Money Management

Want to start a business? See how much start-up capital you really need for a few popular types of businesses, from online stores to restaurants. [[{“value”:”

There’s not an easy answer for how much money it takes to start a small business. If you want to start a simple home-based business, you might only need a few hundred dollars. If you want to open a brick-and-mortar retail storefront or restaurant, you’re likely going to need tens of thousands of dollars of upfront capital to pay for rent, inventory, employee expenses, and more.

Let’s look at a few examples of average start-up capital needed to start a small business — and how you can improve your chances of success.

Home-based professional services business: $1,000 (or less)

If you have professional skills that can be used to start a business as a consultant or freelancer, congratulations: you have a chance to start one of the lowest-cost businesses of all. If you start a professional services business, you might need up to $1,000 of actual cash to get your business off the ground.

A few examples of start-up costs for a home-based professional services business include:

Website builderBusiness cardsForming a Limited Liability Company (LLC) or other legal business entityAdvertising and marketing expenses

The biggest “cost” of starting a business as a freelancer or consultant is mostly the value of your time. You’ll need to burn the midnight oil (or wake up early) to introduce yourself to new clients, promote your services on social media, and otherwise get known by the people who can hire you. But being a freelancer or consultant is one of the best ways to start a business without a big checking account balance.

Online store: $40,000

You don’t always need a lot of money to start an online store. But if you want to make a serious impact with attractive inventory that people want to buy, and with powerful search engine marketing that can drive traffic to your site, you need to spend some cash.

A survey from Shopify found that the average online small business owner spends about $40,000 in the first year. Ideally, you can start making sales and earning revenue quickly so you can cover those costs. But $40,000 is a reasonable average estimate for the cost of starting an online small business.

Franchise: $20,000-$50,000

Sometimes the fastest way to start a business is to buy into an existing business by opening a franchise. When you buy a franchise, you get the support and marketing muscle of a larger brand that can help you make money. The classic phrase to explain the advantage of franchising is that it feels like “being in business for yourself, but not by yourself.”

Opening a franchise is not free, of course. You have to pay a franchise fee to the larger company as a one-time investment to get your business started. According to the International Franchise Professionals Group, the average cost of a franchise fee can range from $20,000-$50,000 — and that’s just the franchise fee, not counting other start-up costs you might need, like real estate and inventory.

Some of the most famous franchise brands, like McDonald’s, require a lot more money than that. For example, McDonald’s requires its new franchisees to have at least $500,000 of non-borrowed personal resources before you can be considered to open a franchise.

But if you believe in the company’s brand, if you can work within established systems and processes, and if you can hustle to find new customers and build your franchise’s presence in your local market, becoming a franchisee can be a cost-effective way to become an entrepreneur.

Food truck: $40,000-$150,000

Food trucks have become a big trend in America’s culinary scene, and unlike the costs of starting a larger restaurant at a fixed location, they can offer a lower-price way to get into the food business. Data from Square shows that average food truck start-up costs might range from $40,000 to $150,000.

One advantage of opening a food truck is that you’re not dependent on one location; you can go where the people are. And food trucks are made for social media — you can build an audience with photogenic, memorable food, and a colorful truck that’s fun to pose with for selfies. If you can find a winning concept with food that people love to eat, you might find that opening a food truck is a cost-effective business idea.

Restaurant: $175,500-$750,500

Opening a restaurant is many people’s dream start-up idea: What could be more fun than creating a unique hospitality environment, where people can gather for delicious food and happy memories? But although restaurants can be cool and glamorous, they’re not cheap.

A survey from RestaurantOwner.com found that the average start-up costs for a restaurant range from $175,500 to $750,500. Restaurants have lots of costs: food, other inventory, real estate leases, construction, employee wages, utilities, license and permit fees, and more. That all adds up to a median start-up cost per seat of $3,586 — or $14,344 for a four-seat restaurant table. Starting a restaurant can be risky, and the profits are not often huge: the RestaurantOwner.com survey found that the typical restaurant’s (median) profit margin was 5.5%.

Bottom line

Starting a business doesn’t have to be expensive, but it’s important to know just how much it can cost. Many entrepreneurs fund their startups with credit cards or personal funds. Until you’re ready to apply for a small business loan, you might need to “bootstrap” your business in this way.

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A lot of people absolutely love Aldi. But take a look at a few reasons to consider spending your grocery budget elsewhere. [[{“value”:”

Aldi has a bit of a cult following. The discount grocer is known for its ultra-low prices that can lead to a world of savings for savvy shoppers. At a time when grocery prices are still inflated, that’s an important thing.

But while Aldi has the potential to do great things for your budget, shopping there doesn’t always make sense. Here are a few reasons to steer clear of Aldi and shop elsewhere.

1. There’s no store close by

You might save yourself money by shopping at Aldi versus a different supermarket. But if there’s no Aldi close by, what you save on groceries, you might spend on gas.

Before you spend 30 minutes on the road to load up at Aldi, run the numbers. If you’re driving 24 miles to Aldi instead of visiting the supermarket down the block, and your car gets 24 miles to the gallon, you’re spending whatever a gallon of gas costs times two every time you do an Aldi run. So when gas is $3.50 per gallon, you’re out $7.

Now, it may be worth it to spend $7 on gas if you’re saving something like $20 or more on your food for the week. But if you’re only saving $4 or $5, then why bother?

2. You can’t find the brands you like

Sometimes, people are accused of being brand snobs for liking certain products more so than others. But preferring the brands you like doesn’t necessarily make you a snob — it makes you a consumer who prefers the comfort of buying the same products over and over. And that’s not such a bad thing if it results in less food waste.

Aldi carries lesser-known brands, which is how it can offer its affordable prices. In fact, more than 90% of Aldi’s inventory stems from Aldi-exclusive brands. But if you prefer to stick with brands you know, then Aldi just isn’t right for you. And that’s really OK.

3. You’re losing work time and productivity due to the store’s inconsistent inventory

Another challenge you might face when shopping at Aldi is not getting access to the products you need. Aldi’s inventory can be pretty inconsistent compared to traditional supermarkets, which means that you may not get everything you need in one shopping trip. If you’re someone who’s self-employed, having to visit multiple stores in the same week could take away from your working hours — and your income.

To put it another way, maybe Aldi could save you $15 on your groceries for the week — if you can find everything you need. But if Aldi only has a few of the items on your list, the trip to the store, which may take an hour from start to finish, could only end up saving you $7 or $8. And if you earn $60 an hour, that’s not worth it.

It’s easy to see why so many people love Aldi. But it may not be the best place for you to shop for these reasons.

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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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Want to know how much the typical 401(k) saver has? Read on for the answer. [[{“value”:”

Saving for retirement, whether in an IRA or 401(k), is crucial if you want to be comfortable later in life. With Social Security only paying the average retiree about $23,000 a year today, it’s clear that you’ll probably need some extra income to avoid financial stress down the line.

Now, if you have access to a 401(k) plan through a job, it pays to contribute for several reasons. First, many 401(k)s come with an employer match, so you might get free money for your retirement.

Also, the way 401(k)s are funded could make it easier to keep up with your savings efforts, since contributions are made through automatic payroll deductions.

It’s not as if you’re actively writing your 401(k) a check at the end of the month, after you’ve paid your bills. Instead, that account gets funded before your paycheck even hits your bank account.

If you already have a 401(k), you may be curious to know how your balance compares to the average. But while you may want to know how much money the average saver has, it’s even more important to know how they probably got there.

401(k) balances were up in 2023

In 2023, the average 401(k) balance was $115,000, according to T. Rowe Price. That represents the highest balance the firm had seen in 10 years, aside from 2021’s average of $124,000.

But a big reason 401(k) balances took off in 2023 was due to a solid performance from the stock market. And if you want to grow your 401(k) into an impressive sum, then loading up on stocks is your best bet.

What a stock-focused strategy can do for you

One thing you should know about 401(k)s is that they generally do not make it possible to invest your money in individual stocks. Rather, you’re usually limited to different funds that allow you to invest in the stock market, either on a very broad level (like with an S&P 500 index fund) or based on the choices someone other than you makes. For example, mutual funds employ fund managers to pick stocks, and you can often buy mutual funds in a 401(k) plan.

You may be skeptical about putting your savings into stocks given the potential for volatility. But you should also know that over the past 50 years, the stock market has averaged an annual 10% return, as per the performance of the S&P 500 index. And that return accounts for both good years and bad.

In fact, one of the simplest ways to invest your 401(k) may be to find an S&P 500 index fund and put your money there. If you contribute $400 a month to your 401(k), whether on your own or in conjunction with an employer match, and your plan gives you an average yearly 10% return, in 40 years, you could be sitting on over $2.1 million.

A big reason not to get so caught up in what the average 401(k) looks like is that a number like $115,000 means different things for people of different ages. That number can also fluctuate from one year to the next, based on the stock market’s performance.

So while it’s not terrible to want to know what the average 401(k) balance is, or how yours compares, a better use of your time is to find out what your company’s 401(k) match is and start contributing enough to claim it in full. Then, look at your 401(k)’s investment choices and make sure you’re putting your money to work efficiently.

If you’re invested in mutual funds, you may be losing money to fees without necessarily benefitting from a better return than what an S&P 500 index fund will give you. So whether your balance is around $115,000, way less, or a lot more, going heavy on an S&P 500 index fund in your 401(k) for many years could be your ticket to retiring with more money than you ever could have imagined.

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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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Will a Costco membership pay off, or will it be a waste of money? Read on to find out. [[{“value”:”

For me, having a Costco membership is truly an obvious win. For the $120 a year I pay for an Executive membership, I typically save at least $10 to $20 per week on the things I buy regularly.

And you don’t even need to make a $120 yearly investment in Costco. A basic (or Gold Star) membership only costs $60. And while you won’t get 2% cash back on your Costco purchases with a basic membership like you will with an Executive membership, you may get some cash back from your credit card that makes up for it.

But while I can say with certainty that having a Costco membership makes sense for me right now, that wasn’t always the case. And if these signs apply to you, you may want to save your money rather than give Costco $60 or $120 per year.

1. You never cook or eat at home

When I was single and lived in New York City, there was a point when I did very little food prep or eating at home. At the time, I had a demanding job that kept me at the office for long hours, so it was often easiest to grab lunch as a means of getting fresh air during the day and to pick up dinner on my way home. Since I was living alone, cooking also wasn’t so much more cost-effective than grabbing cheap prepared food, like a slice of pizza or two.

These days, because I do a lot more cooking and have a family of five to feed, a Costco membership definitely pays off for the savings on groceries alone. But if you truly never cook or eat at home, and you therefore spend little on groceries to begin with, then you’re going to be missing out on one of the biggest benefits of joining Costco. And in that case, a membership may not be a good use of your money.

2. You have zero storage space

My days of being a New York City resident had me living in a studio apartment the size of my current bedroom. Actually, I take that back — it may have been smaller.

When I first met my now-husband and he started spending more time in my studio, he wondered why he kept seeing the same pile of clothing in the corner of my couch week after week. I had to explain to him that storing those items on my couch was my only option in the absence of ample closet space.

If your living quarters are similar to the ones I’m describing, then you probably won’t really enjoy a Costco membership all that much. You’ll probably find that you either have to say no to a lot of purchases due to a lack of space, or that you’ll have no choice but to keep cases of toilet paper and tissues out in your living room in the absence of being able to put them away. And while that could make for a nice conversation starter, it’s still probably not ideal.

3. There’s no Costco nearby

Costco.com offers plenty of bargains in its own right. But if you want to reap the most savings with a Costco membership, you’ll need to shop in stores. The prices there are almost always cheaper than the prices you’ll see online for packaged food, household supplies, and more.

As such, if you don’t have a Costco in a reasonable driving distance, you may want to say no to a membership since you may be limited in the amount of savings you can reap online. And while you can order fresh groceries for same-day delivery, you’ll face a serious upcharge for that convenience.

Clearly, Costco memberships offer a lot of value. If they didn’t, then there wouldn’t be 73 million people paying for one right now. But if these signs apply to you, then you may want to save your $60 or $120 a year and use that money elsewhere.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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