’ worth of bills, but this is predicated on the idea that you’ll have access to unemployment insurance if you lose your job. As a freelancer, you won’t, so it’s a good idea to have even more in your savings account to get you over the hump if you lose a client and have to drum up more paying work for yourself.

4. Skip taking time off work

This is where I often struggle. As a freelancer, you don’t get paid time off. If you’re not working, you’re not making money. And you might feel as if you can’t ever take time off work as a result.

So what’s the solution? I am now feeling a bit more confident in my ability to not be a workaholic all the time, thanks to recently taking a vacation to another country. I took my laptop with me and worked a little. But the bulk of it was when I was sitting around in airports for several hours at a stretch, or when I got up early in the morning (if you can ever get someone else to make you breakfast while you work, I highly recommend it). The rest of the time, I enjoyed myself and didn’t think about work. I also put in extra hours before I left on my trip, and now that I’m home, I’m getting back into the swing of things.

If you’ve ever sat in yet another endless work meeting and wondered, “Isn’t there a better way?” going freelance might be right for you. Just be sure you’re keeping taxes and professional development in mind, and don’t forget to pad your savings. Oh, and take time off, too — it’s good for you.

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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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