Money Management

Anyone can open an Amazon store, but running a profitable one is harder than it looks. Here are three things to know before you try it. [[{“value”:”

You’ve probably heard stories about people who make six figures selling items on Amazon while working just a few hours per week and traveling the rest of the time. It’s painted as this untapped gold mine just waiting for you to come and claim your part of the wealth. But the truth is more complicated.

While there are some people who wind up with huge bank account balances while investing relatively little time into their Amazon business, there are many others who don’t have the same luck.

Here are three factors you may want to keep in mind if you’ve been thinking about setting up your own Amazon shop.

1. Most sellers don’t make very much money

You might expect that sales will be slow when starting a new business. That’s normal. But for many, they don’t pick up that much over time. About 48% of Amazon sellers earn $1,000 or less in monthly sales, according to a recent JungleScout survey.

The survey also found that 47% of small- to medium-size businesses have lifetime sales of less than $25,000. It’s not clear from this data how long these businesses had been in operation.

A $25,000 profit might be pretty good for a business in its first year. But if you’ve been working at building your Amazon store for a few years, less than $25,000 in lifetime sales might be disappointing.

2. Profits are even less than sales

Sales refers to how much the buyer pays for the item, but that money doesn’t all reach you. Amazon takes a cut as the facilitator of the transaction. You’ll also have inventory costs you must subtract to arrive at your actual profit.

The JungleScout survey found that 12% of Amazon sellers report profit margins of 1% to 5%, while another 16% had margins of 6% to 10%.

To help you understand how this works, let’s say you sell an item you picked up for $100. We’ll keep things simple and skip the Amazon fees for the moment. If you have a 10% profit margin, you could sell that item for $110, giving you a profit of $10 on the sale.

Some sellers manage to earn higher profit margins, which means they can earn more on each sale. But a lot depends on what you’re selling and the reputation of your store.

3. Starting a business isn’t free

If you hope to launch a successful Amazon store, you first need something to sell. This could be handcrafted items you make yourself or items you pick up on clearance at a local store and resell on Amazon. In either case, you’ll have to build up your inventory and that requires cash.

Roughly 58% of those JungleScout surveyed reported spending at least $2,500 to get started on Amazon. If you don’t have that kind of cash, you may need to take out a small business loan to acquire inventory. And there’s no way to know how long you’ll have to sit on those items before you earn any sort of profit.

Is an Amazon shop the right business for you?

I don’t share these statistics to discourage you if you’re truly committed to opening an Amazon shop. But it’s important to have realistic expectations before you invest your time and money into it.

If you only planned it to be a side hustle that provides you a little extra cash here and there, then the low average profit might not concern you. But if you were hoping that your Amazon shop might let you quit your day job, you may want to come up with a new plan.

You may be able to increase your odds of success by doing a lot of upfront research on the items you’re selling, what competitors are charging, and how to market your products to draw in the largest customer base. You also need to be attentive to customer questions.

It’s possible, but it takes a long time before you can get a business like this to provide enough income to live on. Start small and use those first few months as a learning opportunity, rather than getting discouraged if you’re not instantly profitable.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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A Costco membership is only a bargain when it saves you money. Here’s how to see if it’s the right fit for you. [[{“value”:”

It’s not easy to shop at Costco without a membership. But it’s also not easy to tell if you’ll save money by shopping at Costco if you can’t, you know, shop at Costco.

So how do you decide if it’s worth forking over the big bucks (currently $60 or $120; starting Sept. 1, it will cost $65 for a Gold Star membership, $130 for an Executive) to join? Well, you use my fool-proof method to join Costco with no risk. Here’s how it works.

Step 1: Get a Costco membership

You can do this at the membership counter of any Costco. It only takes a few minutes. You’ll need to pay your membership fee on the spot.

Alternatively, you can do this online through Costco.com. You’ll be able to shop online without any extra steps. However, you’ll need to head to the desk to get a membership card before you can shop in person.

Gold Star vs. Executive memberships

If you sign up after this month, you’ll need to choose between a Gold Star membership for $65 a year, or an Executive membership for $130.

The most relevant difference between the two account types is that Executive members earn 2% back on Costco purchases (in the form of an annual Costco Reward). Mathematically, you’d need to spend $3,250 to earn $65 and break even at the 2% rate.

In other words, if you think you’ll spend an average of $271 or more a month at Costco, the Executive membership is worth the upgrade. Otherwise, it’s not.

Step 2: Use the membership

Once you have your membership, use it. Buy the items you’d normally buy, while trying out some of the best perks Costco has to offer.

This includes the Costco house brand, Kirkland Signature. A lot of Kirkland products offer quality as good as (or sometimes better than) name brands, often at a discounted price.

You can also find a lot of name-brand bargains at Costco, too. This includes everything from clothing to electronics to appliances.

Pro tip: Costco codes as a “wholesale club”

Credit cards that earn bonus rewards in certain categories determine those categories based on merchant codes. Costco tends to code as a “wholesale club” with most (all?) card issuers.

Supermarkets have a separate code from big-box stores or wholesale clubs, so cards that earn bonus rewards on grocery store purchases won’t earn extra rewards at Costco — even on groceries. Switch to a card that earns bonus rewards at Costco or a good flat-rate card instead.

Step 3: Get a refund if you don’t like it

Costco is well-known for its excellent return policy and satisfaction guarantee. That guarantee covers the membership itself.

If you spend a few months shopping at Costco and realize you aren’t seeing the savings you hoped for, then head into a warehouse. You can cancel your membership at the membership counter and get a refund on your membership fee. It’s that simple.

(Keep in mind this will end your membership. You can’t return your cake and have it, too.)

This also works for downgrades. For instance, if you have an Executive membership but don’t spend enough to pay for the difference, you can downgrade to Gold Star and get a prorated refund.

Trying is doing

The best way to decide if you can save money at Costco is to try to save money at Costco. If it works out, great! If it doesn’t, cancel and get your fee refunded.

Costco isn’t for everyone. But you don’t need to wonder if it’s for you — you can just give it a try.

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

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With interest rates forecast to start their travel downward, it might be time to think about your mortgage rate. Read on to learn the best time to refinance. [[{“value”:”

With mortgage interest rates falling, and rumors that the Federal Reserve will cut the federal funds rate in September, there are a lot of people already thinking about refinancing the mortgages they’re paying 7% for. Before you make the leap, though, there are a lot of things to consider.

Here are a few ways to know it’s the right time to start checking out refinance rates.

1. You’ve decided to stay in your home for a long time

Refinancing your home’s mortgage is generally about getting a better interest rate, but sometimes it doesn’t actually pay to make the leap to a new mortgage. The average homeowner is now in their home for 11.9 years as of 2023, but if you don’t plan to stay long, it might not be worth it.

A refinance on average, according to Freddie Mac, costs about $5,000. That’s money that will either come out of your pocket or pile on top of your mortgage.

So, let’s say your refinance saves you $100 per month when all is said and done. You would need to be in your home for 50 months beyond your refinance simply to break even, and that doesn’t include the fact that you essentially lost all the interest you already paid to your original mortgage.

However, if you can make your day-to-day living more affordable, it can make sense to choose this option regardless of any previously sunk cash.

2. You need to get out from under your mortgage insurance

For some FHA mortgage loan borrowers, mortgage insurance stays for the life of the loan and can only be shed with a refinance to a conventional loan. It’s not possible to lose mortgage insurance until you have at least an 80% loan-to-value ratio, meaning that your home has 20% or more in equity that’s free and clear. So you’ll be paying that mortgage a while before you reach the point where that’s even possible simply by making payments.

If you bought a house that was worth $425,000 with a 5% down payment at 6.5% interest, you would have to pay down the loan to $340,000 to reach the point where you could refinance to remove the mortgage insurance. This won’t happen until midway through year 10.

If you pay mortgage insurance for the entirety of those 11 years, you’d have paid $20,520 — or about $155 per month (mortgage insurance varies based on how much outstanding principal you owe and decreases as you pay your mortgage down).

While that sounds like a lot, hanging onto the mortgage to avoid losing those sunk costs will cost you even more — a total of $39,612! By holding onto your note to avoid refinancing your mortgage insurance, you’ll spend an extra $19,092 over its lifetime. If you plan to stay in your home and pay the mortgage off, this is generally a solid move, since the average refinance only costs about $5,000.

3. Interest rates have dropped dramatically and you still owe a lot

This is unlikely but it’s possible, so let’s explore it. Let’s say you just bought your house and the interest rate was 7%. It’s the same house from above, the $425,000 one with a 5% down payment (meaning you’ve borrowed $403,750). Holding on to this loan for its lifetime means paying $563,267 total in interest across 30 years. It’s not nothin’, as they say.

But because mortgage interest is essentially front-loaded, meaning you pay the most in the beginning of the loan and less as time goes on, refinancing early in the loan is better than waiting until deeper in to do so.

In the sample loan, you’re paying $28,132.57 in the first year in interest alone, and just $4,101 toward the principal. By the end of year three, you’ve paid $83,486 and owe $390,535. If you refinance now, at 5%, you’ll pay an additional $364,196 for the next 30 years of interest, totalling $447,682 — saving you over $115,000 in interest.

But let’s say it takes a while for rates to come down. At the end of year 10, you’ve paid $265,056, or about 47% of the interest you’re gonna pay. You still owe $346,467 in principal. At this point, even refinancing to a 5% interest rate means you’ll pay an additional $323,101 for the next 30 years of the mortgage, totaling $588,157 in interest payments, plus the cost of refinancing.

The right time to refinance your mortgage depends on your circumstances

I know it’s such a cop-out to say the right time to refinance is when it’s right for you, but that’s honestly the truth. Some people need a lower payment to ease their budgets, even if it means a longer time to pay the loan off. Some people need to get rid of mortgage insurance and have no options. Some people simply get lucky and should definitely take advantage of their timing.

So when the Fed announces rate cuts, don’t get too excited. Just take a big breath, and focus on what’s most important to you for your mortgage and stay the course.

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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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Your Costco Executive membership costs a bit extra, but it comes with massive benefits that a basic membership can’t provide. Learn how to make the most of them. [[{“value”:”

Membership has its benefits, as we’ve all been told, but there are very real and tangible advantages to being a Costco Executive member. Out are the basic $65 Gold Star memberships (up from $60 beginning Sept. 1), and in are the more spendy, but far more rewarding, Costco Executive memberships.

But now that you’ve dropped $130 on a Costco membership (up from $120 beginning Sept. 1), how can you make the most of it?

1. Buy more at Costco

It might sound like pretty basic advice, but the truth is that the best way to maximize your Costco Executive membership benefits is to spend more money at Costco. This shouldn’t be hard, given how much stuff it has for sale and how much of it you probably need every day.

Costco Executive members earn 2% back on eligible purchases, which is most anything in the store or on the website besides cigarettes, tobacco products, gasoline, Costco Shop Cards, postage stamps, alcohol (in some states), prescription drugs (in some states), and food at the food court, including the infamous Costco hot dog combo — which, frankly, is so affordable you don’t really need money back on it anyway.

2. Only use your primary membership when shopping

Costco will give you an extra membership card for another adult in your household, but unfortunately, only the primary member can earn rewards on purchases. That goes for anything purchased inside the warehouse, or through the website, including Costco Travel bookings.

Another important thing to note is that if the primary household cardholder is removed from the account at any point, their purchases will not apply toward the reward. So, even if you can’t stand the sight of your primary household cardholder, hold out on splitting up your account until your reward coupons come, which is about three months prior to your renewal.

3. Plan more major purchases around Costco

There are a lot of major purchases we make, and Costco sells almost all of it. You’ll want to price check the competition, but I’ve checked Costco on tons of items for The Ascent, and generally its prices are on par, if not better, than similar products elsewhere. So, for that reason, I highly recommend planning more of your big buys around what Costco’s got.

Need a couch, need a TV, need a refrigerator or toaster to cater Thanksgiving? No problem, Costco’s got you. It even carries lots of basic DIY materials, like luxury vinyl plank flooring, offers professional installation of items like solar panels (you can get cash back on those, too), and provides a range of business services.

Since you can only earn $1,250 in rewards yearly (up from 1,000 beginning Sept. 1), you might not need to spend all your money at Costco, but spending up to $62,500 will allow you to maximize your benefits. If you have teenagers, you can probably do this in groceries alone.

4. Considering a vacation? Yep, you guessed it — Costco

If you’re into cruises or theme park getaways, you can get packages for these through Costco Travel. You can even get a seven-night stay, with airfare, for $6,200 per person to Tahiti and stay in one of those little huts that’s suspended above the ocean. Along with all the memories you’ll make, you’ll also generate some pretty heavy rewards using your Costco Executive membership.

Even if you’re not going on vacation, and just simply need to rent a car for some incredibly mundane reason like that you had a car accident and need a vehicle to get to work for a few weeks, there are Costco Executive rewards for that, too. When you explore the Costco website, so many possibilities for earning that $1,250 reward appear like magic.

Maximize your Costco Executive membership and your budget

Look, I love a good deal as much as anybody, and with a Costco Executive membership, you can get great deals on a range of products, get cash back in the form of a yearly reward certificate, and it’s all very budget-friendly. Although the Costco Executive membership is twice the cost of the basic Gold Star membership, it’s really a quadruple threat.

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Add on the competitive 0% interest period and it’s no wonder we awarded this card Best No Annual Fee Credit Card.

Click here to read our full review for free and apply before the $200 welcome bonus offer ends!

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.Kristi Waterworth 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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