To help get your finances on track and prepare for your future, you may want to start a budget.

Budgeting is the process of creating a plan for how you’ll spend and save your money to help achieve your goals.

To help you on your financial journey, we’ve gathered the following tips that can help with budgeting for young adults:

1. Track your spending
2. Prioritize paying off debt
3. Set short and long-term goals
4. Create a detailed plan
5. Try a zero-sum budget
6. Start an emergency fund
7. Take advantage of employer matching
8. Practice frugal habits
9. Follow the 50/30/20 budget
10. Save for retirement
11. Use a bullet journal
12. Talk to a professional
13. Keep taxes in mind
14. Try a side-hustle
15. Use personal finance apps
16. Protect your health
17. Negotiate your salary
18. Try the envelope method
19. Automate your savings

Ready to start budgeting? Let’s get started with these 19 financial tips!

1. Track your spending

Before you can get started on your young adult budget, you must first understand where your money is going. You can do this in many ways, whether by keeping track of your receipts, using an app, or setting up a spreadsheet.

When tracking your spending, it can be helpful to categorize your transactions to help get a sense of what you’re spending your hard earned money on. These categories may include rent, groceries, utilities, clothing, entertainment, and more.

Remember, there is no set group of categories you should follow, so be sure to categorize your spending however works best for you and your shopping habits. Once you get a big-picture sense of your spending, you can better organize a budget that makes sense for you.

2. Prioritize paying off debt

When looking to improve your future spending, it’s crucial that you don’t forget about any debt you may have. From student loans to credit card debt, prioritizing getting out of debt can help you get out from under any interest payments that are getting in the way of your financial goals.

You can prioritize paying off your debt in different ways, including:

• Snowball method: You can follow the snowball method by paying off your debts, starting with the smallest amounts and working your way up to the largest. This works well for people with small debts, typically less than $3,000.
• Avalanche method: With the avalanche method, you’ll prioritize paying off your debts by starting with the highest interest rates and working your way down to the debts with the lowest interest rates. That way, you’re limiting the time spent holding on to debt with high-interest rates and your overall interest expense.

Whether you decide to use the snowball or avalanche method, continue making the minimum monthly payments on all of your debts as you focus your extra money on paying off the highest-priority debts.

3. Set short and long-term goals

Setting short and long-term goals is a great way to boost your financial success. That way, you can always keep your eyes on the prize. Start a practice of writing down your goals, this will help keep them top of mind for you when you’re making daily spending decisions.

These goals should be customized based on your specific wants and needs. For example, a short-term goal may be to pay off all of your student loans within three years and a long-term goal might be to retire by age 60.

4. Create a detailed plan

A financial plan is a way to assess your current financial situation, identify long-term financial goals, and create a road map to achieve them.

No matter your financial situation or goals, creating a detailed financial plan for young adults is a surefire way to keep yourself committed to financial success. A budget and a financial plan may sound very similar. A budget is a tool for tracking and managing your spending and savings on a short-term basis, where a financial plan actually maps out your goals over the long-term and your plan to achieve them. You can keep it simple and do this using a pen and paper, or you can utilize spreadsheets, templates, budgeting apps, or whatever works best for you.

5. Try a zero-sum budget

Now that you have a sense of how to start a budget, you may wonder what type of budget you should follow. A popular option for young adults is the zero-sum budget. The zero-sum budget is a budgeting method in which you use every penny of your income every single month.

But don’t get your hopes up, as it doesn’t mean you get to blow all of your money on flashy purchases and summer vacations. Instead, you’ll allocate your monthly income towards your wants and needs, debt payments, and savings goals until every penny of your income is accounted for.

For example, let’s say you have a monthly income of $4,167. With the zero-sum method, your budget may look like this:

As you can see, by combining your spending and saving, you’re using up all of your monthly income while also meeting your savings and debt payment goals.

6. Start an emergency fund

Let’s face it. Life can get in the way sometimes. Whether it’s unexpected job loss, car damage, or any other financial emergency, there are times when we could all use some extra cash. Fortunately, you can help dampen the financial burden of these situations by starting an emergency fund with your first budget.

Generally speaking, you’ll want your emergency fund to cover around 3-6 months of expenses. By building up an emergency fund, you can live your life in comfort, knowing you’re prepared to handle any unexpected circumstances that could impact your financial well-being.

7. Take advantage of employer matching

If you’re fortunate enough to work for a company that offers retirement plans with employer matching contributions, it can benefit your financial future to take advantage of it.

For example, if your salary is $50,000 and your company offers 6% matching with their 401(K) plan, your employer will match your contribution up to $250 each month. This means if you decide to contribute $250 a month towards your 401(K), your employer will also contribute $250 bringing the total monthly contribution into your 401(K) to $500. 

By taking advantage of this benefit, you can increase the amount of money that goes towards your retirement every month, allowing you to build up your retirement savings and accumulate wealth more quickly.

8. Practice frugal habits

When prioritizing budgeting for young adults, adopt smart spending habits to avoid spending unnecessary money. Examples of these frugal habits include:

• Making meals at home: By prioritizing groceries over eating out at spendy restaurants, you can limit the money you spend on food every month.
• Shopping secondhand: Whether you buy a used car or furnish your home with used furniture, shopping secondhand can help you reduce spending.
• Skipping brand name items: Generic brands are usually much cheaper than their brand-name counterparts. By shopping for generic brands, you can cut costs at the register.
• Waiting before you buy: If you’re prone to impulse spending, try forcing yourself to wait a few days before making any big purchases. Often, waiting it out can help you realize if your desired purchase is truly necessary.
• Learning to say “no”: In some cases, you may get invited to do things that go against your financial goals. By learning to say “no,” you can avoid committing to things that may be beyond your financial means.
• Buying in bulk: From toilet paper to canned goods, buying in bulk can sometimes come with huge savings, keeping you from paying more than you have to for your essential items.
• Buying essential items only: By sticking to only the essentials every time you shop, you can avoid throwing money away on unnecessary junk spending. Creating a list before you go shopping can help you stick to the task at hand and not get distracted by what you see.

While nobody goes from a mindless spender to a frugal shopping wizard overnight, keeping these frugal habits in mind can help you spend less on your shopping outings.

9. Follow the 50/30/20 budget

Another popular budget for young adults is the 50/30/20 budget. Under the 50/30/20 rule, you’ll split up your monthly income as follows:

• 50% for essentials
• 30% for wants
• 20% for savings

For example, if you make $4,167 a month, you’ll dedicate $2,083.50 to essentials, $1,250.10 to wants, and $833.40 to savings.

By sticking to this simple rule, you can easily budget your spending without skipping out on fun purchases and experiences, all while satisfying your monthly savings goals.

10. Save for retirement

As a young adult, meeting your retirement goals can seem like a far-fetched idea or tomorrow’s problem. But the reality is there is no better time to start saving for retirement, as the earlier you start, the quicker you’ll be able to retire.

This is especially true due to compound interest. In simple terms, you can think of compound interest as “interest on your interest,” meaning the quicker you save money for retirement, the more time it has to grow.

Let’s say you begin saving $150 a month with an average positive return of 1% a month, compounded monthly over 30 years. After those 30 years, your retirement savings will be nearly $525,000.

On the other hand, let’s say you waited 30 years and instead invested $1,200 a month for ten years with the same average positive monthly return. Despite your increased monthly contribution, your retirement savings would only be around $275,000.

As you can see, time is your friend when saving for retirement. Keep in mind that many compound interest accounts require a minimum deposit to get started. Because of this, be sure to do your research and select an account that works best for your financial situation.

11. Use a bullet journal

Another popular way to create budgets for young adults is to use a bullet journal. A bullet journal is highly customizable and includes specific sections you can use to organize your spending, goals, time, and other aspects of your life.

Because there is no right or wrong way to use a bullet journal, you can organize your pages however you’d like. This is a helpful method for those who prefer to physically write things down rather than using a digital method such as a spreadsheet.

12. Talk to a professional

A lot of the time, people may wait until they have a lot of money or are in a crisis before seeking help from a financial advisor. But that doesn’t have to be the case with you.

By being proactive and going over your finances with a professional, you can help come up with a plan tailored to your income, expenses, and financial goals. Plus, it doesn’t hurt to have someone who can answer all of your questions and help you create a personalized budget based on the advice of an expert.

13. Keep taxes in mind

Whenever you’re thinking about budgeting and financial planning, you’ll want to keep your taxes in mind. After all, the amount of money listed for your salary isn’t the same amount that will reach your bank account. Because of this, always use your monthly income after taxes when planning your budget.

In addition, you’ll want to do your research and see if you’re eligible for any tax deductions that can put money back into your pocket. Examples of common tax deductions include deductions for student loan interest and charitable donations.

If you’re unsure what deductions you qualify for, you may want to talk to a tax professional.

14. Try a side-hustle

If you’re looking to turn your free time into some extra cash, you may want to take up a side hustle. Side hustles can vary, from picking up an extra job to turning one of your unique skills or talents into a source of income. Need some side hustle inspiration? Try one of these ideas:

• Become a rideshare driver (Average hourly pay: $21.41)
• Tutor your favorite subject (Average hourly pay: $18.33)
• Sell your talents as a freelance writer (Average hourly pay: $24.26)
• Start babysitting (Average hourly pay: $16.22)
• Become a dog walker (Average hourly pay: $17.54)

No matter your interests or talents, there are many paths to bring in some extra income. If time is a limiting factor, consider passive income sources.

15. Use personal finance apps

For those interested in using technology to help with budgeting ideas for young adults, there are numerous personal finance apps you can use to take control of your finances.

From tracking your spending with a budgeting app to practicing long-term investing with an investing app like Stash, your phone can be a valuable tool for staying on top of your financial goals.

Not only that, but personal finance apps are a great way to manage your budget and finances wherever you go, with some apps even offering the option to link your debit or credit cards to give you an up-to-date view of your monthly spending.

16. Protect your health

Even if your goal is to save as much money as possible, you shouldn’t write off medical insurance as an unnecessary expense. Accidents happen, no matter how careful you are, and medical insurance can be the difference between small out-of-pocket costs and life-changing medical bills.

Something as minor as an accidental sports injury could end up costing you thousands of dollars if you’re uninsured and could put a massive roadblock in between you and your financial goals. Because of this, research what medical insurance is best for you. In some cases, it may be offered through your employer.

17. Negotiate your salary

On top of prioritizing saving money to improve your financial well-being, you can also work towards increasing your monthly income by negotiating your salary. When negotiating your salary, you should first determine your fair market value by assessing the salary of similar job postings.

Then, you’ll want to bring evidence of your value to the company to help show your boss why you deserve a raise. From there, be prepared to answer any questions your boss may have. While this isn’t guaranteed to work every time, you may be able to earn an increased wage which can help you achieve your financial goals.

18. Try the envelope method

Another popular budgeting method for young adults is the envelope method. The envelope method is a budgeting system used to help control where your money goes.

With the envelope method, you’ll want to dedicate an envelope to each spending of your spending categories. For example, if you allow yourself $500 a month for groceries, you’ll want to cash your paycheck and then put $500 into your grocery envelope.

Then, when it’s time to go grocery shopping, you’ll take the $500 and start shopping. Once you’re finished, you’ll put the change back into the envelope, so it’s ready for next time. Once you run out of money, you’re done buying groceries for the month.

This method is a great way to keep yourself from overspending, as you’ll have a physical sense of the money that is leaving your hands with each purchase.

19. Automate your savings

Another great way to help with your budgeting is to automate your savings. Depending on your checking or savings account, you may be able to set up automatic transfers every month. An example of this would be an automatic monthly transfer of $100 into your savings account or emergency fund. Another method to automate savings is to split your paycheck into two different accounts each payroll period, this way a portion of your money goes directly into a savings account where it is out of sight and out of mind.

That way, you can rest easy knowing that your savings goals are being met without you even having to lift a finger, allowing you to focus on other aspects of your financial health, like saving money or earning extra income.

Why you should start budgeting as a young adult

As a young adult, you may feel that budgeting is something that can wait. But by putting off prioritizing your financial health, you’ll be missing out on a wide range of benefits, including:

• Financial stress relief: Taking the time to plan your finances and set spending limits can help you get a birds-eye view of your finances so you have a better understanding of what you can afford. This can help prevent the money stress that can come from poor money management.
• Debt-free living: A large benefit of budgeting is that it allows you to allocate specific amounts of money to help pay off your debts. By prioritizing debt payments early in your life, you can limit the money wasted on interest payments.
• Earlier retirement: When it comes to retirement, the earlier you start saving, the earlier you can retire. Because of this, taking control of your spending at a young age can help maximize your retirement savings.
• Increased savings: By automating your savings and starting an emergency fund during your budgeting process, you can increase your overall savings.
• Preparation for the future: Similar to planning for retirement, setting a budget can help you be better prepared for the future, whether you’d like to purchase a home or go on an international vacation.
• Long-term growth: If you start taking your finances seriously at a young age, you can reap the benefits of time, leading to increased growth compared to starting years down the line.

When it comes to budgeting for young adults, remember that the earlier you start, the better. Whether you’d like to quickly get out of debt or take the money you’ve saved to grow your wealth with long-term investing, focusing on budgeting is a great first step to getting your finances in check.

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Budgeting for young adults FAQs

Still have more questions about budgeting advice for young adults? We’ve got answers.

How do you keep track of a budget?

You can keep track of a budget in many ways, including using a pen and paper, spreadsheets, budgeting templates, a bullet journal, or budgeting apps.

Is the 50/30/20 rule realistic?

While the 50/30/20 rule can be a realistic option for some, it may not work for everyone’s specific financial situation. Because of this, prioritize following a budgeting plan that works best for you and your financial goals.

What is the 70% rule for budgeting?

The 70% rule for budgeting is when you allocate your money as follows:

• 70% for all spending
• 20% for saving and investing
• 10% for debt payments

The post Budgeting for Young Adults: 19 Money Saving Tips for 2024 appeared first on Stash Learn.

Debit cards take money out of your bank account when you swipe, while credit cards add debt to your line of credit when you use them. Understanding the differences between debit cards vs. credit cards will allow you to use the right one for your needs.

In this article, we’ll cover:

• Debit cards and how they work
• Pros of debit cards
• Cons of debit cards
• Credit cards and how they work
• Pros of credit cards
• Cons of credit cards

What is a debit card?

While cash is still a viable payment option for most goods, businesses have long been progressing toward digital payment methods. Purchasing trends have also shown an increase in online shopping, even for groceries, making cash and checks obsolete.

A debit card reduces the need to carry cash or physical checks to purchase. Some retailers no longer accept physical checks as payment, which will likely increase with time.

How a debit card works

A debit card is connected to a bank account the cardholder opens up at a financial institution. You can use a debit card in one of three ways: to make purchases at a point-of-sale (POS) system in a physical store, at an ATM to withdraw cash, or to make purchases online.

The amount of money you can spend using a debit card depends on what you have in your bank account. There is no line of credit you can borrow with a debit card. If funds are unavailable in your account at the time of purchase, the transaction will likely be declined or cause an overdraft to occur.

When a purchase is made in person, you use a personal identification number (PIN) set up at the financial institution when the card is ordered. The transaction is then sent through the online network used by the merchant to remove the funds from your account.

Some debit cards allow you to forgo using the PIN and choose the “credit” option, which typically requires a signature. The transaction is then processed through the global digital payment technology company network, where a hold is placed on the amount, processing within a few days.

The benefits of debit cards

Convenience

Debit cards deduct purchases from your account immediately, so you don’t have to wait days for the money to be subtracted from your available balance. Using a debit card for transactions or to withdraw cash provides benefits like convenience and speed, and some even have rewards.

No annual fees

Debit cards do not require annual fees to stay activated. The bank account that the debit card is connected to may have monthly maintenance fees, but there are ways to avoid those fees with direct deposits or other means.

Avoid overspending

Debit cards can help you avoid overspending since you can only spend what is available in your bank account. If there are not sufficient funds to cover a purchase, the transaction will likely be declined. There are exceptions to this, and some financial institutions allow you to overdraft your account, but overdraft fees apply.

No interest

Since purchases are taken directly from your account, debit cards don’t accumulate a balance to be paid. This means debit cardholders avoid having to pay interest on a balance owed.

Debit card rewards

While they are usually not as generous as the rewards offered by credit cards, some debit cards also come with rewards, When you use your debit card for purchases, some banks might offer you cashback or discounts on specific products or services. While these rewards may be smaller, they still provide a little extra something for your everyday spending.

Cons of debit cards

Spending limit

A debit card restricts you to the money you have in your account. There may be instances where you need to spend more than what you have available. You can budget for those larger purchases, but sometimes, some emergencies require immediate funds.

Overdraft fees

If you don’t have overdraft protection on your account, there may be instances when using your debit card causes an overdraft. When an account is overdrafted, a fee is triggered as a penalty. If you immediately bring your account out of the negative, you can avoid future fees. If not, some financial institutions will charge you an additional fee every day the account is overdrafted.

Limited fraud protection

Any time a debit card is lost or stolen, you must notify your bank immediately. According to the Federal Trade Commission, if you report your lost or stolen card within two days, you may still be held responsible for up to $50 of fraudulent charges. If it takes you more than two business days, you’ll be responsible for up to $500, and anything past 60 days could make you liable for all the fraudulent charges on your account.

Don’t build credit

Since a debit card doesn’t allow you to borrow funds, it doesn’t assist in building credit. While debit cards don’t affect your credit score, other lines of credit, including a credit card, will.

What is a credit card?

Similar to a debit card, a credit card is a small rectangular piece of plastic or metal issued to you by your bank or a financial services company. However, how a credit card functions differs from a debit card.

Credit cardholders may also be granted a separate cash line of credit (LOC). In this case, cardholders can borrow a specified amount of money through cash advances at their financial institution, ATM, or by using credit card convenience checks. Cash advances come with terms that typically involve higher interest rates and no grace period.

How a credit card works

A credit card can be swiped, inserted, and tapped at a payment terminal. You can also use them online with the credit card number, expiration date, and security code. The only time you can use them to obtain physical money is through a cash advance.

Once you make a purchase, it will appear as “pending” in your account activity and take a few days to clear. Once the amount is posted, it will be added to your balance owed and removed from your available credit.

Every month, you’re required to make a payment on your credit card on a specific date. You can pay off your entire balance owed, your current statement cycle balance, the minimum payment, or an amount of your choosing. Paying any amount but the total balance will incur interest, and paying anything below the minimum payment will incur fees.

The benefits of credit cards

Build credit

A credit card can build credit. The type of credit built depends on payments being made on time and the balance owed steadily decreasing. You don’t need to maintain a balance owed to build good credit, so paying the full balance every payment cycle is the best and safest approach.

Rewards

Credit cards generally have incentives or rewards for the cardholder to encourage use. The types of rewards will depend on the card, but they can come in the form of cashback, airfare points, a free night stay at a hotel, and more.

Consumer protections

Many credit cards offer cardholders a zero-liability policy if fraudulent purchases are made on the card. In other words, you won’t be responsible for unauthorized charges. You can also dispute a charge if the product purchased was falsely advertised, unsatisfactory, or absent.

Reservations and travel perks

Certain situations require a credit card, like booking a hotel room. Aside from cash, hotels will only accept credit cards as payment for the room and incidentals, should anything in the room become damaged or go missing. Special travel credit cards have useful perks like concierge services, rental car insurance, no foreign transaction fees, and more.

Cons of credit cards

Overspending

The ease of using a credit card with a large credit limit can lead to cons like overspending. Spending to the credit limit could put you in a cycle of only being able to afford to make the minimum payments and incurring interest charges, which causes your debt to grow. High balances on your credit card can damage your credit score.

Debt

Credit cards allow you access to more funds than your budget may allow, which can lead to debt if overspending occurs. Interest charges can be about as much as the minimum payment if your balance is high, making it difficult to pay down your debt.

Interest rates

Credit cards have variable interest rates, which depend on the federal funds rate. Rising interest rates can cause credit card balances to go up, making it harder to budget and pay down debt. If a balance is left after a payment is made, finance charges can increase.

Fees

Many credit cards have annual fees, fees for adding an authorized user, fees for cash advances, foreign transaction fees, or fees for making a late payment. It’s important to review the fees and perks of a credit card, and how they may or may not impact you, so you can decide if the card is right for you.

Debit vs credit: key takeaways

Having the best of both worlds

You don’t have to choose one over the other when it comes to having a credit card or debit card. Each has its benefits and can be used for separate occasions. For example, the fraud protection on a credit card is more robust, making it the safer option for online purchases. Debit cards are more suited for everyday purchases, so you can better control your spending. Many people have both to manage their funds, establish credit, and take advantage of rewards.

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The post Credit Cards vs. Debit Cards: The Differences Can Add Up appeared first on Stash Learn.

Budgeting doesn’t have to be complicated. This guide will take you through the process, including six steps for learning how to make a budget you can stick to.  

In this article, we’ll cover:

• What a budget is
• The importance of budgeting
• Calculating your net income
• Recording your spending habits
• Predictable vs. variable expenses
• Balancing your budget
• Types of budgeting
• Setting goals for your budget

What is a budget?

In its simplest form, budgeting is just figuring out how much you make and how much you spend and then using that information to inform your future financial decisions. Your budget allows you to plan how you’ll spend your income and keep track of money coming in and out. Tracking your spending lets you see your true financial picture in real-time so you can make informed choices. And planning ahead gives you a chance to put money toward your longer-term goals, like paying off credit cards, saving for a downpayment on a house, or planning for retirement.  

Why budgeting is important

Why learn how to make a budget? The short answer is that knowledge is power. It can be difficult to exercise control over your money until you have a clear picture of your finances. However, the benefits of budgeting extend far beyond just gaining financial control. Let’s dive into the specific advantages and rewards that come with implementing a budget.

Improved financial security

Let’s face it, life can be unpredictable. But with a budget, you can gain control over your finances and build a safety net. By understanding your financial situation, you can build an emergency fund to handle unforeseen circumstances, such as medical emergencies, car repairs, or job loss. This financial security provides peace of mind and reduces the stress that comes with financial uncertainty.

Reduced stress

Financial stress can take a toll on your well-being. Whether you’re living paycheck to paycheck or worrying about money in general, it can be overwhelming and emotionally draining. A budget gives you a clear overview of your income, expenses, and financial goals. It helps you identify areas where you can cut back, eliminate unnecessary debt, and save for the future. With a budget in place, you can make informed financial decisions and eliminate the anxiety that arises from financial instability.

Better decision-making

Picture this: you’re equipped with a budget that serves as your compass. It guides you to make intentional choices aligned with your goals. When you have a budget, every financial decision becomes more deliberate and informed. By tracking your spending habits, you become aware of patterns and identify areas where you may be overspending. This knowledge empowers you to make adjustments and allocate your resources according to what truly matters to you.

Ability to achieve financial goals

A budget serves as a roadmap for reaching your financial aspirations. Whether your goals include paying off debt, saving for a dream vacation, saving for a down payment on a home, funding a child’s education, or planning for retirement, a budget provides a structured approach to allocate funds towards these objectives. It helps you track your progress, make necessary adjustments, and stay motivated on your path to financial success.

Enhanced control and discipline

Setting a personal budget promotes discipline and self-control in managing your finances. It encourages you to prioritize expenses, distinguish between needs and wants, and resist impulsive spending. By consciously allocating your income, you gain control over your money and avoid the pitfalls of overspending or unnecessary debt. Over time, budgeting becomes a habit that empowers you to make smart financial choices that align with your values.

Improved relationships and communication

Money matters can strain relationships. Budgeting is not only a personal endeavor but can also benefit relationships. It fosters open communication about money between partners or family members, ensuring everyone is on the same page regarding any financial goal, spending limits, and saving strategies. Budgeting encourages accountability and cooperation, leading to stronger relationships and shared financial success.

6 Steps to budgeting your money

Step 1: Calculate your monthly net income

You may have heard the terms “gross income” and “net income.” Gross income is the total amount you earn before taxes, benefits, and other payroll deductions are taken out. Net income is the amount of money you actually take home every month after taxes and deductions. For budgeting, you want to identify your net income.

If your sole source of income is a job with a regular paycheck, it’s pretty straightforward: tally up the total amount of all your paychecks during a month. Your employer typically subtracts taxes and other deductions from your base salary before issuing your paycheck. 

You might have additional sources of income, so be sure to include those when calculating your monthly net income. This might include things like:  

• Alimony payments and/or child support 
• Government payments, like disability or veterans benefits
• Passive income, such as income from rental properties 
• Any money you earn from a side hustle or gig work

Step 2: Gather and record your expenses

Once you know how much money is coming in, figure out how much money is going out. Make a list of everything you spend money on every month and about how much you’re spending: bills, necessities, discretionary spending, etc. It can be tough to remember everything, so do some digging by looking at your records. 

You might start by reviewing statements from the accounts you use to pay for things, such as:

• Bank accounts
• Credit cards 
• Digital payment apps

Other useful information about expenses might be found in statements or receipts from:

• Car payments
• Car insurances
• Mortgage documents
• Utility bills
• Investment accounts
• Email receipts 

After your initial pass at tracking your expenses, consider some of the following options to help automate your tracking:

• Embrace budgeting apps: These user-friendly apps often allow you to link your bank accounts and credit cards and automatically categorize transactions and provide a visual representation of your spending patterns.
• Leverage online banking tools: Your bank’s online platform can have a treasure trove of features to help you track expenses. Explore the tools provided, such as spending categorization, transaction history, and spending alerts. 
• Use expense tracking spreadsheets: If you prefer a hands-on approach, a spreadsheet can be your best friend. Create a personalized template with columns for date, description, category, and amount. Enter your expenses regularly and categorize them accordingly. 
• Use the envelope system: The envelope system is a physical method where you assign cash to different envelopes, each labeled with a specific spending category. Whether it’s groceries, transportation, or entertainment, this system allows you to visualize your available funds and make mindful spending choices.
• Keep your receipts: Make it a habit to collect and store receipts for your purchases. Create a designated email folder for digital receipts and store your physical receipts in an envelope or folder.
• Account for cash transactions: Cash can be elusive when it comes to tracking expenses. Stay on top of it by jotting down cash transactions in a small notebook or using a budgeting app that allows manual entry.

Remember, effective expense tracking is crucial for accurate budgeting. Choose a method that works best for you and consistently track and categorize your expenses. Regularly reviewing your spending habits will provide valuable insights for making informed financial decisions and adjusting your budget as needed.

It can be helpful to look through 12 months of records to get a full picture of your spending. Some expenses vary from month to month, and any bill or subscription renewal that recurs yearly will only show up as a charge in one month over the course of the year. Budgeting requires being aware of and anticipating these expenses so you can plan for them. 

Step 3: Categorize fixed expenses vs. variable expenses

Among the easiest expenses to track are those that occur at regular intervals with the same amount, like rent or mortgage payments, your phone bill, and streaming services. These are called fixed expenses, and because they’re predictable, planning for them tends to be easier. 

Variable expenses, on the other hand, shift from month to month. They fall into two categories:

• Predictable expenses that you know will occur even if you don’t know the specific amount, like groceries or utility bills
• Unpredictable expenses that you can’t easily anticipate, such as home and car repair or health care emergencies

Expenses in the first category may vary from month to month but will typically stay within a certain range. The longer you track your spending, the better a feel you’ll get for how much to set aside for these categories. However, even these expenses can sometimes surprise you, as when gas prices suddenly rise. 

Unpredictable expenses are more challenging to budget for. If you own a car, you can reasonably assume that at some point it will need repairs, but you don’t know when or how much money it will cost. For this reason, many budget experts suggest building an emergency fund for contingencies. 

To get you started, here are some examples of different types of expenses: 

Step 4: Calculate your monthly income and expenses

This step is often referred to as balancing your budget; it can be the most sobering part of the process, but it may also be the most useful in planning for the future. If you want to gain any benefit from learning how to budget, you’ll need to be honest with yourself about your income and your spending habits. 

Add up all your monthly income and expenses, then subtract your expenses from your income. The number will tell you whether you’re in the red or in the black. Now it’s time to balance your budget.

• If you’re spending less than you earn, your income is enough to cover all your usual expenses. You can use your discretionary funds to store up for emergencies or start building your nest egg by saving or investing your money. 
  
• If you’re spending more than you’re taking in, you’re living beyond your means, and paying for things with credit cards can hide this fact for only so long. The good news is that learning how to budget will make it easier to gain control of your money. Look over your spending to see if there are areas where you can cut back, paying close attention to your non-essential spending. If you find that your spending is already at the bare minimum, you may want to look for additional sources of income.   

• You may also find that you’re generally in the black, but not by much, or that some months you come out ahead and some months you’re in the red. Reducing your spending on nonessential items might help you spend less than you earn more consistently and make it easier to plan for the future.

Step 5: Choose your budgeting method

You now have a clear picture of your financial situation; it’s time to start planning and tracking your spending. There are several approaches to budgeting, and each has its advocates. It’s up to you to find the method that works best for your circumstances and personality. You might even find that combining elements of different methods makes sense for you. What’s important is that you find a way of budgeting that you can commit to over the long haul.  

Here are some popular budgeting methods you might want to try out:

• 50-30-20 budget: The 50-30-20 budget helps you set your priorities by clearly laying out how much of your monthly income you should spend on each of three categories: 50% to needs, 30% to wants, and 20% to investing and saving. One advantage of the 50-30-20 budget rule is that it provides clear guidelines for your monthly spending while leaving flexibility to adjust as you continue learning how to budget for your personal circumstances.
  
• Zero-based budget: A zero-based budget is just what it sounds like: you assign every dollar of income a category until you hit zero. That includes all your expense categories: necessities, nonessential spending, investing, saving, and emergency funds. Some people enjoy planning with this level of specificity because it can help you feel in control and be disciplined about paying down debt or saving money. That said, you’ll need to track your spending extra closely to make sure you stay on target.
  
• Pay yourself first method: The pay yourself first budgeting method is oriented toward saving and puts your long-term financial goals at the top of the list of funded categories. Essentially, you begin your budgeting process each month by setting aside money for saving and investment. By prioritizing this part of your budget, you can keep your focus on building wealth; some people find it easier to cut down their spending on unnecessary things when the big picture is top-of-mind. 
  
• Envelope method: The envelope method is a classic approach that allocates the money you have on hand to your expense categories. In the most literal form of this budget, you put physical cash into envelopes marked with categories. Then, when it’s time to spend, you take the cash out of the relevant envelope; when the envelope is empty, your budget for that category is used up for the month. The envelope method is the conceptual basis for a lot of budgeting apps, including the Stash partitions feature.   

Step 6: Set realistic financial goals for yourself and stay motivated

Once you learn how to make a budget, the final step is to put your new budget plan to use. That means tracking your spending regularly, planning out your budget for each month, and readjusting as you learn. 

One of the keys to maintaining a budget is motivation: What are you trying to achieve financially? It could be a goal as modest as saving for a new couch or as ambitious as starting your own business. Keeping your focus on why you’re budgeting, and what you hope to get from it, can help you commit to the process.

Here are some tips to help you establish goals that align with your current financial situation and increase your chances of success:

SMART goal setting

Utilize the SMART framework when setting your financial goals. By making your goals specific, measurable, achievable, relevant, and time-bound, you’ll have a solid foundation for success:

• Specific: Clearly define what you want to achieve. Instead of a vague goal like “save money,” specify an amount or percentage you aim to save.
• Measurable: Make your goals quantifiable. This allows you to track your progress and know when you’ve achieved them.
• Achievable: Set goals that are realistic and within your reach. Consider your income, monthly expenses, and financial obligations when determining what you can reasonably accomplish.
• Relevant: Ensure that your goals are relevant to your financial situation, values, and long-term aspirations.
• Time-bound: Set a deadline for achieving your goals. This provides a sense of urgency and helps you stay focused.

Break goals into smaller milestones

Breaking larger goals into smaller, manageable milestones can make them less overwhelming and more attainable. For instance, if your goal is to save $10,000 for a downpayment on a house, break it down into monthly or quarterly savings targets.

Align Goals with Personal Values and Priorities

Consider your personal values, aspirations, and priorities when setting financial goals. Determine what truly matters to you and what you want to achieve in the long run. Aligning your goals with your values will provide a strong sense of purpose and increase your commitment to following your budget.

Remember, the purpose of setting financial goals is to provide direction, motivation, and a sense of accomplishment. Regularly review and reassess your goals as your financial situation evolves. Stay committed to the process and celebrate your progress along the way.

1/4

Quiz

 

With the 50-30-20 budget, 20% of your income should go to:

Savings

Needs

Bills

Wants

Savings. 50% of this budget goes toward fixed or essential expenses (needs), 30% goes toward variable or flexible expenses (wants), and 20% goes toward savings.

2/4

Quiz

 

True or False: Everyone should use the same budget template.

True

False

False. You should tailor your budget to your life and your needs. If you want to prioritize your savings over your “wants”, that’s up to you!

3/4

Quiz

 

Which of the following would be included in your fixed or essential expenses?

Shopping

Retirement

Rent

Going out to eat

Rent. This expense stays the same month-to-month and is essential.

4/4

Quiz

 

Which of the following is another example of a budget you might use?

The piggy bank budget

The zero-sum budget

The credit card budget

The shoe-string budget

The zero-sum budget. With the zero-sum budget, you give every dollar a job and the objective is to get to $0 every month.

 

Quiz

 

You scored 

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How to budget for beginners

If planning and tracking your spending is new territory, the steps above will get you started on the right foot. It may be helpful to keep in mind that you don’t have to get every detail correct from the very beginning. Your budget will always be changing to reflect your circumstances, and the more you use it the more accurate it will become. So get started now and give yourself permission to learn as you go.    

The best budget is the one you stick to

Just by deciding to learn how to budget, you’ve taken an important step toward improving your financial well-being. Budgeting will do you the most good if you can make it a lifelong habit, and taking a long-range perspective can allow you some leeway. If you overspend in a category one month, try to figure out whether you’re underestimating how much you need or if you can adjust your habits to spend less. Eventually, you’ll start to get a sense of the difference between what you need and what you want. Even the simplest budget can change your approach to spending,  saving, and investing for the long-term if you’re willing to commit to it over time.  

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The post How to Budget: A 6-Step Guide for Beginners appeared first on Stash Learn.

A low credit score can have serious implications for your financial life—from securing a car loan to being approved for a mortgage. Luckily, credit scores aren’t set in stone—you have plenty of options if yours is in need of a boost. Depending on what’s hurting your score, it’s possible to see improvements in as little as 30 days. 

While it’s worth noting that not every method will yield immediate changes, there are steps you can take to give your credit score a lift quickly. The effort you put in now will work in your favor in the long run, and create a more solid foundation for your credit and financial wellness going forward. 

If you’re wondering how to raise your credit score, start with these steps: 

1. Review your credit reports

2. Pay your bills on time

3. Lower your credit utilization

4. Expand thin credit files

5. Avoid too many hard credit inquiries

6. Be judicious when closing old accounts

7. Resolve collection accounts

8. Open a secured credit card

9. Consider consolidating debts

10. Diversify your credit mix

11. Use a credit monitoring service

Read along to learn how to raise your credit score. 

1. Review your credit reports

Time commitment: One afternoon 

Improving your credit score starts with knowing where your credit currently stands.  Head to the official AnnualCreditReport.com website to pull a copy from each of the three main credit bureaus: Equifax, Experian, and TransUnion. You’re entitled to one free credit report per year from each.

When reviewing your reports, be on the lookout for any inaccurate information like unauthorized purchases or misreported late payments. If there are any, reach out to your lender to correct and remove them. 

And in case you’re unfamiliar with the concept of credit scores, here’s your refresher: Credit scores are calculated by scoring models based on your credit report from any of the three major credit bureaus. There are a variety of scoring models that weigh certain factors differently, but the two used most often by lenders are FICO and VantageScore. 

So, what is a good credit score? Both FICO and VantageScore models score credit on a scale of 300–850:

While credit scores vary slightly depending on the model, all credit scores are calculated using the same information. Here are the five factors that affect your credit score:

1. Payment history (35%)
2. Credit utilization (30%)
3. Age of credit accounts (15%)
4. Credit mix (10%)
5. New credit inquiries (10%)

Understanding these factors is the first step to learning how to raise your credit score. 

2. Pay your bills on time

Time commitment: Ongoing

Your payment history has the largest impact on your credit score, accounting for 35% of your overall score. If you want to raise your credit score quickly, prioritizing on-time bill payments is one of the easiest ways to do it. 

An account is reported as delinquent when the minimum payment isn’t made within at least 30 days and can stay on your credit report for up to seven years. If you’re past due on any payments, call your creditor to remedy the situation as soon as possible—the longer you wait, the more severely your credit score can be negatively impacted. 

While settling late payments won’t remove them from your credit report, paying all future bills on time can set you up to improve your credit score going forward. 

3. Lower your credit utilization 

Time commitment: Ongoing

Wondering how to increase your credit score quickly? Paying attention to your credit utilization is another good place to start. Not to mention, it has the second highest impact on your credit score, accounting for 30% overall. 

Credit utilization is a ratio of your credit balance (how much credit you’re using at any given time) and your total available credit. For example, if your credit balance is $500 and your total credit limit is $2,000, your credit utilization at that time is 25%. 

Generally, most lenders like to see a utilization of 30% or less. Paying your credit card balances in full every month is an easy way to keep your utilization low. But if you’re trying to improve a low score, you’ll want to aim for 10% or less to have a greater impact on raising a less-than-ideal score. 

Asking for a credit limit increase is another strategy to lower your credit utilization, as long as your balance stays the same. This can be done online, but keep in mind you’ll likely need to have a recent increase in income to be approved. 

4. Expand thin credit files

Time commitment: One hour

If you’re new to credit or haven’t used your credit accounts in a while, you may have a thin credit file. This means you have little to no credit accounts, making it difficult to generate your credit score. If creditors can’t reference your credit score and history, you might be rejected for new credit requests. Or if you are approved, it might be at the expense of a higher interest rate. 

Luckily, there are a few ways to expand a thin credit file if you’re building or rebuilding your credit. One method is Experian Boost*, a program that collects payment data that wouldn’t normally appear on your credit report (like utility payments or phone bills). Boost scans your bank accounts for such payments and then uses them to calculate your Experian FICO score. 

Another option is to utilize rent reporting services. If you pay monthly rent, these services allow your on-time rent payments to appear on your credit reports. Not every credit scoring model factors rent payments into your score, so this method may only impact VantageScore credit scores (not your FICO score). 

5. Avoid too many hard credit inquiries

Time commitment: Ongoing

There are two types of credit history inquiries: soft and hard inquiries. A soft inquiry refers to instances like a credit check by a potential employer, credit checks from banks or lenders you have an existing account with, or checking your credit yourself. Soft inquiries don’t affect your credit score. 

Alternatively, hard inquiries mainly refer to new credit applications, such as for a credit card, a mortgage, or a car loan, and these can negatively impact your score. 

While a single hard inquiry is unlikely to significantly hurt your score, having many in a short span of time can. Lenders might see this as an indication that you’re hurting financially and deem you as a high-risk borrower. For that reason, it’s best to avoid hard inquiries if you’re trying to boost your credit score. 

6. Be judicious when closing old accounts

Time commitment: None

Your credit age (or how long your credit accounts have been open) accounts for 15% of your credit score, and a longer credit history benefits your score. For this reason, keep old accounts open—even if they’ve been paid off—to maintain the length of your credit history and positively impact your score. 

Aside from maintaining your credit age, keeping old accounts open can also benefit your credit utilization ratio. Closing an account while you still have balances on other cards would lower your total available credit, and in turn, increase your credit utilization—potentially lowering your score by a few points. 

Exceptions to this guidance would include any cards or accounts that come with an annual fee (you shouldn’t be paying for an account you’re not using), or if you’re having a hard time keeping track of your open accounts. Older, dormant accounts can be easy to lose track of and be vulnerable for fraud, so you may decide to keep tabs on your oldest account and close others if you’ve accumulated many.

7. Resolve collection accounts 

Time commitment: One to two hours

If your goal is to raise your credit score, you should resolve any collection accounts immediately. A creditor turns an account over to a collections agency when a payment is late by several months, and your original account may appear as a charge-off on your credit report as a result. This means the creditor has given up attempting to collect the debt, and this can stay on your credit report for up to seven years. 

Take action to pay off any collection accounts as soon as possible—this ensures you won’t be sued over the debt. Paying off collection accounts won’t remove them from your credit report; your account will simply be labeled as “paid” or “unpaid.” Still, a paid collection account is more favorable in the eyes of a creditor than an unpaid account. 

Resolving collection accounts will impact your credit score differently based on the score model—VantageScore, for example, doesn’t assign a negative impact to paid collection accounts, while the FICO 8 model still considers them when calculating your score. 

8. Open a secured credit card

Time commitment: 30 minutes

A secured credit card is another option to build or rebuild your credit. These cards give you the chance to build up a history of on-time payments and other good credit habits that can be reflected in your credit reports. 

To open a secured credit card, you’ll have to pay a cash deposit, which is usually equal to the credit limit you’ll receive. The deposit serves as collateral to the lender. Once approved, use the card as you would with any other credit card, keeping in mind that the goal is to create a more positive credit history. That means paying on time each month and maintaining a low balance if you want this method to help boost your score. 

9. Consider consolidating debts

Time commitment: Two hours

If you’re dealing with debts across several different loans, debt consolidation allows you to combine them into a single loan with one monthly payment. On the surface, managing a single loan payment instead of juggling multiple at once sounds like a smart move—but it’s critical that you fully understand the terms of any potential debt consolidation loan. If you don’t, you could end up with a higher interest rate and a longer loan term than what you started with. 

Here’s what you want to avoid with any debt consolidation loan: 

• A high consolidation fee
• A variable interest rate (instead of a fixed interest rate)
• A higher interest rate than what you’re currently paying
• A longer repayment period than what you currently have 

It’s not uncommon for debt consolidation loans to come with hidden terms, like an increased interest rate over time, an extended repayment period that keeps you in debt longer, or a hefty up-front fee. Not only that, but your new interest rate is based on your past credit score and payment history—meaning if you’re already struggling with a low credit score, you’re less likely to secure a better rate. 

That said, if you’re able to secure a lower interest rate than what you’re currently paying and the rest of the terms are favorable, a debt consolidation loan might be worth considering. Ideally, it can help you pay down your debt faster while making your monthly payments easier to manage. 

10. Diversify your credit mix

Time commitment: One hour

Your credit mix refers to the different types of credit accounts you have, such as credit cards, loans, and mortgages. Accounting for 10% of your overall credit score, your credit mix is used to gauge how responsibly you’ve managed different types of credit accounts. Someone who’s successfully managing two credit cards, a mortgage, and a car loan is likely to have a higher score than someone with just a single credit card. 

Diversify your credit mix by adding a new credit account or taking out a credit-builder loan. Whatever account you choose to add, what matters most is that you can manage it responsibly. Adding to your credit mix with a new account only to suffer the consequences of missed payments will do more harm than good to your score. 

11. Use a credit monitoring service 

Time commitment: Ongoing

If you want some support on your quest to learn how to improve your credit score, consider using a credit monitoring service. Primarily used to prevent identity theft and fraud, it’s also a handy way to keep track of your credit report and scores. 

These services alert you to any account changes, such as:

• When a large purchase has been made
• When a new account is opened 
• When an account has been paid off

A credit monitoring service is a great way to stay informed of any fraudulent account activity that could be hurting your score. This is helpful in the event that, say, you’re alerted to a new credit card that’s been added to your file that you don’t recall opening. You’d be able to contact your creditor immediately to report fraud and have it removed from your account before it can damage your score. 

While you can (and should) still contact a creditor at any time to discuss fraudulent activity or suspected errors on your account, a credit monitoring service allows you to nip the issue in the bud before someone has the chance to max out your credit card or sign up for a loan in your name. 

The best way to build credit will depend on your unique financial situation and credit history, but the steps above are a great place to start. Whatever your current credit score is, remember that improving your credit takes time—implement these steps sooner rather than later to see your score improve quickly. And if you could use some extra support in reaching your long-term financial goals, Stash makes it easy to save, plan, and invest on the regular. 

FAQs about how to raise your credit score

Still have questions about how to raise your credit score? We have answers.

Why does a good credit score matter? 

A good credit score indicates that you’re a low-risk borrower, leading to major savings over the long term—it allows you to score better rates on car loans, mortgages, credit cards, and anything else that requires financing. Those with a poor credit score are considered high-risk borrowers and are ultimately subject to higher interest rates and fees for any new account. Additionally, a good credit score is necessary to be approved for things like rental housing, car rentals, or a mortgage. 

Once you’ve reviewed your credit reports and determined exactly what’s hurting your score, you’ll have a better idea of how to increase your credit score. 

How can I raise my credit score in 30 days?

Since your payment history and credit utilization have the largest impact on your credit score, prioritizing on-time bill payments and paying down your account balances in full each month will make the biggest difference in your credit score upfront. 

Will paying the minimum on my cards improve my credit score? 

No, paying the minimum on your credit cards will not improve your credit score. While you should be paying the minimum payment every month to ensure a history of on-time payments, paying your credit card balances in full and as quickly as possible is what will actually improve your score. 

Does getting a new credit card hurt your credit?

It depends. Opening a new credit card will add to your credit mix and lower your credit utilization ratio (which is good), but it also adds a hard inquiry to your account, which could lower your score. If you’ve made several hard inquiries in a short period of time, opening a new credit card is more likely to hurt your score. 

How long does it take to see changes in your credit score?

It depends on the specifics of why your score is low in the first place. If your score dropped after a single missed payment, you can likely boost your score in as little as 30 days once you’ve made the payment. If your credit is low due to multiple missed payments or collection accounts, it will take a few months of positive credit habits to move the needle on your score. The answer to how to raise your credit score, along with how long it will take, will always vary depending on your unique circumstance. 

The post How To Raise Your Credit Score: 11 Steps To Do It Fast appeared first on Stash Learn.

The tech company is introducing a product called Apple Pay Later, which will allow users to split payments into four equal installments without interest or fees. The payment plan can be used anywhere Apple Pay is accepted. 

At online retailers and at registers these days, you may encounter the option to pay with a service known as “Buy Now Pay Later” (BNPL). It’s another way to pay, that doesn’t rely on credit or debit cards, or even cash.

Buy Now Pay Later services provide loans to consumers, letting them pay for something in installments, instead of paying the entire sum at checkout. BNPL companies operate by fronting the money to shoppers, and charging them over the course of a multi-month payment plan that they select. Rather than charging compound interest, as a credit card company might, Buy Now Pay Later companies often charge no interest, or less than credit cards do. 

And that’s one reason they have taken off with younger consumers, such as Gen Z and Millennials, who are looking for alternatives to credit cards. (Learn more here.)

The idea behind these businesses is that they let customers make big, often necessary, purchases without putting them on a credit card and potentially racking up debt. And in fact, they operate much like the layaway plans of old, which thrived before the invention of credit cards. But there are still risks. For example, some BNPL services will hit you with late fees if you miss payments. Missing payments might also negatively affect your credit score if the BNPL service you use reports to a credit bureau.

On the plus side, Buy Now Pay Later companies can also give people without a credit history access to credit. Retailers may benefit too. They often pay Buy Now Pay Later providers to feature them as a payment option on their sites. (In contrast, merchants must pay to accept credit cards.) Stores will reportedly pay even higher fees than they do to credit card companies because they expect consumers to spend more money with BNPL. Services such as Klarna, Sezzle, Afterpay, and Affirm offer point-of-sale short-term loans to consumers, paying the retailer upfront and charging the buyer in installments. 

How BNPL Works

Digital retailers will tell you which BNPL services they offer when you go to checkout. In order to use a BNPL service, you’ll have to download the service’s app on your phone. You’ll then have to provide basic information, such as your name, billing address, and sometimes your social security number. You’ll also have to verify your information with an email or mobile code, and accept terms and conditions. Then you can provide your method of payment, such as a credit card, debit card, or check. At checkout, you’ll make a down payment, and agree to a payment schedule. Payments will then be applied to your debit or credit card, or deducted from your checking account. 

You can also use these apps at the point of sale at retailers that accept them. Getting approval from a BNPL service can reportedly take less than 10 minutes.

How BNPL payments are structured

The payment terms for BNPL companies vary, but are often structured as four equal payments of roughly 25% of the owed amount, including taxes and any fees, with the first payment due at checkout. Some, like Afterpay and Klarna, offer you the ability to pay off your loan in four payments without interest, but will charge fees if your payments are late. Klarna also allows shoppers to pay back a loan interest-free in 30 days, an option known as  “Pay Later,” and offers long-term loans—from 6 months to 36 months—with interest. Others, such as Affirm, may charge interest as soon as you take out the loan, but don’t charge late fees. When you sign up to use Affirm, they’ll typically let you know how much your payments with interest will be, but you won’t pay extra fees if a payment is late.

The interest rates offered by certain BNPL providers can be comparable to those offered by credit card companies. Affirm, for example, charges an Annual Percentage Rate (APR), which reflects the annual interest rate you pay as well as fees, from 0% to 30% depending on how big the loan is, your credit score, and which payment structure you choose. Afterpay and Klarna, meanwhile, do not charge interest but can charge late fees up to 25% of the purchase’s value. 

In contrast, the average credit card rate is reportedly 16.77%, as of June 2022., as of September 2021. Credit card interest typically compounds on a daily basis, which means that if you don’t pay off your balance within your billing cycle, you might owe a much higher amount than you originally did as the interest compounds. 

How BNPL can affect your credit score

For people who haven’t started building credit yet, or are rebuilding their credit, BNPL can be an alternative to credit cards. Afterpay, for example, reportedly instantly approves applicants without checking their credit score. Other options such as Klarna and Affirm perform soft credit checks. A soft credit check appears on your credit report when it’s checked for reasons that are not necessarily related to borrowing money, while a hard credit check appears on your report when you want to borrow money, for example by applying for a credit card, mortgage, or car loan. A hard credit check usually temporarily lowers your credit score, but a soft credit check doesn’t. “This can be an advantage if you don’t have a great credit score or any credit score at all, and it’s fast,” says Ted Rossman, New York-based senior industry analyst at Creditcards.com and Bankrate.com. 

Everyone’s credit situation and financial background is different. You should be aware of how BNPL can affect your credit before you sign-up for it. If a BNPL reports to a credit bureau, your payment history can affect your credit score. “Once you start using [BNPL], if you pay your bill on time, your credit score will….slowly improve,” says Carter Seuthe, chief executive officer of debt management company Credit Summit, based in Austin, Texas. On the other hand, Seuthe says if you fail to pay, your account will be marked as delinquent and that could affect your credit score. “If your account is handed to collections you will see a significant drop in score,” Seuth adds.

Nevertheless, staying on top of your payments if you decide to use BNPL is crucial. In a recent survey, 44% of respondents said that they’ve used BNPL to acquire an item they need. Of those who’ve used BNPL, 34% have reportedly fallen behind on one or more payments and 72% said they believed falling behind hurt their credit scores.

Other considerations before you use BNPL

Keep in mind also that you can earn points as you spend with a credit card, which you can use to pay down your bill, book travel, shop online, and more. You won’t earn those points using BNPL. (Remember that both credit cards and BNPL are forms of debt financing—paying off a loan over time—so you should be careful with both.) A credit card may be a more efficient way to build credit but if you don’t have a strong credit profile or want to avoid a ton of credit card debt, BNPL might be an option worth considering. 

And while BNPL companies often charge little or no interest, there can be hidden fees such as late fees. Missing payments could result in extra costs, and your debt could be sent to a debt collector. If your BNPL payments are taken automatically from your bank account, you should also be mindful of any overdraft fees that your bank charges, in case you don’t have enough in your account to cover the payments. As with anything, it’s important to read any fine print and disclaimers when you apply to use BNPL.

Another potential pitfall with BNPL is that, much like a credit card, it can increase the chances of accruing debt. While it might feel like you’re only paying a small portion of the cost you owe upfront, you will ultimately pay the whole sum over time, plus any fees. 

Follow the Stash Way

Whether you use BNPL or some other financial service to borrow, it’s important to practice good financial habits by budgeting for your essential and non-essential spending. Budgeting is part of Stash’s financial framework the Stash Way, which also includes saving for the short-term and the long-term, and making room in your budget to invest small amounts regularly. 

The post Buy Now Pay Later: How it Works and What You Should Know appeared first on Stash Learn.

The couple, who are based in Las Vegas, soon realized they were facing more than $50,000 in debt, living in a basement apartment and unable to afford what they truly wanted out of life. 

“We do have a lot of outside pressures telling us what we should want, what a successful gay looks like,” Schneider says. “Our spending was not at all aligned with what really mattered to us. We wanted to save for a comfortable retirement, travel much more than we had at that point, but to do it on cash and not come back with a credit card hangover, and to give back to their community.”

The couple, together for more than 17 years and married since 2017, are now the authors of “4: The Four Principles of a Debt Free Life” and the Debt Free Guys website, geared toward helping LGBT people climb out of debt and live smarter financial lives.

They confirm what the numbers show—that LGBT Americans are less financially stable than the general population and face unique challenges that affect their bank accounts.

Nearly half of the 500 LGBT respondents in a wide-reaching 2018 Experian survey said they struggle to maintain adequate savings, compared to 38 percent of the non-LGBT population surveyed, and more than a third said they have “bad spending habits” that they’d like to improve or change, compared to about one-fourth of their non-LGBT counterparts. 

Bias and discrimination has caused financial challenges for 62 percent of LGBT respondents, who also reported being passed over for jobs or promotions, being harassed at work and higher housing costs due to discrmination.

The LGBT population is also more inclined to spend money than save it, according to the Experian survey, and have more challenges when it comes to retirement planning.

Schneider and Auten focused their attention on LGBT finances after attending FinCon, the world’s largest financial content conference, in 2015, a year after they launched Debt Free Guys. They found groups dedicated to black finances, mommy bloggers, Christian bloggers, but not LGBT finances.

“That kind of put a little bit of a weight on our shoulders that said if no one else is going to do this we have to do it,” Auten says.  “We have the responsibility and the privilege to do that.” 

They also recognize that, as cis, white men, they have a privilege that can translate into helping other LGBT people who may be marginalized because they are people of color, transgender or living in poverty.

“I think that we need to be very encouraging to each other in the community that there are as many options and opportunities available to us as there is everyone else,” Auten says. “It may not feel like it at times, but it is.”

We’ve broken down the most pressing financial challenges for the LGBT community along with tips for financial stability.

Savings and Student Loans

Successfully entering adulthood often depends on strong family support and education — two things LGBT youth often don’t have. 

Though LGBT youth comprises just 5 percent to 10 percent of the population, they account for 40 percent of homeless youth. LGBT young adults are 120 times more at risk of being homeless than heterosexual, cisgender young adults.

That sets up the LGBT population for years, if not a lifetime, of struggling, financial stress and low paying jobs.

“You’re worried about where you are going to sleep at night or whether you’re going to be able to get through the day without getting beaten up, or every day you’re dealing with microaggressions because of who you are,” Schneider says. “It’s a little hard to then say, despite all this, I’m going to focus on saving enough for retirement.”

Saving and planning for a stable financial future is a privilege that many LBGT people don’t have the luxury to consider.

“Oftentimes when we think about finances in our community, it’s more from a position of desperation and not as much from a position of opportunity,” he added.

The lack of familial support also means much higher student loan debt for LGBTQ+ youth that make it to college. 

About 4 in 10 respondents in a Student Loan Hero survey of LGBTQ+ borrowers in 2019 said they’ve been denied financial help due to their sexual orientation. Nearly 30 percent say their student loans are unmanageable and a whopping 87 percent said their student loans have prevented them from reaching important milestones.

Still, college is a lifeline for many. Nearly 60 percent said they felt welcomed and accepted on their college campus.

Budgeting Differences

Once you do get to a point of budgeting and saving, it may look different than your hetero, cisgender counterparts.

“A lot of our budgeting needs will be different. A lot of our budgeting goals will be different,” David Rae, a Los Angeles-based certified financial planner whose firm caters to LGBTQ+ and LGBTQ+-friendly clients, says.

Fewer gay and lesbian couples have children than heterosexual couples. While exact numbers are hard to trace because some parents may feel scared to accurately report their status on the U.S. census, there are an estimated 2 million to 3.7 million children living with a parent that identifies as LGBTQ+, according to the most recent data.

Those families that do choose to parent children will spend more to bring those children into their families, through surrogacy, sperm donation, reproductive medicine and adoption fees.

LGBTQ+ Americans also face unique medical costs that can put a major strain on their budgets. This can include anything from higher HIV/AIDS treatment and medication, hormone therapy, and delayed or less effective medical treatment due to the stigma of being LGBTQ+.

For some transgender people who choose gender reassignment surgery, the medical costs can be crippling — almost six figures in some cases. That can be financially devastating for those who are uninsured or whose policies don’t cover the costs.

The Cost of Living (and Keeping Up with the Joneses)

Just a generation or two ago, rampant, dangerous homophobia and laws against gays and lesbians, Rae says, forced people into the safe havens of major cities like San Francisco, New York City or Los Angeles.  

“We don’t have to live in the ‘gayborhood’ necessarily anymore,” Rae says. ““But I do think for the most part, we are ending up in cities… which drives up the average cost. And some of that is to feel safe.”

There is also the very prevalent stereotype of the lavish gay lifestyle, especially among, gay men, according to Rae and the Debt Free Guys, and that plays a major part in spending beyond their means on things they may not even want.

“We want to prove that [LGBTQ+ people] are worthy, that we are just as good as our straight neighbors,” Auten says. “I think it’s a lot of [keeping up with] Mr. and Mr. Jones, Mrs and Mrs Jones.” 

The Atlantic even published a report about the myth of gay affluence, that pointed to a disparity between popular culture, such as Will & Grace and Modern Family and the reality that LGBTQ+ Americans live with a disproportionate amount of poverty and debt. Auten and Schneider says they have friends in New York City, a gay couple, who both earn six figures each, but who are drowning under six figures of credit card debt. 

The Experian study showed that nearly 50 percent of respondents ages 25-34 reported feeling financially out of control along with more than 40 percent of respondents ages 35-44.

“I think the media and the consumerism side of corporate America do a really, really good job, of showing us this is what really fabuous gay men look like,” Auten says. “If you want to be a good gay, you need to look like this.” 

Money Matters at Work

LGBTQ+ Americans continue to face financially devastating discrmination at work, from being denied jobs or promotions to making less money than their straight co-workers. Only 22 states and the District of Columbia have laws to prohibit discrimination on the basis of sexual orientation or gender identity, according to the Human Rights Campaign.

Lesbians reported making $45,606 to straight women’s $51,461, a difference of nearly 13 percent, according to a report from insurance company Prudential  about finanical experiences of the LGBTQ+ community. Meanwhile gay men reported making an average of $56,936 to heterosexual men earning $83,469, a difference of 46 percent. And the unemployment rate for transgender Americans is three times higher than the national average, according to a report from Out & Equal, a workplace advocacy group. (Note: The Prudential report, from 2016-2017 is the company’s most recent on the subject. The 2019 report from Out & Equal is also that organization’s most recent.)

“The best way you can bridge that gap is to build your skill set,” Rae says, “and be as marketable and as valuable an employee as possible.” 

LGBTQ+ Americans, especially those who are younger, don’t have to consign themselves to service jobs or low-paying gigs that don’t come with benefits simply because they are gay or may present outside of the binary, Auten says. 

“There are as many options and opportunities available to us as there are to everyone else,” he adds. “We should be supporting and encouraging each other to reach for those higher paying jobs.” 

Tips for Financial Success and Supporting the LGBT Community

LGBT Americans may face more of an uphill battle in erasing debt and building wealth, but the advice is the same no matter how you identify.

“Create your own opportunity. And a big piece of having that opportunity is having your finances in shape, ” Rae says. “If you’re drowning in credit card debt, you are dependent on that job. You need that paycheck. You don’t have the opportunity leave.” 

Support LGBT and ally businesses. Not only are they a potential source of employment, but they understand, accept and support other LGBT Americans. 

“We as a communty can benefit from supporting gay businsses, supporting gay-friendly businsess,” Rae says, adding that he keeps a constant eye on social justice investments for his clients. “Some of that is our spending and some of that is our investing.”

Save for retirement, even a little at a time. This should be a goal for all Americans, but LGBT Americans as a group are behind the savings curve. Saving for retirement was the top financial concern for LGBTQ+ respondents of the Experian survey. 

But it’s not easy. For one, Rae and the Debt Free Guys pointed out, the HIV/AIDS crisis killed almost an entire generation of LGBTQ+ Americans who would now be nearing or at retirement age and could have set the standard.

Also, retirement planning imagery often involves a “straight, white couple and their golden retriever walking down the beach,” Auten says. “If you don’t see yourself in any of the imagery then you don’t think it’s necessarily for you. As an LGBTQ+ person, you may not even engage with this.” 

Looking for an LGBTQ+ retirement advisor or certified financial professional (CFP) can go a long way toward helping you secure the future you want.

The post Why Saving and Debt are Big Problems for LGBTQ+ People appeared first on Stash Learn.

Yet while the Covid-19 pandemic has sparked a boom in small business for many communities, AAPI business owners and AAPI people in general have faced unique challenges, including higher rates of discrimination and, more alarming, violence in recent years. That’s in addition to a funding gap that leaves many AAPI struggling for loans and other sources of money critical to their operations. 

As we celebrate Asian American and Pacific Islander Heritage Month, we take a look at the importance of AAPI entrepreneurship in the U.S. as well as their challenges. And we offer some ideas for supporting

AAPI-owned businesses

“Everyone has a part to play in assisting AAPI small businesses, not just during AAPI Heritage Month, but throughout the year,” says Chiling Tong, president and chief executive officer of the National Asian/Pacific Islander American Chamber of Commerce and Entrepreneurship (National ACE), based in Washington, D.C. “Whether you’re a large corporation or a fellow small business owner, sharing your support of the AAPI business community by using your networks and platforms is a great way to build advocacy and awareness for this important community.”

AAPI-owned Businesses in the U.S. 

There are more than two million Asian-owned businesses, making up nearly 8 percent of businesses in the U.S., according to the most recent data from the U.S. Census Bureau. Combined, these small businesses earn revenue of $700 billion annually and employ around 3.5 million people, according to business consultancy McKinsey.

Approximately 40 percent operate in the accommodations and food industry, while 25 percent in the retail sector, and 6 percent in professional, scientific, and professional services, according to the National Coalition for Asia Pacific American Development (National CAPACD). 

At the same time, there are over 50 distinct ethnicities and languages with a total of more than 100 native dialects represented in the AAPI community. “Not all resources may be accessible to every language,” says Tong. “This makes it difficult for members of the AAPI business community to get access to the information they need to continue operations, or even open a new business with every competitive advantage.” 

The funding gap for AAPI-Owned Businesses 

Nearly two thirds of AAPI-owned businesses report not receiving federal and local aid because they simply didn’t think they would be eligible, according to a recent survey by a survey by National ACE. AAPI small business owners also report being unaware about these aid programs, or ran into snags in applying for help from governmental agencies, or had difficulty checking off the boxes to meet eligibility, according to other research.

For example, during the first year of the pandemic, 58 percent of AAPI entrepreneurs reported that they had difficulty accessing federal, state, and local relief programs targeted to support small businesses. Of the $800 billion in federal dollars provided as a lifeline to small business owners through the federal Paycheck Protection Program (PPP), a scant $7.7 million went to AAPI-owned businesses. 

Additionally, Asian-owned businesses tend to make up large portions of industries that were disproportionately hit by the pandemic, according to McKinsey, comprising 26 percent of accommodations and food service businesses, 17 percent of retail trade, and 11 percent of education-services businesses.

In fact, the number of actively run AAPI-owned businesses decreased by 26 percent from February to May 2020, according to research from the National Institutes of Health, compared to an 11 percent decrease for actively run White-owned businesses. (Black-owned and Latinx businesses also experienced 41 percent and 32 percent decreases respectively.)

One reason may be the spike in hate crimes targeting the AAPI community. Nearly 11,000 hate incidents were committed against Pacific Islanders and Asian Americans nationwide between March 19, 2020 and December 31, 2021, according to recent research from the nonprofit Stop AAPI Hate.

“There’s been an escalation of violence incited, from hate speech to physical attacks, that has rendered fear among AAPI businesses, making it even more difficult to navigate through the already trying times of the pandemic,” says Nahida Uddin, a spokesperson for the National Coalition for Asian Pacific American Community Development (National CAPACD).

And the problem may be continuing to have a negative influence on day-to-day business activities, says Tong. “Asian American and Pacific Islander business owners are under additional stress as a result of this issue, which creates tension and presents a significant barrier,” Tong adds.

Investing, donating, and shopping

Here are a few ways to support AAP-ownedI businesses. 

Spend money directly with AAPI businesses. Consider scouring your favorite arts, culture, or food websites to see if they’ve published recent roundups of AAPI establishments in your city. You can also check out AAPI small business guides curated by Dwell, New York Mag, or Cold Tea Collective, or Etsy’s Editors’ PIcks of AAPI small businesses on the shopping platform.

Visit your local Chinatown, Little Tokyo, Thai Town, or make it a destination spot during your travels. Besides legacy businesses, such as the traditional Chinese restaurant with rows of roasted Peking duck dangling in the windows, or the imported toy and trinkets kiosk, make a point to also visit brick-and-mortar establishments sprouting up by newer generations of AAPI business owners. “I would love more awareness of Asian American design as a category,” says Jeff Lien, who co-founded design store Chunky Paper in Los Angeles’ Chinatown.

Donate. Do your part in supporting AAPI businesses by donating to nonprofits that assist small business owners, such as National ACE or the National CAPACD. 

Consider giving money to crowdfunding campaigns for entrepreneurs who are starting new ventures or growing current ones. For example, platforms such as IFundWomen of Color allow AAPI-owned businesses run by women to launch fund-raising campaigns from a pool of small investors. 

Partner with fellow business owners. If you’re a business owner, look for ways to support AAPI businesses through collaborations. “By promoting fellow AAPI businesses to your own consumers, it is a great way to cross-promote shopping local and spending local for the small business community as a whole,” says Tong. 

The post Supporting AAPI-Owned businesses appeared first on Stash Learn.

And 2022 is bound to bring surprises, especially as the economy deals with new variants of Covid-19, surging inflation, and interruptions to supply chains. But there are some things you can prepare for, such as rising interest rates, and the return of student loan payments. Plus, you probably have your own financial goals, such as saving for a new home or car, or increasing what you currently contribute to a retirement or brokerage account.

To help you put your best foot forward this year, Stash has put together this checklist of financial goals.

#1 Pay bills on time, and pay off credit cards. 

Paying your bills on time and avoiding credit card debt are key to maintaining your financial health. Timely payments and staying out of debt can help you achieve and maintain a solid credit score. Your credit score is a point-based rating system that assesses how responsible you are with loans and debt over time. 

Credit scores run from a low of 300 to a high of 850, which is considered perfect credit. A score of 670 or above is considered good credit. Having good credit can allow you to get loans that can help you advance your financial life. 

If you’re starting the new year with some debt, maybe from holiday shopping with a credit card, try to prioritize paying off those bills, since interest rates are expected to increase this year. In December 2021, the Federal Reserve (Fed) said it may raise the federal funds rate, which is the benchmark rate, three times in 2022. The federal funds rate dictates how interest rates on other items, including cars, homes, and more, change. So an increasing benchmark rate can mean higher interest rates on credit card bills. So you’ll want to pay off those bills as quickly as possible. 

#2 File your taxes early. 

You have to file your taxes every year, but maybe you have a habit of putting off filing until the last minute. This year, try to file as early as you can. Filing early can be especially useful this year, as the Internal Revenue Service (IRS) is urging people to file early (and electronically) as they continue to experience disruptions caused by Covid-19. 

Before you file your taxes, you need to make sure that you have your paperwork from your employer(s): W-2s for full-time workers, and 1099s for freelance workers. Employers are typically required to provide those forms by February 1, and the IRS usually starts accepting returns around that time. If you file your taxes early, and you’re eligible for a refund, you’re more likely to receive it sooner.

#3 Save for your goals.

You might have struggled with savings in the past, or saving might already be a part of your budget. Try starting off the new year by setting a saving objective for the year, like creating an emergency fund, or putting money away for a down payment on a house. Saving for something specific can motivate you to save regularly. 

Stash has a few tools that can help you plan thoughtfully and consistently. With Set Schedule, you can automate and  schedule your investments. You can also set up specific buckets for your savings objectives, known as Goals,¹ and contribute to them on a schedule. 

#4 Get smarter about how you invest.

If you’re investing this year, think about how you can be an (even) smarter investor. Consider diversifying your portfolio. Diversification means spreading your money across multiple investments, industries, and geographies so that you’re not putting all your eggs in one basket. Stash’s diversification analysis tool can provide you with insights on your portfolio, and how you can diversify it.

Another way you can diversify is by setting up a Smart Portfolio, which are brokerage accounts that Stash actively monitors and manages for you, and rebalances each quarter if the portfolio drifts 5% away from its target allocation. You can also get exposure to cryptocurrency, through investments in funds exclusively for people with Smart Portfolios. 

As always, follow the Stash Way®, our investing philosophy which includes regular investing, diversification, and investing for the long term. Remember: All investing involves risk and you can lose money in the market.

#5 Make the most of your spending. 

Spending is a part of your annual budget. In addition to spending less than you earn, you might want to take stock of which credit or debit cards you’re using to make purchases, and see if you can use cards that earn you rewards. If you use a credit card to make many of your purchases, you might look into one that earns travel points or other rewards. 

Another option could be to use a debit card that earns rewards, such as Stash’s Stock-Back^® Card.² This card can be useful if you don’t want to rack up debt, but you still want to earn rewards. With the Stash’s Stock-Back^® Card, you can earn a percentage of each of your purchases back as a percentage of stock.³ 

Whether your goals for the new year are financial or not, good luck with all of your resolutions for 2022.

Download Stash's sample budget

The post Stash’s 2022 Financial Checklist appeared first on Stash Learn.

In 2020, holiday shopping arrived while the Covid-19 pandemic was in full swing, and before the widespread rollout of vaccines. Consumers reportedly spent an average $312 during the four-day stretch from Thanksgiving to Cyber Monday.

And because of the pandemic, consumers shopped more online, and over a more extended period of time. Total online sales during the 2020 holiday season increased to $209 billion, a 24% jump year-over-year. Holiday retail sales totaled $789.4 billion, an 8.3% increase compared to 2019. 

For 2021, both in-store and online sales are expected to increase between 8.5% to 10.5%. 

In-store shopping is expected to account for 33% of holiday sales, according to a survey from consulting firm Deloitte, compared to 28% in 2020. 

Your health and safety are still the most important thing to keep in mind during Black Friday shopping this year. So if you do plan to shop in stores, remember to wear a mask  if required.

Here are Stash’s tips for taking advantage of deals without overspending on Black Friday, Cyber Monday, and beyond.

1-Build a budget and stick to it

Before you start adding items to your cart this year, you need a budget. And If you haven’t set one up, consider using one like the 50-30-20 budget. First, figure out your monthly income and then break that into three different categories: necessary, fixed expenses (50%) variable expenses (30%), and savings and investments (20%). Your holiday shopping will come from your savings, and your discretionary income. You can use this budget template to stay on track.

You might have also been saving specifically for your holiday spending, so take any funds you’ve set aside into consideration as well. Once you have a set amount of money in mind, you can avoid spending money you don’t have on gifts for other people, or for yourself. You might want to create a partition¹ in your Stash account that’s dedicated specifically to money that you’ll use for holiday gifts. 

2-Don’t get distracted by unnecessary purchases

While it’s nice to pick up something for yourself while you’re doing your shopping this holiday season, don’t get overwhelmed by items that aren’t in your budget. Don’t go to a store or browse online unless you know exactly what you’re looking for and what it’ll cost. 

Consider writing out a list of all the things you want to buy, and then see if you can find discounts by shopping around.

3-Do your research and compare prices

If you have a specific item in mind that you want to buy during the holiday sales, figure out how to get the best price for it. Maybe you’re planning to buy a slow cooker for your sister or a tablet for your kids. Look around for which store is offering the best price for what you’re buying. Something on your list may go on sale on a specific day or at a specific time. 

You might also be able to get cash back, discounts, or rebates through third-party sites such as Rakuten to get Black Friday deals. Or you can use extensions like the Honey app to get discounts and promo codes for certain online purchases.

4-Use a card that earns rewards 

You might have a card that you can use to earn rewards or cash back points. Try to use those reward cards when you’re doing holiday shopping on Black Friday so that you can earn rewards while also getting the best prices.

With Stash’s Stock-Back® card², you can earn a percentage of every qualifying purchase back for each purchase that you make. So when you buy something from Amazon, you can earn a percentage of that purchase back as Amazon stock. 

5-Make sure that you can return items

Lastly, make sure that you (or the person you’re shopping for) can return whatever you purchase. If you find a better price for the item or change your mind, you’ll want to be able to return it. Be aware of the return policies where you’re shopping and keep any receipt that you receive. 

Consider these steps to help you avoid spending too much money on gifts this holiday season. And remember to stay safe while you shop this year!

The post 5 Tips for Saving Money on Black Friday and Cyber Monday appeared first on Stash Learn.

This holiday season, a whopping 80% of shoppers said they plan to spend the same amount or less than they did in 2020 last year, according to Stash’s October 2021 survey*.

Last year, holiday shopping arrived while the Covid-19 pandemic was in full swing, and before the widespread rollout of vaccines. Consumers spent an average $312 during the four-day stretch from Thanksgiving to Cyber Monday, the traditional kickoff for holiday gift purchases, a 14% decrease compared to the same period in 2019. That number could be even lower this year, if Stash’s survey is any indication.

Saving is a priority

Meanwhile, 2020 was a record year for saving, as people spent more time at home and less money on restaurants, entertainment, and other non-essential items. Additionally an influx of cash from stimulus payments from the government helped boost cash in the bank. The personal savings rate increased to 33.8% in April 2020, up from 8.3% in February 2020, before the pandemic took hold. 

Gen Z, perhaps the youngest generation shopping for gifts this year, saved more than any other age group. Stash’s survey found that 47% of Gen Z saved more this year than they did in the previous year, compared to 42% of millennials, 32% of Gen X , and 26% of baby boomers.

As the holiday season begins, here’s how Gen Z  is planning to spend. 

Unwrapping Gen Z’s holiday habits  

Gen Z is divided about spending plans for the holidays this year: Roughly 35% of Gen Z respondents plan on spending less than last year, with the remaining 65% split evenly between spending more, and spending the same, according to the Stash survey. 

Looking for bargains and using debit

Of all the generations surveyed by Stash, Gen Z is the most likely to take advantage of Black Friday deals this year. Twenty-seven percent of Gen Z said that they would start shopping on Black Friday, compared to 18% of Millennials, 15% of Gen X, and 15% of baby boomers. 

When asked how they plan to pay for their holiday gifts this year, Gen Z said that they plan to 

use a debit card, also a larger percentage than other generations. Forty-four percent of Gen Z respondents said they would use a regular debit card, and 20% said they would use a rewards debit card. Millennials and Gen Z are more likely than older generations to use debit than credit, according to a recent study. Millennials and Gen Z also average 14% fewer credit cards than adults older than 35, according to the same report. This research could indicate that younger generations might be more apprehensive when it comes to taking on debt, opting instead for a debit card. A rewards debit card also allows them to get some of the benefits of credit, without accruing the debt.

Here are the top two ways each generation shopping, per Stash’s survey:

Gen Z and millennials are also more likely to use Buy Now Pay Later (BNPL) services than other generations, with a little more than a third of each demographic saying they will use BNPL this holiday season. 
Twenty-four percent of Gen Z plans on giving an investment as a gift this year, more than any other generation, according to the Stash survey. When it comes to receiving gifts, Gen Z is expecting to receive money. Almost three quarters of Gen Z respondents said that they will get money as a holiday gift this year, versus 59% of millennials, 44% of Gen X, and 22% of baby boomers. More than half of Gen Zers hope to save the money they receive this holiday season, while 21% wants to spend it, and 14% wants to invest.

Spending and saving tips for the holidays

While more than two-thirds of Gen Z respondents (per Stash survey) said they will use a debit card this holiday season, only 20% said that they would use a rewards debit card. As you’re buying your holiday gift this year, consider using your Stash Stock-Back®¹card, which is a debit card that can also help you invest. When you purchase something with your Stock-Back® card, a percentage of the purchase value is invested in your Stash portfolio. 

It’s also important to approach your holiday shopping season with a plan. Start by taking a look at your budget and seeing where you’ll need to make adjustments. If you’re using something like the 50-30-20 budget, your budget might have room for fixed expenses, variable expenses, and savings and investing. You may have to shift some of your spending from going out to eat to buying gifts, for example. Or you may have to move some money from savings to do your shopping. 

If you’re planning on receiving money this year, remember to account for it after the holidays. You might want to save it for the long term, or put it toward your retirement. Or you might want to add it to your brokerage account so you can invest in stocks, bonds, and funds.

The post Gen Z’s 2021 Holiday Spending Outlook appeared first on Stash Learn.

That slight uptick in prices can be explained by inflation. Inflation is the rate at which prices for goods and services increase over a period of time. One way inflation is measured is with something called the Consumer Price Index (CPI), which shows the percentage change in prices paid by urban consumers on goods and services. The CPI is produced by the Department of Labor’s Bureau of Labor Statistics (BLS).

Inflation currently stands at 5.3%, according to the September, 2021 CPI. That’s a threefold increase compared to 2020. The increase in prices is thought to be a result of changes to the economy caused by the Covid-19 pandemic, but inflation can happen for a variety of reasons.    

Let’s look at what leads to inflation and what it means for you and other consumers. 

What causes inflation?

Since the beginning of the pandemic, inflation has contributed to rising prices across numerous industries, which has sent prices up for consumers. For example, a shortage of semiconductors, used to power many technologies in cars, as well as an increased demand for vehicles, has sent new car prices higher. That demand for cars is also pushing the price of used cars up, and more road travel has also meant more expensive gas. Food prices and eating out costs are also on the rise. Restaurants are paying workers more amid a labor shortage, and that’s making prices for customers higher.  

The two biggest types of inflation are called demand-pull inflation and cost-push inflation. Remember the rules of supply and demand: supply is the amount of product while demand is the number of people who want the product. Demand-pull inflation occurs when demand increases to a point where supply can’t keep up, increasing prices. When demand slows down, so do price increases. 

Cost-push inflation happens when the price of raw materials or the cost of workers’ wages goes up, and businesses pass those costs on to consumers as price increases. This phenomenon has contributed to the current rate of inflation. The price of lumber, for example, has pushed up house construction prices during the pandemic. With more houses being built, the cost of lumber increased by more than five times in the 14 months following March 2020. 

The Federal Reserve and inflation

Government policy can also have an impact. A country’s central bank can control how much money is available, thereby affecting supply. The central bank of the U.S., known as the Federal Reserve, or the Fed, can affect inflation by increasing or decreasing the money supply. The more money is available, the less each dollar is worth, which can cause inflation. For example, some economists have suggested that the influx of cash into the economy from recent stimulus bills has contributed to pushing prices up. 

The Fed also sets something called the federal funds rate, the central bank’s benchmark interest rate. Changes to the federal funds rate lead to changes in interest rates throughout the economy. So when the Fed reduces that rate, borrowing money for things like a house and on credit cards can become cheaper. However, cheaper loans can also cause costs to go up as demand increases. The Fed also uses this rate to fight inflation, by increasing the rate and making borrowing more expensive. 

A degree of inflation is thought to be normal and healthy because it means the economy is functioning properly. The Fed tries to maintain roughly a 2% inflation rate, and when it goes significantly higher, the central bank may raise the federal funds rate to achieve its target rate. 

However, at the start of the pandemic, the Fed lowered that rate to almost zero percent to stimulate the economy with so-called cheap money in the form of low-interest loans.  The Fed has kept the rate there, and has been hesitant to increase it, since the economy is still recovering. And that may be keeping inflation higher than normal.

What inflation means for consumers 

Inflation has real implications for your wallet. Generally speaking, inflation can reduce the value of your money as costs of goods and services go up. It can also decrease the value of savings in a traditional bank account, especially while interest rates remain low, as they are now. And if you invest in bonds, inflation can also affect the value of that investment, since interest payments on bonds are fixed. Over time, with inflation, those payments will be worth less.

In the current inflationary period, energy prices have experienced a 25% increase year over year, according to the BLS. Within energy, fuel oil prices increased by more than a third, and gasoline prices by more than 42%. Meanwhile, natural gas prices have gone up by 21.1%. 

Source: BLS

At the grocery store, prices have also risen 3%. The three areas that have experienced the biggest jump in prices are meat, poultry, eggs, and fish (8%), fruits and vegetables (2.3%), and nonalcoholic beverages, and beverage materials (2%). At restaurants and other out-of-home dining experiences, costs have reportedly risen 4.7%.

How consumers can combat inflation

Investing in stocks and exchange-traded funds (ETFs) is one way to try to combat the effects of inflation. While you’re not guaranteed a return on any investment, investing your money is a way to try and stay ahead of inflation—hopefully, your return will outpace the rate of inflation.

If the inflation rate is currently 2%, for a simple example, and your portfolio had a return of 5%, your real return would be 3%.

For comparison, the average annual return for the S&P 500 index over the past 10 years has been more than 13%. If you were to invest your money into a fund that tracks that index, your money would stay way ahead of the inflation rate.

Remember, however, that all investing involves risk. In order to protect yourself and your money against risk, it’s important to follow the Stash Way, by investing regularly in a diversified portfolio of stocks, bonds, and ETFs.

The post Explaining Inflation’s Effect on Your Wallet appeared first on Stash Learn.

While it’s important to spend on things that give you pleasure—whether it’s a cable subscription or take out once in a while—this kind of spending can get out of hand quickly if you’re not careful, and it can interfere with your larger savings goals. That’s why it’s critical to build discretionary spending into your monthly budget. Having a budget for discretionary spending helps to ensure you can cover your bills and still have some fun.

What is discretionary spending?

One way to identify discretionary spending is to consider the difference between needs and wants. Things you need contribute to essential spending and include food, shelter, medicine, utilities, and insurance. What you buy outside of this category can usually be categorized as a “want,” or a discretionary expense. Discretionary spending is less about the purchases that are needed to keep your household running and more about lifestyle. Some examples include:

●      Going out to eat

●      Vacations

●      Gym memberships

●      Concert tickets

●      Books, magazines, movies and other forms of media

●      Luxury clothing

●      Spa visits, hair salons, nail appointments

●      Birthday gifts and holiday spending

●      Meal subscription services

●      Hobbies

Discretionary spending isn’t a bad thing. But if you don’t stay vigilant, non-essential purchases can wreak havoc on your budget, leaving you without enough money to cover your essentials.

Building a budget that includes discretionary spending

A budget is a detailed plan for how to spend your money. Start by taking a look at your income, the money you have coming in from your job, side gigs, and any passive income from things like dividend stocks or rental property. The money you have coming in each month represents the upper limit of what you can reasonably spend.

Next, gather detailed information about your monthly spending. Look at bank and credit card statements and determine how much you typically spend on essential and non-essential expenses. Total your essential costs and subtract this sum from your income. What’s left is available for discretionary spending. If your necessary spending changes in the future—say your insurance premiums go up—you may need to find ways to trim your discretionary expenses.

Your discretionary income also represents the pool of money you have to use toward savings for financial goals, such as a down payment on a house, a college fund for your kids, or your own retirement. Keeping track of discretionary spending not only helps to ensure you can cover your bills but can help you reach your other financial goals, too.

Budget strategies

There are a variety of ways you can structure a budget and monitor your discretionary spending.

One popular method is the 50-30-20 budget, popularized by Senator Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan. With this method, 50% of your income goes to necessary expenses, 30% goes to discretionary spending, and 20% goes to savings.

Another approach is known as the zero-sum budget. This type of budget allocates every dollar of your income to necessary and discretionary expenses, debt payments, and savings. 

You may also consider a values-based budget in which you prioritize the types of discretionary spending. After accounting for your necessary expenses, prioritize the spending that is most important to you and stop or decrease the types of discretionary spending that don’t add value to your life. For example, going to the gym may be the best way you manage stress, so you might want to make sure to include that expense in your budget.

Regardless of what kind of budget you choose, the most important part of budgeting is adhering to it. Don’t be afraid to try multiple strategies until you find the one that works for you.

Tips for sticking to your budget

Tracking your discretionary spending every month is a necessary habit that can feel difficult at times. There are a few strategies that can help you stick to your budget for non-essential items.

When you are tempted to buy something you don’t need, initiate a 24-hour waiting period to help you avoid impulse buying. If you are still interested in buying the item one day later, it may be worth making room in your budget for it. If not, it’s likely a purchase you can live without.

Reward yourself for achieving financial goals, such as building an emergency fund. Reaching a savings goal takes discipline and careful monitoring of discretionary spending. Once you get there, reward yourself with something you want, such as dinner from a favorite restaurant. Doing so can help keep you motivated and stick to your budget when short-term gratification is tempting.

The post Making Room for Discretionary Spending in Your Budget appeared first on Stash Learn.

Thanks to digital wallets, you can pay for things in many retail locations simply by tapping your phone on a PIN pad. Fortunately, if you use a digital wallet, you can add Stash’s Stock-Back® Card¹ to that wallet and use it for mobile payments.

What’s a digital wallet?

Digital wallets—also known as e-wallets—are payment apps that let customers use their  smartphones to make electronic purchases, either online or in stores at the register. They work by securely storing a customer’s credit and debit card information, much like a physical wallet. This allows customers to get the most out of mobile payments, freeing them from the need to pull out credit cards or cash for purchases.

How you can use your digital wallet with Stash

The Stock-Back® Card works with Samsung Pay, Google Pay (formerly known as Android Pay), and Apple Pay®, three of the most popular digital wallets today.

You can use your digital wallet in stores, by tapping your phone at registers that allow digital wallet payments. The technology used is called near-field communication, or NFC. Basically, that’s a complicated term for an encrypted form of payment that lets the chip in your card communicate directly with a merchant’s register.

You can tell which merchant accepts digital wallets by these logos:

You can also use your digital wallet online, if the merchant accepts digital wallet payments. Simply click on the digital wallet payment option at checkout, and select it for payments. The same thing applies to merchants with their own apps.

How can I add my Stock-Back® card to my digital wallet?

1. Go to your digital wallet on your phone
2. Follow the instructions on your device to add your card
3. Accept the Terms & Conditions
4. Confirm the security code we send

Is it secure?

Not only can digital wallets make your purchasing process faster and easier, but it can also make it more secure. Digital wallets encrypt banking and personal data, meaning it’s encoded and hidden by software, and it’s also encoded whenever it’s transmitted in a transaction. 

Additionally, most smartphones today come with their own layers of security, including the use of biometrics, to help keep things safe.

Add the Stock-Back® card to your digital wallet so that you can make purchases on your phone and earn stock rewards² in the process.

The post Stash Banking, Meet your Digital Wallet appeared first on Stash Learn.

But it doesn’t have to be. In fact, there’s a silver lining for the budget-conscious: Valentine’s Day spending is projected to decrease $32 per person this year, to $164.76 from $196.31, according to the National Retail Federation. One major reason for this is many couples will not be dining out or hitting fancy cocktail bars this year. Without the pressure to spend nearly $200 per person at a restaurant, many of us are free to try something non-traditional, and cheaper, this Valentine’s Day. Here are a few ideas: 

1. Virtual concerts.: If you miss live events as much as I do, consider watching your favorite performer live from home. Josh Groban is hosting two Valentine’s Day concerts for $32 a pop, the boy band O-Town has $15 tickets for their Valentine’s Day show, and Boys II Men is doing a free concert on DoorDash’s Twitch and Facebook. Additionally, a quick search on Eventbrite reveals all types of inexpensive virtual events: from comedy shows to burlesque, cooking classes and more.

2. Plan your future vacation: Part of the fun of going on vacation is the planning, and the pandemic can’t take that away from us! Grab a bottle of wine with your partner, and plan your next, big post-pandemic dream vacation on Valentine’s Day. By keeping a spreadsheet with the  average costs of your preferred hotels, restaurants, attractions, and flights, you can break down how much you’ll need to save each week to take this trip in a year. 

3. Puzzles and games: This is THE year to stay in and take on a fun project with your partner. Kambri Crews, owner of the performance space and shop Q.E.D. in Astoria Queens, says she’s seen an uptick in sales of puzzles, games and candy over the last week in preparation for a Valentine’s Day at home. Jars of high-end candy sell for $5.99 at the store, date night dice go for $15.95, and puzzles run between $8 and $25.

4. There’s no coronavirus on Memory Lane: Journal entries from after your first date. Old photos. Ancient texts to your friends. Your first emails and Facebook messages to one another. Rediscover your love for your partner by reviewing your early communication with and about the one you love. Best part? It’s totally free. 

5. Start a new tradition. Most of us won’t be able to have our ideal Valentine’s Day, but necessity is the mother of invention. Brooklyn resident Kirsten Phung definitely knows this. “When I was a kid, my step-dad was a pilot and was gone most of the week,” she says. “One year he was gone on Valentine’s Day, so my Mom told my brother and [me] we could have anything we wanted for dinner. We wanted shrimp and artichokes. … We did it again the next year, and Mom called it our Heartichoke dinner.”  It’s been almost 30 years, and Phung says her family is still celebrating the same way, even though she and her brother have grown up, moved out, married, and started their own families.

Whether it’s your own budget-friendly version of a Heartichoke dinner, a new board game, or a concert and a bottle of wine, having a great pandemic Valentine’s Day is totally possible for under $50.

The post Enjoy a Pandemic-Friendly (and Cheap) Valentine’s Day appeared first on Stash Learn.

This habit is called “spaving,” which is when you spend money to save, only to find yourself  with less money in the bank and more stuff you probably don’t need.

I’m certainly not alone. According to research from Slickdeals.net, consumers overspend $7,400 a year, or $143 a week. The three most common gateways to spending above your budget are online shopping, grocery shopping, and subscription services.

Let’s look at the behavioral economics underlying spaving, and what you can do to kick this habit to the curb.

The behavioral economics behind spaving

Retailers understand that for most customers, price is a reflection of value, says Mariel Beasley, co-founder of the Common Cents Lab at Duke University in Durham, North Carolina.

“We don’t inherently know what something is worth and how good it is, so we assume that the price demonstrates that,” she says. So when you see an item dramatically marked down from the original price tag, you think you’re getting more for less money.

This is an example of how behavioral economics, a branch of human psychology, can explain why people stray from making rational spending and saving decisions. Here are a few spending traps to avoid:

The compelling pull of free. This is particularly relevant for “buy one, get one” deals, where you need to spend a set amount on an item, or items, to snag something for free. 

“Free has an allure that even the smallest cost doesn’t have because we tend to not think about the downsides or opportunity costs associated with free,” says Beasley. 

Limited time offers. Retailers create pressure by offering deals with expiration dates. “Deadlines help us focus and overcome procrastination,” says Beasley. “We worry about missing out on something that we may want in the future and are prompted to buy things before the deadline.” 

Social norms. As social creatures, humans look to what others are doing as cues about what they should do, says Beasley. “So when it seems like everyone is taking advantage of the Labor Day Sale or Black Friday or Prime Day, we assume that we should as well, even if we weren’t actually needing anything at the moment,” she says.

Moral licensing effect. This is a psychological phenomenon that links what people perceive as “bad” behavior, such as spending on unnecessary purchases, with offsetting “good” behavior, such as shopping “smart” by getting a deal.  “It’s easier to put aside your worries about spending if it’s paired with something that feels like a positive financial decision,” says Washington D.C.-based Heidi Johnson, director of behavioral economics for the Financial Health Network, a non-profit research consortium. 

Visit drivers. These are deals that bring you into a store where you might not typically go. “Maybe you normally shop at one market, but you see an ad in the newspaper that your usual body wash is 50% off at the other store,” says Helen Robb, the Financial Health Network’s senior manager of data and analytics. By reeling you in with a single deal, the grocery chain could encourage you to spend your entire grocery budget at that store. Using tactics such as visit drivers can certainly be worthwhile for the retailer

Ways to control spending

Here are some ideas that can help you combat retail marketing strategies designed to separate you from your money.

Create a spending plan. Budgets can serve as a reality check for people to see the expenses they need to cover. However, setting up a realistic budget is the key to success, says Johnson.

One key roadblock is that people tend to think that their past expenses are lower than they actually are, and then to assume that their future expenses will also be unrealistically lower, according to research. This is called expense prediction bias. Since people may think they’ll spend less in the future, they’re more likely to set up an unrealistic budget.

“This sets people up for failure, which is discouraging,” says Johnson. “And because it’s not possible to meet the goals they’ve set, it sets them further off track.”

Check your opportunity costs. Often, we don’t think about what we’re giving up when we make a purchase, says Beasley. So when we see a great deal, we get excited and think about how much we saved rather than thinking about the trade-offs.

“So when you are contemplating a great deal, ask yourself: ‘If I didn’t buy this item for $50, what could I do with that $50 instead?” says Beasley. “Then think about whether this purchase is more important to you than what else you could do with that $50.” This concept is called opportunity cost. Another way to think of it is how many hours you had to work to purchase that item.

Stock up during sales. If you are going to buy in bulk, consider spending more when the items you need are on sale, then slow down your spending when they’re not. That way, you’ll be getting the most bang for your buck.

Compare prices based on units. A key rule of shopping: the bigger the quantity you’re buying, the cheaper it should be per unit. So if you’re buying a 24 pack of flavored water, the cost per can should be less expensive than the 12 pack. “Sometimes promotions can break that rule, making a smaller box cheaper per unit,” says Robb. “Keep an eye on times when that rule is broken and make the most of those sales.” 

Look at the actual prices, not the retail prices. Try to compare the final cost across stores or platforms, suggests Beasley. Ignore the retailer’s price or full price, which could create the illusion of a deal. “The full price of the item should be irrelevant,” says Beasley. “You should only be paying attention to whether you think these pants are worth $50, not what the pants were originally priced at.”

While it’s far too easy to spend on deals, knowing what the common spending traps are, and how to best avoid them, can help save your budget. With Stash, you can create partitions within your account to help you stay on budget.¹ You can make partitions for separate spending and saving goals, such as “grocery shopping” or “new home fund.”

The post What’s “Spaving,” and How to Avoid It appeared first on Stash Learn.