Financial security is a universal aspiration. No matter where you are in life, the desire to secure your future financially is a common thread that binds us all. Whether you’re just starting your career, raising a family, or approaching retirement, the choices you make today can significantly impact your financial well-being tomorrow.

In this comprehensive guide, we will delve deep into a wide range of finance tips that can help you pave the path to a secure financial future. From saving and investing wisely to managing debt and planning for retirement, we’ll cover it all. By the time you finish reading this guide, you’ll be equipped with valuable knowledge to make informed financial decisions and build a brighter financial future for yourself and your loved ones.

• Investing Principles
• Retirement Planning
• Tax Planning
• Insurance and Risk Management
• Real Estate Investments
• Education and Career Development
• Estate Planning
• Financial Pitfalls to Avoid
• The Road to Financial Freedom
• Your Financial Future Awaits

The Foundation: Budgeting and Saving

Two important parts of money management are budgeting and saving. Creating a budget shows how much money is coming in and where your money is going. Having a clear picture of where your money is going is very important to financial success. Budgeting can help drive savings, help you manage and plan to pay off your debt, and build savings for a big purchase or something long-term, like retirement.

There are many ways to save money. Some ways to save can be easy and others require creativity. Saving is a very important tool in getting out of debt or building wealth. Information about creating a budget and finding ways to save are below.

Budgeting is the process of projecting revenue and expenses over a given time period. It is usually compiled and reread on a regular basis to be updated. A person, a family, a group of people, a business, a government, a country, a global organization, or any other entity that earns and spends money can all budget.

Savings are the funds left over after subtracting total expenditure from disposable income produced in a certain time period.

Budgeting is a great way to track your spending and saving. Creating a budget, or spending plan, may seem overwhelming or tough, but it can be done. Start by tracking your expenses. This will give you a good idea of what you are spending your money on, how much you are spending, and when you are spending it.

You can simplify your budget by considering your needs and wants. You also want to make sure your budget is helping you reach your financial goals. The example below shows you one way to develop a budget.

Monthly Income:	$3,600
Savings:	$180
Rent:	$1800
Utilities:	$400
Groceries:	$300
Eating out:	$150
Auto Insurance:	$100

When building your budget or spending plan, use the information below to help you decide how to best spend your money (these percentages should be based on your total net income):

• Housing (rent or mortgage) 20 to 35% –
• Utilities (gas, electric, water, trash, telephone) 4 to 7% –
• Food (at home and away) 15 to 30% –
• Family necessities (laundry, toiletries, hair care) 2 to 4%.
• Medical (insurance, prescriptions, bills) 2 to 8%.
• Clothing 3 to 10% –
• Transportation (car payment, gas, insurance, repairs, or bus fare) 6 to 30% –
• Entertainment 2 to 6%.
• Savings 10 to 15%

Get started by creating your own budget or use the resource we have created. It’s important to regularly review your spending plan. As you develop your spending plan or budget, visit the All About Spending resource for more information.

Saving

Saving is a key part of reaching financial independence and building wealth. Think of saving as giving a gift, or paying a reward, to yourself. The money you save gives you so many benefits, like having cash in an emergency. It can also give you the ability to buy big things, like a car. Remember that building up huge amounts won’t happen overnight. But it can happen if you make saving a habit, make it automatic, and stick with it over time.

To get started, try to track all the money you spend. A simple way to track your spending is to keep a log or diary of everything you spend.

At the end of the month look over the log and ask yourself a few questions:

• What expenses make me proud or happy?
• What expenses would I reconsider?
• Can I organize my spending into larger categories?
• What categories did I spend the most money on?
• Are there expenses or items that I can cut out of my budget or spend less on?
• What changes should I make given my goals and spending habits?

Think of one or two actions you can take today to help you reach your goals. Can you cut back in one area? Can you delay purchases to limit impulse buys? Consider picking a small action that can help you reduce your spending in one category. For example, eating out for lunch is something that you could possibly cut back on to save money. Using the money you saved, set a weekly or monthly savings target.

Keeping track of your spending and prioritizing savings are two ways to reach your financial goals. In order to gain control of your finances try to remember to earn:

• Embrace reminders. Use reminders to keep you motivated. For example, consider setting a reminder the day before your payday to remind you to review your spending plan.
• Automate your savings. Consider setting up automatic transfers to make consistent deposits. If you set up automatic transfers, you can “set it and forget it”. Removing barriers and using automatic efforts has been shown to help increase your savings. 
• Reduce your exposure. Leave extra money and credit cards at home to limit spending. If you, your friends and family like to shop, explore other activities with them that don’t involve spending money.
• Network. Do you have friends or family that also have savings goals? Challenge one another and check in on your goals. This may help you stay on track and meet your goals faster.

Emergency Funds

People who have experienced huge and unexpected bills are likely to tell you one of two things: how grateful they were to have an emergency fund or how tough it was to obtain the money they suddenly required. As with other financial concerns, preparation ahead of time is critical to successfully weathering the storms we will all experience in life. According to the 21st Annual Transamerica Retirement Survey, the median emergency fund balance among employees is $5,000, and only one in every four Americans has no retirement savings.

An emergency fund is essentially money that’s been set aside to cover life’s unexpected events. The money will allow you to live for a few months should you happen to lose your job or pay for something unexpected that comes up without going into debt.

Think of it as an insurance policy. Rather than paying premiums to a company, you’re paying yourself money that you can use at a later date. The cash can be accessed quickly and easily if some unfortunate event happens to occur.

Although it can be challenging to live below your means, you’ll be happy that you did when that rainy day arrives and the overall impact on your financial well-being is minimal. Focus on changing your mindset. The only person you can really depend on to get you out of trouble is you. Don’t rely on family, friends, government safety nets, insurance policies, or just plain luck. Bad things can happen to anyone, and working toward financial health should be just as much a priority as looking after your physical health.

Debt Management

Debt management refers to the process of organizing and controlling debt in a way that minimizes financial risk and maximizes the ability to meet financial goals. It involves assessing one’s debt situation, creating a plan to repay debts, and implementing strategies to prevent future debt-related problems.

Debt management is crucial for individuals who have taken on loans, credit card debt, or other forms of debt, as well as for businesses that rely on borrowing to finance their operations. Effective debt management is essential for maintaining financial stability and preventing the negative consequences of excessive debt, such as bankruptcy, damaged credit scores, and increased stress levels.

By successfully managing debt, individuals and organizations can improve their financial health, save money on interest payments, and achieve long-term financial goals.

Personal Debt Management

• Credit Card Debt

Credit card debt is a common form of unsecured loan that arises when individuals spend more on their credit cards than they can afford to pay off each month. Effective debt management strategies for credit card debt include paying more than the minimum payment, negotiating lower interest rates, and consolidating high-interest balances.

• Student Loan Debt

Student loan debt is incurred when individuals borrow money to finance their education. Debt management techniques for student loans can include income-driven repayment plans, loan forgiveness programs, and refinancing to obtain lower interest rates.

• Mortgage Debt

Mortgage debt refers to loans taken out to purchase a home or property. Debt management for mortgages may involve refinancing to secure lower interest rates, making extra payments to reduce principal balance, or utilizing government assistance programs for homeowners.

• Auto Loan Debt

Auto loan debt is created when individuals finance the purchase of a vehicle. Managing this type of debt can involve refinancing for better terms, paying off the loan early, or trading in the vehicle for a more affordable option.

Corporate Debt Management

• Bank Loans

Bank loans are a form of corporate debt that businesses use to finance operations or expansion. Debt management strategies for bank loans include negotiating better terms with lenders, consolidating multiple loans, and prioritizing repayment to reduce overall interest costs.

• Bonds

Bonds are debt securities issued by corporations to raise capital. Corporate debt management for bonds can involve refinancing at lower interest rates, buying back outstanding bonds, or strategically issuing new bonds to manage outstanding debt.

• Commercial Paper

Commercial paper is a short-term, unsecured corporate debt instrument typically issued to meet short-term financing needs. Effective debt management for commercial paper may include refinancing with longer-term debt, establishing lines of credit, or utilizing other sources of working capital.

Government Debt Management

• Sovereign Debt

Sovereign debt is issued by national governments to finance public spending and meet budgetary needs. Debt management for sovereign debt can involve restructuring repayment terms, negotiating interest rates, or implementing fiscal policies to reduce deficits.

• Municipal Bonds

Municipal bonds are debt securities issued by local governments to finance public projects. Debt management for municipal bonds can include refinancing existing bonds at lower interest rates, implementing revenue-generating policies, or prioritizing repayment of high-interest debt.

Debt Management Strategies

• Debt Management Plans (DMPs)

Debt management plans are formal agreements between borrowers and credit counseling agencies that consolidate unsecured debts into a single monthly payment. DMPs can help individuals reduce interest rates, waive fees, and establish a structured repayment schedule, making it easier to manage and eventually eliminate debt.

• Debt Consolidation

Debt consolidation involves combining multiple debts into a single loan with more favorable terms, such as lower interest rates or longer repayment periods. This debt management strategy simplifies repayment and can save borrowers money on interest payments over time.

• Debt Settlement

Debt settlement is a debt management strategy where borrowers negotiate with creditors to accept a lower payment than the full amount owed, effectively reducing the total debt. This option can provide relief for borrowers with significant unsecured debt, but it may negatively impact credit scores and should be considered carefully.

• Bankruptcy

Bankruptcy is a legal process that allows individuals or businesses to discharge or reorganize their debts under court supervision. While bankruptcy can provide a fresh start for those overwhelmed by debt, it has long-lasting consequences for credit scores and should only be pursued as a last resort in debt management.

• Snowball vs Avalanche Methods

The snowball and avalanche methods are two popular debt management strategies for repaying multiple debts. The snowball method prioritizes paying off debts with the smallest balances first, while the avalanche method targets debts with the highest interest rates.

Both strategies can be effective in debt management, and the choice depends on individual preferences and financial situations.

Avoiding Common Debt Traps

A debt trap is a trap that occurs when a borrower is compelled to take out more loans in order to pay off previous ones. In essence, a debt trap happens when financial responsibilities outweigh a person’s ability to repay loans. 

Payday loans could be one debt trap example, Payday loans are short-term loans with high interest rates and fees. Borrowers who can’t repay on time may take out another loan, leading to a cycle of debt that’s hard to escape.

The main loan amount (the amount you borrow) and the interest rate are two factors that come into play whenever you take out a loan from a moneylender (the amount the lender charges on the principal loan amount). Once your principal starts to drop, can you start moving forward with loan repayment?  But, every month that you pay back the loan, you contribute to both the principal and the interest. This is due to the amortizing structures of most loans.

This means that each payment you make towards your loan applies to both the principal and the interest, and that your loan is intended to be repaid over the course of a certain number of fixed installments. And if you cannot make the payment, you are most likely to fall into debt traps.

If you are already in a debt trap, coming out of it might seem impossible. However, it is not, and there are certain steps that you can take to come out of your debt before you get trapped completely. 

Here are some ideas that can help you escape from an impending debt trap:

• 1. Check Your Priorities

Sometimes people tend to spend their money extravagantly without checking their expense heads and spending patterns. To avoid this, it is essential to create a priority list to segregate your needs. Categorize your needs into essential, semi-essential, and non-essential. Try to focus only on the essential items. 

By making a budget and tracking your monthly expenses, you can identify and prevent all wasteful expenses. This will help minimize your discretionary and unwanted spending and help to focus on the necessities. A disciplined approach will guide you to improve your spending habits and help reduce the risk of falling into a debt trap. To avoid spending money recklessly, create a priority list to segregate your needs.  You can also categorize your needs into essential, and semi-essential and focus more on the essential items. This will help you impro

• 2. Build an Emergency Fund

One of the best ways to avoid a debt trap is to have an emergency fund. An emergency fund consisting of your 6 months’ salary should be kept aside. With an emergency fund, you can sail across the stormy seas of financial uncertainties. It will help to run things smoothly momentarily and avoid a debt trap for a few months until the situation stabilizes. 

• 3. Avoid Taking More Debts

You should not take any more debts to pay your previous ones. This is an important step towards avoiding a debt trap. If you keep taking loans to repay your previous loans, your monthly commitments will rise, which will only add to your mental and financial stress. This might be a bit hard to practice as avoiding borrowing means you might not be able to purchase certain things until you earn the money. However, you must stick to the rule of not going for impulsive purchases.

• 4. Get Rid of High-interest Loans First

Categorize your loan as short-term and long-term. Short-term debts might include personal loans and credit card loans, while long-term loans include home loans. After this, you can focus on getting rid of the more expensive loans that have higher interest rates. 

• 5. Automate Your EMIs and Utilities Bills

You can authorize a bank or concerned organization to automate your EMI and utility bill payment. These bills are important and need to be paid on time without fail. A system automatically collecting payment for these bills might solve the problem. 

• 6. Consider Debt Consolidation

Debt consolidation can simplify your debt trap, you can consolidate all your loans under a single loan. If you choose this option, you will not have to worry about repaying multiple loans with different interest rates and different due dates. 

Opting for a new personal loan with a lower interest rate in comparison with your old debts will help in reducing EMI outflow.

• 7. Insurance Policy to Protect You

Get enough insurance to safeguard you and your family from unforeseeable situations. If you have insurance, you can allocate all your savings to debt repayment without worrying about escalating medical costs.

Investing Principles

To establish a solid investment portfolio, every investor should keep in mind these essential principles. These concepts can assist you in making wise selections and avoiding frequent mistakes whether you are an experienced investor or just getting started.

Here are five key principles of successful investing that every investor should keep in mind:

1. Diversification: To lower your overall risk, diversification refers to distributing your investments among various asset types, such as stocks, bonds, and real estate. Diversification can help you obtain more stable returns over time and prevent you from putting all of your eggs in one basket.

2. Asset allocation: Based on your investment objectives, risk tolerance, and time horizon, asset allocation is the process of deciding how much of your portfolio to allocate to various asset classes. Your asset allocation should be customized to meet your specific needs and goals.

3. Risk management: Successful investing requires effective risk management. This entails being aware of your level of risk tolerance and making investments in assets that fit your risk profile. Additionally, it entails routine portfolio monitoring and any necessary risk-reduction adjustments.

4. Long-term Focus: A long-term view is necessary for successful investing. It’s critical to resist the urge to make short-term trades based on market volatility and keep your attention on your long-term objectives. The force of compounding can enable enormous growth in your investments over time.

5. Disciplined approach: Successful investors maintain their discipline and stick to their investment plans despite market turbulence. This entails abstaining from emotional choices and maintaining attention to your long-term objectives. To keep your portfolio in line with your financial goals, it’s also important to routinely rebalance your assets and maintain a diversified portfolio.

Risk Tolerance

Risk tolerance is the degree of risk that an investor is willing to endure given the volatility in the value of an investment. An important component in investing, risk tolerance often determines the type and amount of investments that an individual chooses.

Greater risk tolerance is often synonymous with investment in stocks, equity funds, and exchange-traded funds (ETFs), while lower risk tolerance is often associated with the purchase of bonds, bond funds, and income funds.

All investments involve some degree of risk and knowing their risk tolerance level helps investors plan their entire portfolio, determining how they invest. Based on how much risk they can tolerate, investors are classified as aggressive, moderate, and conservative.

Risk tolerance assessments are available online, including risk-related surveys or questionnaires. An investor may also want to review historical returns for different asset classes to determine the volatility of the various financial instruments.

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One factor that affects risk tolerance includes the time horizon for an investor. Having a financial goal with a long time horizon, an investor may have greater returns by carefully investing in higher-risk assets, such as stocks. Conversely, lower-risk cash investments may be appropriate for short-term financial goals.

Risk Mitigation

Risk mitigation is the practice of reducing the impact of potential risks by developing a plan to manage, eliminate, or limit setbacks as much as possible. After management creates and carries out the plan, they’ll monitor progress and assess whether or not they need to modify any actions if necessary.

Though it might feel tempting to take a page from another business’s risk management book, your plan will depend on your unique business strategy.

Taking the time to create a unique risk mitigation plan could be the difference between maintaining a strong relationship with clients and losing out on business. Let’s take a closer look at what you would want to achieve when you mitigate risks.

Unfortunately, ignoring risk factors won’t make risks disappear, and forging ahead without a plan may damage your bottom line. This is why risk mitigation is important.

With a concrete plan with clear action items, you can prevent risks from turning into problems that spin out of control or even prevent risks altogether.

This not only carries tangible benefits—such as keeping your business profitable—but it also has intangible benefits as well, such as helping you maintain a good reputation for stability within the industry and keeping internal and external stakeholders happy.

The latter is especially important. In a recent survey, 59% of organizations believe the number and complexity of business risks are only increasing. Another finding: 68% of organizations indicate they have recently experienced an operational surprise due to a risk they did not adequately anticipate.

Those operational surprises can cost time, money, and other valuable resources. If stakeholders feel the risks are too high or handled improperly, that could lead to a shuffle in management. So risk mitigation is important, but before you can develop a plan, you need to know what risks you can face.

Risk mitigation steps need to be practical. It won’t help your business if you can’t figure out how to actually mitigate the risks you’re facing. That’s what we’ll dive into below.

The following five steps will help you figure out a way forward through your risk mitigation process. Let’s break down the steps.

• 1. Identify

Before coming up with any plan, you may want to identify any risk that could impact your project or wider business operations. In this stage, it’s important to collaborate with a broad selection of stakeholders with different business perspectives to give yourself the best chance of identifying all possible risks.

For projects, project documentation can act as a valuable source of information. Review similar projects for hints about potential risks you might encounter.

• 2. Assess

Now you’ve got a list of all your possible risks, it’s time to assess them by analyzing the likelihood that they will occur and the degree of negative impact your business would face.

The actions you take for each risk will depend on which category they fall into after your risk assessment. For example, as we mentioned earlier, you might decide to accept all “Low” category risks, reduce or transfer “Medium” risks, and avoid all “High” category risks.

• 3. Treat

At this point, you’re deciding on your mitigating action and putting strategies in place. Make sure to record each risk, its category, and your chosen prevention measures in a risk register.

This is a resource for all stakeholders to refer to and understand the plan and which actions to take if needed. A risk register will prevent confusion down the line, helping your team stay organized and aligned if risks occur.

• 4. Monitor

Businesses aren’t static and projects frequently change. It’s important to regularly monitor each risk to check its category and mitigation strategy. You can set up times in your weekly meetings or daily stand ups to quickly review risks.

There are also several statistical tools — such as S-curves — that can track project progress and flag any changes in risk profile for key variables such as project cost and duration.

• 5. Report

Sharing information on risks, best practices, and mitigation approaches can make your business’ risk mitigation strategy even more effective. Keeping risks at the forefront of stakeholders’ minds is important for informed decision-making and regular reporting may surface other risks that haven’t been identified yet.

The most effective risk mitigation strategies make risk reporting part of the regular business operations, such as weaving reporting into the daily or weekly workflows.

Investing for the Long Term

While the stock market is riddled with uncertainty, certain tried-and-true principles can help investors boost their chances for long-term success. Some investors lock in profits by selling their appreciated investments while holding onto underperforming stocks they hope will rebound. But good stocks can climb further, and poor stocks risk zeroing out completely.

Below are some long term investment tips:

• Sell a Loser 

There is no guarantee that a stock will rebound after a protracted decline, and it’s important to be realistic about the prospect of poorly performing investments. And even though acknowledging losing stocks can psychologically signal failure, there is no shame in recognizing mistakes and selling off investments to stem further loss.

In both scenarios, it’s critical to judge companies on their merits, to determine whether a price justifies future potential.

• Don’t Sweat the Small Stuff

Rather than panic over an investment’s short-term movements, it’s better to track its big-picture trajectory. Have confidence in an investment’s larger story, and don’t be swayed by short-term volatility.

Don’t overemphasize the few cents difference you might save from using a limit versus market order. Sure, active traders use minute-to-minute fluctuations to lock in gains. But long-term investors succeed based on periods of time lasting years or more.

• Don’t Chase a Hot Tip

Regardless of the source, never accept a stock tip as valid. Always do your own analysis on a company before investing your hard-earned money.

Tips do sometimes pan out, depending upon the reliability of the source, but long-term success demands deep-dive research.

• Pick a Strategy and Stick With It

There are many ways to pick stocks, and it’s important to stick with a single philosophy. Vacillating between different approaches effectively makes you a market timer, which is dangerous territory.

Consider how noted investor Warren Buffett stuck to his value-oriented strategy and steered clear of the dotcom boom of the late ’90s—consequently avoiding major losses when tech startups crashed.

• Don’t Overemphasize the P/E Ratio

Investors often place great importance on price-earnings ratios, but placing too much emphasis on a single metric is ill-advised. P/E ratios are best used in conjunction with other analytical processes.

Therefore a low P/E ratio doesn’t necessarily mean a security is undervalued, nor does a high P/E ratio necessarily mean a company is overvalued.

• Focus on the Future and Keep a Long-Term Perspective

Investing requires making informed decisions based on things that have yet to happen. Past data can indicate things to come, but it’s never guaranteed.

In his 1989 book “One up on Wall Street” Peter Lynch stated: “If I’d bothered to ask myself, ‘How can this stock possibly go higher?’ I would never have bought Subaru after it already had gone up twentyfold. But I checked the fundamentals, realized that Subaru was still cheap, bought the stock, and made sevenfold after that.”2 It’s important to invest based on future potential versus past performance.

While large short-term profits can often entice market neophytes, long-term investing is essential to greater success. And while active trading short-term trading can make money, this involves greater risk than buy-and-hold strategies.

Retirement Planning

Planning for retirement is a way to help you maintain the same quality of life in the future. You might not want to work forever or be able to fully rely on Social Security.

Retirement planning has five steps: knowing when to start, calculating how much money you’ll need, setting priorities, choosing accounts, and choosing investments. Generally, financial advisors suggest you invest more aggressively when you’re younger, then slowly dial back to a more conservative mix of investments as you approach retirement age.

Retirement planning has several steps, with the end goal of having enough money to quit working and do whatever you want. Our aim with this retirement planning guide is to help you achieve that goal.

• 1. Know when to start retirement planning

When should you start retirement planning? That’s up to you, but the earlier you start planning, the more time your money has to grow.

That said, it’s never too late to start retirement planning, so don’t feel like you’ve missed the boat if you haven’t started. Even if you haven’t so much as considered retirement, every dollar you can save now will be much appreciated later. Strategically investing could mean you won’t be playing catch-up for long.

• 2. Figure out how much money you need to retire

The amount of money you need to retire is a function of your current income and expenses, and how you think those expenses will change in retirement, and how they won’t. For example, Washington Post columnist Michelle Singletary suggests people set a retirement budget because you’ll probably still want to take vacations, go out to dinner, and you may still have car or home maintenance costs. The typical advice is to replace 70% to 90% of your annual pre-retirement income through savings and Social Security.

• For example, a retiree who earns an average of $63,000 per year before retirement should expect to need $44,000 to $57,000 per year in retirement.

• 3. Prioritize your financial goals

Retirement is probably not your only savings goal. Lots of people have financial goals they feel are more pressing, such as paying down credit card or student loan debt or building up an emergency fund.

It’s a good rule if thumb to save for retirement while you’re building your emergency fund — especially if you have an employer retirement plan that matches any portion of your contributions.

• 4. Choose the best retirement plan for you

A cornerstone of retirement planning is determining not only how much to save, but also where to save it.

• If you have a 401(k) or other employer retirement plan with matching dollars, consider starting there.
• If you don’t have a workplace retirement plan, you can open your own retirement account.

There is no single best retirement plan, but there is likely the best retirement plan — or combination of retirement accounts — for you. In general, the best plans provide tax advantages, and, if available, an additional savings incentive, such as matching contributions. That’s why, in many cases, a 401(k) with an employer match is the best place to start for many people.

Some workers are missing out on that free money. Section 101 of the Secure 2.0 Act

noted that Black, Latinx and lower-wage employees were less likely to participate in their work’s retirement plan compared with their colleagues. A new provision in the law establishes automatic enrollment in retirement plans to help increase participation for all employees.

If you don’t have access to a workplace plan (or the one you’re offered doesn’t come with a match), or you’re already contributing to a 401(k) and you’re looking for the best options for additional retirement savings, you may want to consider an IRA. This is a plan you open yourself at an online broker or other account provider. An IRA is hardly a consolation prize.

Here are seven types of retirement plans that might work for you.

• 401(k)
• Roth IRA
• Traditional IRA
• Self-directed IRA
• Simple IRA
• SEP IRA
• Solo 401(k)

• 5. Select your retirement investments

Retirement accounts provide access to a range of investments, including stocks, bonds and mutual funds. Determining the right mix of investments depends on how long you have until you need the money and how comfortable you are with risk.

• Generally, the idea is to invest aggressively when you’re young, and then slowly dial back to a more conservative mix of investments as you approach retirement age. That’s because early on you have a lot of time for your money to weather market fluctuations — a few bad years won’t ruin you, and your nest egg should benefit greatly from the stock market’s history of long-term growth. Investing for retirement evolves alongside you as you change jobs, add to your family tree, endure stock market ups and downs and get closer to your retirement due date.
• Your investments don’t necessarily require constant babysitting. If you want to manage your retirement savings on your own, you can do it with just a handful of low-cost mutual funds. Those who prefer professional guidance can hire a financial advisor.

Strategies for Catching Up on Retirement Savings

The good news is that you can learn how to catch up on retirement savings by incorporating a few key tips. Consider these tips for saving for retirement to reach your retirement goal on your time frame:

• 1. Say goodbye to high-interest debt

If you’re wondering how to catch up on retirement savings, one of the best ways is to pay off any high-interest debt as quickly as you can. Instead of spending on interest charges, you can divert those funds to your retirement savings. Thanks to compound interest, these new funds you are able to allocate to retirement will earn interest of their own, and that interest will start to earn interest. Pretty exciting, right?

Take stock of your existing debt, whether it’s from credit cards or loans, and update your budget with the goal of paying off your debt as soon as possible. You can consider starting with the debt that has the highest interest rate first, and gradually move on to debt with lower rates.

2. Reduce discretionary expenses

This retirement savings tip involves reducing those non-essential expenses (you may classify these items as “wants” instead of “needs”) and making lifestyle changes that will save you money.

If you’re budget-less, creating one will really help you track your expenses and find areas where you can cut back, funneling those savings to help you catch up on your retirement savings. Consider implementing a zero-based budget or a budget with the 50-20-30 rule to get started right away.

3. Save extra cash

Putting any extra money you receive toward retirement is one of the retirement savings tips to keep front and center. What can you consider extra money? Think: tax refunds, inheritances, salary increases, and bonuses, for example.

If you do receive a windfall, move it directly to a savings or retirement account. This will allow it to start earning interest right away, and it may help you avoid the temptation to dip into the funds for another purpose.

4. Increase your earning potential

When you’re figuring out how to catch up on retirement savings, one of the most proactive steps you can take is to increase your earnings before you take full retirement.

As you’re preparing for retirement, you may consider taking on a side hustle you can start today to supplement the earnings of your primary job. You might also explore a second job before you retire or a part-time job during your early retirement.

5. Create a savings goal—and go for it

Another one of the key tips for saving for retirement is to target a savings plan outside of your comfort zone. Having a specific goal in mind can motivate you to take the necessary steps to get there. It can also help you hold yourself accountable. The more specific the goal (how much you want to have in retirement savings, and by what age, for example), the more focused your efforts will be.

If you can buckle down, cut out as many discretionary expenses as possible and increase the amount of money you save each month, you’ll gain momentum toward your retirement goals faster than you think. This may require discipline, but it can be one of the best ways to catch up on retirement savings.

• 6. Consider your IRA options

As you’re putting these retirement savings tips into practice, consider your various IRA (Individual Retirement Account) options.

For example, the Discover IRA CD offers you the ability to earn a guaranteed return with flexible terms ranging from three months to 10 years. The Discover IRA Savings Account allows for flexible contributions and provides a place for you to transfer your maturing IRA CD without locking in a term.

One of the best ways to catch up on retirement savings could be using both accounts to complement one another. Explore Traditional and Roth options for both your IRA CD and IRA Savings Account to get the best tax treatment based on your expected income levels over time.

• 7. Max out your retirement accounts

Contributing the maximum amount allowed to your IRA and/or 401(k) every year is among the crucial tips for saving for retirement—especially if you’re trying to catch up. You may want to contact a financial advisor or tax professional for further information on your specific situation.

If you have an employer-sponsored retirement plan, be sure you take full advantage of any matching 401(k) benefit your employer offers. Think of this as free money that compounds tax-free until you withdraw it.

Your IRA may also give you tax savings now or when you start withdrawals, depending on whether you chose a Traditional IRA or Roth IRA.

• 8. Consider IRA catch-up contributions

Another retirement savings tip is that you and your spouse may each be able to contribute up to $1,000 more to your IRAs if you are both 50 years of age or older. You can make catch-up IRA contributions to your Traditional or Roth IRA in accordance with IRS income rules.

Note that IRA catch-up contributions (as well as regular contributions) are due by the due date of your tax return (not including extensions). Questions on your individual situation? Check with your financial advisor or a tax professional.

• 9. Learn the ins and outs of your retirement benefits

Check with the Social Security Administration to understand how your retirement start date impacts your benefits. The later you start drawing benefits prior to age 70, the larger your monthly benefit will be. Keep this information in mind as you update your budget and implement your retirement savings strategies.

No matter when you retire, be sure to sign up for Medicare three months before you reach age 65.

• 10. Explore retirement savings tax credits

Investigate your eligibility for the Saver’s Credit, formerly called the Retirement Savings Contributions Credit, available to some low-to-moderate income families to match a portion of your IRA or employer-sponsored retirement plan. If you qualify, this retirement savings tip could make a significant impact on your financial future.

Tax Planning

Tax planning is the analysis of a financial situation or plan to ensure that all elements work together to allow you to pay the lowest taxes possible. A plan that minimizes how much you pay in taxes is referred to as tax efficiency. Tax planning should be an essential part of an individual investor’s financial plan. Reduction of tax liability and maximizing the ability to contribute to retirement plans are crucial for success.

Tax planning covers several considerations. Considerations include timing of income, size, and timing of purchases, and planning for other expenditures. Also, the selection of investments and types of retirement plans must complement the tax filing status and deductions to create the best possible outcome.

There are some fundamental objectives of tax planning. Tax planning diminishes tax liability by saving the assessee the maximum amount of tax by arranging their financial operations according to tax decisions. It also conforms to the provisions under taxation laws, thereby minimizing any litigation.

One of the biggest benefits of tax planning is that the returns can be directed to investments. It is the most productive way to make smart investments while fully utilizing the resources available due to tax benefits. Investing tax money generates white money to flow through the economy, aiding in the country’s economic development. Tax planning hence contributes to the economic stability of the individual as well as the country.

Now that you know as to what tax planning is, let us look at three types of tax planning.

• 1. Short and Long-range Tax Planning

Tax planning done every year for specific objectives is called short-range tax planning. On the contrary, long-range tax planning refers to practices undertaken by the assessee, which are not paid off immediately. Simply put, short-range planning usually occurs towards the end of a fiscal year while long-range planning occurs in the beginning.

• 2. Permissive Tax Planning

Tax planning is deemed permissive when carried out under the provision of a country’s taxation laws.

• 3. Purposive Tax Planning

It is a tax planning method for a particular objective. It may include diversification of business and income assets based on residential status and replacing assets if necessary.

Estate Planning and Inheritance Taxes

When a person dies, their assets could be subject to estate taxes and inheritance taxes, depending on where they lived and how much they were worth. While the threat of estate taxes and inheritance taxes does exist, in reality, the vast majority of estates are too small to be charged a federal estate tax. In 2022, federal estate tax applies only if the assets of the deceased person are worth $12.06 million. In 2023, this exemption limit is $12.92 million.

What’s more, most states have neither an estate tax, which is levied on the actual estate, nor an inheritance tax, which is assessed against those who receive an inheritance from an estate.

An inheritance tax is a tax imposed by some states on the recipients of inherited assets. In contrast to an estate tax, an inheritance tax is paid by the recipient of a bequest rather than the estate of the deceased.

The inheritance tax is not common in the U.S. In fact, just six states have an inheritance tax as of 2023, and the taxation depends on the state in which the deceased lived or owned property, the value of the inheritance, and the beneficiary’s relationship to the decedent. Taxes for 2022 are paid in 2023.

An inheritance tax is not the same as an estate tax. An estate tax is assessed on the estate itself before its assets are distributed, while an inheritance tax may be imposed on the bequest’s beneficiaries. 

There is no federal inheritance tax in the U.S. While the U.S. government taxes large estates directly—imposing estate taxes and, if relevant, income tax on any earnings from the estate—it does not impose an inheritance tax on those who receive assets from an estate.

Inheritance taxes are collected by six U.S. states: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Whether your inheritance will be taxed, and at what rate, depends on its value, your relationship to the person who passed away, and the prevailing rules where you live.

Inheritance tax may be assessed by the state or states where the decedent lived or owned property.

Insurance and Risk Management

A well-organized risk management strategy is critical for assuring the long-term profitability of enterprises. The primary goal of risk management is to identify potential hazards before they cause havoc in the system and plan ahead of time to mitigate their influence on your business objectives. It ensures various vital aspects of business, including as smooth operation, increased productivity, and income production. However, many business owners are unclear about the function of insurance in risk management. If you are one of these folks, continue reading to learn more.

What is the importance of insurance in risk management?

• Business owners will generally have many tasks to be performed for the smooth functioning of their operations. They may be looking to reach new customers, looking for financial backups, efficient employees, better workplaces, and many more. These responsibilities are more intense and riskier if you are new to the business. It can enhance your risk of safeguarding the business and make the process more complicated.
• You may take care of all the possible known risks that will take a toll on your proceedings. But there may be many hidden or surprise risks that may come in between your operations and jolt your operations. Regrettably, these are the types of risks that might be irreversible and impact heavily on the organization. Additionally, without any proper financial backups, you may be in an awkward situation that may lead to the closure of the business. To mitigate all such risks, business owners may purchase insurance to negate these damages, and surprise risks can cause to their operations.
• Risk is defined in insurance terms as the probability of loss or other unfortunate events that hold the capability to interrupt the business objective and require the benefit of the insurance claim. Risk management in insurance is described as the process of finding probable threats in advance, researching them, and taking safety measures to mitigate those threats. Insurance is one of the crucial risk-financing means to complete optimal risk management courses. This is highly important as the majority of organizations may not be financially prepared to manage such probable losses and insurance is the effective solution to all such risks.

Insurance is a key aspect in risk management processes due to its invaluable benefits like:

• Safeguarding from financial loss: Businesses can be impacted by several factors like theft, natural disasters, or accidents. Insurance can be a crucial aspect in avoiding financial losses due to such threats. This could be helpful for both small businesses that may find it extremely difficult to make the loss from theft or even a small device that was important for the proceedings. Surprising events can cause huge losses to businesses and completely block them without any previous warnings. Even though you may think of purchasing insurance as a minimal extra cost, it can add great value to any type of business. It can successfully negate the damage caused to the company which may otherwise lead to stopping its operations completely.
• Enhanced status: In the situation of looking for financial backup with effective investments, having insurance will enhance the value of the business to a significant extent. It will make the business owner look more responsible and get you the expected financial requirements easily.
• Enhanced liability: Insurance will safeguard the business owners from financial losses due to any surprise events or risks. This includes diverse types of risks related to their employees, and equipment such as an injury to a person while operating the equipment related to your business operations. You can be ready for any kind of event and take your business towards a bright future.

Preparing for Unforeseen Events

Would you be prepared in the event of a financial emergency? If you answered no or are unsure, it’s time to review your personal finances. A financial emergency might strike at any time. Job loss, big medical bills, natural disasters, and any other unforeseen occurrence that results in considerable financial loss are all covered.

The only way to be prepared for these types of catastrophes is to plan ahead of time. In five steps, you’ll discover how to plan for the unexpected and rethink your financial management.

• Set Up a Safety Net

If you don’t already have an emergency fund set up, you need one. This fund should be able to cover approximately three to six months of expenses. To get one started, evaluate your paycheck and determine how much you can contribute to the fund each month. Treat that amount as you would any other bill you need to pay and deposit it into a new, emergencies-only account. Once you have enough in the account, you can stop contributing.

Some experts even recommend having two accounts for unexpected expenses. One is your fund for true emergencies, such as job loss, natural disasters, or significant medical problems. The other is a “rainy day” fund, which covers smaller-scale but still urgent expenses, such as home or car repairs. Build up your true emergency account before starting your rainy day fund.

• Get Insurance

Having a full insurance portfolio is one of the best ways to protect yourself from financial loss. Home insurance, for example, can protect you from natural disasters or theft. Depending on where you’re from, you may also have the option of purchasing car, medical, life, or even pet insurance.

Prioritize which assets are most important to you and use those determinations in deciding how much you’re willing to spend each month in guarding them against loss. For each asset, you may also want to project the likelihood of it causing you financial loss and whether you could afford that full amount if the time were to come. If the failure would be catastrophic and unaffordable for you and your family, insurance is an appropriate option.

• Pay Down Debt

Unfortunately, when you’re experiencing a financial emergency, your creditors and lenders will still expect you to make at least the minimum payments on your debt. If you don’t, you’ll likely face financial penalties. The best way to avoid this is to avoid debt entirely. But for many adults, debt is already a part of their lives. So how best to pay down your debt, so you won’t need to worry about it during emergencies?

First, make sure you’re making at least the minimum payments on all of your loans, whether that be credit card debt, a home loan, or something else. Second, make sure your emergency fund has at least a few months’ worth of expenses. Next, create a strategy for tackling your debt. It’s best to pay down debts with the highest interest rates first, so focus on those. Try to add extra funds beyond the minimum payment each month for those high-interest balances. You may also consider paying off a debt with a small balance first for a quick win before tackling the others.

Create an Expenses Plan

If you don’t already have a budget for your current pay and expenses, first see our five steps to creating a budget. The budget you create will serve you well during normal times, but during an emergency, you’ll need to make adjustments. Generally, this will mean cutting back on nonessential expenses.

Plan ahead which nonessentials you’ll need to cut down on when money is tight. Make a list of these items now so you’ll have an outline ready to refer to in the event of an emergency. Nonessential expenses include takeout from restaurants, shopping, special treats, coffee, subscriptions, and more.

• Switch to a Credit Union

Too many large banks, you’re often just a number. They tend to be less forgiving about missed payments, even if you’re experiencing an emergency. If instead, you bank through a credit union or a community bank, you may experience more understanding and better customer service when faced with an emergency. Smaller banks are more likely to approve you for a personal line of credit to help you make it through a particularly tough time.

Explore the option of a credit union or community bank to see if it’s a good fit for you. Regardless of which bank you select, though, remember that it doesn’t hurt to ask them for flexibility in the event of an emergency. Some banks will offer to waive a late payment or two if you have a history of being a good customer.

Real Estate Investments

Real estate is defined as the land and any permanent structures, like a home, or improvements attached to the land, whether natural or man-made. Real estate is a form of real property. It differs from personal property, which is not permanently attached to the land, such as vehicles, boats, jewelry, furniture, and farm equipment.

The terms land, real estate, and real property are often used interchangeably, but there are distinctions.

Landrefers to the earth’s surface down to the center of the earth and upward to the airspace above, including the trees, minerals, and water. The physical characteristics of land include its immobility, indestructibility, and uniqueness, where each parcel of land differs geographically.

Real estate encompasses the land, plus any permanent man-made additions, such as houses and other buildings. Any additions or changes to the land that affects the property’s value are called an improvement.

Once land is improved, the total capital and labor used to build the improvement represent a sizable fixed investment. Though a building can be razed, improvements like drainage, electricity, water and sewer systems tend to be permanent.

Real property includes the land and additions to the land plus the rights inherent to its ownership and usage.

What Are Types of Real Estate?

• Residential real estate: Any property used for residential purposes. Examples include single-family homes, condos, cooperatives, duplexes, townhouses, and multifamily residences.

• Commercial real estate: Any property used exclusively for business purposes, such as apartment complexes, gas stations, grocery stores, hospitals, hotels, offices, parking facilities, restaurants, shopping centers, stores, and theaters.

• Industrial real estate: Any property used for manufacturing, production, distribution, storage, and research and development.

• Land: Includes undeveloped property, vacant land, and agricultural lands such as farms, orchards, ranches, and timberland.

• Special purpose: Property used by the public, such as cemeteries, government buildings, libraries, parks, places of worship, and schools.

Homeownership Tips

Few things are more exciting than leaping from being a renter to being a first-time homeowner. Getting swept up in all the excitement is a wonderful feeling, but some first-time homeowners lose their heads and make mistakes that can jeopardize everything they’ve worked so hard to earn. Following a series of practical steps early in the homeowning experience can save new owners time, money, and effort later down the road.

• Don’t Overspend to Personalize

You’ve just handed over a large portion of your life savings for a down payment, closing costs, and moving expenses. Money is tight for most first-time homeowners. Not only are their savings depleted, but their monthly expenses are also often higher as well, thanks to the new costs that come with homeownership, such as water and trash bills and extra insurance.

Everyone wants to personalize a new home and upgrade what may have been temporary apartment furniture for something nicer, but don’t go on a massive spending spree to improve everything all at once. Just as crucial as getting your first home is staying in it, and as nice as solid maple kitchen cabinets might be, they aren’t worth jeopardizing your new status as a homeowner.

Give yourself time to adjust to homeownership’s expenses and rebuild your savings—the cabinets will still be waiting for you when you can more comfortably afford them.

• Don’t Ignore Important Maintenance

One of the new expenses that accompany homeownership is making repairs. There’s no landlord to call if your roof is leaking or your toilet is clogged. To look at the positive side, there’s also no rent increase notice taped to your door on a random Friday afternoon.

While you should exercise restraint in purchasing the nonessentials, you shouldn’t neglect any problem that puts you in danger or could worsen over time. Delay can turn a relatively small problem into a much larger and costlier one. One way to protect yourself against potential maintenance issues is to have a potential home inspected before buying it.

• Hire Qualified Contractors

Don’t try to save money by making improvements and repairs you aren’t qualified to make. This may seem to contradict the first point slightly, but it doesn’t. Your home is both the place where you live and an investment. It deserves the same level of care and attention you would give to anything else you value highly.

There’s nothing wrong with painting the walls yourself, but if there’s no wiring for an electric opener in your garage, don’t cut a hole in the wall and start playing with copper wiring. Hiring professionals to do work you don’t know how to do is the best way to keep your home in top condition and avoid injuring—or even killing—yourself. Also, be sure to check with the local building authority and pull any necessary permits to complete the work.

Get Help With Your Tax Return

Even if you hate the thought of spending money on an accountant when you usually do your tax returns yourself, it can pay off. And even if you are feeling broke from buying that house, don’t scrimp on tax preparation. Hiring an accountant to ensure you complete your return correctly and maximize your refund is a good idea. Homeownership significantly changes most people’s tax situations and the deductions they are eligible to claim.

• Keep Receipts for Improvements

When you sell your home, you can use these costs to increase your home’s basis, which can help you maximize your tax-free earnings on your home’s sale. In 2008, you could have earned up to $250,000 tax-free from the sale of your home if it was your primary residence and you had lived there for at least two of five years before you sold it.

This deduction assumes that you owned the home alone—if you owned it jointly with a spouse, you could each have gotten the $250,000 exemption.

Let’s say you purchased your home for $150,000 and were able to sell it for $450,000. You’ve also made $20,000 in home improvements over the years you’ve lived in the home. If you haven’t saved your receipts, your basis in the house, or the amount you originally paid for your investment, it is $150,000. You take your $250,000 exemption on the proceeds and are left with $50,000 of taxable income on the sale of your home.

However, if you saved all $20,000 of your receipts, your basis would be $170,000, and you would only pay taxes on $30,000. That’s a considerable saving. In this case, it would be $5,000 if your marginal tax rate is 25%.

With the great freedom of owning your own home comes significant responsibilities. It would help if you managed your finances well enough to keep the house and maintain the home’s condition well enough to protect your investment and keep your family safe. Don’t let the excitement of being a new homeowner lead you to bad decisions or oversights that jeopardize your financial or physical security.

Education and Career Development

Professional development and formal or informal learning are often crucial to improvements and innovation in a workplace. Both the employer and their employees can benefit from a culture focused on learning and improvement, and there are several benefits that make dedicated learning a must for any business. Understanding learning in the workplace and the role developing employees plays in a company’s success can help you better understand why to consistently pursue greater knowledge, more skills and a better understanding of your industry.

Ongoing learning and development are types of formal and informal education that help employees expand their skill set to adapt to an ever-changing environment. This can include things like continuous education at a local college or professional development courses or on-job-training. Many of the skills you learn during these processes, whether they are skills in leadership, communication, collaboration or more tangible skills, like learning how to use a piece of software or a specific technique, are transferable to other professions, so you can use them throughout your professional career.

• Informal learning

You can learn through informal or formal learning and development methods, although most employees and workplaces typically engage in both forms. Informal learning typically doesn’t require any sort of curriculum or structure, isn’t institutionalized or evaluated, and is often transferrable. This kind of learning can be ideal for more experienced employees who want to sharpen their skills, learn by direct experience or learn from their colleagues by working alongside them.

• Formal learning

In contrast, formal training is usually institutional and led by an organization’s management. Formal learning and development typically have explicitly declared learning objectives or skills that the instructors expect students to know by the end of the training, use a variety of learning methods to convey knowledge and applies an evaluation at the end to see how much participants have learned. Typically, a company’s managers then assess the employees to determine what they learned and whether they reached their objectives.

Career Advancement Strategies

There are a wide variety of methods you can use to take on either formal or informal ongoing learning and development. Here’s a list of several options that may be available to you:

• Apprenticeships and internships

To support continuous professional development and learning, companies can offer apprenticeships and internships to incoming employees. This is a unique opportunity that introduces new employees to the standards of the workplace and the company’s unique culture by placing them under the supervision of an experienced professional. This professional can help them learn or improve on key skills, expand on their institutional knowledge with direct experience and guide them in the nuances of the job they might not learn elsewhere.

• Career counseling

You can work with a counselor at your university or graduate school or hire an outside career counselor to help you develop a career plan. Career counselors can help you to identify the areas where you can improve and connect you to resources that can help you learn those skills and capabilities. A counselor might also help you understand whether your career aspirations are realistic or timely and what job opportunities may be available once you master certain skills.

• Workshops and courses

You can enroll in a course outside of the workplace to learn new skills or get a focused overview of a particular subject area. In some careers, such as attorney, doctor, or nurse, ongoing professional development courses are a requirement to maintain a license. You can either pursue a degree or take classes as necessary to learn specific, applicable skills for your career. Check with local community colleges and universities to see what classes are currently available.

• Membership in a professional organization

Joining a professional organization or guild can be a great way to expand your professional network and access professional development opportunities. Many professional organizations offer a discount or exclusive access to such opportunities for their members. Social events hosted by a professional organization can also give you opportunities to meet like-minded friends and professional contacts in your field. A broader professional network can introduce you to new methods, skills and industry standards and possibly allow you to increase your references for a job search.

Side Hustles and Passive Income

As the gig economy continues to flourish, more and more people are looking for ways to supplement their income outside of their day jobs. Two popular terms that have emerged are “side hustle” and “passive income.” While they may seem interchangeable at first glance, there are some key differences that define each term. While both options can help you earn extra money, here is why you want to focus on passive income.

A side hustle generally refers to a job or project you work on outside your 9-to-5 job. It typically involves actively earning money by performing a service or selling a product. Common examples include delivering food, online tutoring, or freelance writing.

Conversely, passive income requires an initial investment of time and/or money but then can generate money with little or no ongoing effort from you. For example, rental property or investing in stocks can generate passive income.

• Passive income offers more security

The problem with a side hustle is that it depends on your time and physical presence. You only have so many hours in a day and can only trade your time for money for so long. If you get sick, or if you need to take a break for any reason, your income source dries up.

Passive income, on the other hand, offers more security. Whether it’s through rental properties, stock dividends, or a business that runs itself, passive income streams can continue to earn money for you even when you’re not actively working.

• Passive income offers more flexibility

Side hustles often require you to work during inconvenient hours or to accept work that doesn’t align with your passions or long-term goals. On the other hand, passive income streams offer more flexibility.

Once you’ve set up your income source and established a system for maintaining it, you can enjoy more free time and more control over how you spend your energy. Passive income also gives you the freedom to pursue other ventures or projects that may not generate immediate income but could lead to greater wealth and satisfaction in the longer term.

• Passive income can provide long-term wealth

While side hustles may offer immediate relief from financial stress, they often don’t provide a sustainable path to long-term wealth. With passive income, however, you have the potential to build a portfolio of income streams that can continue to grow and provide steady wealth over time.

Whether it’s through compound interest or by buying a rental property that appreciates in value, passive income can help you achieve your financial goals without continually trading your time for money. Best of all, you can add multiple passive income streams and create assets that you can potentially sell later.

• Building your passive income portfolio

So, how do you go about building your own portfolio of passive income streams? The first step is to identify your strengths and interests. What do you enjoy working on or learning about? What skills or assets do you have that could be leveraged for passive income? Once you’ve identified your niches, it’s time to start exploring the various strategies for earning passive income, such as:

• Investing in dividend-producing stocks
• Buying real estate to rent out
• Starting a business that can be automated
• Creating and selling digital products or courses
• Receiving royalties on properties such as books, music, or artwork
• Building a blog or website that generates revenue through ads or affiliate marketing
• High-yield savings accounts and CDs (While the returns may be relatively low, these financial instruments offer a secure way to earn passive income with minimal risk)

As you begin building your portfolio, it’s important to remember that passive income takes time and effort to establish. You may not see immediate results, and it’s important to stay patient and committed to the process.

Consider diversifying your revenue streams by establishing multiple sources of passive income. Even generating $25 from each source on a monthly basis can add up in the long run.

While side hustles may offer some short-term benefits, prioritizing passive income can provide greater financial security, flexibility, and long-term wealth. By identifying your niches and exploring the various strategies for building passive income streams, you can begin building a portfolio that allows you to enjoy more autonomy and financial freedom. Make no mistake — it’s still going to take discipline and hard work upfront. But the benefits of investing in a passive income stream could potentially outlast your active earning years and set you up for a more comfortable retirement.

Hustles for Passive Income

These side hustles vary in terms of required initial investment, time commitment, and potential returns. In today’s high-inflation economy, more and more people are looking for ways to diversify their income. One report found that 44% of Americans at the end of last year had a side hustle. Take a look at some of the most popular ways to generate passive income.

• 1. Rental Property Investment

Investing in real estate and renting out properties can provide a steady stream of passive income through rental payments. It is a good side hustle because it offers long-term wealth accumulation, potential tax benefits, and property value appreciation.

• 2. Create and Sell Online Printables 

Starting an online printable store can be a great side hustle for generating passive income. Create and design printable templates, such as planners, calendars, worksheets, coloring pages, or party decorations, and sell them on your website or platforms like Etsy. Once the designs are created and listed, you can earn passive income as customers purchase and download your printables. With proper marketing and optimization, your printables can continue to generate sales even while you focus on other aspects of your life.

• 3. Dividend Investing

Investing in dividend-paying stocks allows you to earn regular income from the dividends distributed by the companies you invest in. It is a good side hustle because it provides a passive income stream, the potential for capital appreciation, and the opportunity to reinvest dividends for compounding growth.

• 4. Invest in High-Yield Savings Account

Keeping your money in high-yield savings accounts with competitive interest rates can generate passive income through interest earnings. It is a good side hustle because it requires minimal effort, provides liquidity, and offers a safe place to park your money while earning interest.

• 5. Create and Sell Online Courses

Sharing your knowledge and expertise by creating and selling online courses can generate passive income. Once the course is created and marketed, it can continue to generate sales without much ongoing effort. It is a good side hustle because it leverages your skills, allows you to reach a global audience, and offers scalability.

• 6. Affiliate Marketing

Promoting products or services through affiliate links and earning a commission on each sale is a popular passive income stream. It is a good side hustle because you don’t need to create your own products, and you can earn passive income by recommending products or services you believe in.

• 7. Create and Sell Stock Photos or Graphics

If you have photography or graphic design skills, creating and selling stock photos or graphics can generate passive income. It is a good side hustle because it allows you to monetize your creative skills, earn royalties on each sale, and have the potential for recurring income.

• 8. Develop and Sell Mobile Apps

Creating and selling mobile apps can provide passive income through app downloads, in-app purchases, or advertising revenue. It is a good side hustle if you have programming skills and can develop useful or entertaining apps that resonate with users.

• 9. Start a Blog and Monetize It

Building a successful blog and monetizing it through advertising networks or sponsored content can generate passive income. It is a good side hustle because it allows you to share your passion or expertise, build an online audience, and earn income from ad placements or sponsored collaborations.

• 10. Create and Sell Digital Products (ebooks, templates, music, etc.)

Creating and selling digital products like ebooks, templates, music, or other downloadable content can generate passive income. It is a good side hustle because it leverages your creative skills, has low production costs, and can be sold repeatedly without inventory management.

Estate Planning

Estate planning is the process of designating who will receive your assets in the event of your death or incapacitation. Often done with guidance from an attorney, a well-constructed estate plan can help ensure that your heirs and beneficiaries receive assets in a way that manages and minimizes estate taxes, gift taxes and other tax impacts.

Estate planning involves determining how an individual’s assets will be preserved, managed, and distributed after death. It also takes into account the management of an individual’s properties and financial obligations in the event that they become incapacitated. Contrary to what most people believe, this isn’t a tool meant just for the ultra-wealthy. In fact, anyone can and should consider estate planning.

Assets that could make up an individual’s estate include houses, cars, stocks, artwork, life insurance, pensions, and debt. Individuals have various reasons for planning an estate, such as preserving family wealth, providing for a surviving spouse and children, funding children’s or grandchildren’s education, or leaving their legacy behind for a charitable cause.

The most basic step in estate planning involves writing a will. Other major estate planning tasks include the following:

• Limiting estate taxes by setting up trust accounts in the names of beneficiaries
• Establishing a guardian for living dependents
• Naming an executor of the estate to oversee the terms of the will
• Creating or updating beneficiaries on plans such as life insurance, IRAs, and 401(k)s
• Setting up funeral arrangements
• Establishing annual gifting to qualified charitable and non-profit organizations to reduce the taxable estate
• Setting up a durable power of attorney (POA) to direct other assets and investments

The following table serves as a checklist when it comes to planning your estate:

Task	Considerations
1. Make a list of all your assets.	Be sure to include any physical assets like real estate and precious metals along with any bank accounts, insurance policies, and annuities.
2. Make a list of all your debts.	This list should include everything you owe, including any loans.
3. Make copies of your lists.	If you have multiple beneficiaries, it helps to make multiple copies for each one to have at their disposal.
4. Review your retirement accounts.	This is important, especially for accounts that have beneficiaries attached to them. Remember, any accounts with a beneficiary pass directly to them so it doesn’t matter what your will states.
5. Review your insurance and annuities.	Make sure your beneficiary information is up-to-date and all of your other information is accurate.
6. Set up joint accounts or transfer of death designations.	Joint accounts, especially checking and savings accounts, do not have to go through the probate process as long as there is a right of survivorship. This means the account moves directly from the deceased to the surviving owner. Similarly, a transfer of death designation allows you to name an individual who can take over the account after you die without probate.
7. Choose your estate administrator.	This individual is responsible for taking care of your financial matters after you die. Choose someone you trust. Your spouse may not be the right person as they may not be in the right emotional space to take over your finances.
8. Write your will.	Wills don’t just unravel any financial uncertainty, they can also lay out plans for your minor children and pets, and you can also instruct your family/estate to make charitable donations with the money you leave behind.
9. Review your documents.	Make sure you look over everything every couple of years and make changes whenever and wherever you see fit.
10. Send a copy of your will to your administrator.	This ensures there is no second-guessing that a will exists or that it gets lost. Send one to the person who will assume responsibility for your affairs after you die and keep another copy somewhere safe.
11. See a financial professional.	This individual may be an estate planner or a financial planner. This person can help you review your accounts and help you make decisions to optimize your earnings.
12. Consolidate your accounts.	Some people have accounts in different places. But as time goes on, it’s always a good idea to move as much as you can into one place. Doing so helps clear up any confusion in the future for you and for your heirs.
13. Complete other financial documents.	You may need other legal and financial documents as you get older. Consider a power of attorney (POA) for health and finances, living wills, and letters of instruction that provide direction for your funeral or what to do with other assets like a digital wallet.
14. Consider other savings vehicles.	There are some tax-saving investment vehicles you can take advantage of to help you and others, such as 529 college savings plans for your grandchildren.

Creating a Will and Trust

A will is a legal document that provides instructions on how an individual’s property and custody of minor children (if any) should be handled after death. The individual expresses their wishes and names a trustee or executor that they trust to fulfill their stated intentions.

The will also indicates whether a trust should be created after death. Depending on the estate owner’s intentions, a trust can go into effect during their lifetime through a living trust or with a testamentary trust after their death.

The authenticity of a will is determined through a legal process known as probate. Probate is the first step taken in administering the estate of a deceased person and distributing assets to the beneficiaries. When an individual dies, the custodian of the will must take the will to the probate court or to the executor named in the will within 30 days of the death of the testator.

The probate process is a court-supervised procedure in which the authenticity of the will left behind is proved to be valid and accepted as the true last testament of the deceased. The court officially appoints the executor named in the will, which, in turn, gives the executor the legal power to act on behalf of the deceased.

Financial Pitfalls to Avoid

Here we’ll take a look at some of the most common financial mistakes that often lead people to major economic hardship. Even if you’re already facing financial difficulties, steering clear of these mistakes could be the key to survival.

1. Excessive and Frivolous Spending

Great fortunes are often lost one dollar at a time. It may not seem like a big deal when you pick up that double-mocha cappuccino or have dinner out or order that pay-per-view movie, but every little item adds up.

Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra credit card or auto payment or several extra payments. If you’re enduring financial hardship, avoiding this mistake really matters—after all, if you’re only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever.

2. Never-Ending Payments

Ask yourself if you really need items that keep you paying every month, year after year. Things like cable television, music services, or high-end gym memberships can force you to pay unceasingly but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning yourself from financial hardship.

3. Living on Borrowed Money

Using credit cards to buy essentials has become somewhat commonplace. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries, and a host of other items that are gone long before the bill is paid in full, it’s not wise financial advice to do so. Credit card interest rates make the price of the charged items a great deal more expensive. In some cases, using credit can also mean you’ll spend more than you earn.

4. Buying a New Car

Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car can also mean an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car.

Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Worse yet, many people trade in their cars every two or three years and lose money on every trade.

Sometimes a person has no choice but to take out a loan to buy a car, but how many consumers really need a large SUV? Such vehicles are expensive to buy, insure, and fuel. Unless you tow a boat or trailer or need an SUV to earn a living, it can be disadvantageous to purchase one.

If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain. Cars are expensive, and if you’re buying more of a car than you need, you might be burning through money that could have been saved or used to pay off debt.

5. Spending Too Much on Your House

When it comes to buying a house, bigger is not necessarily better. Unless you have a large family, choosing a 6,000-square-foot home will only mean more expensive taxes, maintenance, and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?

6. Using Home Equity Like a Piggy Bank

Refinancing and taking cash out of your home means giving away ownership to someone else. In some cases, refinancing might make sense If you can lower your rate or if you can refinance and pay off higher-interest debt.

However, the other alternative is to open a home equity line of credit (HELOC). This allows you to effectively use the equity in your home like a credit card. This could mean paying unnecessary interest for the sake of using your home equity line of credit.

7. Living Paycheck to Paycheck

In June 2021, the U.S. household personal savings rate was 9.4%. Many households may live paycheck to paycheck, and an unforeseen problem can easily become a disaster if you are not prepared.

The cumulative result of overspending puts people into a precarious position—one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you’ll have very few options. 

Many financial planners will tell you to keep three months’ worth of expenses in an account where you can access it quickly. Loss of employment or changes in the economy could drain your savings and place you in a cycle of debt paying for debt. A three-month buffer could be the difference between keeping or losing your house. 

8. Not Investing in Retirement

If you do not get your money working for you in the markets or through other income-producing investments, you may never be able to stop working. Making monthly contributions to designated retirement accounts is essential for a comfortable retirement.

Take advantage of tax-deferred retirement accounts and/or your employer-sponsored plan. Understand the time your investments will have to grow and how much risk you can tolerate. Consult a qualified financial advisor to match this with your goals if possible. 

9. Paying Off Debt With Savings

You may be thinking that if your debt is costing 19% and your retirement account is making 7%, swapping the retirement for the debt means you will be pocketing the difference. But it’s not that simple.

In addition to losing the power of compounding, it’s very hard to pay back those retirement funds, and you could be hit with hefty fees. With the right mindset, borrowing from your retirement account can be a viable option, but even the most disciplined planners have a tough time placing money aside to rebuild these accounts.

When the debt gets paid off, the urgency to pay it back usually goes away. It will be very tempting to continue spending at the same pace, which means you could go back into debt again. If you are going to pay off debt with savings, you have to live like you still have a debt to pay—to your retirement fund. 

10. Not Having a Plan

Your financial future depends on what is going on right now. People spend countless hours watching TV or scrolling through their social media feeds, but setting aside two hours a week for their finances is out of the question. You need to know where you are going. Make spending some time planning your finances a priority.

The Road to Financial Freedom

Financial independence is the state of having sufficient personal wealth to live, without having to work actively for basic necessities. Most of us dream of the day we can quit our day jobs and live life on our own terms, but few of us are setting ourselves up to attain that goal. Financial freedom seems like an overwhelmingly impossible task, and many people do not know where to begin.

In order to achieve financial freedom, it is best to break down the tasks into smaller steps:

Spend less than you earn. Overspending is super easy to do, especially with the ease of online purchases, credit cards and “buy now, pay later” offers as a constant temptation. Therefore, you have to draw a line between what you absolutely need and the nice-to-haves.

The best way to do this is to create a budget listing essential expenses like housing, utilities, food, transportation, insurance and debt payments in one column and extras such as entertainment, dining out and vacations in another. A shortcut for budgeting is to use the 50/30/20 rule: This means targeting 50 percent of your income toward needs; 30 percent toward wants; and 20 percent toward savings.

Have a saving mindset. For some people, saving comes naturally. Others almost have to trick themselves into doing it. One great tactic is to pay yourself first by setting up an automatic monthly transfer from your checking to your savings account. But whatever it takes, make it a habit. To keep you motivated, spell out your goals, periodically check your progress and make adjustments as needed.

Create a rainy-day fund. Continuing the theme from point two, carve out a portion of your savings budget to build a separate emergency fund, aiming to have enough cash to cover three-to-six months’ essential expenses. If you’re just starting out, aim for $1,000-$2,000 and build from there. Why? Look no further than the pandemic when millions of Americans were caught with a drop in income and unexpected expenses. What would happen if you lost your job or were injured in an accident? How would you pay your bills? That’s why a rainy-day fund is essential, regardless of your age.

Control debt—don’t let it control you. Credit cards can feel so freeing—but they can also lock you into spiraling and expensive debt. It’s fine to use credit cards for convenience, but only if you don’t charge more than you can really afford and can pay off in full every month. In addition, if you have student debt, stay on top of your loans. Consolidate if it makes sense, review your repayment options, and reach out to service providers if you’re struggling and are at risk for missing a payment.

Get insured. You’ve heard it before, and you might have resisted it, but make sure you have health insurance. Whether through work or an individual policy through healthcare.gov, don’t take the risk of being uninsured. If you’re 26 or younger, you’re still able be included on a parent’s policy. Of course, if you have a car, you need automobile insurance. Renting? Look into a low-cost renters’ policy. A big part of being independent is being prepared. 

Think retirement starting now. It’s super easy to postpone saving for retirement when you’re young, but the sooner you get started, the less you’ll need to save. In your 20s, aim to save between 10-15 percent of your gross salary between what you and your employer are contributing. Wait until you’re in your 30s, and you’ll need to ramp that up to 15-20 percent. If your employer offers a 401(k) match, you should at the very least contribute enough to get the full amount.

If you’re on your own, consider opening a traditional or Roth IRA. They each have different tax advantages that may make one a better choice depending on your situation. Roth accounts may be a good choice for a young person because, while you don’t get the tax advantage up front, withdrawals are tax-free after age 59½ when you’ll potentially be in a higher tax bracket.

Invest. Saving is one thing, but investing is another—and I encourage you to start investing as soon as you’ve built up your rainy-day fund. Before you get started, think about your goals, time horizon, and risk tolerance. This will help you develop an investment strategy and choose appropriate investments.

Thankfully, it doesn’t take a lot of money these days to get started, especially if you use mutual funds, exchange-traded funds, or fractional shares. Depending on how involved you want to be, you also might consider a robo-advice service. If you’re still unsure, consider working with a financial advisor who can help you get started, diversify, and make adjustments to your financial plan as your goals and market conditions change. You don’t need a lot of money to get help. 

Conclusion: Your Financial Future Awaits

More than 40% of Gen Zers surveyed last year feel anxious about their finances and a large majority of recent college graduates rely on their parents to cover recurring expenses and/or “special circumstances.” While unsurprising, given income levels, the pandemic, and other dynamics impacting young adults, these findings demonstrate ample opportunity to gain better financial footing as you set forth to pursue a lifetime of fulfillment.

Below we offer 9 strategies for establishing a strong financial foundation that can alleviate stress, help you avoid conflict with your parents and others, and allow you to achieve more for yourself and the people and causes you care about.

1. Reflect and write down your priorities

Your money will have no shortage of possible uses. Without a guide, you risk a low spending-to-fulfillment ratio. Take some time, reflect, and write down expenditures that will deliver the most value to you over the long run. For example, do you want to own a home in a certain location? Do you want to travel internationally? Do you want to own your own business? What inspires you and keeps you motivated? Write these big picture goals down and use them as a guide for your budget and to help you exercise spending restraint.

2. Align with your parents

Many young adults continue to receive financial support from their parents or other caregivers after they leave home. Many parents (and grandparents) want to continue supporting their children. There is nothing inherently wrong with accepting financial help from those that love you. The potential pitfall is a lack of communication and conflicting expectations.

To avoid this issue, don’t be afraid to talk about money with your parents. If they help you with certain expenses, have an open conversation about how long they expect to continue helping you. Likewise, if you receive annual cash gifts from your parents or grandparents discuss their vision for how you will use these funds. Share your long-term goals and dreams. Ask your parents about their philosophy and values around money. These types of conversations can be difficult to initiate but can have a significant payoff in terms of your relationships and finances.

3. Build a budget

Develop a plan for spending and saving that reflects your values and priorities. Doing it in your head is not enough. Even if you are a high earner and expect to have ample money to cover day-to-day expenses, spending without a budget leaves you vulnerable to sacrificing your long-term goals for meaningless spending. To help, choose a free budgeting app or ask for recommendation from a financial advisor.

4. Establish an emergency fund

As you build your budget, plan to have a safety net in case of an unexpected life event, such as a medical emergency or job loss. A good rule of thumb is to keep a reserve large enough to fund at least 6 to 12 months of living expenses.

5. Adopt good credit habits

Credit is a critical factor in your financial health. Having good credit becomes particularly important when it comes time to rent an apartment, finance a car, buy a house or even find a job. Further, poor credit habits — to which you will be particularly vulnerable if you don’t have a budget — can jeopardize your lifestyle and other financial goals as more of your money becomes allocated to interest payments. Some rules of thumb for establishing good credit include:

• If you haven’t already, educate yourself about credit
• Begin building credit as soon as possible – perhaps through a student card (if you are still in college) or as an authorized user on a parent’s credit card
• Research your options before applying for a credit card
• Use your credit card(s), make payments on time and pay off your balances each month
• Avoid applying for multiple credit accounts close together
• Regularly check your credit scores and reports

6. Maximize contributions to tax-deferred retirement accounts

As a young adult, you have an incredibly valuable asset: time. The more time you have, the more you can benefit from compounding returns — the increased value of your savings and investment accounts derived from re-investing interest and dividends, which are not taxed in qualified retirement accounts. To maximize this benefit:

• Take advantage as soon as possible of tax-advantaged accounts, including 401Ks and Individual Retirement Accounts (IRAs).
• If possible, set automatic deductions from your paycheck to your retirement accounts.
• If your employer offers a 401K plan with a matching contribution, at a minimum contribute enough from your paycheck to receive the maximum employer match.
• Ideally, contribute the maximum annual amount allowed under IRS rules
• If offered, take advantage of any advice services offered through your 401(k) plan to help you select investments

In addition to benefiting from compounding tax-free returns, by contributing to tax-deferred accounts you may also benefit from reducing your taxable income.

7. Invest your leftovers

If after meeting your living expenses, establishing a rainy-day fund and maximizing your retirement account contributions you have leftover money, invest in strategies (e.g., exchange-traded-funds, mutual funds, etc.) that align with your age, risk tolerance and long-term goals. While the investing world can seem daunting — the number of options is dizzying — many available resources exist to help you make informed decisions.

8. Carefully manage your taxes

Paying your taxes on time and navigating tax code will be a significant part of your financial health. U.S. tax code is complicated and there are a number of tax deductions and credits that can lower your overall tax bill. These savings can add up over time. Further, if you’re still in college or a recent graduate, you may need help determining if you need to file taxes at all.

Do not feel overwhelmed. There are free tools and services for filing taxes, especially if your income is under a certain threshold. If not, ask your financial advisor or your parents’ financial advisor to recommend an accountant, who will likely be well worth the cost as your income grows and your finances become more complicated.

9. Lean on a financial advisor

You may be skeptical about the financial industry or advice from a human in the digital age, where information is abundantly free, algorithms reign and real fortunes seem made in meme stocks. While digital tools may help improve your financial health, there is no comparable substitute for relationship-based advice. A financial advisor can help you manage your entire financial picture (e.g., instead of just picking investments) and provide answers relevant specifically to you. They can save you significant time, money, and stress and will be more vested in your financial success than the latest fintech app.

Financial planning can help you feel more confident about navigating bumps in the road — like, say, a recession or historic inflation. According to Charles Schwab’s 2023 Modern Wealth Survey, Americans who have a written financial plan feel more in control of their finances compared with those without a plan

Once your basic needs and short-term goals have been addressed, a financial plan can also help you tackle big-picture goals. Thoughtful investing, for example, can help build generational wealth, and careful estate planning can ensure that wealth gets passed down to your loved ones.