Money Management

Many people want to forge their own financial path. Keep reading for a few pitfalls you may encounter along the way — and how to cope. [[{“value”:”

You might think you know all the potential pitfalls that come with starting a new business — you need ideas for products or services, of course. You’ll contend with competition in your line of business. And you need effective marketing to reach your customers and sell them your product or service.

But hidden among these big challenges are a few less-discussed ones that could trip you up in a big way if you’re not careful. Here are two to be mindful of, as well as tips for coping with them.

1. The impact on your personal life

A W-2 job usually comes with set parameters to establish where and how much you’re working, as well as the schedule you follow. For example, you might work 40 hours per week, and that work is performed from an office building on a schedule of Monday through Friday, 8 a.m. to 5 p.m. (and you get a daily hour-long lunch break).

Start a small business and all of this goes right out the window. You could conceivably be doing work tasks 24/7, and finding it hard to fulfill non-work obligations. This could present a real problem if you’ve got a spouse, children, or other relationships that take up a lot of your time — they could suffer as a result of you spending so much time getting your business off the ground.

What’s the solution? Honestly, managing expectations and getting serious about taking time off are your best bets here. I’m sure the important people in your life know how vital your business venture is to you, and if for some reason they don’t, tell them, so they don’t wonder why you’re suddenly much less available. And try to build some rest time (where you’re not working) into your schedule — maybe you can make one day a week off-limits for business tasks. Never taking time off will cost you, and you could find yourself facing burnout and mental and physical health problems as a result.

Being self-employed means not getting paid time off through your employer anymore. This was a big adjustment for me when I became a full-time freelancer. I decided at the end of last year that I would give myself the gift of PTO in my savings account. I designated a sub-account as my PTO fund, set a savings target, and now I have a small pot of money that I can draw on as needed to replace income on days when I’m not working. It helps me feel better about taking time off as needed.

2. Legal and regulatory issues

Starting a new business is easy, right? You just need an idea, and the money and wherewithal to make it happen. But not so fast! Depending on what type of product or service you intend to offer customers, and the structure of the business you want to set up, you could be facing far more legal and regulatory hoops to jump through than you may realize, beginning with obtaining a business license.

Think about it: If you’re intending to prepare and sell food, you’ll have to stay on the right side of food service codes and laws for your state. You’ll also likely be subject to regular inspections to ensure compliance. Want to start a home daycare center? My parents have operated one for years, and to stay in business and out of trouble with their state, they are required to complete regular training courses and recertifications.

If you’re intending to grow your business to the point where you’ll be bringing on staff, your potential issues in this area will multiply. You’ll need to pay employer taxes, comply with labor laws, and more. Even if you’re not ready to do this just yet, it’s worth thinking about for the future.

What’s the solution? Research, research, research. The U.S. Small Business Administration (SBA) maintains a lot of useful information for business owners, including a page about legal compliance for businesses. Dig into SBA information, as well as resources offered by your state and local governments about business requirements.

Knowledge is power, and it’s a good idea to learn as much as you can about the laws you’ll need to comply with before launching your business. Consulting with an accountant about taxes and financial issues is also a stellar idea.

Starting a small business can be rewarding on many levels, including financial and emotional. Plus, there really is something great about working for yourself. Just keep these two challenges in mind before starting down the small business path — and be prepared to address them.

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Loyalty to one airline is a good strategy for some travelers, but it’s not for everyone. Check out a few reasons why airline loyalty may not make sense. [[{“value”:”

I travel several times a year and typically visit destinations that require me to fly to get there. But even though I’m a frequent flyer, I’m not loyal to one airline. While airline loyalty may make sense for some travelers, I’ve chosen not to focus on being loyal to one brand. Here are a few reasons why I find it doesn’t pay to be loyal to one airline.

1. I don’t want to overpay for airfare

If I were loyal to one airline, I’d likely overpay for some of my plane tickets. Some frequent flyers continue flying with a particular carrier to earn or maintain elite status and take advantage of the additional perks they get as loyalists.

But if you always fly with the same airline, you’re probably not always getting the best price. Your chosen airline may have more expensive prices than competitors for similar fare types and routes. And every time you overpay, it impacts your checking account balance.

Not being loyal to one airline allows me to compare airfare prices for similar routes across multiple carriers. I can book a route that fits my schedule and vacation budget. That doesn’t mean I always choose the cheapest ticket — but I can make strategic moves to avoid overpaying.

I also like to book flight deals sent to me through a paid flight deal service. I spend around $100 annually for a subscription and have scored some incredible flight deals. Since I receive alerts for various carriers, being loyal to one airline isn’t ideal because I’d miss out on savings.

2. My home airport isn’t an airline hub

Some travelers live in major cities that are airline hubs. An airline hub is an airline’s main airport that serves as a transfer point. Airlines fly in and out of these airports on direct routes more frequently, and many connecting flights are routed through their hubs.

Being loyal to one airline makes sense if you live in a city with a hub airport. You’ll have more flight choices and can likely take advantage of more direct routes with a particular airline. You might also find the flights to be more affordable because you’re traveling through a hub.

Since my home airport isn’t an airline hub, I have little incentive to choose to fly with one airline over another. I will sometimes travel to a neighboring city’s airport if it has more direct flight options, or I’ll fly out of my home airport on a flight with a connection.

3. I don’t value elite flyer perks

Some travelers are loyal to one airline because they’ve worked hard to achieve elite status. Being an elite flyer can earn you valuable benefits, but I don’t particularly value the perks of being an elite status member.

For example, some airlines provide free checked bag perks to elite status members. Since I typically fly with just a carry-on bag, I don’t need to save money on checked bag fees. I also don’t need to board the plane early, so early boarding perks aren’t helpful.

Instead of taking advantage of elite status perks, I use the benefits included with my travel rewards credit cards to improve my trip experience. For instance, when flying through an airport with a Priority Pass lounge, I use my credit card perks to relax and unwind for free.

Consider your goals and needs

Only you can decide if it makes sense to be loyal to one airline. For me, it’s best to choose a destination and fly with an airline that offers a route and price that fits my needs. Consider your goals when deciding who to fly with for your next trip. Booking with the airline that best meets your needs is smart. Don’t assume that brand loyalty is always the best strategy.

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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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Natasha Gabrielle 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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The best high-yield savings accounts have mind-boggling APYs. But here are three reasons you might want to avoid them in 2024. [[{“value”:”

Savings accounts can be a great choice when you want to combine flexibility with earning interest on your savings. With a savings account, you can withdraw funds freely, that is, without having to untie it from stocks or break a CD contract. And while they can be pretty boring, savings accounts have lately boasted some impressive APYs, with one account that we know of even paying out at 5.55%.

That said, savings accounts aren’t always the best choice for your money. In fact, though they have few risks, sometimes you could lose money to opportunity costs. If you’re contemplating a savings account, here are three drawbacks to consider.

1. You could get stronger returns in the stock market

Savings accounts aren’t great choices when you’re saving for a long-term goal, like retirement. In fact, they’re pretty lousy. Often, the rates on savings accounts can barely keep pace with inflation. Even when they do pace (or even outpace) the inflationary rate, they’re not going to generate the kinds of returns you’ll find in other investments, like stocks.

Over the last 50 years, the stock market has averaged an annual return of about 10%. At that rate, you could become a millionaire in 36 years by investing $250 monthly. Even if you were to deposit a lump sum, say $10,000, you could still grow it to over $350,000 in 36 years if your average annual return was 10%.

Even at today’s great rates, savings accounts can’t compete with the growth opportunities in the stock market. While savings accounts are safer and don’t come with market risks, storing a large sum in one might not make financial sense, especially if you’re years from retirement and have time to bounce back from market downturns.

2. Savings rates can change

Today’s savings account may have good rates. But don’t be fooled — those rates won’t stick around forever.

Savings accounts have variable APYs, which means your bank could change your savings rate at any time. The same savings account that earns 5.55% today could earn less than half that rate in a few years.

It might not even be long before rates on savings accounts start to drop. Currently, rates are mostly at a standstill, as banks wait to see what the Federal Reserve decides to do with the federal funds rate. While the fed funds rate doesn’t necessarily set interest rates for savings accounts, the two typically move in tandem. If the central bank reduces rates later this year, as most experts and policymakers predict, a chain reaction of rate reductions across savings accounts will likely follow.

It’s impossible to predict where savings rates will be in a few months. But if you have savings that aren’t earmarked for an immediate purpose, it might be prudent to move it into another fixed rate investment — like a CD.

3. Certificates of deposit could earn more interest overall

If you don’t want to invest in stocks, but you’re concerned rates might drop later this year, you could look into certificates of deposit (CDs). Unlike savings accounts, CDs have fixed interest rates, which can be instrumental in locking today’s great rates for a longer period of time.

While many of the highest CD rates are currently on shorter terms, like three to 12 months, long-term CDs could also present you with a lucrative opportunity. Like other bank accounts, long-term CDs have benefited immensely from the Fed’s interest rate hikes. These days, it’s not rare to find 4.00% to 4.30% APYs on 5-year CDs.

With a 4.00% interest rate on a 5-year CD, you could earn roughly $4,333 in interest on a $20,000 deposit. Of course, you have to keep your money locked up in the CD for the full 60 months to earn that much interest, which is one reason to choose a savings account over a CD for money you know you’ll need in the near term. But, again, if you’re confident you can part ways with a portion of your savings, you might be better off opening a CD account, even if your savings account pays at 5.55%.

All things considered, savings accounts are a good place to store savings you’ll need in the near term, especially for emergencies. But for longer savings goals, like retirement, you’ll probably get a better return when you invest it in the stock market or in CDs. Examine the options for yourself, then use our calculators if you need help visualizing how your money could grow.

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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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Not sure how to find the perfect Mother’s Day gift? Read on to see why a Costco membership might fit the bill. [[{“value”:”

Each year, many doting grown children dip into their savings to shower their moms with the perfect Mother’s Day gift. This year, Mother’s Day spending is expected to reach $33.5 billion, according to the National Retail Federation.

You may be more than happy to spend some of your hard-earned money on a gift for your mom. But what if she’s a person who’s tough to shop for?

If your mom doesn’t tend to enjoy classic gift items like chocolate, flowers, and jewelry, you may be at a bit of a loss. But rather than stress, there’s an easy gift you can purchase that might really make your mom’s day — a Costco membership.

A basic annual membership at Costco costs $60 a year. Or, you could upgrade your mom from the start and buy her an Executive membership, which costs $120 for the year but gives her 2% cash back on her Costco purchases. No matter which membership type you choose, here are three reasons why it could be the perfect gift.

1. You won’t have to worry about cluttering up her house

If your mother is the type of person who doesn’t appreciate clutter and likes to own a minimal amount of stuff, then she probably doesn’t want another vase, photo frame, or kitchen gadget. The beauty of a Costco membership is that you’re not giving her an item that takes up space — you’re giving her an opportunity to buy low-cost items during the year as she sees fit.

2. She can enjoy ongoing savings that are all attributed to you

Whether your mom is an avid cook or spends as little time in the kitchen as possible, she’s apt to need groceries at some point, not to mention household essentials like cleaning supplies and paper towels. The great thing about the gift of a Costco membership is that your mom will get to save money on her purchases year-round, thereby easing the strain on her budget. And every time she’s able to spend a bit less, she’s likely to think of you and smile.

3. Your mom can always cancel if she’s not happy with her membership or doesn’t use it

If you buy your mom a sweater that doesn’t fit and she doesn’t make it back to the store you bought it from within 30 days to return it, she may be stuck with it. On the other hand, a Costco membership is something you’re never really stuck with. If your mom decides she doesn’t want her membership, or she comes to realize she’s not getting great use out of it, you can cancel and get refunded. Granted, at that point, you may feel compelled to come up with a replacement gift, but that’s a different issue.

This year, instead of spending $70 on a Mother’s Day floral arrangement or $100 on a gourmet gift basket, consider buying your mom a Costco membership. You can go here to purchase a membership gift card online (you’ll want to get two $60 cards if you’re trying to give the gift of an Executive membership). Otherwise, see customer service at your local store.

And if she ends up loving that membership, guess what? You’ve just solved the problem of what to get her for Mother’s Day for many years to come.

Top credit card to use at Costco (and everywhere else!)

If you’re shopping with a debit card, you could be missing out on hundreds or even thousands of dollars each year. These versatile credit cards offer huge rewards everywhere, including Costco, and are rated the best cards of 2024 by our experts because they offer hefty sign-up bonuses and outstanding cash rewards. Plus, you’ll save on credit card interest because all of these recommendations include a competitive 0% interest period.

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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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