One thing to keep in mind: Investment accounts are not the same as savings accounts at a bank. The assets in any investment account could grow significantly over time, but investing always involves risk, including the risk that you could lose money.

In this article, we’ll cover:

• Brokerage accounts
• Individual retirement accounts
• Employer-sponsored retirement accounts
• Custodial accounts
• Education savings accounts

Brokerage accounts

When people say “brokerage account,” they usually mean a highly flexible investment account that allows you to choose from many types of investments, trade the securities you want to own and withdraw money whenever you wish. Here’s an overview of how they work:

• A brokerage firm, or broker/dealer, is a company offering financial services; you open your account with the brokerage, and they execute trades on your behalf. Brokerage firms come in many forms, from brick-and-mortar in-person service online-only platforms or apps. Your brokerage may offer other services too, like an online robo-advisor or financial advising.  
• A broker is a licensed professional who can trade on your behalf. They work for a brokerage firm and typically charge a commission or other fees for helping to manage your money. You might not necessarily work with an individual broker at your brokerage firm; it’s common for people to use a robo-advisor or manage their investments themselves at online and app-based brokerages.
• A brokerage account is the individual investment account you open with a brokerage firm. You put money into your account, and the brokerage invests it as you wish. If you want to buy or sell any securities, you request the trade and the brokerage enacts it.  If your account earns profits, dividends, or interest, you’ll likely owe taxes on that money 

A point of clarification: almost every type of investment account is held by a brokerage firm, even accounts with more restrictions, like an IRA or a custodial account. That’s because only brokers can interface directly with the stock market. They enable individual and institutional investors to buy and sell securities, like stocks, bonds, exchange traded funds (ETFs), mutual funds, and more. You interact with the brokerage, and the brokerage trades on the stock market on your behalf.

Cash account

Cash brokerage accounts are funded with your money: if you deposit $100, you can invest up to $100. In many cases, you can get started with just a few dollars. You can invest in whatever securities your brokerage offers; in addition to stocks, bonds, and funds, some brokerages offer access to commodities like gold and newer investment vehicles like cryptocurrency. 

Margin account

With a margin account, you can invest your own money, as well as borrow money from your broker to buy securities. You must pay back the loan, plus interest, even if your investments lose value. In some cases, the brokerage can force you to sell your investments to cover your debt. Margin accounts usually represent a significant risk to investors. 

>> Learn more about brokerage accounts 

Individual retirement accounts

Individual retirement accounts (IRAs) are tax-advantaged accounts that help people save for retirement. You can invest your contributions in almost any security, and investment returns grow tax-deferred while they remain in your account. There is typically a penalty for money taken out before age 59½, but there are a few exceptions. There are two main types of IRAs: traditional and Roth. 

>>Learn more about IRAs

Traditional IRA

With a traditional IRA, your contributions may be tax-deductible. This can reduce your taxable income, which might lower your overall tax bill in any given year. Any investment returns accrue tax-deferred and at 59½, you can begin making withdrawals. You’ll typically owe tax on the money you take out. If your tax rate is lower when you withdraw than it was when you contributed, you might reap tax savings. 

If you take out money before age 59½, you’ll have to pay an extra penalty tax unless you qualify for an exception. And when you turn 70½, you’re required to start taking distributions; you’ll owe additional tax if you don’t.

>>Learn more about traditional IRAs

Roth IRA

Unlike traditional IRAs, Roth IRAs are funded with after-tax dollars. Qualified distributions made after you turn 59½, however, are tax-free. That means any money you earn on your investments is also tax-free. If you expect to be in a lower tax bracket earlier in your career and a higher tax bracket close to retirement, a Roth IRA could help you save on taxes. Roth IRAs can also provide more flexibility when it’s time to withdraw, as you may be able to take out your principal investment without penalty prior to age 59 ½, and there are no required minimum distributions like traditional IRAs impose.  

>>Learn more about Roth IRAs

Employer-sponsored retirement accounts

There are a few types of investment accounts offered by employers to help their employees with retirement savings. They typically offer tax advantages, and employers often make a matching contribution on your behalf. These retirement accounts usually have higher contribution limits than IRAs, but investment options tend to be much more limited.

>>Learn more about employer-sponsored retirement accounts. 

401K

A 401(k) plan is a retirement account that can be offered by private companies. Employees commonly contribute with pretax dollars, lowering their taxable income, though Roth and after-tax contribution options may also be available Employers may match employee contributions up to a certain amount, so many employees contribute at least enough to get the employer match. In many cases, these plans have a “vesting” schedule, meaning that employees do not fully own the employer’s contributions until they have worked there for a certain amount of time. 

Money in the account contributed on a pre-tax basis, including any investment returns, is not taxed until it’s withdrawn. If you expect to be in a lower tax bracket when you retire, you might save money on taxes. Funds withdrawn before age 59½ are subject to an extra penalty tax in most cases. Like traditional IRAs, 401(k) plans have required minimum distributions.

Roth 401K

Roth 401(k)s have different tax advantages than standard 401(k)s. Like a Roth IRA, contributions to a Roth 401(k) are made with post-tax dollars, but qualified distributions are tax-free, including investment returns. If you expect to be in a higher tax bracket when you retire, a Roth 401(k) could offer substantial tax savings.

403(b)

Only private employers can offer 401(k) plans. Nonprofits and some government employers can offer a similar plan: the 403(b). 403(b) plans are also called tax-sheltered annuities.

Like 401(k)s, 403(b) plans allow you to make contributions of pre-tax money, and employers often offer matching contributions. You can generally take qualified distributions after age 59½, and will owe taxes on your money at that time; nonqualified distributions come with a 10% penalty. 403(b) accounts also have required minimum distributions.

Custodial accounts: investment accounts for kids

A custodial account is a type of investment account for a child. A parent or other adult is the custodian; this person makes investment decisions and often funds the account. The assets in the account belong solely to the child, but the child cannot withdraw money until they reach the age of majority, which varies from state to state. Nevertheless, the account may be considered the child’s asset in financial aid calculations, potentially limiting the aid available to them. Additionally, any income from a child’s custodial account belongs to the child, so if income exceeds a certain threshold, you’ll need to file a separate federal income tax return for the child. The custodian, however, can use the money for the child’s benefit. 

>>Learn more about custodial accounts 

Uniform Gifts to Minors Act (UGMA)

UGMA accounts are custodial investment accounts that allow an adult to transfer assets to a child without establishing a formal trust. The account can contain stocks, bonds, and other securities. It’s managed by the custodian until the beneficiary reaches the age of majority; at that point, the beneficiary can use the money without restriction. Before that, the custodian can use the money for the child’s benefit. UGMA accounts will likely be treated as the child’s asset for purposes of financial aid, which might lower the amount of aid available. 

While UGMA investment returns are not tax-free, in some cases they are taxed at the minor’s tax rate, or the “kiddie tax,” which may be lower than the custodian’s. Contributions are made with post-tax dollars, but individuals can contribute up to $16,000, and married couples up to $32,000 per year, without triggering gift tax.

Note: UGMA is a federal law that states can adopt. While all states have done so, some have made amendments. You’ll want to learn the details of your state’s UGMA implementation before making investment decisions. 

Uniform Transfers to Minors Act (UTMA)

UTMA largely aligns with UGMA: it allows adults to open a custodial account to transfer assets to children without establishing a trust, requires a custodian, may impact the child’s access to financial aid, and passes to the child without restriction at the age of majority. But UTMA extends UGMA to allow investments in more asset types, including real estate, paintings, patents, and royalties. UTMA also allows some flexibility for gifted assets to reach maturity dates, like bonds, even after the minor comes of age. 

UTMA is another federal law that states can choose to adopt. Most have adopted it, but not all, and some have amended it. It’s important to understand your state’s UTMA before making investment decisions. 

Custodial IRAs

Any individual can contribute to an IRA if they have earned income. Thus, children with earned income can fund IRAs to get a head start on retirement planning. Other people can contribute on the child’s behalf, as long as the total does not exceed the child’s earned income. A child’s IRA, however, must be set up as a custodial account.

Custodial IRAs can be traditional or Roth, and the contribution tax rules are the same as adult IRAs. For children, Roth IRAs can be especially attractive because contributions are made with post-tax dollars, at a time when a child’s tax rate is likely low. Then any investment returns grow tax-free, and any qualified distribution is also tax-free.

Investment accounts for education

The funds in UTMA and UGMA custodial accounts can be used for any purpose, though people often use those types of investment accounts to save for education. However, there are certain custodial investment accounts specifically designed for educational expenses: 529 college savings plans and education savings accounts (ESAs). These accounts offer special tax advantages, but they feature more restrictions on how the money can be used.

529 college savings plan

A 529 plan is a savings and investment account for college, K-12 education, and some apprenticeship programs. The most common type is the college savings plan; contributions can grow tax-free and be withdrawn tax-free for qualified educational expenses. The 529 prepaid plan, in contrast, allows adults to prepay in-state public tuition in hopes of locking in a lower rate. 529 plans are usually operated by states and can vary significantly from state to state. 

Education savings account (ESA)

An ESA, sometimes called a Coverdell education savings account, is another type of investment account for educational expenses; the beneficiary must be under 18 or be considered “special needs.” The funds can be used for college or K-12 expenses. Contributions are made post-tax, but assets can grow tax-free, and distributions for qualified educational expenses are tax-free. Withdrawals made after the beneficiary turns 30 will incur penalties and taxes.

Finding the right type of investment account for you

With so many types of investment accounts, it might seem daunting to decide which kind you want. They all have different levels of flexibility, potential tax advantages, and limitations. So it’s all about lining up your goals with the type of investment account that best supports them.

The good news is, that you don’t have to choose just one way to invest. It’s not uncommon for people to have one or more retirement accounts to take advantage of tax benefits, a brokerage account to grow money at a faster pace than inflation, and an account to save for their kids’ education. Investing can be a way to build wealth for the future, whatever your goals; with all the types of investment accounts out there, you can find the right approach for the future you want to build. 

The post Types of Investment Accounts appeared first on Stash Learn.

If you work in the private sector, you’ll likely have a 401(k), vs. a 403(b), which is more common for government or certain nonprofit workers. In some cases, you might even have both, although that’s rare. Knowing the differences between a 403(b) and a 401(k) can help you prepare for retirement, whether you’re in your 20s, your 60s, or somewhere in between.

How does a 403(b) work?

A 403(b), also known as a tax-sheltered annuity plan, is a defined contribution retirement plan for employees of non-profit organizations, government workers, and public school employees, like professors, teachers, and school administrators. The plan invests the contributions and makes payments to employees, typically after retirement.

• Making contributions: A 403b plan allows you to set aside a portion of your paycheck in a retirement account before taxes are taken out. In addition, employers can contribute to their employees’ plans, often matching a portion of what employees put in.
  
• Investment options: Employees can invest their contributions in mutual funds or annuities and reinvest their returns on a tax-deferred basis, which can help their savings grow faster. Tax-deferred, in this context, means you don’t pay tax until you withdraw the money.
  • Annuities are sold by insurance companies. The purchaser makes a one-time payment or a series of payments to the insurance company. In exchange, the insurance company agrees to make periodic payments right away or at a specific time in the future. Mutual funds are baskets of securities and can include stocks, bonds, and other securities.
    
• Limits on contributions: The IRS determines the maximum amount that you can contribute to a 403(b), and that limit can change from year to year. Annual employee contributions for a 403(b) are capped at $20,500 in 2022, allowing employees to contribute an extra $1,000 compared to previous years. The combined contributions, meaning the sum of what both the employee and the employer put into the account, are limited to $58,000 a year in 2021 and $61,000 a year in 2022, or 100% of the employee’s most recent annual salary, whichever is the lesser amount.
• Catch-up contributions: Employees with 15 years or more of service with a qualified organization may be eligible to make catch-up contributions of an additional $3,000 a year. Employees who are 50 and older are eligible to make catch-up contributions of an additional $6,500 in 2021 and 2022.

• Paying taxes: The money you contribute to your 403(b) is tax deferred, meaning, you don’t pay income tax on the money you contribute or the return on your contributions until you make withdrawals from the account. If you withdraw funds before age 59½, you may owe early withdrawal penalties of 10%, although there are some limited exceptions to the early withdrawal rule.
  
• Required minimum distributions: When you reach age 70½, you must take a certain amount out of your 403(b) every year (or age 72 if your 70th birthday is July 1, 2019 or later); this is called the required minimum distribution (RMD). The government determines how much you are required to withdraw based on your account balance and your life expectancy.

How does a 401(k) work?

Employers in the private sector may offer their employees a 401(k) retirement plan as part of their benefits package. Like 403(b)s, 401(k)s are tax-deferred savings vehicles designed to help employees save for retirement. Contributions are invested, and employees typically begin receiving money after retirement.

• Making contributions: Just like 403(b) plans, 401(k) plans allow employees to make pre-tax contributions. And like 403(b)s, employers may make matching contributions to employee accounts.
  
• Investment options: 401(k) plans typically offer a limited set of investments to choose from, such as a handful of mutual funds, target-date funds, often a special type of mutual fund, and exchange-traded funds (ETFs), which are baskets of investments. Though rare, it’s possible that a 401(k) could include annuities as part of its offerings.
  

• Limits on contributions: 401k plan contribution limits are the same as 403(b)s: $20,500 a year for employees in 2022 ( previously capped at $19,500 in 2020 and 2021);  $58,000 for combined employer/employee contributions in 2021 and $61,000 in 2021. People aged 50 and older are eligible to make catch-up contributions of an additional $6,500 a year in 2021 and 2022.
  
• Paying taxes: Neither employee contributions nor the earnings on investments are taxed until you withdraw funds. Just like with a 403(b) plan, funds withdrawn from a 401(k) before age 59½ are subject to a 10% early withdrawal penalty unless an exception applies.
  
• Required minimum distributions (RMDs): 401(k) plans also have RMDs, beginning at age 70½ or age 72 if your 70th birthday is July 1, 2019 or later.

403(b) vs. 401(k): The difference at a glance

403(b) vs. 401(k): Your options 

As a general rule, employers only offer one kind of plan, so the 403(b) vs. 401(k) decision may be made for you. In the rare case that your employer offers both a 403(b) and a 401(k), you can participate in both, or you may find the differences between 403(b)s and 401(k)s push you in the direction of one or the other. If you do choose both, your combined contributions across both accounts can’t exceed the annual limitations, even though you have two plans.

If a 403(b) or 401(k) is not an option, Stash offers IRAs to help you save

In some cases, the difference between a 403(b) and a 401(k) plan doesn’t matter because your employer doesn’t offer a retirement plan, you aren’t employed, or you are self-employed. But there are still tax-advantaged savings options available to you, and you may want to save for retirement with an individual retirement account (IRA). IRAs for individuals come in two varieties: traditional and Roth. Here is a short overview of how these accounts work:

• Making contributions: Contributions to a traditional IRA are made with pre-tax dollars, while contributions to a Roth IRA are made with after-tax dollars.
• Investment options: IRAs may offer the opportunity to invest in a broader range of securities than 401(k)s and 403(b)s. However, some restrictions apply.
• Limits on contributions: You can contribute up to $6,000 each year in either a Roth or traditional IRA for 2020, 2021, and 2022, although Roth IRAs have some additional limits in 2022. And if you’re 50 or older, you can make an additional catch-up contribution of $1,000, so you can contribute a total of $7,000. You can have both a Roth IRA and a traditional IRA, but the combined contribution limit is still the same; the additional account doesn’t allow you to contribute more.
  
• Paying taxes: For traditional IRAs, neither contributions nor investment returns are taxed until withdrawal. If you withdraw money before age 59½, you’ll owe an additional 10% penalty unless an exception applies. With Roth IRAs, qualified distributions are tax-free. To qualify, a distribution must be made five or more years after the Roth IRA was created, and meet certain other conditions.
  

• RMDs: Traditional IRAs require you to make RMDs at age 70½, or at age 72 if your 70th birthday is on or after July 1, 2019. Roth IRAs, on the other hand, do not have RMDs during the original owner’s lifetime.

Whether you’re looking into a 403(b) vs. a 401(k) or considering an IRA, investing for retirement now, no matter what your age, can help you plan for your financial future.

The post 403(b) vs. 401(k): Two Ways to Save for Retirement appeared first on Stash Learn.

It’s not as far fetched as it sounds. In fact, the odds are increasingly in your favor. A record number of individual retirement accounts (IRAs) and 401(k) accounts now hold $1 million or more, according to a new study by the brokerage firm Fidelity. It found that 441,000 of the IRA and 401(k) accounts that it manages held $1 million or more as of the fourth quarter 2019. The fourth-quarter total marks a 15% jump compared to the from the third quarter of 2019, when 382,400 retirement accounts held $1 million or more—a record at the time. 

Also on the plus side:  The average amount saved in a 401(k) or IRA increased 7% between the third and fourth quarters of 2019. Fidelity customers had an average of $112,300 saved in 401(k)s for the fourth quarter of 2019, up from $105,200 in the third quarter. Customers had an average of $115,400 saved in IRAs, up from $110,200.

(A higher number of 401(k)s had $1 million or more, compared to IRAs. A total of 233,000 401(k) accounts held $1 million or more while 208,000 IRA accounts held $1 million or more.) 

Fidelity is reportedly one of the largest retirement account providers, with a combined 27 million 401(k) and IRA accounts. 

What does it take to be a millionaire?

There are nearly 19 million millionaires in the United States, more than in any other country. Yet, the number of millionaires in the U.S. accounts for less than 1% of the population. 

Financial advisors and retirement organizations including the AARP often suggest that a range of $1 million to $1.5 million is a benchmark for retirement savings. While more 401(k)s and IRAs than ever have $1 million or more at Fidelity, only 1.6% of the accounts there hold $1 million or more.

What you need to have saved for retirement varies from person to person. Either way, it is important to know your goal for retirement savings and to account for those savings in your budget.

401(k)s vs. IRAs

While you plan for retirement, it is important to know the difference between the types of accounts.

A 401(k) is a qualified employer-provided retirement plan, meaning it satisfies federal tax guidelines for such plans. Often, an employer will provide this plan to employees with an additional perk, called a matching contribution. This means that employers match the funds you place into your account, generally up to a certain percentage, potentially allowing you to save more, faster.

As of 2020, you can contribute up to $19,500 annually to your 401(k) if you’re younger than 50 years old. You can contribute an extra $6,500 per year if you’re 50 or older.

When you contribute to your 401(k), you contribute pre-tax income. Once you start withdrawing from your 401(k) in retirement, typically at age 70½, you will pay taxes on that income.  

An IRA, on the other hand, is an individual retirement account that anyone who earns income can open up through a brokerage or financial institution. There are two types of IRAs: Traditional IRAs and Roth IRAs. 

Traditional IRA accounts provide some tax advantages, as your contributions are made from your income on a pre-tax basis.  Account owners pay taxes on the funds when they withdraw them.

You can contribute to a Roth with income after taxes have been deducted. In contrast to a traditional IRA whose withdrawals are taxed, Roth investors generally don’t pay taxes on withdrawals once they’ve reached retirement age.

As of 2020, you can contribute up to $6,000 annually to an IRA if you’re younger than 50 and up to $7,000 annually if you’re 50 or older.

Good to know: It’s probably easier to save $1 million or more in a 401(k) than an IRA. A 401(k) lets you put away more money, and if there’s an employer match on funds, it can all really add up over time.

IRAs are available to most people who earn an income, letting you put money away in an investment account on a tax-favorable basis. Since there’s no one matching your contributions, you may have to save more aggressively over time to get to your magic number.

Start saving early

The sooner you start saving in a retirement account, the more money you’re likely to have over time, thanks to a market principle called compounding. (You can find out more about how time in the market and compounding can help you here.)

If you haven’t started planning for retirement yet, it may be time to start planning. Try Stash’s retirement calculator to figure out how much you might need to retire and visit Stash Retire to assist in planning.

The post How You Could Become the Millionaire Next Door appeared first on Stash Learn.

In fact, about 73% of taxpayers got money back from the Internal Revenue Service (IRS) in 2019, and the average refund for 2019 was about $2,700, according to the IRS.

And while people have a range of plans for that money—from purchasing a big-ticket consumer item such as a car, or refrigerator, to paying down debt—it might surprise you to learn that many consumers saved and invested their refunds in 2018, according to recent research.

Here’s what taxpayers did with their refunds in 2018:

Retirement saving

Stash believes in smart saving and investing, and we think one of your goals should be saving for retirement. Why? About one-third of U.S. consumers have $5,000 or less saved for retirement. (Various estimates suggest you may need as much as $1.5 million to support 30 years without working.)

Additionally, fewer of us are likely to have pensions, and Social Security probably won’t cover your expenses after you’ve stopped working.

Meanwhile, career paths are likely to be unpredictable, and healthcare costs probably will be expensive when you can no longer work.

But the sooner you start investing for retirement, the more money you can potentially accumulate.

Waiting even a few years can dramatically reduce your retirement savings. The following chart shows the difference in your potential nest egg if you start at 25 compared to 35. The person who waits ten years might have almost half as much money in retirement.

Consider Stashing it

Stash offers both traditional and Roth individual retirement accounts (IRAs). The maximum you can contribute to your Stash retirement account in 2020 is $6,000.  People who are age 50 and older can contribute an additional $1,000 each year as a catch-up contribution.

Have a tax refund coming your way? Consider stashing it in a Stash Retire account.

The post How to Use Your IRS Refund To Jumpstart Your Retirement Savings appeared first on Stash Learn.

The Internal Revenue Service (IRS) increased contribution limits for anyone with a 401(k) or 403(b), two kinds of workplace retirement plan. The IRS made the changes as part of its adjustments to tax rates for the tax year 2020, which begins January 1.

People who have either type of account will now be able to put an additional $500 away annually, for a total of $19,500. People who are 50 or older can also put an additional $500 away as part of their catch-up contributions, which we’ll explain below.

Taxpayers will generally file their returns for 2020 in April, 2021.

What’s a 401(k) and 403(b)?

A 401(k) is a qualified employer-provided retirement plan, meaning it satisfies federal tax guidelines for such plans. Often, an employer will provide this plan to employees with an additional perk, called a matching contribution. This means that employers match the funds you place into your account, generally up to a certain percentage, potentially allowing you to save more, faster.

A 403(b) is similar to a 401(k), but it’s offered to public school employees, and some workers for tax-exempt organizations.

You typically contribute funds to a 401(k) or 403(b)  from pre-tax income, which can lower your taxable income. However, this does not mean you won’t pay taxes. You must pay taxes when you start withdrawing money from the account, typically after age 70 ½.

There is also something called a Roth 401(k) and Roth 403(b), which allow workers to contribute to their retirement accounts with after-tax income.

Starting next year, workers under age 50 can deposit up to $19,500 per year into either type of account. Over age 50, workers can make additional contributions of $6,500, up from $6,000 in 2019.

What about IRAs?

The new IRS adjustments do not affect Individual Retirement Account (IRA) contribution limits for 2020.

In contrast to a 401(k) and 403(b), which are sponsored by employers, anyone can open up an IRA through a brokerage, or financial institution.

Similar to a 401(k), contributions to a traditional IRA are made on a pre-tax basis, and they can lower your taxable income. You must also pay taxes when you start withdrawing money from the account, typically after age 70 ½.

There is also something called a Roth IRA. With a Roth IRA, as with Roth workplace-sponsored plans, taxes work the other way around. You pay tax on any income you contribute to the account. After that point you don’t have to pay any tax on that money or on any of its investment gains—you can withdraw any funds in the account tax-free, as long as you stick to some basic rules. In basic terms, the main difference between the two, with a Roth IRA you pay taxes now, and with a Traditional IRA you pay taxes later

Your total contribution to both a traditional and Roth IRA can’t exceed the contribution limits: $6,000 in 2019, or $7,000 for people who are 50 or older.

You can set up an IRA retirement account with Stash. Find out more about IRAs here.

The post You Can Soon Put More Away in Your 401(k) appeared first on Stash Learn.

Think of Belle from Disney’s Beauty and the Beast.

She’s a heroine because of her independent mind, her great work ethic, her intellectual curiosity, and her strong personality.

But she only really ends up rich and happy in a magical castle because she developed a codependent relationship with her weirdo kidnapper. Great lesson, right?

Women get dumb lessons about money

Countless popular books, films, and TV shows still carry the same basic message for women: Work hard, get an education, look flawlessly beautiful at all times, and a rich husband will find you and take care of the electric bill (or provide a dancing, talking candlestick to light your gigantic home).

But how realistic is that? Um, not very.

There were 110 million unmarried people in America age 18 and older in 2016, according to the most recent data from the U.S. Census Bureau. That accounted for 45.2% of all U.S. residents over the age of 18. And of that number, 53.2% were women.

So if you’re a single lady, you’re in good company. And chances are you’ve got to pay your own damn bills.

Women have to fight harder

It’s commonly accepted that boys should fend for themselves financially. It’s a sign of conventional contemporary masculinity to be “financially independent” as a man. We don’t always teach girls the same lesson. They may not know how hard they’ll have to fight for equal pay when they enter the workplace.

This is a big deal when many businesses certainly don’t value women’s work on par with men’s work. According to U.S. Census Bureau data, on average, an American woman earns 80.5 cents for every dollar a man earns. Women’s median annual earnings are $10,086 less than men’s.

The gulf grows much wider when we look at salaries for women of color versus white men. And while many women (and a few good male allies) advocate for change, we’ve also got to be extra invested in our own financial future.

Be your own Princess Charming

Now, I’m not saying you won’t marry a rich man (or extremely, fabulously wealthy person of any gender!) I’m just saying you shouldn’t depend on it.

Having your own income and savings will hopefully help you feel stronger, more confident, and less dependent when you do get into a serious relationship.

Maybe you aren’t making enchanted Disney prince (or princess) money, but you can start dealing with your actual financial reality right here and now, regardless of your dreams for the future or your regrets about the past.

All the single ladies (can achieve financial independence)

Here are a few easy tips that can help you get going on your badass single lady financial plan.

Open a retirement account and make regular contributions

The positive effect of compound interest is real and it’s powerful. You can set up a Roth or traditional IRA on your own—I did when I was a full-time freelancer.

But some companies provide a 401(k) and will match your contribution up to a certain dollar amount (usually 4%). Let’s say you get a regular paycheck, and you choose to contribute 10% of each paycheck to your 401(k), pre-tax. The company will match 4% of your contribution. They’re giving you free money! That’s great!

You won’t be able to tap into that fund until you hit a certain age, at least not unless you want to incur very high penalties, taxes, and fees. But it’s your superpowered future-cool-old-lady savings account. Have somebody in HR walk you through the different options, or use the online tools they’ll probably give you

And make sure that, in the unlikely event that you shuffle off this mortal coil early, your 401(k) is earmarked for a loved one.

Envision your ideal financial future

Here’s a set of questions to get your imagination going. We’re going to work backwards, which may feel a little odd, but will hopefully jog your brain in a good way.

1. Where do you hope to be at the very end of your days? Let’s imagine you are fortunate enough to have a long and healthy life. When you’re elderly, do you expect to want to live in the fanciest of eldercare facilities? Do you want to spend your final days in a home that you own? (In that case, you’ll likely need full-time in-home health aides at some point—keep contributing to that 401(k)!) I know this is a wild thing to consider, and it may seem unnecessary at your young age, but there’s no harm in imagining it for a moment.
2. Let’s look at your life when you’re retirement age—say, 65. You may very well live into your nineties or beyond, so retiring at 65 means you may have a few decades left to enjoy! Are you the type of person who loves to travel? You’ll probably still enjoy it at your advanced age, and have more time to do it. There’s no way of knowing if you’ll have kids or grandkids, but we can be fairly certain you won’t want to be a financial burden on them. The choices you make now can help ensure your independence in later age.
3. And now let’s envision your life ten years from now. Where do you hope to live then? Do you want to own a home? What would that home look like? Where might it be? Every time you start to think, “Well, I’m sure my husband can help share expenses,” stop yourself. You may very well be right! But since we’re thinking about single lady finances, reframe the question. “How can I put myself in the best position to be able to afford my happiest, healthiest lifestyle in ten years?”
4. Now let’s look at the next year. What are some things you might realistically be able to accomplish in the next year? Making a move to a town you truly love? Finding a better apartment in the city where you live? Adopting a dog and providing for its care? Maybe your goals are simply: “Paying every bill in full on time, and paying more than the minimum on my credit cards each month.” That’s great!

Check out your answers to the above questions. Walk away from them for a week and return to them. Edit and revise as necessary. Then maybe purchase a helpful book, or even seek out a certified financial planner (CFP), a person trained in the fine art of helping adults get their money right. Many CFPs deal with estate planning, investing, and more. They usually don’t get into the nitty-gritty of day-to-day budgeting.

Read a good book on personal finance

Or more than one good book! Try one of these: Suze Orman’s “Young, Fabulous and Broke;” Allen Carr’s “Get Out Of Debt Now”; Anna Newell Jones’s “The Spender’s Guide to Debt-Free Living”; or something that just happens to appeal to you in the bookstore. Set aside, donate, or sell the books that don’t jibe with your sensibility. Read and re-read the ones that do!

It took me until my mid-thirties to start getting on top of this, but whether you’re younger or older, it’s the right time to begin!

So don’t avoid looking at reality like I did for many years—start taking small, sensible steps now to save and provide for your own health and happiness.

The post How to Be a (Financially Independent) Single Woman appeared first on Stash Learn.

“DON’T DO IT,” said almost every breathing body who heard my plan.

“Oh really? Why not?,” I’d ask, and promptly tune them out to fantasize about melty cheese. I’d made up my mind about quitting, and no accountant, broke comedian, or corporate climber could talk me out of it.

These people weren’t wrong, of course. Taking a hit on your 401K is a poor friggin’ decision if you’re looking at life from a strictly-numbers perspective. But people aren’t numbers, and I was burnt out.

Years of working full-time during the day, running to comedy shows at night, writing scripts on weekends, and scrapping for free moments to promote my work had taken its toll, and I needed sleep. I also needed to find out what caliber of content I could create without having a full-time job occupying so much of my mental and physical energy.

In mid October, seven months after I quit my job, my savings were low. The first seven months had felt like a vacation—I traveled all summer doing standup, staying at decent AirBnBs, eating great meals, and spending money that had been sitting in my checking account.

But in October, I had to decide whether I was really ready to cash out my 401K, incur a huge penalty, and fritter away the only “rainy day” money I’d ever had.

As if my Last Chance Guardian Angel was watching over my bank account, in October I got an out-of-the-blue job offer to create online videos for a media company. The pay wasn’t great, but it’d be enough to survive very frugally.

I turned it down.

I felt I was only getting started on my work, and that I must march boldly into my future without a job holding me back. Still, hitting that final WITHDRAW button on the 401K website was utterly terrifying.

But here I am, alive and well-ish enough to tell you what I’ve learned from taking this financial plunge:

Timing is everything. I’d originally tried to quit at the end of 2016. But it was a hectic time at the office, so I agreed to stay on until March of the next year. This was not smart for tax reasons. My 401K will be taxed based on the entirety of my 2017 income. The money I made from January through March bumps me up to a higher tax bracket. Also, had I stayed on staff much longer, my annual income would have made me ineligible for Medicaid, which has been a huge financial relief.

Point is, it’s in your best interest to keep your total income as low as possible during the year or years you plan to cash out your 401K.

People aren’t kidding about negotiating. Because of the circumstances under which I left my job (i.e. “Living my truth”), I felt more open, excited, and relaxed than I ever had in an exit interview. I told the human resources woman that I’d kicked myself for not negotiating my salary. She checked my paperwork.

“You could have gotten a lot more,” she said.

Also, when I turned down the job creating videos for that media company, I was offered a sizeable salary bump. (Still nothing to write home about, but a lot more than the original offer.)

I’ve never been good at negotiating, especially because writing jobs are so hard to come by. But after these experiences, I will always, always tell my potential employer what I want and where I’m coming from.

Full-time jobs pay for your down time. I miss promoting my comedy shows on social media at work. I miss taking a long lunch and thinking “I’m getting paid for this.” I miss blowing up an air mattress, sliding it under my desk, applying an aloe eye mask and taking a Manhattan siesta.

Okay, I never did the last one, but I have to admit that full-time jobs cover a lot of random “me time,” which is something to consider if you’re considering transitioning to the gig economy.

Now, every minute is a my minute, and I feel an added stress to take advantage of every hour in every day. I try to counterbalance this stress by making accomplishment charts for myself. If I hit a certain number of accomplishments in a week, I won’t let myself feel bad, even if I didn’t do everything I wanted.

It’s easier to spend less when you’ve got more time. I’m no beacon of frugality. I just don’t have the constitution to eat cold beans and sew my own clothes. But, I have been able to stay within the budget I set for myself by doing things that take more time but cost less money—walking to destinations, cooking my own food, and selling my clothes on apps like Poshmark before I buy new ones. All of this has been good for my overall mental, physical and emotional health, too.

I wouldn’t trade it for the world. Has this been scary? YES TIMES A MILLION. It was hard to decide whether the time was right to leave the workforce. And as I prepared to do it, I felt a lot of guilt. Who did I think I was, some bratty princess? Some spoiled, rotten Lady Moneybags?

But once the deed was done, these feelings went away. After all, I’m spending my money to buy myself much-needed time to grow. And as a result, I’m performing with more energy than ever before. I’m writing—not as quickly as I’d hoped—but it’s happening. At yoga (yes YOGA—who AM I?), the teacher used me as an example of a person doing something right for the very first time in my life.

It all feels so, so, so much better than money in the bank.

The post What I Learned from Taking the Biggest Financial Risk of My Life appeared first on Stash Learn.

The only problem was that my salary wasn’t enough to cover the astronomical expense of living in New York City, along with all of my graduate school student loan debt. That was especially true after my roommate moved out and I decided to live in my two-bedroom Brooklyn apartment on my own. I kept finding myself paying my rent later and later, taking full advantage of my landlord’s ten-day grace period.

Since I relied on credit to cover the gap between what I made and what I spent, my credit card bills also started creeping up each month. First a hundred dollars, then an extra three or four hundred dollars.

When my debt hit $8,000, I realized I needed financial help.

I thought I’d hit on the perfect solution: I’d cash in my 401(k), which I’d started contributing to at a previous job. I’d saved $10,000. It wasn’t a huge amount, but that was enough to make a big dent in my growing debts, and to give me a small cushion to cover future expenses so I wouldn’t keep falling back into debt.

When my debt hit $8,000, I realized I needed financial help.

I knew there would be penalties for cashing in my account, including a 10% penalty from the Internal Revenue Service, as well as state and local taxes. However, those seemed like a small price to pay for wiping out my credit card issues with one lump sum. It seemed especially worthwhile, since the interest on my credit cards was over 20%.

What I failed to consider were the long-term consequences of my decision, the biggest being that I was jeopardizing my retirement.

I may have only saved $10,000, but that amount would have grown if I’d kept contributing at the same rate, about 5% of my $40,000 salary, along with the market gains over the years. Today, I’d probably have about $100,000.

In retrospect, I realize I could have taken a loan from my 401(k) account, rather than cash it out, but that didn’t occur to me back then. I also could have gotten an interest-free loan from my family, or a 0% APR credit card to use temporarily, and pay back before the 0% rate ran out. (I also could also have cut back on expenses like eating out and going to concerts.)

But I was ashamed of being in such a dire situation, so I didn’t consult with a financial advisor or family members, who might have steered me in a different direction.

Worst of all, I told myself that my dip into my retirement account was temporary, and that I’d return to saving as soon as I was more financially stable. Well, it turns out that was an overly optimistic outlook. While I expected to simply take care of my credit card debts, then immediately resume retirement savings, once I stopped contributing, I kept finding reasons that I needed that 5%.

First, I got laid off from my magazine job and went on unemployment. Then I became a self-employed freelancer. When my rent increased by $100 each month, or the price of a Metrocard went up, or I simply wanted to go on vacation, instead of looking for ways to cut back on expenses, I told myself I could always restart my 401(k) later.

It wasn’t until I moved in with my boyfriend four years ago and realized that he’d been saving steadily since his twenties,  that it became clear how different our financial futures are.

Now that I’m in my forties, I’ve finally started contributing to a retirement account again. But I’m afraid it may be too little, too late. I’m currently putting $5,500 a year into an Individual Retirement Account (IRA), about 10% of my income, and the maximum amount I can contribute each year. I’m also hoping to increase my non-retirement savings starting next year.

If I hadn’t been so short-sighted, I wouldn’t have my bare bones retirement account looming over me

One big difference is that I’m now self-employed, so I no longer have an employer to match any of my contributions. Another is that rather than have my retirement savings automatically taken out of my paycheck, I have to be pro-active about setting that money aside, which is big challenge when you don’t have  regular paycheck.

There’s a reason there are financial penalties for cashing in your 401(k) early. The whole point of a retirement account is that it’s there to take care of you in the future. When you’re in your twenties, you can still find side gigs to bring in extra income, take on an extra roommate and cut back on spending. While you can work past your official retirement, well-paying jobs will likely be tougher to come by at that age when I’d be competing with people who are several decades younger.

Now that retirement is only twenty-five, not forty-five, years away, and I only have $11,000 saved, it’s gotten a lot more real in my mind—and a lot scarier to try to build up enough to live on in a much shorter period of time.

While half of Americans retire between 61 and 65, unless my income rises dramatically in the next two decades, I’ll likely be working well into my seventies in order to save enough.

If I hadn’t been so short-sighted, I wouldn’t have my bare bones retirement account looming over me. Making a rash decision about my money cost me a lot more, in savings and in peace of mind, than I ever expected.

So take it from me—if you’re considering cashing in your 401k early, don’t.

The post I Cashed In My 401(k) in My Twenties and It Was a Huge Mistake appeared first on Stash Learn.

Guillebeau, the author of the best-selling book $100 Startup took on countless gigs in order to reach his goal of visiting every country in the world by age 35.

His new daily podcast is all about the side hustle—something you do for love because it has the potential to make you money while you’re doing something else. (A book on the same subject is out in September.)

While Guillebeau says that he has a pretty typical approach to investing today, that wasn’t always the case.

We asked for his best tips on how to put your money to work while forging your own path.

Pay to play

“I’m a big believer in having a ‘slush fund’—a separate account that’s either for fun or for something that you’re saving toward,” he says.

“I’m a big believer in having a ‘slush fund’

That’s especially important if you have a passion but not necessarily a high income—as was the case when Chris was doing a lot of traveling.

“At the end of the year, when I’m doing my finances and figuring out what to contribute to my SEP IRA, I also set aside money for next year’s travel,” he says. “When you have a project that’s not a huge money-maker, it helps to have the money, going into it.”  

Invest in your education

Chris taught himself about investing back in college—not in a class, but in the school computer lab, day trading with the cash he received from a student loan.

“I don’t know if I ever made a lot of money, but I didn’t lose a lot of money,” he says. He guesses that he broke about even with the $15,000 he was working with throughout the year.

“I was hardly an expert, but I read everything I could—the library got the Wall Street Journal and Barron’s,” he says. “I walked away feeling like I had this unique experience that could help me later.”

Retire like Chris Guillebeau

Chris now contributes annually to a Simplified Employee Pension Individual Retirement Fund (or the much simpler-to-say “SEP-IRA”).

It’s a relatively common choice for people who are self-employed or who own their own businesses (in other words, people who can’t benefit from a company’s 401(k)), in part because you can contribute more to a SEP-IRA than you can to a traditional or Roth IRA.

Chris’s account is invested mostly in index funds—usually in a standard split of 60 percent stocks and 40 percent bonds.

“That’s pretty basic,” he says, “but it’s good advice for most people.”

The post Talk Money to Me: Chris Guillebeau’s Side Hustle Strategy appeared first on Stash Learn.