Money Management

Start-up costs breed like aphids. 

There are two main reasons people turn hobbies into hustles:

To try to make their passion a career; or,To boost their personal finances.

If you’re motivated by the former, then you probably don’t care too much about the costs. You’re in it for the experience. If you’re in the latter group, however, then how much a side hustle costs to start can be a big factor in whether it’s worth the investment.

While the specific costs will depend on what you’re doing (and even where you’re doing it), some of the costs are universal. And while many may be obvious, there are a number of extra costs you may not think to include in your calculations. Here are a few to consider.

1. Banking/merchant fees

One of the best things to do when starting any new business is to open a bank account for that business. This keeps your expenses clean from the start, which will make it much easier to track (and tax) everything along the way.

As with consumer checking accounts, however, business accounts can have monthly maintenance fees tacked on. There are a good number of free business bank accounts out there, however, so keep an eye out.

A bank account is also necessary if you intend to take customer payments. And if you want to accept credit cards, be prepared to pay extra fees for that, too.

2. Insurance

Many popular side hustles also come with associated insurance costs, though whether you need insurance — and how much you need if you do — will depend on your industry.

Driving for a ride share company, for instance, means having excellent auto insurance. If you want to start a home repairs business, you may need some sort of liability insurance. This is also the case for kicking off that pet sitting side hustle you’ve been pondering.

Be sure to research if you need insurance for your new venture, and include that cost in your start-up budget.

3. Marketing

The key to any successful business is marketing. (If nobody knows about you, they can’t give you their money!) Yes, ideally you’ll get some word-of-mouth marketing once you start developing a reputation. But you can’t rely on that alone, and you certainly can’t rely on it when you’re just starting out.

Getting your name out there will come with a variety of fees. For starters, you’ll need a website no matter what you plan to do. If you deal with customers, a telephone line may also be useful (you certainly don’t want to give them your personal phone number.) Stickers, web ads, flyers — marketing materials for digital and analog alike will all come with an extra cost.

4. Tools/supplies

It’s probably already crossed your mind you’ll need some basic tools and supplies for your side hustle. But you may be underestimating what you’ll need.

Let’s go back to driving for a rideshare service. On the surface, you only need a vehicle and a phone, right? But that’s not all. Many riders now expect extras, like water bottles and charging cables.

And the same thing can apply to just about any type of hustle you might start. Selling clothes on eBay? Don’t underestimate all the packaging you’ll need. Walking dogs on the weekend? Be sure to buy stock in the poo-baggie manufacturer.

5. Taxes

While not necessarily something inherent to starting a side hustle, it is, nonetheless, an expense you need to keep in mind all year long. If you make at least $400 during the year, you’ll need to pay taxes on it. And if you don’t pre-pay those taxes by making estimated tax payments throughout the year, you could be hit with an underpayment fee when you finally file.

6. Time

Sure, you knew that starting up a side hustle was going to take some time investment. But it’s highly probable the time you think it will take will be significantly less than the time it actually takes.

What’s great about a side hustle, however, is that you can spend exactly as much time on it as you want. If you just want some pocket money, a few hours a week is perfectly fine. If you want to potentially change careers, you’ll need to dedicate quite a bit more time to turning your side hustle into a profitable business.

Either way, be sure you know what you want out of it before you get started. As we’ve shown, the time cost is just a part of it — the financial investment can really add up, too.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

Higher prices mean people are buying fewer beers. 

There are some signs that inflation may be cooling, or at least coming off the boiling point we saw at points last year. All the same, a slowdown in price increases doesn’t impact all of our spending equally. In fact, the prices of some items — such as beer and even eggs — continue to rise even while others fall.

Analysis of Nielsen data by Bump Williams Consulting showed average beer prices rose more than 7% in the 12 weeks before Christmas, more than they did the year before. The cost of some brands, such as Bud Light, Miller Lite, Yuengling Lager, and Coors Light rose by as much as 10%.

Data from the Bureau of Labor Statistics backs this up. Beer at home was 1.8% more expensive in November than October, while prices of ordinary food items only increased by 0.2%. This was a much bigger price jump than other alcoholic beverages at home. Wine prices actually fell by 0.2% month on month and spirits increased by just 0.9%.

Why is beer getting more expensive?

There are a few reasons why your favorite brew costs more than it did six months ago. For starters, the industry isn’t immune to the supply chain issues and higher energy prices that have impacted other products. On top of this, the cost of hops has increased because of droughts in some parts of the world, and the Russia-Ukraine conflict has impacted barley production.

Another issue for smaller brewers is the cost of cans. In November, the largest can supplier in the U.S. announced significant changes to its minimum order requirements and warehouse inventory provisions. September also saw a shortage in CO2, which is another key ingredient for some brewers.

Rising prices have already translated into a reduction in consumption. Beer is often considered recession-proof, especially at home. It’s one of those little luxuries that people may continue to buy even as they cut back on bigger expenses such as vacations or new cars. Even so, the recent price increases proved too much for some consumers who bought less in December. Bump Williams Consulting said sales of premium beer Michelob Ultra rose 0.8% throughout the year, but fell off by 2.3% in the month before Christmas.

Everything in moderation

I’m a Brit and drinking is so ingrained in our national psyche that it almost pains me to write this. But beer is not an essential item. In fact, even if beer prices weren’t going up, cutting down on after-work drinks — whether at home or in the bar — can be a good way to save money.

The trick to any money-saving plan is to make it achievable. If one of the things that brings you joy is to go out for a couple of drinks with friends or open a craft beer at home, don’t cut it out completely. You’ll be miserable and could end up spending more money as a result. Instead, look at your budget and work out what you spend now on beer and what a reasonable beer budget might be.

You might be able to cut costs by switching to a lower-cost brand, or cut back on the amount you drink. Perhaps you’re already trying a dry January, which some say is good for both your bank account balance and health. Let’s say you usually spend $15 a week on alcohol. If you decided to give up alcohol completely, you could save $780 a year.

It might be more realistic to try cutting that figure to $10 a week instead. A $5 reduction in spending could mean $260 a year more in your savings account. It’s not going to pay for a new car, but it could help cushion your finances a little against economic uncertainty.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

Contrary to popular belief, this isn’t a situation where the rich get richer and the poor get poorer. 

Lots of people love using rewards credit cards, and it’s easy to see why. There are cards that earn 3%, 4%, and sometimes even 5% or more back on purchases in certain categories. You also have your choice of earning cash back, airline miles, or flexible rewards points.

It’s great for those who are earning big rewards, but who pays for them? After all, credit card companies can’t whip up something of value out of thin air. It stands to reason that if someone is coming out ahead, someone else isn’t.

Some have claimed that it’s a reverse Robin Hood situation. Wealthy Americans are the ones who benefit, while poorer Americans who pay with cash or debit cards foot the bill in the form of higher prices. However, a recent study found that this isn’t the case. Whether you benefit or lose money from credit card rewards depends primarily on your financial habits.

Who pays for credit card rewards?

A study released in Dec. 2022, “Who Pays For Your Rewards? Redistribution in the Credit Card Market,” looked at how rewards redistribute wealth. It found that credit card rewards don’t simply transfer wealth from poorer people to the rich.

It’s actually consumers with higher credit scores who profit at the expense of consumers with lower credit scores. The study refers to these two groups as sophisticated consumers and naive consumers.

To understand why, we need to look at how card issuers fund their rewards programs. The largest U.S. banks paid $34.8 billion in credit card rewards in 2019. There are three types of fees used to pay for this:

Credit card interest: Cardholders who carry a balance from month to month are charged credit card interest.Interchange fees: Merchants pay processing fees to accept credit cards. One of these processing fees, the interchange fee, is paid to the bank that issues the card.Card fees: Some credit cards have additional fees, with the most common being an annual fee.

Of those fees, interchange fees are the ones that contribute to higher prices. If a merchant makes a $100 sale, it may keep $97.50 or $98 after all the processing fees are taken out. Merchants raise prices to balance paying these fees. Cash and debit card users pay the same higher prices, without earning rewards. But there are a few clarifications to add here.

You don’t need to be wealthy to get a rewards card. The best rewards credit cards do require good credit, but your income isn’t a factor in your credit score. You can build a high credit score and qualify for rewards cards no matter your income and bank account balances.

There are also those two other fees to consider. In 2019, the largest U.S. banks made more than twice as much money from interest and card fees as they did from interchange fees. They reported income of:

$89.7 billion in credit card interest$41.3 billion from interchange fees$9.9 billion in card fee income

The rewards study compared rewards earned and fees paid by cardholders with different credit scores and incomes. It found that rewards cardholders with high FICO® Scores earned more in rewards than they paid in fees. Rewards cardholders with low FICO® Scores paid more in fees than they earned in rewards. This was due to suboptimal habits by the latter group, who carry higher balances and pay more interest.

It also clarifies that these results “are not driven by income, as they hold within the sub-samples of low-, middle-, and high-income individuals.” What mattered were credit habits, not how much money consumers made.

How to profit from credit card rewards

It’s easy to be part of that “sophisticated consumer” group that profits from credit card rewards. There are only a couple of things you need to do.

The most important is to always pay your credit card balance in full. By paying in full, you don’t get charged interest. The value of rewards will never outweigh the cost of interest, so this is crucial.

In addition, avoid unnecessary card fees. Pay on time so you don’t get charged a late fee. If you’re considering a card with an annual fee, make sure it has enough benefits to make up for that. Credit cards with annual fees can provide much more value, but only if you can take advantage of their perks.

Credit card rewards are mostly paid for by consumers with lower credit scores who carry balances and incur more interest charges. To some extent, shoppers who use cash and debit cards also pay in the form of higher prices. The good news is that at any income, you can be one of the consumers who benefits. Get a rewards credit card, pay the bill in full every month, and you’ll come out ahead.

Top credit card wipes out interest until 2024

If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR for up to 21 months! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read our full review for free and apply in just 2 minutes.

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.

 Read More 

Don’t take life too seriously. You’ll never get out alive. 

Your 30s are an interesting time. You’re now old enough to be a grown up by just about anyone’s standards — but you’re still young enough that things like retirement and old age are abstract thoughts for Future You.

And yes, that list often includes things like life insurance. After all, you survived your 20s (miraculously, in some cases). What could possibly take you out now, other than the unstoppable hands of time?

Unfortunately, the answer is: Lots of stuff. That’s why, as too soon as it may seem, you very well may need good life insurance even at 30.

But, how much life insurance do you actually need? The answer depends on your personal situation. In some cases, the right amount may even be “none.” For most folks, however, at least a little life insurance will make a big difference to your loved ones.

If you have dependents

Unless you’re exceedingly wealthy, the one case in which you absolutely, positively need life insurance is when you have dependents.

We’re not necessarily just talking about the kind of dependents you claim on your taxes, either. This could include a stay-at-home partner, children, aging family members, your best friend from college who “just needs $20,” again — you get the idea. Dependents include anyone who relies on your income to survive.

Figuring out exactly how much insurance to get when you have dependents can be complicated. It will vary based on your debts, expenses, and how you want your loved ones’ lives to look after you’re gone.

Do you want your stay-at-home partner to be able to continue to stay home? Then you may need a large policy with enough money to pay off your debts, as well as provide living expenses for the future. This could easily mean a policy with a payout of $500,000 or more.

At a minimum, consider getting a policy large enough to cover your debts and at least a year of living expenses. It will take some time for your spouse (or other caregivers) to adjust to life without you — or your income — and this can give them room to settle into the new normal.

Most life insurance companies offer easy-to-use calculators that can help you figure out how much insurance to get. Or, if you prefer more individualized attention, you can find an insurance agent who can help you not only figure out how much insurance to get, but help you find the best company to meet your needs.

If you have a partner

Another common scenario is someone who may not have children, but who has a partner with whom they cohabitate and share expenses. If that’s you, then you may want to consider getting a modest life insurance policy to help your partner cover costs after the loss of your income.

Think about it this way: If you lost your job tomorrow, could you and your partner still pay all of your bills?

If the answer is no, get life insurance. Ideally, get at least enough insurance to cover any death-related costs, as well as six months (or more) or expenses. This will give them a decent emergency fund to rely on.

Even if the answer is yes — consider life insurance anyway. For one thing, your partner will still likely be footing your funeral bills. And funerals are not cheap (they really do get us coming and going!). It will likely cost at least a few grand to take care of all of your post-life costs.

What’s more, your death will probably have a pretty serious impact on your partner’s mental health, at least for a little while. They will certainly appreciate having those funds to fall back on so they can take time to grieve.

Pro Tip: If you and your partner aren’t legally married, you may want to set up a will, as well as financial and medical powers of attorney. This can give you similar rights to that of a married spouse.

If you’re single

The point of life insurance is to financially provide for your dependents after you die. So, if you’re single and have no dependents, you can potentially skip the life insurance altogether. Why pay for something if there’s no one who will benefit from it? (It’s not like you’ll be able to use it, what with being dead and all.)

However, there are a few things to consider being deciding to forego life insurance:

Do you have pets? While not considered a dependent in legal terms, your pets will still need care if something happens to you. A life insurance policy large enough to cover their expenses for life would be a great way to help whoever agrees to take care of your pets after you’re gone.

Can your savings cover your funeral costs? The last thing you want your grieving loved ones to deal with is a funeral bill. Especially when funerals can easily cost top $10,000 for the casket alone.

Do you have a mortgage? If you’ve purchased property and have a mortgage, consider life insurance that will pay off your mortgage loan. This can make things much easier on whoever it is you leave your property to in your will.

Death is unavoidable (so far). So it makes sense to plan for it. Even if you think you’re too young to worry about it — stuff happens. Help your loved ones deal with it (or at least throw money at it) with an appropriate life insurance policy.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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.

 Read More 

Climate change isn’t going away. 

Will 2023 be your year to buy a home? It’s not a particularly good time for buyers (and is increasingly becoming unfavorable for sellers too, as mortgage rates spiked last year, rendering homes even more unaffordable for many prospective buyers), but you might be in a good position financially and ready to buy nonetheless.

As we head into the future, there is a massive elephant in the room: climate change. This will present a greater problem in the short term for some cities in particular, as they contend with flooding, extreme temperatures, and wildfires — and resulting higher costs. But no matter where you’re hoping to buy, there are some home features you’ll want to focus on finding, as they’ll save you money and help the planet by saving energy. Look for these home features to live a greener life and also save some green.

1. Location, location, location

It’s true what they say: When it comes to real estate, location is everything. I don’t just mean buying a home in a hot neighborhood with lots of amenities like shops and restaurants (although, if these things are important to you, by all means look for them). Consider how nice it would be to have the option to walk or bike to the store, or have your kids walk to school rather than waiting on a bus or having to drive them. What if your neighborhood featured well-maintained sidewalks and bike lanes, or even a park, and you could walk, jog, or bike for exercise? This could save you the cost of a gym membership (and the cost of the gas you’d use driving there).

2. Updated appliances and home systems

If the home you’re considering has newer appliances and home systems (like plumbing and HVAC), you may end up paying a higher price for the home, but you won’t have to pay to make these kinds of upgrades yourself. You also won’t have to wait on materials or appliances to come in; supply chain issues have made home upgrades even more time-consuming and expensive these last few years. And you’ll get to reap the benefits of lower utility bills and a smaller carbon footprint — what’s not to like?

3. Windows on the world

If your home has old, leaky windows, you are literally paying to air condition or heat the outdoors. While there are workarounds for this (such as covering your windows with plastic during the winter), if you have the option to buy a home with upgraded windows that keep the weather out and your precious heated or air-conditioned air inside, you should.

4. Mature trees

Trees can save you money and improve your eco-footprint at home. How so? If you have large shade trees in front of your windows, you’ll save money on your cooling costs. And trees can help mitigate the effects of soil erosion. Plus, when it’s time for you to sell your home, you might be able to command a higher price for it — people like trees, for these reasons and beyond. Bonus: Trees are beautiful.

5. Other eco-friendly upgrades

Depending on your home-buying budget and where you’re trying to buy, you may have access to homes that come with even more green upgrades, like solar panels or water-saving landscaping. Solar panels, in particular, are not cheap, but if you can buy a home with them already installed (and fully paid for by the previous owner, rather than leased), you will likely save money on your energy costs, even if you pay more for the home upfront due to the presence of the panels.

There’s so much to think about when it comes to homeownership, and it’s a great idea to add these features to your home-buying checklist if you want to both save money overall and live a more eco-friendly life in your new home.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More