Money Management

Many people feel uncomfortable talking about money. Find out how breaking that taboo can help the people you care about build financial security. 

Money may make the world go around, but it often stops conversation dead in its tracks. Finances are up there with politics, sex, and religion in terms of taboo topics. And yet, talking about our cash situations can be transformative. Here’s what happened when I started to talk to my friends about money.

1. Two friends started to actively manage their cash flow

Budgeting is a fundamental part of building financial security. It helps us to live within our means and know what we can and cannot afford to do. Yet, for many, a mere mention of the word “budget” is enough to send them into a tailspin.

One friend said she’d grown up being told that she wasn’t good at math and now has a serious financial blind spot. Our conversations helped her to understand the basics of budgeting. She installed a budgeting app and planned how much she’d have left each month after covering the essentials. The big news? When we started to make a budget together, she found there were a few months where she hadn’t received her full paycheck. She’s now reclaimed thousands of dollars that got lost in an accounting error.

Another friend said, “I don’t want to make a budget because I don’t want to have to stop spending.” She worked with a financial advisor and allocated a set amount of money to the fun stuff, alongside some savings and investments for the future. It’s true that budgets can be about cutting spending on non-essentials. But it doesn’t have to be that way. They can also help you prioritize your spending. By cutting spending in some areas, you may wind up with more money in your bank account for the things you love.

2. Several friends started to invest for the future

The combination of compound interest and time is a powerful thing. Unfortunately, when you’re in your 30s, old age seems a long way off and it often feels like there are other more urgent demands on your wallet. Speaking personally, I was late to understanding the difference that 10 or 20 years makes in terms of building wealth.

Let’s say you invest $10,000 in the stock market and are able to get returns of around 9% (which is a bit less than the average returns from the S&P 500 over the past 30 years). There are no guarantees when it comes to investing. But if you were able to get a 9% annual return on that $10,000, in 10 years time, your assets could be worth around $24,000. Give it another 20 years, and those assets could be worth $130,000. That doesn’t factor in inflation, but it’s still a lot of money.

Following our discussions about retirement planning, several friends have opened brokerage accounts and started to invest a small amount each month. We looked at a compound interest calculator online and talked about what it means to be financially free and how much we might need to get there. It’s never too late to start building a portfolio that will accumulate in value over time.

3. Emergency funds became a reality, not an item on a list

Several friends said they knew they should have an emergency fund, but it was something they kept kicking down the road. Open conversations about money made them prioritize those contributions. And we supported each other by doing less expensive activities, such as going for walks or cooking dinner at home rather than eating out.

Having three to six months’ worth of cash in a savings account can tide you over if you lose your job or face a medical crisis. It can stop you having to take on debt or sell off your investments. Even so, it isn’t something people talk about very often. Celebrating one another’s progress toward this important financial goal made it more achievable.

Bottom line

It isn’t easy to manage your money. There’s all kinds of conflicting advice on the internet, and almost unlimited ways to spend it. Plus, many of us didn’t learn about personal finance in school. That makes it all the more important to learn from your peers and bring money talk into the open.

Not only can we learn from one another, we can also encourage loved ones (and ourselves) as we progress toward our financial goals. A couple of my friends are so excited that they’re talking about creating a money club so we can learn together and share experiences. Break the taboo and see what kind of breakthroughs your friends can make.

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Looking to get a side hustle? Read on to see if working as a substitute teacher is a good move for you. 

There are plenty of benefits to picking up a side hustle. The extra cash might allow you to boost your savings, pay off some credit cards, or work toward another goal. And the experience you gain via your side hustle could also be a good thing to put on your resume.

In 2022, 40% of Americans reported having a side hustle, according to Zapier. And if you’re thinking of getting one, you may be wondering what it’s like to work as a substitute teacher.

A friend of mine held down this gig last year, and she said it has its pros and cons. Here’s what to consider.

The upside of working as a substitute teacher

To become a substitute teacher, you need to go through a background check, which makes sense since you’re entering a school and working with children. Once you’ve gone through that, there aren’t really specific skills you need, my friend says. Teachers will leave lesson plans behind, and if you can read and follow them, well, you’re all set.

What’s more, the good thing about being a substitute teacher is that you don’t have to worry about securing childcare if you have school-aged kids of your own. That’s because your workday will start when theirs does, and you’ll end when they finish up so you don’t have to pay for an after-school babysitter.

Also, in some cases, the work can be fun. You might get to substitute for the art teacher, for example, which means getting to do crafts and creative projects with kids.

The downside of working as a substitute teacher

While there are perks to being a substitute teacher, there are drawbacks, too. First of all, while substituting is perhaps a great gig for stay-at-home parents looking to drum up extra cash, if you have a full-time job, it probably won’t work, since you’ll need to spend the bulk of your workday at a school. Also, the work can be sporadic, since you’re covering for teachers when they’re off work.

My friend said that last year, she had some weeks when she was able to work every day. But then she would sometimes go weeks without being called into the school to help out. So if you’re looking for a side hustle that will generate consistent income, this may not be it.

Plus, you may not always get a lot of notice as to when you’re needed to come to work. My friend often had to turn down opportunities because of previous commitments, like doctor appointments.

Also, the work itself can be tough. Often, it means you’re on your feet all day managing a classroom and dealing with children. That can, in many cases, be harder than sitting at a desk writing reports and juggling deadlines.

Should you work as a substitute teacher?

All told, working as a substitute teacher can be a good way to pad your savings account and increase your personal cash flow. But prepare to hit some dry spells on the work front, and to spend a lot of time consoling weepy children or yelling at rowdy ones.

Finally, expect at least some of your clothing to get ruined in the course of substituting, my friend warns. Consider it a hazard of working at a school.

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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.Maurie Backman 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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You have options if you start struggling to pay your mortgage. Read on to learn more. 

In March, the median monthly mortgage payment for new applicants rose to $1,736, according to the Mortgage Bankers Association. If you’re a homeowner, that figure may be a lot lower than the mortgage payment you’re paying today, or a lot higher. But either way, you may be at the point where it’s become a struggle to keep up with your mortgage payments.

Perhaps your personal financial picture has changed. Maybe you were laid off at work and had to accept a lower-paying job. Or maybe you had a baby and are now facing sky-high childcare costs that are making your remaining bills, including your mortgage, difficult to cover.

Also, a lot of people are struggling in general these days due to inflation. So if higher living costs are making it problematic to keep up with your mortgage, that’s understandable.

If your mortgage was once affordable for you but that’s no longer the case, you have some options. One, of course, is to try to sell your home and move to one that’s less expensive. This is an especially viable option right now because housing inventory is down on a national scale and home prices are still high. So chances are, you’d be able to sell your home for enough money to pay off your mortgage in full.

But you may not want to sell your home. Doing so would mean having to move, uproot your family, and potentially take on a much higher mortgage rate by virtue of getting a new home loan. So if that’s not a route you want to take, your best bet is to reach out to your lender and see what help it can offer.

You may have more options than you think

Falling behind on your mortgage payments could cause you to lose your home. This won’t happen after a single missed payment, or even a couple. But eventually, if you stop repaying your mortgage, your lender will have the right to foreclose on your home, and that’s not what you want. Not only will you be forced out of your home, but your credit score could take a massive hit.

A better bet, therefore, when you’re struggling to pay your mortgage, is to contact your lender, explain your circumstances, and see what help it can offer. There are a couple of options that may be available to you.

First, if your financial struggles are more temporary in nature, then you might get the option to put your mortgage into forbearance. With forbearance, you don’t make payments for a period of time, but you’re not reported to the credit bureaus as delinquent.

Secondly, your lender might agree to loan modification. This isn’t the same as a refinance, which has you getting a completely new mortgage. Rather, when your loan is modified, its terms change. And in the case of a financial hardship, you might get your loan modified so that your repayment period is extended, but your monthly payments shrink in the process.

Reach out when you’re struggling

Mortgage lenders want to get repaid, so you may be surprised at how willing yours is to work with you. But the sooner you reach out once your mortgage becomes unaffordable, the better. That way, you can put a plan in place that allows you to avoid foreclosure and the many unpleasant consequences that come with it.

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One easy change to your investing habits can dramatically increase your returns. Discover what it is and how much more you could make. 

There are all kinds of ways to save more money, but to be completely honest, a lot of them aren’t worth it. Advice about cutting back on small luxuries, like buying coffee at a cafe, is a perfect example. You can only save so much this way, and it will probably make you miserable in the process.

You’re much better off focusing on financial decisions that can make a big impact and won’t ruin your quality of life. Finance guru Ramit Sethi often recommends one simple money move that can do just that. It isn’t difficult, and it could help you accumulate hundreds of thousands more by the time you retire.

Make a small annual increase in how much you invest

Sethi frequently recommends that you “create a rule to increase your investment rate by 1% every year.” Your investment rate refers to the percentage of your income that you invest. What Sethi is suggesting is that you bump it up by 1% of your income per year, and he says this could make you hundreds of thousands of dollars.

It may sound like an exaggeration, but the math checks out. When you’re investing for decades, these seemingly small changes make a massive impact.

To show just how powerful a 1% annual increase can be, let’s look at an example. Let’s say you earn $75,000 per year. You invest 5% of that ($3,750 per year). And your portfolio gets an 8% annual return, which is reasonable based on the stock market’s average return.

We’ll compare two scenarios. In the first, you invest the same amount of money for 35 years. In the second, you increase your contribution by 1% per year for the first six years, until you’re contributing 10% of your income. You then maintain that for 29 years. Here’s how your results would differ:

You’re investing over the same amount of time, 35 years, either way. With the second method, you invest $120,000 more. In return, you end up with $547,092 more. Even after subtracting the additional $120,000 you put in, you make $427,092 more.

This only considers how much you’d have if you increased your investment rate from 5% to 10%. If you invested larger amounts, such as starting at 10% and going up to 20% of your income, you’d accumulate even more.

How to increase your investment rate

The main takeaway here is that the more you can increase your investment rate, the more wealth you’ll build. That’s especially true over long time periods. But even if you’re in your 40s or 50s, you can still do well if you invest diligently.

Sethi’s advice works because it’s not too difficult of an adjustment to make. Increasing your investment rate by 1% per year probably won’t affect you much financially. But what if you can’t manage it? Or if you want to make an even bigger change? Here are the best ways to be able to invest more.

Work hard to increase your income. Look for ways to get a raise at your current job and go job hunting to see if you can get a better salary elsewhere. The most effective way to invest more is to earn more.Take advantage of your company’s 401(k) match. If your employer matches your 401(k) contributions up to a certain amount, ask HR how much you need to contribute to max this out.Be careful how much you spend on home and car payments. These are two of the biggest monthly expenses for the average person. Keep them under control, and you’ll likely be in good shape financially.Make investing automatic. Many of the best stock brokers let you set up automatic investments. This saves you time and ensures you invest the amount you planned on.

Increasing the amount you invest every year is a smart habit to help you save more toward retirement. How much you choose is up to you, but 1% is a good starting point that will pay off in a big way.

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

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If you’re not good at time management, you might struggle with a side hustle. Read on to learn more. 

A few years back, a friend of mine needed money and decided to go the side hustle route. She wanted to earn enough to pay off her credit cards and save for a vacation.

She landed on a gig she thought would be simple and flexible — driving for a ride-hailing service. That way, she could set her own hours and work when it was convenient for her.

It was a good idea in theory. But it backfired on her for one big reason.

When you fail to find the time to do your side hustle

Some side hustles require you to report to work on a preset schedule. When you drive for a ride-hailing company, you get a lot more flexibility, which can be a good thing. But in my friend’s case, it wound up being a bad thing.

My friend thought she could juggle a full-time job with a side hustle, all the while maintaining her home, caring for her kids, cooking, and running errands. The main reason she failed at her side hustle was that she barely managed to find the time to do it.

There were some weeks, she said, when she was convinced she’d end up spending eight to 10 hours on the road shuttling passengers around. Only somehow, the hours got away from her, so she wound up working her side gig for more like two hours instead.

Now, one thing my friend has going for her is her bubbly personality. It’s something that’s been an advantage in job interviews in the past, and she was convinced it would lead to generous tips from her passengers. That largely didn’t happen, though. So all told, between struggling to carve out the time for her side job and earning minimal tips, her gig wound up being nothing more than a giant fail.

An important lesson learned

As of last year, a good 40% of Americans had a side hustle, according to Zapier, so if you’re thinking of getting one, you’re clearly in good company. But if time management isn’t your strong suit, then you may want to steer clear of a gig that gives you too much independence and leeway.

My friend realized that if she was going to work a side hustle, she needed a gig with defined hours. So she decided to start working two night shifts a week at a local bar in town. That setup wound up being better for her because she knew to block off the time on her calendar in advance. And in that environment, her outgoing personality did result in generous tips — and more take-home pay.

A side hustle could really help you work toward your financial goals, whether they entail buying a home, saving for retirement, or socking money away for new electronics. But it’s important to find the right gig for your personality. And if you’re worried about your ability to manage your time well, then you may want to stick to a gig that gives you less leeway to blow it off on a whim.

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Being a freelancer comes with risks and rewards. Keep reading to see how you can assess whether it might be time for you to quit that W-2 job. 

Have you been feeling the urge to quit your W-2 job and become a freelancer? Many people are in the same boat, and the number of freelance workers is on the rise. Zippia found that in 2022, there were 70.4 million freelancers in the U.S., a number that has steadily risen — in 2017, there were 57.3 million of us. Plus, 82% of U.S. freelancers are in fact freelance writers, meaning I’m in excellent company indeed.

I went from a career change in 2021 to a beginning freelancer in 2022 to a full-time freelancer in early 2023. Along the way, there were many signs that I was ready for it. Have a look at the following 10 ways to tell if you, too, might be ready to give up that regular paycheck in exchange for greater flexibility and indeed, greater happiness.

1. You’re prepared to be your own boss

Can you handle being in charge of your own work? When you’re a freelancer, you’ll have clients, but it will be up to you to decide on a work schedule. I recommend setting up a semi-regular routine for yourself, as it’ll be easier to get in the headspace to work effectively.

You’ll also get to choose the kinds of work you want to do, which is easily one of the best things about being a freelancer. If you struggle with time management, staying on task, and keeping motivated, however, freelancing might not be a good fit for you.

2. You have a place to work

You likely won’t have a set workplace anymore, and if your work is only on a computer, you can often quite literally work from anywhere. This isn’t to say you’ll be able to work everywhere, though, as outside distractions can have a negative impact on your work.

Having a dedicated home office has been excellent for my productivity, and while I can and do occasionally work elsewhere (be it from my living room couch or another country if I’m traveling), I get the most done in my home office. If you don’t have room at home to work effectively and don’t mind the extra cost, you might consider renting office space to work from. Failing that, there’s always noise-canceling headphones.

3. You have the right technology

Your equipment needs will vary based on your work, but at the very least, you’ll likely need a decent computer. This means that you may need to rethink that plan to use your tired old laptop to launch your freelance career. Consider buying a refurbished computer (and other necessary equipment) to save money — if you buy from the manufacturer, you can be sure it’s been thoroughly inspected and will function like new.

4. You have significant savings

Having cash savings (say, in the form of an emergency fund) is such an important part of money management. It’s even more crucial if you’re giving up a predictable paycheck, though. The common wisdom is that you should have enough to cover three to six months’ worth of expenses, but if you’re hoping to quit that W-2 job and go it alone, it’s a good idea to have even more.

Aim for six to 12 months’ worth of cash, just in case you lose a client and end up taking some time to make up the income loss. And if you keep the money in a good high-yield savings account, you’ll even earn some interest.

5. You have enough work to stay busy (and paid)

Speaking of your clients, you definitely want to make sure you have enough work before quitting your W-2 job. It can be exhausting to cultivate freelance work alongside a full-time job, but it’ll be worth the effort. And if you’ve got the cash savings we discussed above in addition to a solid client base, you can keep your stress levels down during those crucial first months as a freelancer. Make sure your budget is up to date, too — it’s important to know how much money you absolutely need to get by, to create an earnings target for yourself.

6. You have a tax professional to help you

When you’re self-employed, you’re responsible for paying your own income taxes, and they’ll be due on a quarterly basis (in January, April, June, and September every year). Personally, taxes intimidated me even before I became a freelancer, so it was crucial for me to hire a CPA to handle my yearly tax return and also advise me on how much to pay every quarter. Your tax professional can help you figure out which deductions you might qualify for (such as the home office deduction) and handle the complicated math for you.

7. You’re able to keep work expenses separate

Speaking of taxes, it’s also important to keep excellent records of your business expenses so you can deduct them come tax time. To that end, you might want to consider applying for a small business credit card and using it to pay for anything you need to do your job. It’ll be a lot easier to keep track of those expenses and keep them separate from your personal purchases, and you can earn cash back and other rewards.

8. You’re comfortable with working more (but also getting flexibility)

For many people, becoming a full-time freelancer means giving up the traditional 9-to-5 schedule. I wish I could say that this means you’ll get to work less than when you had a W-2 job, but in my experience, this hasn’t been the case. I work more now than ever before, but I can take breaks whenever I want, and if I have an appointment during the day, I can easily make up the time later (or not at all, if there’s nothing pressing to do and I don’t feel like it). As I write this, I can see a blue sky from my office window and I’m looking forward to getting outside for a walk soon. That beats the pants off another endless Zoom meeting.

9. You can handle procuring your own benefits

As a freelancer, you’ll have to figure out your own benefits, like health insurance and a retirement plan. This can be a pain (and a financial one, at that — marketplace health insurance plans are expensive), so I recommend getting help if you’re overwhelmed. Your state likely has insurance brokers, and you could consult with a financial planner to discuss retirement plan options.

10. You want to!

I know I put this one last, but in some ways, it really is the most crucial consideration of all. Becoming a full-time freelancer is a big step that can change your life. If you’re feeling ambivalent about your W-2 work, are tired of meetings (maybe that was just me), or just long to be able to choose your own assignments, these are all good signs that the freelance life could be great for you.

I love being a full-time freelancer, and while it was a huge change, it’s been worth it so far. If you’re thinking of going freelance, decide based on the considerations above — and good luck!

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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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