In this article, we’ll cover:

• Key differences between saving and investing
• When to save and when to invest

The key differences between saving and investing

Saving and investing are distinct financial concepts. While they both involve putting money toward the goal of increasing your assets in the future, they have very different functions and results when it comes to time horizon, potential for returns, liquidity, risk, and inflation. Once you understand the differences, you can determine how each fits into your financial plan. 

Your future goals

Some of your future financial goals are achievable sooner than others. If you’re looking at the short term, think of savings. If your goal is further into the future, consider investing. 

• Short-term goals: Saving can be a good choice for achieving short-term financial goals like taking a vacation, buying a car, getting a new computer, or putting a down payment on a home. Opening a savings account is also ideal for building up an emergency fund to cover large, unexpected expenses or get you by if you lose your job. 
• Long-term goals: In contrast, investing is more appropriate for achieving large goals far in the future, like paying for your kid’s college education or setting yourself up for retirement. Investments have the potential to grow your money more over time by earning higher returns than you’d get from earning interest in a savings account, but you may need to keep your money invested over the long haul to realize those gains. 

Potential returns

The return on investment (ROI) differs quite a bit between saving vs. investing. The entire point of investing is to earn returns. Saving is more about setting aside money over time, but earning interest in a savings account certainly does grow your money more than hiding it in your mattress. Most traditional savings accounts pay some interest, and you can often earn an even better rate with high-yield savings accounts, money market accounts, and certificates of deposit (CDs). Interest rates are variable, and often rise and fall in relation to inflation. The longer you keep your savings in an interest-bearing account, the more you can take advantage of compound interest, which is when the interest you’ve earned also earns interest. 

The ROI on different types of investments can vary greatly, but over the long term they usually outpace both inflation and what you could earn through interest in a bank account. The historical average return for stocks is around 10%, while bonds have historically produced 5% to 6% in returns on average. Other investment vehicles like mutual funds, index funds, and ETFs vary quite a bit in their average returns, since each fund contains a different mix of multiple assets. But because they usually hold stocks and bonds, funds tend to offer more lucrative long-term returns than a simple savings account. 

Impact of inflation

Inflation measures how much the cost of products and services rise over a given period of time. When inflation goes up, your purchasing power goes down; your dollars don’t go as far as they used to. This is an important consideration for your savings. If the interest rate on your savings account is lower than the inflation rate, it erodes the value of your savings over time.  

The money you earn today will have less purchasing power in a couple decades, so you want your investments to generate enough returns to compensate. Investing is often used as a hedge against inflation because the returns are generally higher than inflation over the long term. That’s why investing is typically advised for financial goals far into the future, like retirement. In fact, some investors pursue strategies intended specifically to profit from inflation. 

Liquidity (how accessible your money is to you)

Liquidity describes how quickly you can get your hands on your money. Cash is your most liquid asset; actual dollar bills in your wallet can be spent any time. Money in your savings account is also incredibly liquid because you can easily withdraw it at the bank or ATM. The only drawback is that some savings accounts charge a fee if you make more than six withdrawals a month. Liquidity gives you the flexibility you need to spend your savings, such as tapping your emergency fund for a big car repair or buying that TV you’ve saved up for when it goes on sale. 

Investments are typically less liquid than savings; the amount of rigidity varies among asset and account types. Certain types of investment vehicles, like bonds, may have a fixed term that requires you to stay invested for a certain amount of time. Stocks and shares of many funds are more liquid in that they can be sold any time, though it usually takes three business days to get your money. And if you’re selling stock because you need the money for an emergency, you run the risk of having to sell at a loss. Tax-advantaged retirement accounts, which are types of investment accounts, are extremely inflexible; you usually can’t withdraw money before age 59 1/2 without incurring steep penalties. Finally, if you invest in things like collectibles or real estate, your money is locked up in those assets until you can find a buyer, which could take a lot of time and effort.  

Risks involved

People usually think about risk when it comes to investing, but not savings. It’s true that putting money into savings is generally quite low-risk. As long as you keep savings in an FDIC-insured bank account, you’re protected even if the bank were to go under. That said, saving money comes with certain risks, too. For example, if you only keep money in a traditional savings account without investing some of it, you run the risk that it won’t grow enough to keep up with inflation, leaving you with a lot less spending power in retirement. There’s also the risk associated with variable interest rates. If your bank drops interest rates, the return you’re earning on your savings will drop as well. 

With investing, there’s always the risk that you could lose money if the value of your assets drops below what you paid for them. Business risk is the potential for a stock to lose value due to financial or management issues with the company. Geopolitical risk comes into play when things like war, terrorism, and trade relations impact the economy. And overall market volatility can cause the value of your portfolio to fluctuate. One way investors can manage these investment risks is by diversifying their portfolios. Diversification reduces risk by spreading the holdings in your investment portfolio across different asset classes like stocks, bonds, and funds. If one of your investments loses value, others may hold steady or even grow.

When to save your money

How do you decide when you should be saving vs. investing? Consider what you’re trying to achieve. Saving is well-suited to funding things you want within a few years and protecting your financial well-being when life throws you a curveball.  

• Financial goals: If there’s a large purchase you want to make in five years or less, saving for it makes sense. That’s too short a time to be confident that investments will grow, but not so long a timeframe that inflation is likely to seriously erode your purchasing power. 
• Emergency funds: If your dog needed emergency surgery tomorrow, could you pay for it without going into credit card debt? What about if you were laid off; how long could you cover your basic living expenses before your bank account was empty? These kinds of scenarios are exactly what an emergency fund is for. Putting aside money to cover unexpected expenses is one of the primary uses for a savings account.  

If you want to save up more, look for ways to spend less. From sticking to a budget to reducing discretionary spending to lowering your bills, reducing how much money you spend increases how much money you can put into your savings. 

Places you can park your cash and save

When you’re stashing money aside for an emergency fund or savings goal, you can put it to work earning interest so your savings grow faster. There are several different kinds of deposit accounts where you can store your savings, and they vary in the details of potential interest rates, liquidity, minimum balances, and fees.  

• Traditional savings account: A basic savings account usually offers a pretty low interest rate; the average APY (annual percentage yield) was 0.46% as of December 2023. But there are often low or no minimum balances or fees, making them accessible if you’re just getting started with saving.  
• High-yield savings account: This type of account functions just like a traditional savings account, but offers much higher interest rates. At the same time, many require you to maintain a minimum balance and might charge account maintenance fees, which can eat into your returns. There’s often a minimum opening balance, too, so you’ll need to already have some funds accumulated before you can open an account. 
• Money market account: If you want higher rates and more liquidity, money market accounts can be a good place to keep your savings. Their interest rates are usually close to high-yield savings accounts, and, unlike savings accounts, they come with a limited number of checks and debit transactions a month. That makes it even easier to spend your money when you want to. Be aware that minimum balances and fees are common with these accounts. 
• Certificate of deposit (CD): Savings and money market accounts offer variable interest rates, so they could go up or down at any time. CDs, on the other hand, give you a fixed interest rate for a set term, usually between six months and six years. CDs often have interest rates as good as or better than high-yield savings accounts, but the trade-off is a lack of liquidity. If you withdraw your money before the term is over, you’ll generally lose some of the interest you’ve earned. 

When to invest your money

Are you many years, or even decades, away from retirement, sending your kids to college, or putting a down payment on the house of your dreams? Do you have an emergency fund and enough money in savings for your short-term needs? Have you paid down any high interest debt? If so, it may be time to start investing your money. Investing is most likely to help you reach longer-term goals: things for which you need to build up a large amount of money, but you won’t need it any time soon. Consider investing when:

• You don’t need the money within the next five years: Keeping your money in investments for at least five or ten years may lead to better returns in the end. Long-term investing, also known as a buy-and-hold strategy, is the idea that you hang onto assets long enough to ride out the inevitable ups and downs of the stock market.
• Your employer offers 401(k) matching: Many employers will match your contributions dollar for dollar up to a certain percentage of your salary. It’s like free money for your retirement account. If your financial situation allows, invest at least as much as your employer will match so your retirement account grows more quickly. 
• You want tax advantages for retirement investments: The money you put into 401(k)s and traditional IRAs is pre-tax, meaning you don’t pay income tax until you withdraw it in retirement. Your contributions now are subtracted from your taxable income when you file your return, reducing your current tax burden. 

Whether you’re a hands-on DIY investor, prefer working with a financial advisor, or enjoy the ease of an automated robo advisor, opening a brokerage account is the first step in your investment journey.  

Saving vs. investing: strike the balance you need for financial security

Saving and investing aren’t mutually exclusive. Understanding how to use both strategies empowers you to work toward your goals in the short term and far-off future using the right types of accounts for what you want to achieve. Something saving and investing have in common: the sooner you start, the more time your money has to grow. Start finding your balance today.

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The post Saving vs. Investing: 2 Ways to Reach Your Financial Goals appeared first on Stash Learn.

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.

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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. A good financial plan not only considers your current finances—including your cash flow, budget, debt, and savings—but also your long-term financial goals like saving for retirement. 

In this post, we’ll break down the necessary steps to create a financial plan, including:

• 1. Find your net worth 
• 2. Examine your cash flow 
• 3. Identify your financial goals
• 4. Build an emergency fund 
• 5. Contribute to an employer-sponsored retirement plan
• 6. Pay down high-interest debt  
• 7. Invest to build wealth 
• 8. Periodically review and adjust your financial plan 

Dive into a more thorough breakdown below as we help answer the question: what is a financial plan? 

8 essential financial planning components

Financial planning is like a road map to help you meet both your short-term needs and long-term goals. While every financial plan is different, they typically include the following: 

• Your net worth: your assets (things you own) minus your liabilities (debts) 
• Cash flow and spending analysis: your flow of money coming in and out each month (or year) and analysis of spending patterns
• Financial goals and priorities: your financial goals, both big and small, short term and long term 
• Budget and savings plan: your current cash flow and financial goals can guide how you set up your monthly budget 
• Debt management: any debts you currently have and a plan to pay them down. 
• Retirement plan: a plan for saving a portion of your income (15–20%) for retirement, ideally in an employer-sponsored retirement account like a 401(k) or IRA
• Long-term investing: additional outside investments to further build wealth, such as index or mutual funds  
• Tax reduction strategy: a strategy for minimizing taxes on personal income

Remember, there’s no template for the perfect financial plan—it should be customized to fit your unique circumstances and priorities. Review each financial plan component and adjust as necessary. 

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How to create a financial plan in 8 steps

Personal financial planning is an ongoing process and should be highly unique to your needs. That said, addressing the following steps can help you create a well-rounded plan. 

1. Find your net worth 

Find your net worth by assessing your current assets and liabilities. Assets are anything of value that you own, like a home, car, cash savings, or investments. Liabilities include anything you owe money on, like credit card debt, student loans, car loans, or mortgages. 

To find your net worth, subtract your total liabilities from your total assets. This gives you a clearer picture of your current financial health.

2. Examine your cash flow 

A financial plan can’t exist without first knowing where your money is going each month. Review how much you earn and spend to determine how much you could reasonably save and invest on a monthly basis—or where you could cut back to save and invest more.

Start by documenting your mandatory monthly expenses like rent or mortgage payments, home or car insurance, bills, and utilities. Then, factor in other costs like food and groceries, transportation, and subscriptions before moving onto additional spending categories like clothes, travel, and entertainment. Subtract your expenses from your income to see what’s leftover. 

This should give you a better idea of exactly where your money is going each month. From here, you can assess if your current spending aligns with the financial goals you’ll outline in the next step. 

3. Identify your financial goals  

You can’t make a financial plan without first knowing what your financial goals are. Your financial goals are simply the things you hope to accomplish with your money, both short term and long term. Ultimately, it means considering what you want in life and how you can put your money to work to get there. On a high level, consider the following: 

• What do I want to achieve? 
• What’s most important to me? 
• What type of lifestyle do I want to lead? 

Use these questions to make a list of goals, and break them down by short term, medium term, and long term: 

• Short-term financial goals can be achieved in one to three years (i.e., building an emergency fund).
• Medium-term financial goals can be achieved in 3-5 years (i.e., saving for a down payment on a home).
• Long-term financial goals can be achieved in 10+ years (i.e., retiring by 45).

Are you hoping to pay off debt or build an emergency fund? Those are examples of short-term goals. Long-term goals could include saving for retirement, saving for your future children’s college funds, or building a dream home in a new city. 

Determine how much each goal will cost and the time frame for when you hope to achieve it. The more specific your goals are, the easier it will be to take action on them. 

4. Build an emergency fund 

If you don’t already have an emergency fund, prioritize building one. Ideally, it should be enough to cover three to six months of living expenses, but if you can’t afford that yet, you can start small and add more over time. Stashing away even just $1,000 can help cover any small emergencies, sudden medical procedures, or unexpected repairs. You can incrementally add more to your fund over time. 

5. Contribute to an employer-sponsored retirement plan  

If it’s available to you, the next step is to ensure you’re contributing to an employer-sponsored retirement plan like a 401(k)—especially if your employer offers a matching contribution. If they do, prioritize contributing at least the minimum amount needed to get the match, as that match is essentially free money. 

Even if you have high-interest debt, you should still prioritize contributing to an employer-sponsored retirement account (at least the minimum amount to get the match). The reason is because employer matching funds are tax-free, risk-free, guaranteed returns—often at a higher rate than your debts.   

6. Pay down high-interest debt 

Once you’re taking advantage of your employer match, you should make a plan for tackling any debt. Prioritize high-interest debt first, as you could be paying double or triple what you actually owe due to high interest rates. In any case, a good starting point is to make the minimum monthly payments on all of your debts. 

There are a variety of approaches to paying off debt, from increasing your monthly credit card payments, getting a debt consolidation loan, or using the snowball method or avalanche method. Choose the approach that works best for you, but remember to pay off the most demanding debt first. Ultimately, the goal is to become debt-free as soon as possible, so figure out how much you can feasibly allocate toward debts each month and get started. 

7. Invest to build wealth  

Make a plan to invest in the stock market based on your financial goals and risk tolerance. Regardless of your specific long-term financial goals, planning to have enough income in retirement is key to any well-rounded financial plan. 

This could include various savings accounts and retirement accounts like 401(k)s and individual retirement accounts (IRAs), which are a good starting point for your retirement savings. From there, you can add other accounts to fit your goals. While there are countless ways to invest, ETFs or mutual funds make excellent long-term investments due to their stable growth over time. 

Rather than putting all your eggs in one basket by investing in a single stock, ETFs or mutual funds contain shares of hundreds of different companies within a single fund, instantly diversifying your portfolio. This makes them a great choice for new investors who don’t have the time or experience to analyze individual stocks but want a reliable way to invest for the long term. A diversified portfolio will help you grow your investments steadily over time.

8. Periodically review and adjust your financial plan 

Regularly check in on your financial plan to track your progress toward goals and make any adjustments. This may include altering timelines for certain goals, setting higher savings minimums, or increasing your investments or rebalancing your portfolio. 

You might find that you don’t have the same priorities five years down the road, and life is full of unexpected circumstances that can impact your plan. Stay flexible and expect to revise your plan based on your unique experiences. 

Here are some check-in questions to consider (or questions to regularly ask a financial advisor): 

• How is my current portfolio working toward my goals?
• What major life events are approaching (if any) that I should plan for (starting a family, moving cities, starting a business, etc.)? 
• Are my current spending and saving habits serving the lifestyle I want to live?
• How do I feel about my current budget?
• Are there any upcoming big purchases (over $500) that I should be aware of?
• What is my top spending category? Does this feel aligned with what I value?
• Can I increase my automated savings/investments?

Committing to annual check-ins ensures your financial plan remains aligned with your goals. 

Additional financial planning considerations 

The steps above will position you for financial success early on. 

Once you’ve made progress with your initial goals and investments, consider these additional financial plan components:

• Risk management planning: you may already have home or car insurance, but don’t forget about life and disability insurance, personal liability coverage, and property coverage to further protect you in the event of unexpected emergencies. 
• Tax reduction planning: once your investments are set, you can move on to more advanced goals like creating a tax reduction strategy to minimize taxes on personal income. 
• Estate planning: having a plan for who will inherit your estate (your possessions and valuables) might seem irrelevant if you’re young, but you’ll eventually need to consider this important financial plan component. This ties into your generational wealth goals that will directly impact your family and loved ones, including your will. 

Remember, the only asset more valuable than money is time. The steps above are key to protecting all the hard work you’ll put into the rest of your financial plan. If you’re feeling overwhelmed at the thought of navigating a financial plan on your own, a financial advisor can be an incredible resource. 

Eventually, you may consider eliciting some outside help from any of the following types of financial advisors: 

• Traditional financial advisor: a financial advisor can help with all aspects of your financial life, including saving, investing, insurance, and other forms of planning. If you have a complicated financial situation, they also offer specialized services like tax preparation and reduction or estate planning. 
• Online financial planning services: instead of visiting a financial planner in person, you can access the same services virtually. Most offer the same services as a traditional advisor, such as investment management and helping you build a financial plan. 
• Robo-advisor: if you’re only looking for help managing or building your investment portfolio, a robo-advisor can help—and at a low cost. A robo-advisor automatically builds your portfolio based on your investment preferences, and manages it on your behalf. Robo-advisors can be a less expensive, more accessible avenue for investors who don’t want to cover the cost of a personal financial advisor.

If you choose to go with a traditional financial advisor, we recommend fee-only advisors who are fiduciaries—meaning they’re legally obligated to act in your best interests. When looking for a financial advisor, be sure to find one who cares about your big picture: paying off debt, having emergency savings, covering tax bases, and building wealth for the long term.

At the end of your financial plan, you’ll have a strong understanding of where you are financially, where you want to be, and how you’ll get there. While finances as a whole can be complicated, the financial plan components are quite simple—and once you get started, you’ll feel more empowered to build the financial life you deserve. Successful wealth building doesn’t happen overnight, but planning for the long-term will pay off in big ways down the road. 

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FAQs about financial planning

Find answers to any lingering questions about financial planning below.

What is the purpose of a financial plan?

A financial plan is a road map for putting your money to work in a way that serves the life you want to lead, both now and in the future. Achieving short-term and long-term goals, gaining control over your finances, and ensuring financial security during retirement are all key purposes of a financial plan. 

Why is financial planning important? 

Financial planning is more than just accumulating wealth—it’s about using that wealth intentionally in a way that supports your core values and dreams in life. When you have a financial plan, you’re more likely to put your money toward only the things that serve your highest goals. Financial planning also helps reduce stress about money. 

What are the types of financial planning?  

There are a variety of types of financial planning, including cash flow planning (your monthly income and expenses), investment planning (using index or mutual funds to achieve long-term wealth goals), insurance planning (prioritizing health and life insurance), and tax planning (strategically minimizing income taxes). 

The post What Is a Financial Plan? A Beginner’s Guide to Financial Planning appeared first on Stash Learn.

When your income barely covers your monthly expenses, it can be tough to find extra money to put into savings. Yet putting aside money for emergencies and future goals is an important part of building long-term financial security. The good news is that there are several strategies you can use to cut costs and begin saving.  

In this article, we’ll cover these savings tips:

1. Estimate your income
2. Identify your fixed monthly expenses
3. Manage your variable expenses
4. Don’t forget about periodic expenses
5. Prepare for unexpected expenses
6. Compare your income and expenses
7. Choose your budgeting method
8. Remember to budget for discretionary spending
9. Implement the 30-day rule
10. Try a cash diet
11. Delete online payment info
12. Plan out meals to reduce food waste
13. Be strategic at the grocery store
14. Make more coffee at home
15. Reduce restaurant spending
16. Use a cashback credit card
17. Opt for thrift stores and local shops
18. Use browser extensions for online shopping
19. Explore community events and free concerts
20. Compare car insurance plans
21. Maintain a good driving record
22. Take a close look at your coverage level
23. Remove policy add-ons you don’t need
24. Switch to LED bulbs
25. Optimize laundry habits
26. Adjust your refrigerator temperature 
27. Use your dishwasher’s air-dry setting
28. Manage home’s temperature
29. Change furnace filters regularly
30. Conduct a home energy audit
31. Cancel unnecessary subscriptions
32. Look for ways to save on essential subscriptions
33. Choose a debt repayment strategy
34. Consider debt consolidation
35. Establish an emergency fund
36. Plan for short-term goals
37. Set medium-term goals
38. Focus on long-term goals
39. Check your current savings account interest rate
40. Switch to a high-yield account for better earnings
41. Automate transfers to your savings account
42. Define your financial goals and values
43. Limit your time on social media
44. Have a weekly money date
45. Celebrate your financial wins

Track your spending against your income

Scouring through a list of all the best ways to save money can be fun. But before start trimming down your spending, you need to get a clear picture of where your money is going every month. So, the first step in saving money is to track your spending and compare it to your income. 

Here’s how.

1. Estimate your income

Income is all the money you bring home. You need a clear picture of what’s coming in to make sure you have enough to cover your expenses and savings goals. Make a list of all sources of income, which might include:

• Your net pay from your job 
• Extra cash you make from a side hustle or passive income stream
• Child or spousal support
• Disability or veterans benefits
• Dividends or other income from investments

2. Identify your fixed monthly expenses

Fixed expenses are your life’s must-haves. They’re usually consistent every month. Understanding these is crucial for creating a budgeting plan and avoiding credit card debt. Common expenses include: 

• Rent or mortgage
• Utilities, like electricity, water, and gas
• Phone and internet
• Health insurance
• Healthcare, like prescriptions and regular doctor appointments
• Minimum debt payments, such as student loans and car payments
• Transportation, like bus fare, gas usage, car insurance
• Childcare and school tuition
• Streaming services and subscriptions
• Membership fees, like a gym or co-working space 

3. Manage your variable expenses

Variable expenses are just like they sound: spending that varies from month to month. While the amount of money you spend may change, you can get an average by tallying up what you’ve spent over the last six months and dividing by six. Expenses you may want to capture:

• Groceries
• Dining out
• Entertainment
• Pet costs, such as food, grooming, doggy daycare
• Home maintenance
• Medical and veterinary bills
• Travel
• Gifts
• Personal care and wellness

4. Don’t forget about periodic expenses

Periodic expenses occur less frequently, so they’re easy to forget about. But you’ll need to add them to your budgeting plan if you want a complete picture of your finances. The key is to break these costs down into how much they cost monthly. 

For example, if it costs $120 a year to renew your car’s tags, divide that amount by 12 to get $10 a month; that’s how much money you’d need to put aside each month to have the amount you need when the bill comes due. Check your records for expenses like:

• Annual vehicle registration
• Annual tax preparation
• Quarterly utilities
• Subscriptions that renew annually
• Car maintenance
• Home maintenance
• Periodic healthcare, like new glasses or annual physicals 
• Clothing and shoes
• Household items and furniture

5. Prepare for unexpected expenses

Unexpected expenses like emergency repairs and medical bills are unpredictable. Creating an emergency fund can be a good way to cover these costs without having to rack up credit card debt. Some unexpected expenses you could save for include: 

• Car or home repairs
• Medical and dental bills 
• Unplanned travel
• Emergency vet bills
• Weather emergencies
• Replacement appliances
• Unexpected sudden loss of income

6. Compare your income and expenses

Once you’ve gathered the info about your income and expenses, it’s time for some simple math. Add up all your monthly expenses, including averages for variable expenses and periodic expenses. Then tally up your monthly income. 

When you compare the two numbers, ideally your income will be larger than your expenses. If it’s not, you may want to consider how to save money by reducing discretionary spending or trimming the cost of necessities.

Create a budget that works for you

With your list of income and expenses in hand, you’ll be ready to make a budget. In its simplest form, a budget is a list of your planned monthly income and expenses. Once you set it up, you can track spending in real-time, compare it to your plan, and adjust as needed. 

Making and sticking to a budget is half the battle of saving money. It gives you a clear picture of your finances in real time and helps you plan for your goals, like getting out of debt, saving up for a vacation, or building an emergency fund. 

It also allows you to manage short-term spending, like whether you can order take-out for dinner without putting yourself in a pinch when your car payment is due. 

7. Choose your budgeting method

There are many approaches to budgeting, including budgeting for young adults. While they all have benefits, what matters is finding one that works for you. Here are a few popular budgeting methods you might try:

• 50-30-20 budgeting: You categorize your expenses and allot income accordingly: 50% to needs, 30% to wants, and 20% to saving and investing.
• Zero-based budgeting: You assign every dollar to a specific expense so that the difference between your income and expenses is zero. 
• Pay yourself first method: Each month you first set aside money for saving and investing, which cuts spending and prioritizes your long-term goals.
• Envelope method: You allocate funds to expense categories and put the money into literal or digital envelopes; when an envelope is empty, your spending on that category is done for the month.

8. Remember to budget for discretionary spending

While budgeting for the necessities, be sure to include space for some discretionary spending in your budget too. This promotes healthier spending habits, as it can be easier to stick to your spending plan when you have money specifically set aside for fun. Also, it can give you a bit of a buffer if you underestimate your needs in one of your budget categories.  

Cut out impulse purchases

Everyone has those moments: the last thing you want to do after a long day is cook dinner, so you open a restaurant delivery app and unwittingly spend a good chunk of your grocery budget on one meal. Or an ad for a cool jacket pops up on your screen, you click the link, and suddenly you’ve spent money you’d planned to put in savings on something you don’t really need. 

Impulse spending is only human, but it also creates a huge barrier to saving money. Consider trying these tricks to help you put the brakes on that spur-of-the-moment spending that undermines your budget plans.

9. Implement the 30-day rule

If you find you want to make an unplanned purchase, set the money aside and wait 30 days. This is known as a 30-day spending rule. If after a month you still want to buy the item, go ahead. But you may find that the delay takes some of the shine off of the thing that seemed so appealing at first glance, and a month later you might decide to put that money into your savings account instead.

10. Try a cash diet

A “cash diet” is where you commit to only making impulse buys in cash. Build it into your budget with an “allowance,” then take the money out in cash at the beginning of the month. Swiping a card makes impulse spending that much easier, but handing over actual cash has a greater psychological impact and makes you stop and think about the purchase more carefully. 

11. Delete online payment info

The more effort it takes to shop online, the more likely you’ll be to pause and think about whether you truly want to fork over your money on a whim. Delete your saved debit or credit card information on any website where it’s stored and forget the autofill option; when you want to buy something, get your physical card and enter the number. That little work might prod you to think about your budget and saving goals.

Look for ways to save on food

If you’re like most people, food is one of your three biggest spending categories. Between groceries and dining out, it can add up quickly. Here are a few ways to trim down food costs.

12. Plan out meals to reduce food waste

Feeding America states that America wastes 80 million tons of food, totaling $444 billion, each year. The USDA adds that the average American family of four loses $1,500 to uneaten food per year.

Planning out your meals and snacks for the week helps prevent groceries from being wasted. For instance, if a recipe calls for half a head of cauliflower, you can plan to use the other half later in the week instead of watching it go bad in the fridge.

13. Be strategic at the grocery store

Efficient grocery shopping and meal planning can lead to significant savings. Here are some other ways to help keep your grocery costs down and foster better savings habits:

• Scan sale circulars and grocery store apps to find the best deals, and use print or digital coupons. 
• Consider shopping at several grocery stores to get the best price on different items, if time allows. 
• Check your pantry before heading to the store so that you don’t double up on products you already have.
• Shop from a list, which will help you avoid impulse spending on products that grocers put in special displays.
• Purchase items in larger quantities and use them in several meals throughout the week or freeze portions for later use.
• Buy store brands or generic brands instead of name-brand products. Most have the same ingredients.
• Keep grocery trips down to once a week, if possible, which will force you to use up the food you already have at home.
• Shop online and pick up your groceries to avoid the temptation of going off your list while browsing the shelves.

14. Make more coffee at home

It’s probably not a good idea to cut out a coffee shop for good. It’s a cozy experience all in itself. But frequent visits to the coffee shop can quickly add up, especially when a large oat milk latte can easily cost $7, plus tip. Consider brewing more coffee at home and treating yourself to your favorite coffee shop once or twice a week.

15. Reduce restaurant spending

Dining out often can significantly impact your budget. Limit restaurant spending by exploring new recipes at home, opting for takeout over dine-in to avoid additional costs like tips, or taking advantage of restaurant deals and specials.

You don’t have to cut out restaurant food completely. Start with small amounts. Try to eat out one or two fewer times per week than you do now. Over time, continue to trim it back until your food budget is where you want it to be.

16. Use a cashback credit card

For necessary purchases like grocery shopping, consider using a cashback credit card. These cards return a percentage of the amount spent, reducing the overall cost and potentially saving you money over time. 

Only use this strategy if you’re sure you can pay your credit card balance in full each month. Otherwise, stick with your debit card or look for a debit card that earns rewards. 

Discover ways to save on shopping and entertainment

There are tons of ways to save on shopping and entertainment. Explore these practical tips to cut down your expenses while still having fun.

17. Opt for thrift stores and local shops

Skip the brand names and shop at thrift stores and local stores in your own city instead. You’ll find unique items at lower prices and keep your shopping cart total low. Plus, you’re supporting the community!

If you find yourself on a wedding guest list, use online thrift stores like Poshmark and Tradesy to snag the perfect outfit at a discount.

18. Use browser extensions for online shopping

Online shopping is convenient but can lead to overspending. To avoid this, use browser extensions. They help compare prices and find discounts, ensuring you don’t miss out on lower prices and keep those small amounts from adding up.

19. Explore community events and free concerts

One of the easiest expenses to reduce is entertainment costs. Your own city likely offers numerous free attractions and activities. 

• Explore local parks or community spaces for a change of scenery without the added expense. 
• Visit museums with no admission fees and community centers that host free events. 
• Look for free concerts that not only offer entertainment but also provide a chance to socialize and discover local talent.

Save money on car insurance 

There are many avenues to explore when looking at how to save money on car insurance: comparing plans, maintaining a good driving record, and taking a close look at your coverage level and add-ons.

20. Compare car insurance plans

Even if you’re happy with your current insurance company, requesting quotes from several other companies might reveal opportunities for saving money if you switch. You can also call your current insurer and ask if you’re eligible for any discounts; they’re often willing to offer an incentive to keep your business. 

21. Maintain a good driving record

Car insurance rates are based on several factors, including your driving record and your credit score. That means being a safe driver and improving your credit can save you money on car insurance. 

22. Take a close look at your coverage level

If you don’t have an outstanding loan on your car, another way to save money is to change the type of coverage you carry. Generally, there are three types of coverage available: 

• Liability insurance: Liability covers only the other person’s damages if you get into an accident; this is the minimum level of coverage required by law.
• Collision insurance: Collision pays to repair damage to your car if it crashes into another vehicle or object.
• Comprehensive insurance: Comprehensive covers damages and pays if your car is stolen or damaged by storms, vandalism, or hitting an animal. 

Collision and comprehensive insurance never pay more than what the car is worth. So, if you have an older car that’s worth less than your deductible plus the cost of annual coverage, you might be paying more than you need to; you could save in the long run by only carrying the liability insurance mandated by your state.

23. Remove policy add-ons you don’t need

Review your current policy to see if you’re paying for any add-on services that you don’t need. Many policies offer extras like rental car reimbursement, roadside assistance, or windshield repair. If you’re paying for them, consider whether they’re really worth the cost. 

Once you finish this process for car insurance, do it again for life insurance, home insurance, and any other policies you have.

Reduce your energy costs

Saving money on electricity can add up over a year. Much like with groceries, one of the simplest ways to start is to reduce waste. A few simple habits can boost efficiency and shave dollars off your bill.

24. Switch to LED bulbs

LED bulbs use 75% less energy than incandescent bulbs. Making the switch can work wonders in helping you cut down on your electricity bill.

25. Optimize laundry habits

Wash your clothes in cold water and avoid overfilling the dryer to conserve energy. Adopting these simple habits can significantly lower your energy consumption and reduce your utility bills.

26. Adjust your refrigerator temperature 

Maintain your refrigerator at 37°F and your freezer at 0°F, and clean the coils periodically to ensure optimal efficiency. Proper temperature settings and regular maintenance can help prevent unnecessary energy use and prolong the life of your appliance.

27. Use your dishwasher’s air-dry setting

Use the air-dry instead of the heat-dry setting on your dishwasher to save energy. This small adjustment can make a noticeable difference in your energy bill without compromising the performance of your dishwasher.

28. Manage home temperature

Close shades on hot days and turn off the air conditioner when not needed to reduce cooling costs. Being mindful of home temperature and making adjustments based on the weather can lead to substantial energy savings.

29. Change furnace filters regularly

Regularly changing your furnace filter ensures it runs efficiently, saving you money in the long run. A clean filter improves air quality and allows the furnace to heat your home more effectively, avoiding unnecessary energy waste.

30. Conduct a home energy audit

If you own your home, consider making energy-efficient updates. Your local utility company or a professional home inspector can conduct a home energy audit and tell you how much energy your home uses, where inefficiencies exist, and which fixes you should prioritize to save energy. 

Review your current subscriptions

Have you been keeping up with your Mandarin lessons, or is it time to let go of that language-learning app? When you turn on the TV, how many services do you rarely, or never, actually use? 

31. Cancel unnecessary subscriptions

When you’re looking for savings opportunities, review all your subscriptions. Keep the ones you use at least three times a week and cut ties the rest. Look at things like phone apps, music services, TV and movie streaming, print and digital publications, and any free trials you signed up for but forgot to cancel. What do you really use and need? Cancel subscriptions that don’t enhance your life.

32. Look for ways to save on essential subscriptions

There may be ways to save money on some of the subscriptions you want to keep. For example, some services have multiple tiers or allow you to share an account with friends and family to split costs. Also, some phone or internet plans have a streaming service included. Check to see if your library has a video or music streaming app.

Pay off high-interest debt

Whether it’s personal loans, student loans, auto loans, credit card bills, or mortgages, around 340 million Americans carry some form of debt. Saving money can be a struggle when your budget is burdened with monthly payments. Credit card debt is often a particularly tough hole to dig out of; the average credit card interest rate is 27.81% as of January 2024.

33. Choose a debt repayment strategy

The sooner you make a plan to get out of debt, the sooner you can stash more money away in your savings account, emergency fund, and investments. If your budget allows, start paying down your high-interest debt like credit cards, personal loans, and car loans. Doing so can also help you improve your credit score.

But which loans should you tackle first? There are two popular approaches:

• The avalanche method is focused on paying off the debt with the highest interest rate because that higher rate costs you more money the longer you hold the loan.
• The snowball method is based on paying off your smallest balance first, then moving on to the next-highest balance, to give you a sense of momentum and accomplishment.  

34. Consider debt consolidation

Debt consolidation can be a useful strategy for managing and reducing your debt. It involves combining multiple debts into one, often with a lower interest rate, making it easier to manage and pay off. This method can help reduce your monthly payments and save you money on interest over time, enabling you to allocate more funds towards savings.

Set realistic savings goals

Your monthly budget is a plan for what you’ll do with your money. That includes covering necessities like rent, groceries, and utilities as well as discretionary purchases. But your budget isn’t only about spending; it’s also your plan for saving up. So when you’re planning how to allocate your income, be sure to budget for savings. 

In addition to asking how to save money, ask yourself why you want to save money. That’s how you determine your goals, and saving up can feel more achievable if you determine specific, realistic aims.

35. Establish an emergency fund

When the unexpected strikes, your emergency fund is there to cover expenses that you might otherwise have to put on a credit card or leave your budget squeezed. Keep your emergency fund in a savings account so it’s easy to access in the event of things like a big car repair, medical bill, or even covering living expenses in the event you’re laid off. 

Ideally, you’ll have enough money to cover six months of living expenses in your emergency savings. That may sound like a large sum, but if you put a little aside each month, you may be surprised at how quickly it adds up.

36. Plan for short-term goals

Think about what you want to save for in the next one to three years. Maybe it’s fun stuff, like a vacation, a new bike, or a gaming console. You might want to save for practical things, like replacing your aging car or moving into a bigger apartment. 

For each goal, figure out how much money you’ll need, how long you’ll save, and how much you’ll have to set aside each month to get there. 

37. Set medium-term goals

Saving for things three to five years in the future is also more achievable when you set specific goals; your motivation to keep saving may be stronger if you can picture what you’re going for. You might save for a downpayment on a house, remodel if you already own a home, or start a small business

38. Focus on long-term goals

When you think a decade or more into the future, goals might be harder to picture, but saving for them now can help you get there. Building up retirement savings and paying for your children’s college education are big targets, so focus on consistently saving a certain amount over time. When the far-off future arrives, you’ll be better prepared for it.  

Open a high-yield savings account

If you’re wondering how to save money more quickly, think about interest. When your money earns money, you add more to your nest egg without lifting a finger. The higher your savings account’s interest rate, the more your money will grow. And with compound interest, the interest you’ve earned also earns interest, so your savings grow even more rapidly. 

39. Check your current savings account interest rate

If you’re keeping a large amount of money in a basic savings account at a big bank, you could be missing out on some serious earning potential. In December 2023, the average national bank savings account interest rate was only 0.47%, and it was a meager 0.01% at the largest banks.

If you don’t know your current savings account interest rate, log into your dashboard or look at your latest bank statement. While you have your bank accounts pulled up, review your checking account to see if you’re being charged any pesky bank fees that could be hindering your ability to save money. 

Use a high-yield savings calculator to see if you could be earning more.

40. Switch to a high-yield account for better earnings

If your current savings account isn’t earning much, take 15 minutes today to sign up for a high-yield savings account. A high-yield savings account can help you reach your short-term savings goals and build your emergency fund faster. 

These accounts work just like regular savings accounts; some have minimum balance requirements or monthly fees, but many don’t. With the proliferation of online banks and credit unions, there are a growing number of options; some online banks offer high-yield savings accounts with annual percentage yields of 4% or more. 

Curious about other ways to put your idle cash to work? Learn more about this investment.

41. Automate transfers to your savings account

Saving up money is an exciting idea in theory; in practice, though, it can take a lot of discipline. That’s where automatic transfers come in. Setting up an automatic monthly transfer from your checking account to your savings account is an effortless way to make sure you don’t accidentally spend. 

Another option is to have your employer direct deposit a certain percentage of your paycheck into your savings account. As the old saying “out of sight, out of mind” goes, tucking away your funds before you see them will help to reduce the likelihood that you’ll spend all of your money each month.

Stop trying to keep up with the Joneses

Your college roommate is posting photos from another Caribbean vacation. Meanwhile, you’re clipping coupons and eating leftovers for lunch. When you compare your life to what everyone else around you seems to have, it can lead to anxiety and poor self-esteem. 

Trying to keep up with the Joneses can lead you to torpedo your financial plan, spend money on things you don’t really want, and even accrue unmanageable levels of debt. 

Learning how to save money isn’t just about the logistics of budgeting and adding to a bank account. It’s also about adopting a mindset that puts your financial priorities first:

42. Define your financial goals and values

Get clear about your money values and both the short-term and long-term financial goals you’re working toward. This clarity will help you stay focused on your priorities, rather than getting swayed by others’ spending habits.

When you see someone else splurging, picture the things you’re saving for. This mental imagery can act as a powerful motivator and reinforce your commitment to your financial objectives.

43. Limit your time on social media

Minimize your time on social media and unfollow accounts that make you feel envious or discouraged. Reducing exposure to ostentatious displays of wealth can help alleviate the pressure to conform to societal spending norms.

Associate with people who have similar values and personal finance goals. Being around individuals with comparable financial mindsets can help reinforce your saving habits and reduce the temptation to overspend.

44. Have a weekly money date

Make a weekly date with yourself to update your budget and check on your progress. Regularly monitoring your financial situation keeps you informed and motivated to achieve your set savings goals. If you have a partner or spouse, be sure to include them. Only if they know your household financial goals and the steps you’re taking to achieve them, can they make fully informed spending decisions with household dollars.

45. Celebrate your financial wins

When you achieve something, whether it’s hitting a set savings goal or coming in under budget on your groceries, celebrate your accomplishment. Acknowledging your successes, no matter how small, can boost your morale and keep you motivated on your savings journey.

Save and invest for the long haul with Stash

Once you get clear on your goals and figure out how to save money in ways that work for you, you may find yourself looking for more ways to work toward your long-term financial health. And that could include investing. 

If that sounds daunting, you’re not alone: 90% of Americans say they want to invest, but nearly half don’t know where to start. Stash makes it easy to begin putting your money into the market with automated investing and fractional shares that allow you to become an investor with as little as $5.

The sooner you start saving money and investing, the longer your money has to grow. Whatever methods you use to save, and no matter how small you start, taking the first step can set you on the course toward long-term success. 

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Frequently asked questions about how to save money

What is the 30-day rule?

The 30-day rule is a simple budgeting technique where you wait 30 days before making a non-essential purchase. If you need help controlling impulse purchases, this rule is a good one to use. It helps you determine whether the item is a true necessity.

How can I save $1000 fast?

To save $1,000 fast, consider cutting non-essential expenses, selling unused items, working extra shifts, or finding additional sources of income. Creating a budget and tracking expenses can also help you best save for your goals.

How can we save money in the current economy?

In the current economy, you can save money by reducing discretionary spending, shopping smarter with discounts and coupons, and prioritizing needs over wants. Consider refinancing high-interest loans and consolidating debt to further reduce expenses.

How can I save money with high inflation?

During high inflation, prioritize essential expenses, and cut back on non-essential spending. Consider buying store brands instead of name brands, and look for discounts and sales. Also, keep money in interest-bearing accounts to offset the impact of inflation.

Is it safe to keep money in the bank during inflation?

Yes, keeping money in the bank is generally safe during inflation due to the FDIC insurance protecting deposits up to $250,000 per depositor, per bank. However, the purchasing power of your money may decrease, so consider diversified investments to hedge against inflation.

The post How to Save Money: 45 Best Ways to Grow Your Savings appeared first on Stash Learn.

What is the 50-30-20 budget?

The 50/30/20 budget rule is a budgeting guideline in which you divide your monthly income among three broad categories: 50% to needs, 30% to wants, and 20% to savings/investing. 

• 50% goes to needs: These are your essential living expenses and bills that must be paid; if you have debts, include at least the minimum payments in this category.
• 30% goes to wants: These are the things you’d like to spend money on but could live without.
• 20% goes to savings: This bucket includes sinking funds for short- and mid-term savings goals, your emergency fund, and long-term investments like retirement.

What’s the difference between a want and a need?

What counts as a “want” and what counts as a “need” will look different for different people. 

Your needs are unavoidable bills. These generally include food, housing, transportation, utilities, and debt payments. They can also include things like childcare, medical costs, care for family members, tithing, and more. Think about all the money you have to spend in a month to take care of your and your family’s must-haves: those are your needs.

On the other hand, your wants are the things you’d like to have or do but could do without. Typical wants include things like entertainment, takeout, hobbies, gym memberships, and subscriptions. They can also include things like classes, gadgets, home decor, and other more expensive purchases.

Defining what you need versus what you want is very personal. For one person, a gym membership may be a want, something they enjoy but could give up if they had to. Someone else may be unable to live without a gym membership due to chronic pain or a lack of other options. Similarly, your lifestyle, where you live, who you support financially, and your dependents will all impact what you define as a want versus a need. A single young adult’s budget may look different than one for a family or someone with multiple dependents. For example, a parent working from home who doesn’t have childcare options might see a streaming service subscription as a need if their kids get home from school a couple of hours before the workday ends; that expense may be necessary for their kids to be safely occupied while they get their work done. But a college student who has a tight budget may see that subscription as a nice-to-have.

Organize your needs and wants, on paper or mentally, before you get started making a budget. That way, you’ll go into your 50/30/20 budget with a framework already started.

How do you budget for savings and investing?

The savings category is for your short, mid-term, and long-term savings and investments. There are three primary areas to consider.

• Emergency fund: Your first savings priority is an emergency fund. Many experts recommend keeping six months of expenses in your savings account so you won’t have to struggle if your water heater breaks, your cat needs surgery, or you have an unexpected medical cost. This amount can also be a buffer to get by if you unexpectedly lose your job.
• Savings goals: This is the money dedicated to your short- and-mid-term goals. These goals might include smaller expenses like upgrading your laptop, buying new shoes, or getting tickets to an upcoming concert. You might also have bigger goals like buying a car, funding a wedding, or putting a down payment on a house. The size and type of your goals will vary and change over time.
• Retirement: Finally, putting aside money for retirement is part of your savings/investing category. Most experts recommend you dedicate at least 10%-15% of your monthly income to retirement. Consider starting with a set percentage going into your retirement account and increasing your investments annually. The sooner you start, the better, as your investments can benefit from the power of compounding.

How you save money, how much you’re investing, and what you save for are going to shift over time as you achieve your short-term goals and are able to focus on your long-term investment opportunities. 

How do you budget for debt repayment?

Making the minimum payments on your debts is generally considered a need, because missing those can incur fees, damage your credit score, and even lead to collections. However, paying more than the minimum payments can help you get out of debt faster and reduce the amount of interest you pay in the long run. 

So if you have a lot of high-interest debt, it may make sense to shift the 50/30/20 rule temporarily to pay down your debt faster. You could use a 60/20/20 rule, or even 70/20/10, categorizing extra debt repayment as a need and devoting more of your income to that category.    

5 steps to budgeting with the 50/30/20 rule

Since your budget is unique to your lifestyle and circumstances, there are several steps you need to take to ensure you have all the information you need for a successful 50/30/20 budget.

1. Calculate your monthly take-home income

Step one is to understand what you have to work with. Add up the money you make each month from every income source you have. Look at your paystubs to see your actual take-home pay, which is what you get after you pay taxes. Also include any other money coming in, like child-support payments, interest on savings, side hustles, or second jobs. If you make money as an independent contractor, don’t forget to set aside a percentage of your earnings from taxable income; don’t include the money you’re putting aside to pay your taxes when calculating your take-home income. If your income is inconsistent, consider starting by averaging what you made over the past three months and using that as your framework. 

Once you know how much money you have, it’s time to bucket it based on the 50/30/20 rule. 

2. List all your needs

Next, make a list of your needs, those things you can’t live without. Start with your monthly bills, and then consider your quarterly and yearly expenses. You can account for those expenses by dividing them by three, six, or twelve. 

For example: 

• A quarterly water bill that’s $150 can be budgeted as $50 a month: $150 divided by three months
• If you get a $60 oil change every six months, that could be $10 a month: $60 divided by six months
• A yearly insurance bill that’s $1,200 can be $100 a month: $1,200 divided by 12 months

Now add up all those expenses and see how close you fall to the 50% allocation for needs. If your needs are 50% of your income, or pretty close, you’re ready to take a look at your wants. 

If your needs are more than 50%, look for opportunities to reduce your costs. Are there cheaper options for some of the things on your needs list? Could you get by with a less expensive phone plan? Shop around for lower insurance rates or special internet/phone bundles. Finding less expensive options is ideal, but not always possible. Don’t be afraid to shift to a 60/20/20 structure while you look for cost-cutting opportunities.

3. Determine your wants

Your next priority is understanding your wants. Initially, focus on the money you already spend to see if it adds up to about 30% of your income. Take a look at your transactions over the last couple of months to get a realistic idea of the don’t-need-but-really-want expenses in your life. If the total cost of your wants falls around 30% of your take-home pay, you’re good to go. 

If your wants exceed the 30% allocation, consider prioritizing them so you can cut or delay those with the lowest priority. Be realistic when making these decisions: if you cut out too many of life’s little pleasures, there’s a good chance you’ll start feeling deprived and blow your budget with impulse buys. And on the flip side, if you prioritize lots of wants that don’t really give you much enjoyment, you’re losing the opportunity to save up for the things you truly want down the line.  

Budget tip: If your wants are coming in way over the budgeted 30%, consider shifting the more expensive items to the savings category and saving up for them over the course of a couple of months. This way, you’re sticking to your 50/30/20 rule but can still afford to buy the things you really want by planning ahead.

4. Decide your savings/investing split

The last 20% of your budget is all about savings. Take a look at your short-term, mid-term, and long-term dreams and set your savings goals. What do you want to achieve this year? In the next five years? What about retirement?

Your first priority is likely filling your emergency fund so you can cover the recommended six months of expenses. Once you’ve done that, or if you already have an emergency fund, you’ll want to think about your savings and retirement split.

How you break down your 20% is up to you, but here are some questions that might help guide you as you ponder your options.

• Do you have any big goals coming up, such as a house or wedding?
• Do you have any expected expenses coming up in the next few years, like a new roof, upgraded computer, soccer camp for your kids, or educational courses? 
• How reliable is your income, and how much of a safety net do you already have?
• Are your retirement investments matched by your employer?
• How old are you, and how soon do you hope to retire?

Remember to look at the timeline, size, and priority of your goals. Start as simply as you can; it’s always possible to add goals and complexity over time. 

5. Learn and adjust as you go

Now that you’ve implemented the 50/30/20 rule, it’s time to stick to it and make adjustments along the way. Here are a few tips for making the most of your budget: 

• Create a system. Whether you use an app, spreadsheet, or pen and paper, the 50/30/20 budget will only work if you stick to it. Automating with tools can help, but your priority is creating a sustainable and realistic budget and saving strategy.
• Schedule a regular money date with yourself. Make sure to check your progress. You can start with weekly check-ins to see how it’s going and make adjustments if things aren’t working quite how you planned. If your budget doesn’t work one week, see what went wrong and make the necessary adjustments for the next. The better you understand your income, expenses, and savings, the better you’ll be able to manage your financial health. 
• Celebrate your wins. It’s easy to focus on what didn’t work, but make sure to celebrate your budgeting successes so you stay motivated and excited about managing your money.

Is the 50/30/20 rule right for you?

The 50/30/20 rule is a simple way to make sure you’ve got the essentials,, while still enjoying things you want and putting money into savings and investments. 

Of course, there isn’t a one-strategy-fits-all solution. If you try out the 50/30/20 rule and it isn’t for you, consider giving zero-based budgeting a try. The best budget is one you can stick to and one that gives you confidence with your money. With the right tools and the right budget, you can change your approach to spending, saving, and investing to set yourself up for long-term financial success.

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The post Exploring the 50/30/20 Rule: A Simple Budgeting Strategy appeared first on Stash Learn.

In this article, we’ll cover:

• Why you need an emergency fund
• When emergency funds come in handy
• How much you should save up
• How to build your emergency fund
• Where you can keep your savings
• Emergency savings vs other savings

Why you need an emergency fund

Without emergency savings, you wind up sacrificing your future plans to stay afloat during a time of need. Think of your emergency fund as a double-pronged defense: it protects you in the moment when unforeseen expenses arise and safeguards your ability to build long-term financial health.

• Avoid racking up debt: An emergency fund prevents you from relying on credit cards or loans for unexpected expenses, so you don’t have to accumulate debt, pay interest on loans, or risk damaging your credit score.
• Don’t deplete your savings: Instead of withdrawing money you’ve earmarked for other savings goals, an emergency fund ensures you have a separate cache in case of a crisis.
• Protect your investments: With an emergency fund, you won’t be forced to liquidate investments before you’d planned to, potentially taking a loss in the process.
• Maintain peace of mind: Knowing you have money in reserve reduces the worry that a financial emergency could undermine your financial stability, especially during challenging times.

When to use an emergency fund

An emergency fund is a safety net to cover large expenses, generally over $1,000, or to sustain you if you lose your income. It’s crucial to use it only when it’s truly urgent and necessary; if you deplete your emergency savings for non-essentials or to cover normal monthly expenses, the money won’t be there when you genuinely need it.

Emergency expenses

An unexpected expense is just that: unexpected. That means you can’t necessarily anticipate what you’ll need emergency savings for. That said, there are some common scenarios in which people rely on an emergency fund. 

• Major car repairs: Situations like a car accident, engine failure, or a transmission issue can all pose a high financial toll.
• Home repairs: Whether you’re a homeowner dealing with a failing furnace or a renter fighting a bedbug infestation, unexpected home repairs can be costly.
• Medical emergencies: Health is unpredictable. From sudden surgeries to treatments not covered by insurance, medical expenses can take you by surprise.
• Unplanned travel: Sometimes, urgent trips are unavoidable. Whether it’s attending a family emergency, a funeral, or assisting a sick loved one, having funds set aside can ease the journey.

Income loss

Even the most stable-seeming job can go up in smoke, so it’s important to be prepared for the possibility of unemployment. If you face a sudden loss of income due to layoffs or health issues, an emergency fund can help cover your living expenses without going into credit card debt while you find a new job. 

Emergency cash is especially crucial if you’re self-employed or a gig worker, since government financial aid options like unemployment or disability benefits might not be available to you.

How much money should you have in your emergency fund?

A widely accepted rule of thumb is to keep three to six months’ worth of living expenses in your bank account for emergencies. The reasoning is that it can take many months to find a job, so you want to have enough to cover your living expenses in case of unemployment.

The exact amount for a healthy emergency fund will vary for everyone. To get a ballpark figure for yourself, jot down all your monthly expenses and multiply that by three (for the conservative side) or six (for a more comfortable cushion). The number you come up with might seem like a lot of money, and you may want to whittle it down by subtracting expenses you’d temporarily cut if you lost your job, like entertainment or treats. 

For example, say your total expenses add up to $5,000 a month. You’d need between $15,000 and $30,000 in your emergency fund to cover three to six months of living expenses. But if you were to remove some discretionary spending from your budget, you may find that $10,000 or $20,000 would be enough to get by if you tighten your belt.  

In reality, however, six months of living expenses sounds like an intimidating savings goal for most people. The good news is, you don’t need a specific amount of money to start an emergency fund. If you just start saving a portion of your paycheck based on what you can afford, your fund will grow over time.

How to build an emergency fund

Like any financial goal, building an emergency fund may sound daunting at first, but it’s much more accessible when you have a plan and tackle it in small chunks. 

The key is saving consistently and gradually increasing your contributions as you’re able.

Make a budget you can stick to

Building a budget is the foundation of managing your day-to-day spending, paying down debt, and working toward your savings goals. There are many different budgeting strategies out there, such as the 50/30/20 rule, the envelope method, and zero-based budgeting. The best approach for you is the one you can stick with. Include a line item in your budget specifically for your emergency fund so you’re adding to it bit by bit every month.

Automate your savings

One of the smartest moves you can make for your savings is to automate your contributions. By setting up a direct deposit from your paycheck into your savings account, you can tuck a portion of your earnings directly into your emergency fund before you even see it, thereby reducing the temptation to spend that money. Over time, this consistent, automated approach can significantly grow your emergency savings without feeling the pinch.

Take advantage of windfalls

Sometimes life drops a financial bombshell, but every so often you get a pleasant surprise as well. Windfalls like tax refunds, bonuses, and gifts are an opportunity to bolster your emergency savings. When you find yourself with extra money, consider channeling a portion into your emergency fund. Allocating windfalls to your savings can accelerate your fund’s growth, getting you closer to your financial goals without affecting your regular income.

Trim your expenses

Every dollar saved can be a dollar earned for your emergency fund. By reviewing and cutting back on non-essential expenses, you can free up more money for your savings. From cutting back on discretionary spending to reducing the cost of monthly expenses, look for practical ways to save money and funnel the extra cash into your emergency savings.

As you begin reviewing your spending habits, you might find some easy wins—such as canceling unused monthly subscriptions or seeking out the most cost-effective car insurance provider—these small changes can quickly reduce your total spending and free up dollars to grow your emergency fund.

Where to keep your emergency fund

When storing your emergency savings, two principles are key: liquidity and growth. Liquid means you can access your funds quickly and easily, without facing penalties. And growth is all about earning money on your savings. 

While it’s essential for your emergency cash to be accessible, you don’t want it to sit idle in your checking account. Opting for an interest-bearing savings account can help your emergency fund grow more quickly without you having to lift a finger.  

• Savings accounts: A traditional savings account offers a safe place for your money, typically with minimal or no fees. Many banks offer options with a low minimum required deposit; the trade-off is that these bank accounts usually pay lower interest than other short-term ways to grow your money.  
• High-yield savings accounts: These are similar to regular savings accounts, but offer a higher interest rate. This means your money can grow faster over time. Some might have higher minimum balance requirements or monthly fees, so be sure to read the fine print.
• Money market accounts: A money market account combines features of both checking accounts and savings accounts. Typically offering higher interest rates than standard savings accounts, they may also come with checks or debit cards. However, they might require a higher minimum balance and have monthly limits on transactions, making your emergency fund less liquid.

Emergency savings vs. other savings

Saving money is all about planning for the future, whether it’s unanticipated expenses or things you know you’ll need or want. An emergency fund is one component of an overall savings strategy; be sure you understand how it differs from other types of savings funds so you can plan accurately for all your financial goals.  

• Emergency fund: Emergency savings are for unexpected and significant expenses, typically those over $1,000, or even much more.  
• Rainy-day fund: Tailored for smaller unforeseen expenses, a rainy-day fund can cover living expenses you may not have accounted for in your budget. For instance, if there’s an out-of-the-blue spike in your water bill or a surprise visit to the vet, this fund comes to the rescue.
• Sinking fund: This is your planned savings pool. It’s for anticipated expenses you know are coming down the road, like regular vehicle maintenance, holiday gifts, or a vacation. When you have a solid emergency fund, you can rest assured you won’t have to siphon money away from these savings goals if you’re in a financial pinch. 
• Retirement savings: Preparing for your golden years is a marathon, not a sprint. Many people opt for tax-advantaged retirement accounts like IRAs or 401(k)s to maximize their savings. Withdrawing funds early can have substantial financial repercussions, so it’s extra important to rely on your emergency fund instead of tapping into retirement savings in a crisis. 

Protect your present and future with an emergency fund

An emergency fund equips you to navigate life’s uncertainties with confidence. And it also prepares you to work toward your longer-term financial health. Knowing you have a buffer to weather a financial storm empowers you to focus on saving and investing money to reach your bigger goals. 

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The post How to Set Up an Emergency Fund 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.

Understanding stock market fundamentals is key to making smart investing decisions, keeping a pulse on the market, and eventually taking on more complex trading strategies. Use the terms below to get a jump start on learning basic stock market vocabulary and create a strong foundation for your long-term wealth goals.

In this article, we’ll cover:

• Arbitrage
• Ask
• Asset allocation
• Asset classes
• Averaging down
• Bear market
• Beta
• Bid
• Bid-ask spread
• Blockchain
• Blue-chip stocks
• Bond
• Bull market
• Buyback
• Capitalization
• Capital gains
• Common stock
• Current ratio
• Day trading
• Debt-to-equity ratio
• Diversification
• Dividend
• Dividend yield
• Dollar-cost averaging
• Dow Jones Industrial Average (DJIA)
• Earnings per share (EPS)
• Economic bubble
• Equal weight rating
• Equity income
• Exchange
• Exchange-traded funds (ETFs)
• Expense ratio
• Futures
• Going long
• Going short
• Growth and income funds
• Growth stocks
• Head and shoulders pattern
• Index funds
• Inflation
• Initial public offering (IPO)
• Limit order
• Liquidity 
• Margin
• Market index
• Market volatility 
• Moving average 
• Mutual funds
• NASDAQ
• Non-fungible token (NFT)
• Order imbalance
• OTC stocks
• Outstanding shares
• P/E ratio
• Preferred stock
• Price quote
• Profit margin
• Recession
• Risk tolerance
• Roth IRA
• Sector
• Shares
• Stock market holidays
• Stock option
• Stock portfolio 
• Stock split
• Time horizon
• Value stocks
• Volume
• Volume-weighted average price (VWAP)
• Yield
• 52-week range

What is the stock market?

The stock market is a collection of markets where people buy and sell shares of publicly traded companies. When someone invests in a stock, their investment is represented by a share, or partial ownership, of that company. 

The stock market operates by potential buyers naming the highest price they’ll pay for an asset (the “bid”) and potential sellers naming the lowest price they’re willing to sell for (the “ask”). Trades are typically executed by stockbrokers on behalf of individual investors.

72 stock market terms for new investors  

The stock market terms below are a great starting point if you’re new to trading stocks. Study these terms to familiarize yourself with common stock lingo that any new investor should understand. 

1. Arbitrage 

Arbitrage refers to purchasing an asset from one market and selling it to another market where the selling price is higher than what you paid for it, resulting in profit. 

2. Ask

An ask is the selling price that a trader offers for their shares. 

3. Asset Allocation

Asset allocation is an investment strategy that aims to balance risk and reward by dividing a certain percentage of investments—like stocks, bonds, real estate, cash, etc.—across different assets in an investment portfolio. 

4. Asset Classes

Asset classes are categories of assets, such as stocks, bonds, real estate, or cash. 

5. Averaging Down

Averaging down is an investing strategy that involves buying additional shares of an asset or stock after its price has fallen, resulting in a lower average purchase price. 

6. Bear Market

A bear market is a market condition in which prices are expected to fall. Typically, this entails major indexes or stocks decreasing by 20% or more compared to previous highs. 

7. Beta

Beta is the measure of an asset’s risk in relation to the market. A stock with a beta of 1.5 means that the stock typically moves 50% more than the market in the same direction. Generally, a higher beta indicates a riskier investment—if the market rises 10%, the stock will rise by 15%, but if the market falls by 10%, the stock will fall by 15%. 

8. Bid

The price a trader is willing to pay for shares of a stock or other asset. 

9. Bid-Ask Spread

Bid-ask spread is the difference between what buyers are willing to pay and the price sellers are asking for a stock. 

10. Blockchain

A blockchain is a record-keeping database in which transactions made in Bitcoin or other cryptocurrencies are recorded across multiple computers and distributed across the entire network of those computers.

11. Blue-Chip Stocks

Blue-chip stocks are common stocks of well-known companies known for their quality and history of growth. 

12. Bond

A bond is a type of security loaned by an investor to a borrower like a company or government used to fund its operations. 

13. Bull Market

A bull market is a market condition in which prices are expected to rise.

14. Buyback

A buyback is when a company repurchases outstanding shares to reduce the number of shares on the market and return profits to their investors, resulting in an increased value of the remaining shares. 

15. Capitalization

Also known as market cap, capitalization is the total market value of all a company’s outstanding shares. It’s calculated by multiplying the total number of shares by the current share price. 

16. Capital Gains 

Capital gains refers to the profit earned after selling an asset or investment for a higher price than you paid for it. 

17. Common Stock

This is one of the most basic stock market terms to know. Common stock is a type of security that represents ownership in a company. Holders of common stock are able to vote on matters like corporate policies and elect directors within that company. 

18. Current Ratio

The current ratio is a measure of a company’s ability to pay short-term debt. It’s determined by dividing current assets by current liabilities. 

19. Day Trading

Day trading is the practice of buying and selling shares of stock within a single day.   

20. Debt-to-Equity Ratio

Debt-to-equity ratio represents a function of a company’s debt relative to its equity, or the value of its assets minus its liabilities. The ratio is found by dividing total liabilities by total shareholder equity. 

21. Diversification

Diversification is an investment strategy that divides investment funds across a variety of assets in order to minimize overall risk. 

 22. Dividend

“Dividend” is one of the most basic terms for the stock market. It’s simply a portion of a company’s earnings paid out to its shareholders. 

23. Dividend Yield

A dividend yield is a dividend expressed as a percentage of its stock price. 

24. Dollar-Cost Averaging

Dollar-cost averaging is an investment strategy in which you invest a fixed amount on a regular basis regardless of the price of the asset. 

25. Dow Jones Industrial Average (DJIA)

Also known as Dow 30, the Dow Jones Industrial Average is a stock market index consisting of the 30 most-traded blue-chip stocks on the New York Stock Exchange. It’s used to measure the performance of shares among the largest U.S. companies and gauge the overall direction of stock prices. 

26. Earnings per Share (EPS)

Earnings per share is a company’s profit divided by its number of outstanding shares, and is used to measure corporate profitability.

27. Economic Bubble

An economic bubble is a situation where asset prices surge to significantly higher levels than the fundamental value of that asset. 

28. Equal Weight Rating

An equal weight rating is a measure used by equity analysts to signify how well a stock is performing relative to other stocks. An equal weight rating suggests that a stock will perform similarly with the average of all the stocks being used for comparison.

29. Equity Income

Equity income is used to describe any income received from stock dividends. 

30. Exchange

An exchange, or stock exchange, is a marketplace where investors and traders buy and sell stocks. You’ve probably heard of the most well-known exchanges in the U.S.: the New York Stock Exchange (NYSE) and Nasdaq. 

31. Exchange-Traded Funds (ETFs)

Commonly known as ETFs, exchange-traded funds are a collection of stocks or bonds combined in a single fund that can be purchased and traded on major stock exchanges. Similar to mutual funds, they’re a pooled investment fund, meaning a “pool” of money is aggregated from multiple investors. 

32. Expense Ratio

An expense ratio measures the cost of owning a mutual fund, including expenses like the management of the fund, overhead fees, and any other costs associated with running the fund. It’s essentially an administrative fee paid to the company in return for owning the fund. The ratio is measured as a percentage of your total investment—for example, if you invest $10,000 in a fund with an expense ratio of .20%, you’ll pay $20 on top of your investment. 

33. Futures

A future is a contract that requires a buyer to purchase a specific asset, and the seller to sell that asset at a certain future date at an agreed-upon price. Futures are a way for investors to hedge current investments—a risk management strategy intended to offset potential losses in other investments.

34. Going Long

Going long refers to the act of buying stock shares with the expectation that the asset’s price will rise, resulting in a profit. 

35. Going Short

Going short—the opposite of going long—refers to the act of selling stock shares with the expectation that the asset’s price will fall. When an investor goes short on an asset, they borrow that asset, sell it, and hopefully purchase it later at a lower price if the price does decline, resulting in profit. 

36. Growth and Income Funds

This is a type of mutual fund or ETF that has both a history of capital gains (growth) and income generated from dividends (income). Growth and income funds have a two-sided strategy of both long-term growth and short-term income. 

37. Growth Stocks

A growth stock is a common stock of a company whose revenues are expected to grow at a significantly higher rate than what’s average for that industry. 

38. Head and Shoulders Pattern

The head and shoulders pattern refers to a specific chart formation seen on a technical analysis chart. It appears when a stock price reaches three peaks: when the price peaks then declines; rises above that peak and declines again; and rises a third time (but not as high as the second peak) and then declines again. The second peak represents the formation’s “head,” and the first and third peaks represent the “shoulders.” It’s generally considered to be an indicator of an impending bear market. 

 39. Index Funds

Index funds are investment funds that follow the performance of a specific benchmark or stock market index, like the S&P 500. When you invest in an index fund, your money is used to invest in every company in that index. This results in a more diverse portfolio than if you were hand-selecting individual stocks, for example. 

40. Inflation

Inflation is the rate of increase in prices for goods and services in the economy. 

41. Initial Public Offering (IPO)

An IPO refers to a previously private company that becomes public by selling stock 

shares on the stock market. 

42. Limit Order

A limit order is an order to buy or sell a stock at or below a specific price. Limit orders give traders control over how much they pay. 

43. Liquidity 

Liquidity measures how quickly and easily a stock can be bought or sold without impacting its price. Cash, for example, is the most liquid asset—no exchange is necessary to gain value from it, and it’s already in its most liquid form. On the other hand, a car is less liquid—regardless of its value, you might have to wait to sell it at its best price. 

44. Margin

Sometimes referred to as “buying on margin,” margin is when investors borrow money from a broker to purchase a stock, similar to a loan. 

45. Market Index

A market index tracks the performance of a certain collection of stocks, often grouped to represent a certain industry. They’re a tool for investors to gauge the health of the stock market by comparing current and past stock prices.

46. Market Volatility

Market volatility is a measure of how much and how often the value of the stock market fluctuates. 

47. Moving Average

A moving average is the average price of stocks or other assets over a specific period of time. Generally used in technical analysis charts, it’s calculated by averaging data from the previous time periods to help investors identify the current direction of price trends.

48. Mutual Funds

Mutual funds are pools of investments from shareholders used to “mutually” buy securities like stocks, bonds, and other assets. 

49. Nasdaq

Nasdaq, or National Association of Securities Dealers Automated Quotations, is an electronic exchange where investors can buy and sell stocks through an automated network of computers. It’s the second-largest stock exchange in the world, following the NYSE.  

More broadly, Nasdaq can also refer to the Nasdaq Composite Index, a stock market index of over 3,300 companies listed on the Nasdaq exchange. In this context, it can be thought of similarly to other indexes like the DJIA or the S&P 500.

50. Non-Fungible Token (NFT)

A non-fungible token, more commonly known as an NFT, is a blockchain-based financial security. Each NFT represents a unique digital asset. “Non-fungible” indicates that it can’t be replicated or replaced with something else. 

51. Order Imbalance

An order imbalance occurs when orders of one type of stock aren’t offset by opposite orders, resulting in an excess of orders for that specific stock and sometimes volatile price changes. 

52. OTC Stocks

OTC stocks, or over-the-counter stocks, are securities that are traded on a broker-dealer network instead of on a major U.S. stock exchange. They’re often used by smaller companies who don’t meet the requirements to be listed on a formal stock exchange.

53. Outstanding Shares

Outstanding shares refers to the total number of a company’s shares that have been issued to shareholders, including restricted shares. 

54. P/E Ratio

Used to value a company, the P/E ratio, or price-earnings ratio, is the ratio of a company’s share price to the company’s earnings per share. 

55. Preferred Stock

Preferred stock is a type of stock that combines characteristics of both common stock and bonds. Owners of preferred stock receive different rights than common stockholders, like receiving dividends before common stockholders, but they generally don’t come with corporate voting rights like common stocks do. 

56. Price Quote

A price quote is the price of a stock or other security as quoted on an exchange. Price quotes usually come with important supplemental information to help traders make more informed investment decisions. 

57. Profit Margin

Profit margins are used to gauge the profitability of a company. It’s expressed as a percentage and is calculated by dividing the company’s net profit (total revenue minus total expenses) by total revenue. 

58. Recession

A recession is defined as a period of decline in economic performance throughout the economy, generally lasting for at least several months. 

59. Risk Tolerance

Risk tolerance is a measure of the level of risk you’re willing to accept on your investments. Someone with a lower risk tolerance typically sees lower returns on their investments in exchange for lower overall risk in periods of market decline. 

60. Roth IRA

A Roth IRA is an individual retirement account that allows you to contribute after-tax dollars, allowing your earnings to grow and be withdrawn tax-free. 

61. Sector

The stock market includes shares from thousands of different companies, which are broken into 11 different sectors. A sector is a group of companies with similar business products, services, or characteristics. 

62. Shares

Shares are units of ownership in part of a company’s total stock. 

63. Stock Market Holidays

While this isn’t necessarily a term or definition, it’s important to know what days you can and can’t buy or sell on the U.S. stock exchange. The U.S. stock market observes 10 holidays a year, closing on those days. In 2023, the observed holidays are New Years Day, Martin Luther King Jr. Day, President’s Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving, and Christmas.

64. Stock Option

A stock option is a contract that gives an investor the right to purchase or sell a specific number of stock shares at a predetermined price within a specified time period. 

65. Stock Portfolio

A stock portfolio is an individual’s collection of investments, including stocks, bonds, mutual funds, and other financial assets. While a portfolio refers to all of your investments, they might not be contained in one single account. 

66. Stock Split

A stock split occurs when a corporation increases the number of its outstanding shares by distributing more shares to current stockholders. By splitting existing shares into multiple new shares, the stock becomes more affordable. 

67. Time Horizon

Time horizon refers to the period of time an investor expects to hold an investment, which will vary based on personal investment goals and strategies. For example, investing in a retirement account like a 401(k) has a longer time horizon, since the funds won’t be withdrawn until you reach retirement age. Generally speaking, longer time horizons correlate to more risk potential in a portfolio, and shorter time horizons correlate to a more conservative (less risky) portfolio. 

68. Value Stocks

Value stocks are shares of companies selling at bargain prices that investors expect to rise because the company’s financial fundamentals suggest the shares are actually worth more than the current value.

69. Volume

Volume is a measure of how much a certain stock or other investment has been traded over a certain period of time. Volume is a critical component of strategically analyzing stock market trends, and is often used to determine market strength.  

70. Volume-Weighted Average Price (VWAP)

Volume-weighted average price (VWAP) is a measure of the average trading price of a stock or other asset, adjusted for volume. It’s calculated by dividing the total dollar value of trading in that asset by the volume of trades. 

71. Yield 

Yield refers to the income earned on an investment over a set period of time, expressed as a percentage of your original investment. 

72. 52-week Range

The 52-week range is a technical indicator that measures the lowest and highest price of a stock traded during a 52-week period. Traders use this measure to analyze current stock prices and predict its future movements. 

Learning to navigate the stock market and stock trade terms for the first time might feel daunting, but consider this your official first step on the path to developing your investing muscles. When you come across a term you’re unfamiliar with in your own research, refer back to this post until you’ve mastered them. You’ll find that learning these stock terms for beginners is more doable than you think. 

The more time you invest in learning stock market terms and fundamentals, the more confident you’ll become as an investor. And if you’re looking for a little more support, consider turning to a platform like Stash. We make it easy to invest what you can afford on a set schedule, all the while providing unlimited financial education and personalized advice based on your risk level—so you can start building long-term wealth, even if you’ve never invested before. 

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FAQs About Stock Market Terms 

Have more questions about stock market terms? We have answers.

Why Should You Know Stock Market Terms? 

Establishing a working knowledge of stock market terms forms the foundation for the rest of your investment journey. It’s the gateway to crafting a strategic market approach, understanding different trading strategies, and making sense of market fluctuations that will inform your future trading decisions. 

How Do You Buy Stocks? 

Before investing a dollar, get clear on your investment goals—this informs everything from your investment timeline to the specific investments you’ll choose. From there, the process of buying your first shares of stock is surprisingly easy:

1. Open a brokerage account
2. Research what stocks you want to buy
3. Determine how much you can afford to invest 
4. Purchase your first share
5. Maximize returns with a buy and hold strategy

What Are the Most Used Stock Market Terms?

The most used stock market terms include bear market, bull market, dividend, ask, bid, and blue-chip stocks. 

The post 72 Stock Market Terms Every Beginner Trader Should Know appeared first on Stash Learn.

In this article, you’ll learn:

• Decoding investing: What you need to know first
• How to get started investing
• Why investing is important
• When you should start investing
• The difference between active vs. passive investing
• Common questions about investing

Decoding investing: What you need to know first

Investing – it’s a word that might conjure images of high-flying stock traders, complex charts, and confusing terminology. But at its core, investing is simply about putting your money to work for you in a way that earns more money over time.

Why Invest? The primary reason is to grow your wealth. Essentially, it involves looking out for your future self. Whether saving for retirement, a down payment on a house, or your child’s education, investing is one of the best ways to reach these financial goals. Unlike putting your money in a savings account, investing offers the potential for higher returns, albeit with some level of risk.

How to get started investing

Investing means buying securities (which is an investment), like stocks, bonds, mutual funds, and exchange-traded funds (ETFs), to make money as they grow in value over time. 

Investors generally create a portfolio made up of these various investments and often hold them for years or even decades. Traders, on the other hand, generally buy and sell investments rapidly to generate many small profits as prices rise and fall. 

If the idea of day trading makes you sweat, rest assured: investing is generally much simpler and less stressful. Remember that investing should be a marathon, not a sprint. Here’s how to get started.

1. Define your investment goals

Learning how to invest starts with a crucial step: defining your investment goals. It’s about understanding why you want to invest and what you hope to achieve. Are you saving for a comfortable retirement, a down payment on a house, or your child’s education? 

Defined goals help new investors stay focused and motivated, especially during market fluctuations. They act as a compass, guiding your investment decisions and helping you measure progress. Each goal will have a different time frame and risk profile. 

At Stash, we believe in the power of goal-oriented investing. It’s not just about growing your wealth but aligning your investments with your life’s objectives. When you have clear goals that matter to you, you can tailor your investment strategy to match them. 

2. Make sure you’re ready to invest

Before you start investing, you may want to first determine if you’re ready. Here are some indicators that the time may be right:

• Disposable income. If you can pay all your bills with a bit left over, it might be time to put your dollars to work. If you’re not currently budgeting, now is the perfect time to get started.
  >>Learn more: How to make a budget
• No high-interest debt. Let’s say you earn 5% on your investment, but you owe 18% interest on a credit card balance. That cancels out your return and then some, so paying down high-interest debt before you invest may be a good option.
  >>Learn more: How to get out of debt
• An emergency fund. Do you have three to six months of expenses in savings? If not, tying up all your extra cash in investments might force you to liquidate fast in case of an emergency, which may cause you to lose money on your investments.
  >>Learn more: How to start emergency and rainy-day funds
• Clear financial goals. Both investing and saving can be good ways to set aside money for the future; they each serve different functions. Setting goals and determining the right financial tools for meeting them lay a solid foundation.
  >>Learn more: How to create your financial plan

Even if you have $1,000 to invest, it may be better to put that money toward things like high-interest debt and an emergency fund if those aren’t in place yet. 

3. Set up your investment budget

If you’re ready to invest, the next step is to decide how much you can afford to invest. It doesn’t have to be a large sum; even small, regular contributions can grow significantly over time, thanks to compound interest. 

In fact, with many online brokers, you can often get started investing with as little money as a dollar. While shares of stock and other securities can be costly, many brokerages sell them by the slice via fractional shares. 

Once you start investing, you’ll likely want to keep adding money to your accounts, especially if you have long-term goals like retirement. Many experts recommend investing 10-20% of your income on an ongoing basis. But these are guidelines, not hard rules. 

The 50/30/20 budgeting method, for example, allocates around 20% of your budget to savings and investments. 

But for many people, investing 10-20% of your income might not be immediately practical. What matters most is starting early and investing consistently within your means. Even using a strategy like micro-investing can lead to significant growth. Use a compound interest calculator to see how your money could grow over time. 

>>Learn more: How much you should be investing

4. Choose the right investment account

The next pivotal step in your investing journey is opening an investment account, but it’s not just about picking any account. Your choice should be guided by the goals you’ve set. 

For instance, if you’re saving for retirement, you might choose a tax-advantaged individual retirement account (IRA). If you’re saving up for your future dream house, you might consider a standard brokerage account. 

There are several types of investment accounts to choose from. 

• Taxable brokerage accounts. A brokerage account allows you to buy and sell virtually any investment. Adults can also create custodial accounts for children.
  >>Learn more: How to open a brokerage account
• Employer-sponsored retirement plans. This category includes 401(k), 403(b), SEP Individual Retirement Accounts (IRAs), and SIMPLE IRAs. Many workplaces offer an employer match, which is essentially free money for your retirement.
  >>Learn more: Roth IRAs vs. 401(k)s
• Individual retirement accounts (IRAs). If you don’t have an employer-sponsored plan, or if you want to invest more, a traditional or Roth IRA can help you save for retirement and reap tax advantages.
  >>Learn more: Traditional vs. Roth IRAs
• 529 education savings plan. Saving for your child’s education? A 529 savings plan may offer flexibility and tax advantages.
  >>Learn more: Custodial accounts vs. 529 savings plans 

5. Think about your risk tolerance

All investment involves risk, including the risk that you could lose money. But how much risk each person is comfortable with is very personal. Your age, income, financial goals, and other factors play a role. Investors typically sort risk tolerance into three categories:

• Conservative. A conservative investor values stability over the potential for higher investment returns. Asset allocation is likely to be 40% stocks and 60% bonds.
• Moderate. Moderate investors aim to balance stability with higher reward potential. Typically, they allocate 60% to stocks and 40% to bonds.
• Aggressive. Aggressive investors feel comfortable taking big risks and hope to earn big rewards. They usually allocate 80% to stocks and 20% to bonds.

It’s vital to know your comfort level. Are you okay with high-risk, high-reward options, or do you prefer a safer, steady growth approach? Are you getting closer to retirement age, or do you have decades to go? Your risk tolerance will influence the types of investments you choose, balancing potential gains with the possibility of losses.

>>Learn more: Determine your risk profile  

6. Choose your investments

In this next step, you’ll choose investments based on your goals and risk tolerance. There are many types of stock market investments available; most everyday investors put their money in stocks, bonds, mutual funds, or ETFs. Cryptocurrency is also becoming a popular investment option, although it is a very risky investment. Additionally, you can even invest in real estate through a real estate investment trust (REIT).

For beginners, index funds and mutual funds can be a great way to start as they can offer built-in diversification and lower risk. Stash can guide you in choosing investments that match your financial objectives and risk profile.

The table above reflects general information on volatility and performance profiles. But there is tremendous variation within each investment type. Value stocks, for example, tend to be relatively stable, while “junk bonds” can be quite risky. That’s why it’s important to research stocks, funds, and any other investment options before investing.

>>Learn more: Different types of investments 

7. Decide your investment approach – DIY or robo-advisors

As you learn how to start investing, another critical decision you’ll make is whether to manage your investments yourself (DIY) or use a robo-advisor. Each approach has its benefits and considerations.

DIY investing allows you full control over your investment choices. You can select individual stocks, bonds, ETFs, and other assets based on your research and preferences.

It requires a commitment to learning about financial markets, investment strategies, and how to monitor your portfolio. It’s ideal for those who have a keen interest in financial markets and want to be actively involved in managing their investments.

Robo-advisors use algorithms to manage your investments based on your goals and risk tolerance. They automatically allocate your funds across various assets and rebalance your portfolio as needed.

Automated investing is great for beginners or those who prefer a hands-off approach. It eliminates the need for extensive market knowledge and ongoing portfolio management, saving you time and effort.

8. Monitor and adjust your investments

Once you’ve laid the groundwork and made your investment choices, you’re officially investing. You no longer have to figure out how to start because you’re doing the thing. 

But remember — investing isn’t a set-it-and-forget-it activity. Regularly review your investments to ensure they align with your goals and make adjustments as needed. Market conditions change, and so might your financial situation or goals. Consult a Certified Financial Planner for personalized advice on how to use investment funds to reach your financial goals.

When you first start investing, it can feel overwhelming. But it doesn’t have to be complicated to begin putting your money to work. The Stash Way® can help: it’s all about investing what you can afford on a regular basis, building a diversified portfolio, and investing for long-term growth. 

>>Learn more: How you can diversify your portfolio in 2024

Why is investing important? 

Many experts agree that investing is a critical component of a brighter financial future. About 61% of Americans own stock (Gallup, 2023), and many invest in other types of investments as well. Here are some of the most common reasons people invest:

• Retirement. In 2022, 72% of non-retired Americans had some retirement savings, and many put those dollars into investment accounts. Investing could help your nest egg grow faster than saving alone (Federal Reserve, 2023).
  >>Learn more: Calculate how much you’ll need to retire
• Combating inflation. Money loses buying power over time: an item that cost $100 in 1950 would cost over $1,276.64 today in 2023. Investing can be particularly important during inflationary times to preserve and grow the purchasing power of your money.
  >>Learn more: How to combat inflation
• Lowering tax burden. Retirement and college savings accounts offer tax advantages that could lower your taxable income, and some investment profits are taxed at the lower capital gains rate of 0-15%.
  >>Learn more: How taxes on stocks work
• Growing wealth through passive income. Investing puts your dollars to work for you. You might earn passive income through dividends, as well as returns when you sell securities that have increased in value.
  >>Learn more: Passive income streams 

How early should you start investing?

As a general rule, the sooner you start investing, the greater your earning potential. How? The power of compounding. 

Imagine you invest $100 and earn a 5% return annually. In the first year, you’d earn $5. When you re-invest those earnings, you’d earn interest on $105 the next year, for a return of $5.25. Every time your money makes money that you re-invest, it increases your balance, as well as the return on that balance. 

The longer your money compounds, the greater the effect. Let’s say you start with $100 and contribute $25 a month for 20 years, earning an average rate of 5%. After 20 years, you’d have deposited $6,100 and your balance would be over $10,000. And after 50 years, you’d have contributed $15,100 and your balance would be almost $64,000. 

The moral of the story is clear: there is no right age to start investing. But the earlier you begin, the more time your money has to grow. Think long-term and harness the power of compounding to build wealth.

>>Learn more: Calculate compounding over time

What’s the difference between active vs. passive investing?

In the world of investing, there’s a place for every kind of investor. Are you a hands-on or hands-off investor? Each approach comes with risks and benefits.

Hands-on, active investors tend to focus on short-term gains; they usually spend substantial time maintaining their portfolios and trade more frequently. Active investors may also try to beat the stock market by choosing specific stocks that may outperform leading indexes like the S&P 500. 

But even professional fund managers don’t beat the market reliably. Active investing can be a higher risk and involve more account fees due to the frequency of trading. 

Passive, hands-off investors usually practice a buy-and-hold investing strategy: they hold their investments for long periods of time, seeking a long-term return. They frequently invest in index funds that aim to mimic the performance of the market overall and keep them for a long time. 

Passive investing is often recommended for long-term goals like building wealth for retirement. Even Warren Buffett, one of the most successful investors, emphasizes the importance of long-term, value-driven investing strategies.

>>Learn more: How passive investing works  

Common Questions About Investing

Is investing in the stock market risky?

Investing in stocks always involves risk. While you can make money by investing in stocks, bonds, funds, and other securities, you can also lose money, especially if your investments lose value. It’s a good idea to diversify and do careful research before you purchase securities, so you can reduce your risk.

How do I invest money in the stock market?

You can invest in the stock market by purchasing stocks, bonds, mutual funds, and exchange-traded funds (ETFs), as well as other securities. You can make these purchases by setting up an investment account with a brokerage, either online or through an investment app. Use the steps in this article to learn how to start investing.

How much money do you need to invest in stocks?

You may think you need a large sum of money to start investing in order to buy pricey stocks or other investments. But you can crack into the investing world with as little as $1 thanks to fractional shares. As their name implies, these are fractions of full shares that can help you start investing, sometimes with just a few dollars.

Is $100 enough to start investing?

Absolutely, $100 is enough to start investing. Many online brokers and robo-advisors offer low or no minimum investment requirements, making it accessible for beginners. Also, options like fractional shares allow you to invest in high-value stocks with smaller amounts of money. Starting with what you have, even if it’s $100, is a great step towards building your investment portfolio.

What is the difference between trading and investing?

Trading is the process of buying and selling individual stocks, which usually takes place over the short term. Investing generally implies buying stocks or bonds and holding onto them over a longer period of time. 

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Like any sort of job, side hustles come in all kinds of shapes and sizes, potential incomes, costs, and time investments. Some are quick, low-effort, and tend to generate less money. Others can be built into real money-makers, but require some up-front investment or additional time and effort. 

In this article we’ll cover:

• What a side hustle is
• Types of side hustles
• Side hustle ideas
• How a side hustle can help you grow your wealth
• Tax implications of side hustles

What is a side hustle?

A side hustle is work that provides supplementary income in addition to the money earned through one’s main job. Essentially, a side hustle is a second (or third, or fourth) job. Side hustles can include anything from gig work, like driving for Uber or Amazon Flex, to flipping houses or furniture, to freelancing using your professional skills. 

Many people with side hustles use the internet, apps, or their professional networks to find opportunities; some go so far as to build small businesses around their side work. The amount of work and potential income earned through your side hustle will depend on what type of work you pursue and how much time you can devote to it.

What is a “legitimate” side hustle? 

A legitimate side hustle is one where you provide the product or service required and can trust that you’ll get paid what you expect. There are many scammers on the internet, though, and it isn’t surprising that they sometimes target those looking for side hustles. Keep an eye out and stay safe while looking for side hustles to protect your time, income, and personal information. If an opportunity seems too good to be true, it likely is. Here are a few tips for checking the legitimacy of a money-making opportunity:

• Screen potential freelance or contract work clients to ensure they’re legitimate businesses. Get a contract in place if possible. 
• Look at reviews and web forums for any apps or websites you’re using to find work. 
• Never pay a fee to apply to work for an individual or company.
• Beware of opportunities that require you to purchase products upfront to resell to others or require you to invest money in training materials. Multi-level marketing schemes (MLMs) often require this, and many people lose money or go into debt with these types of endeavors. 
• Guard your personal information. Review a company’s website, check the Better Business Bureau, and talk to someone directly before providing anyone with your personal information.

Types of side hustles

Side hustles aren’t one-size-fits-all. You can choose from different types that require varying levels of time and effort, upfront costs, and skill requirements. 

Here are five broad categories to consider:

• Freelance or contract work: This work requires an existing level of skill, and many people use the professional skills they rely on for their primary job to pick up freelance work in the same industry. 
• Gig economy jobs: Gigs are temporary and part-time positions in which independent contractors fulfill some services provided by a company, such as making deliveries for a food-delivery service.
• Online side hustles: Online side hustles are generally not jobs so much as tasks. Online roles are generally quick, easy, and attainable, but relatively low-paying.
• Small businesses: Some hustlers turn their side work into small businesses, whether that’s selling a skill or a product. These roles are often more time- and cost-intensive, but consist of building a brand and potentially turning their small business into their main job.
• Passive income: Passive income can come in several different forms but generally consists of investing in something or renting something out, resulting in repeating income that requires little ongoing effort. There may be a fair amount of work up-front, but the goal is to earn a regular income once set up.

Side hustles ideas for 2024

Based on the types of sides hustles we covered, here 29 hustles to consider broken into the following categories:

• Freelance/contract side hustle ideas
• Gig economy side hustle ideas
• Online side hustle ideas
• Small business side hustle ideas
• Passive income side hustle ideas

Freelance/contract side hustle ideas

Generally, these side hustles are hourly or project-based and require some level of skill or expertise. Freelance and contract work can be found through numerous apps like Fiverr, Upwork, Steady App, and many more. You might also find these opportunities through your network, family, and friends, or by building a public or industry reputation. 

Freelance and contract work require an investment in your own expertise, and your income generally depends on the amount of time you put into the work and your experience level. When pursuing these side hustles, make sure the work you do doesn’t breach a non-compete agreement you might have with your main employer. Some examples of freelance work include: 

• Handywork/landscaping
• Writing
• Graphic design
• Bookkeeping
• Editing
• Website development
• Social media
• Tutoring
• Administrative work

Gig economy side hustle ideas

Gig work is a specific type of contract work based on flexible, temporary, or freelance jobs generally managed online or through an app. In the gig economy, everyone is an independent contractor, so people generally don’t have regular schedules or get benefits from employers. Instead, you get the flexibility to work when you want to. 

Pet sitting or dog walking

If you’re an animal lover, you can find opportunities to take care of pets for some extra cash. The amount of time and potential income is dependent on how much work you take on, where you live, and the reputation you build. 

House sitting 

If you like to travel, house sitting might be a good fit for you. Using websites dedicated to sourcing house sitters, you can find opportunities to make some money in exchange for staying at someone’s home, watering their plants, grabbing their mail, and other domestic tasks. House sitting comes with the side benefit of helping with your travel budget since your accommodations are free. You might also find opportunities where you live if you’re interested in this kind of work but don’t want to travel.

Ridesharing

Rideshare driving is a popular side hustle these days. You’ll need to have a relatively new car in good condition, as well as a good driving record. Some people enjoy the chance to travel around the city and meet new people, as well as the chance to earn more money through tips. 

Delivering food through apps

You’ll need reliable transportation to pick up gigs delivering food; most people rely on a car, but some deliver by bike. You’ll usually earn money for each delivery in the form of payment from the company and tips from customers.

Delivering packages

Amazon and other businesses hire flex drivers in hour blocks to deliver packages. If you have three to five hours free, you can sign up for a flex block, pick up packages, and deliver them in your area. 

Online side hustle ideas

Unlike most gig work, online side hustles can usually be done from home. These jobs often require a lower time investment, with a wide range of potential incomes. 

Participating in online surveys

Market research companies often pay participants to share their thoughts, opinions, and experiences. With these websites, you’ll take surveys in exchange for a small amount of money. The more surveys you take, the higher your income. Watch out for potential scams, such as websites that require payment to join their panel of participants; check reviews before signing up to be sure the website is reputable. 

Participating in user testing

You can also test apps, websites, or platforms. Testers are often asked to click through a mockup of a website or sort cards so web developers can learn more about user behavior. These can earn more income than surveys on a per-task basis, but generally require a higher time investment. 

Transcribing videos, calls, or recordings

Some sites hire transcribers to turn audio recordings into text. Those who can transcribe quickly can earn a fair amount of money this way, as you’re often paid per audio minute or per file.

Virtual assistant

Many businesses need some help but don’t need a full-time executive assistant. That’s where a virtual assistant comes in. Often managed completely online, a virtual assistant can perform executive assistant-type tasks contractually. 

Starting a podcast, social media, or YouTube channel

Are you an expert on something, or do you have something you’re passionate about? Viral social media content comes in many forms, and if you can build an audience and you’re good at it, you may be able to generate income from a podcast or social media. It can take time to build a large enough audience to monetize your endeavor, but the effort can also be fun and rewarding in its own right. 

Selling used clothes or items

Those who are good at thrifting or garage sales can often find items at a relatively low price and resell them for a higher price via online marketplaces. The amount of income you can earn varies widely, but you could do well if you’re knowledgeable about niche items that have a high value on the secondary market. It’s possible to get started without investing too much money upfront if you can find good deals on used items; you could even start by selling items you own but no longer want. 

Small business side hustle ideas

A small business is your opportunity to create a brand and sell something you’re good at, whether that’s a product or a service. These are often high-effort, higher-potential income opportunities. 

Selling crafts or art

Do you draw, paint, work with wood, or otherwise create a physical product? These products can be sold at fairs, markets, shows, and through online marketplaces to make some money. Work like this requires some up-front budgeting for materials, websites, booths, or other business investments, as well as the time required to create things to sell. But building a brand can turn your side hustle into your full-time hustle. 

Refurbishing furniture

Another small business opportunity is refurbishing and reselling furniture. With the right supplies, you can update or fix up old or damaged furniture found online, through garage sales, or even on the street for some extra income. This takes an investment in skills and supplies, as well as the time to dig up good finds you can restore. 

Creating and selling art

Art doesn’t have to be physical to sell. If you have skills with platforms like Photoshop, you can create original digital art you can sell online. Because it doesn’t require physical supplies, this can be less expensive than physical art. Many people take commissions to increase opportunities to make money.   

Coaching or teaching classes

If you have expertise in something, you can share your expertise by offering online classes, either through your own website or an online platform. This avenue can also provide repeatable income if you sell the same recorded course many times.

Passive income side hustle ideas

Passive income is different than active income. Broadly, this is income that you can generate without requiring daily participation. While passive income usually requires an initial investment, you may be able to earn dividends for years from that investment. Check out our full breakdown of passive income opportunities. 

Renting

Whether you’re renting a spare room in your home or you’ve invested in a rental property, you can generate regular and predictable extra income monthly. Investing in rental properties will often require a hefty investment, so spend time researching options and budgeting before making such a significant decision. 

Renting out your car

All this requires is having a car and not needing it while it’s being rented out. There are platforms dedicated to these types of rentals and a significant time investment isn’t usually involved. 

Affiliate marketing

Affiliate marketing requires an audience, but once you have one, you can promote content through blogs, videos, or social media and collect ongoing income from your audience’s purchases.

Investing in bonds

While this isn’t exactly a side hustle, it’s an opportunity for passive income that some people overlook. Investing in bonds is a relatively low-risk way to use the savings you have to get a guaranteed return, and there are long and short-term bonds available to fit your timeline. 

Opening a high-yield savings account or CD

While they also aren’t side hustles, both high-yield savings accounts and CDs are ways you can use your existing savings to make more money. Both of these accounts offer short-term opportunities to earn interest for storing your cash.

How side hustles can help your financial health

What you do with the money you make from your side hustle is dependent on your unique financial journey. It can help you balance your budget, put money aside toward retirement, or save up to buy something you really want. Relying on side hustles to pay your monthly bills can be risky because they often don’t guarantee consistent income, but a side hustle can help you: 

• Build an emergency fund
• Save more toward your goals
• Pay down debt
• Invest in the stock market
• Build your retirement account
• Treat yourself

Tax implications of side hustles

Remember, any income you make has implications for your taxes. Many first-time contractors and side hustlers find themselves shocked when they realize at the end of the year that they have to pay taxes on that income. Unlike money from your regular paycheck, taxes aren’t withheld from the money you make through a side hustle. You’ll have to pay state and federal income tax, and may also be responsible for self-employment taxes.  It’s important to research what your taxes are expected to look like and be prepared. You may be able to defer taxes on self-employment income with an IRA. 

How to choose the best side hustle for you

Here are some questions to consider when selecting the best side hustle for your unique situation.  

• What existing skills and experience do you have?
• How much time can you put into this work?
• How much income do you need to make from a side hustle? 
• What resources do you already have available?
• What opportunities would bring you the most joy?

Remember that side hustles don’t have to be huge commitments. You can try something to see if you like it before investing a lot of money or time.

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In this article, we’ll cover:

• What the FIRE movement is
• How  the FIRE movement works
• Common FIRE movement philosophies
• Who the FIRE movement attracts
• Tips for participating in the FIRE movement

What is the FIRE movement?

FIRE stands for Financial Independence, Retire Early. The goal is to save up enough money so you no longer need to work and to do so much younger than the traditional retirement age of 65. Financial independence is achieved when you can cover all your living expenses with your savings and investment income so that you can retire early.

Exactly who started the FIRE movement is unclear, but many of the concepts underlying it come from Your Money or Your Life, a 1992 book by Vicki Robin and Joe Dominguez. The book’s core premise is that people should evaluate their expenses in relation to the number of working hours it took to pay for them. For example, if you want to buy shoes that cost $100, and you make $25 an hour, are those shoes worth working for four hours of your life?

FIRE is a long-term strategy that involves maximizing income, reducing costs, and aggressive saving and investing. There are three common kinds of FIRE strategies to choose from. 

• Fat FIRE: Those attempting Fat FIRE want to retire early but maintain their current standard of living. This requires substantial savings, heavy investing, and generally a high income, as the focus is more on maximizing income and investment returns than reducing expenses.
• Lean FIRE: Lean FIRE is the opposite of Fat FIRE, and is the more traditional FIRE strategy. When you Lean FIRE, you’re willing to pursue a minimalistic lifestyle in order to retire early. Some people will live on as little as $25,000 per year, even if their income is many times more than that.
• Barista FIRE: This approach balances the techniques of Fat FIRE and Lean FIRE. These individuals are willing to “partially retire,” quitting their full-time job and supplementing their retirement with part-time work or passive income in order to live below their means without committing to an extremely frugal lifestyle. 

How does the FIRE movement work? 

There are three major elements to any FIRE strategy: reducing expenses, increasing income, and investing as much money as you can in a mix of taxable and tax-advantaged accounts. 

To achieve financial independence and retire early, you’ll need to understand how much you need to retire, actively manage your current lifestyle and expenses, and stick to a strict savings and investing strategy. 

• Thorough planning: The FIRE movement stresses the importance of having a detailed financial plan and sticking to it long-term. That requires close attention to personal finances, including detailed retirement planning and precise budgeting for how every penny is spent, saved, and invested. 
• Financial discipline: The goal is to maximize the money coming in, minimize the money going out, and optimize where your money is stored and invested. You can’t casually participate in the FIRE movement; it requires consistency and discipline. That said, you can use a lot of the FIRE concepts to improve your own financial situation, even if you aren’t following the philosophy to the letter.
• Dedicated investing: Investing is at the core of retirement planning. But when you pursue FIRE, you can’t rely solely on traditional retirement strategies. Retirement accounts like 401(k)s and traditional and Roth IRAs come with steep penalties for withdrawing money before age 59½, and you can’t start drawing social security until age 62. So FIRE followers need a taxable brokerage account that can provide income when they retire early. FIRE followers also have to invest a larger portion of their income than is traditionally recommended in order to retire more quickly. 

Core FIRE movement techniques

FIRE followers have put together a handful of specific strategies for achieving the level of financial independence needed for early retirement. 

The rule of 25

If you want to retire early, you need to know how much money you need to live after you stop working. The rule of 25 states that you’ll need to save up 25 times of your annual expenses before you retire. You can calculate this number for yourself by estimating your monthly expenses, multiplying them by 12 to get your annual expenses, and then multiplying that number by 25. 

Here’s an example:

• Monthly expenses = $5,000
• Annual expenses = $5,000 x 12 = $60,000
• FIRE number = $60,000 x 25 = $1.5 million

The rule of 25 provides the key financial goal for the FIRE method: the amount of money you have to save up before you can retire. Of course, the rule makes several assumptions, so think of it as a goalpost for planning instead of a fixed number. This rule doesn’t account for inflation or significant lifestyle changes, like new chronic illnesses or substantial changes in annual costs. It’s also designed to cover 30 years of retirement. Depending on how early you plan to retire and how circumstances change over time, you may need to adjust your target number.  

The 4% rule

The 4% rule states that retirees can withdraw 4 percent from their savings and investment accounts every year in order to have enough money to live on for 30 years. This means withdrawing 4 percent in year one and then adjusting for inflation in subsequent years. 

For example:

• Value of savings and investments: $1.5 million
• Annual withdrawal in year one: 1,500,000 x .04 = $60,000
• Annual withdrawal in year two (assuming 2% inflation): $60,000 x 1.02 = $61,200 

The 4% rule is designed to be general. So, when building your personal FIRE strategy, test out a couple of variations to see what might work for you. Maybe you need closer to 5% to 6% or can get away with as low as 3.5% depending on the lifestyle you plan to have in retirement. 

The power of compounding growth

Compounding is when your interest and returns from one period earn additional interest and returns in subsequent periods. Essentially, it’s a percentage of money you gain on top of what your principal investment earns. Compounding can be a powerful tool to get you closer to early retirement and financial freedom. 

The power of compounding relies on long-term savings and investments. Interest on savings, dividend income from stocks, and returns on investments must stay invested in order to earn additional returns. The sooner you start investing, the longer your money has to grow and compound. 

Tax efficiency

Traditional retirement accounts come with tax advantages that help you keep more of your money instead of spending it on taxes. But if you withdraw money before you’re 59½, you lose those advantages and have to pay penalties. FIRE followers often seek to retire much earlier than that, so they diversify where they invest so they can reap tax benefits while also generating enough income to cover their expenses between early retirement and traditional retirement age.  

• Tax-advantaged retirement accounts: IRAs and 401(k)s can help lower your taxable income and allow for tax-deferred or tax-free growth on investments as long as you don’t withdraw money early. FIRE investors often leverage these accounts to save for their retirement expenses after age 59½, while planning to withdraw from their brokerage account after they retire but before they hit that milestone.
• Health savings accounts (HSAs): Healthcare expenses are an important consideration in planning for your later years, and HSAs can provide significant tax savings on money you spend on qualified medical expenses. First, you fund the HSA with pre-tax money, reducing your taxable income each year you contribute. Second, you don’t have to pay taxes on money you withdraw from the account as long as you spend it on qualified healthcare expenses. And finally, the funds in your HSA can be invested, and earnings are not taxed if they’re spent on qualified medical expenses. 
• Tax-efficient investments in brokerage accounts: While a brokerage account doesn’t offer any particular tax advantages, FIRE investors can look for tax-efficient options. Holding investments for more than a year generally lets you pay the lower long-term capital gains rate on returns, as does earning qualified dividends. Index funds, exchange-traded funds (ETFs), and some mutual funds may also be more tax-efficient because they might trigger fewer capital gains. 

Who is the FIRE movement for?

People who follow the FIRE movement would rather live frugally and be very disciplined about their personal finances so they have more years of their lives free from the obligation to work. FIRE followers often forgo living in high-cost areas, owning new cars, taking vacations, dining out, and spending on entertainment to accomplish this goal. 

Each individual has their own definition of early retirement; some people see age 55 or 50 as attainable, while others aspire to leave the workforce much younger. Regardless of the specific goal, anyone who can live well below their means to reach financial independence can follow the principles of the FIRE movement. For a real-life example, check out the story of one couple who used the FIRE movement to pay off $200k of debt and move toward financial independence.  

Limitations of the FIRE movement

While anyone can technically pursue financial independence and early retirement, it can be a difficult path, and there are a number of barriers that can make achieving FIRE more difficult. These include financial burdens beyond one’s control, like extensive or chronic healthcare needs, familial obligations, high student loan debt, and unpredictable life events and emergencies. Additionally, pursuing FIRE can require a high income that may be more difficult to obtain for those coming from historically oppressed populations, lower socioeconomic backgrounds, or those who face barriers working traditional jobs. 

In reality, FIRE isn’t necessarily attainable for everyone. That said, even those who can’t commit fully to a FIRE method can use elements of the philosophy to improve their overall financial situation. 

Tips for participating in the FIRE movement

• Create and stick to a budget: Building a budget that includes detailed plans for spending, saving, and investing is fundamental for following the FIRE method. If you already have a budget, you might need to heavily rework it or start from scratch to make sure you’re allocating enough money each month toward your retirement goals, debt repayment plans, emergency fund, and other financial goals. 
• Determine your retirement needs: If you want to retire early, you’ll need to plan meticulously. Start by understanding when you want to retire and how much money you’ll need. Then you can work backward, using the rule of 25 and the 4% rule to determine what income and savings rate you need. A retirement calculator can help you zero in on those numbers based on your individual goals and circumstances.
• Save or invest 50% to 70% of your income: To successfully FIRE, you’ll need to save and invest as much as you can. The usual rule of thumb is to save 20% of every paycheck, but those participating in the FIRE movement usually aim for 50-70% of their income instead.
• Pay off your mortgage: You can dramatically reduce your post-retirement expenses by paying off your mortgage early. This has the dual advantage of reducing how much you pay in interest on your mortgage overall and reducing your monthly post-retirement expenses by eliminating a mortgage payment from your budget. 
• Minimize expenses and spending: FIRE is a long-term goal, and requires significantly trimming short-term spending. To successfully FIRE, you’ll need to reduce your expenses and save as much money as possible. You’ll also need to track expenses carefully to ensure you don’t derail your plans. Many people use cash or a debit card instead of a credit card to help curb the potential for overspending.
• Get out of debt: Debt can quickly douse your FIRE strategy. The sooner you get out of debt, the sooner you can start putting the money you’re spending on interest payments toward your retirement savings. Paying off high-interest debt through the avalanche method can help you spend less on interest payments overall.
• Build up your emergency fund: An emergency fund helps you avoid going into debt or draining your savings and investment accounts when unexpected expenses come up. Most experts recommend you maintain enough for three to six months of living expenses in your emergency fund. For those pursuing FIRE, it’s generally recommended to stash enough money to live on for 12 months if possible.
• Plan for medical needs: While it’s not possible to anticipate exactly what your healthcare needs will really be in the future, they’re an important factor in understanding how much money you’ll need to live on in the future. If you have known medical expenses, factor those into your FIRE strategy. Take advantage of an HSA and maintain an emergency fund to prepare for medical expenses. Remember, you don’t qualify for Medicare until you’re 65, so you’ll have to be able to cover all your medical expenses in the meantime. 
• Start investing with a brokerage account: Think of your brokerage account as a bridge to carry you from your early retirement age to 59½, when you can withdraw from tax-advantaged accounts penalty-free. Take the number of years you have between those ages and multiply it by the annual retirement income withdrawal you determined using the 4% rule. For example, say you want to retire when you’re 54½ and will need $60,000 a year to live on. Since you’d need to draw from your brokerage account for five years, you’d need about $300,000 in that account. 
• Contribute to tax-advantaged retirement accounts: You can have multiple tax-advantaged retirement accounts, so explore all your options. Traditional and Roth IRAs have different tax advantages; you might leverage one or both to get the most tax benefits. If your employer offers a 401(k) plan, you might want to take advantage of it as well, as it comes with an entirely different set of benefits and limitations compared to IRAs. 
• Diversify your investments: To ensure your investments will carry you through retirement, you’ll want to reduce risk by diversifying your portfolio. This means spreading your holdings across different asset classes so major changes in one company or sector don’t have as significant an impact on the overall value of your investment portfolio.

How to make the FIRE movement work for you

FIRE isn’t for everyone, but its philosophies can benefit even those who don’t want to commit to the movement fully. The core concepts of decreasing expenses in order to save and invest can help anyone improve their personal finances and work toward a greater sense of financial freedom. 

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All that to say: Improving the bottom line has never been harder for hardworking Americans.

So in service of helping you get on track, Stash collected 100 of the best financial tips you’ll want to implement going into 2024—advice that will lessen the burden on your wallet and make it possible for you to get closer to your money goals.

Our Stash 100 tips are simple, jargon-free, and easy to follow. Bookmark them, share with your friends, and scrawl them on your mirror. It’s advice that will lessen the burden on your wallet and, even more importantly, put your mind at ease as you tackle the world ahead.

Investing 

1. Invest now. The sooner you start investing, the greater your earning potential.

2. Invest for the long-term with a buy-and-hold approach, and put your money to work. 

3. Invest regularly, and it becomes a powerful new habit that compounds your success. 

4. Diversify. Choose a variety of investments with different risks to reduce your risk of loss and reduce swings in your account value.

5. Choose low-fee ETFs. It’s safer to invest in ETFs, or baskets of assets, than in any one asset. 

6. Take advantage of dollar-cost averaging, which is periodically buying certain stocks or other assets using a set amount of money on a schedule. You’ll buy assets when the price is low and when it’s high without being driven by emotion. 

7. Combat inflation by investing your cash. Keeping too much money on-hand allows inflation to erode its value over time.

8. Don’t be afraid to invest. Having some cash is important, but keeping all your money on the sidelines can put you at risk for missing out on tens of thousands, or even millions of dollars over the course of your lifetime.

9. Keep your emotions in check. Avoid impulsive decisions based on fear or greed, and instead focus on your long-term goals and intentions. 

10. Don’t panic sell just because an investment is down. Knee-jerk reactions can derail your investing success.

11. Leave day-trading behind. You can be a great investor without being a frequent trader. In fact, trading less often can often be a better investment strategy. 

12. Focus on goals. Understand your objectives and time horizon to help you determine what combination of investments is right for you.

13. Park your cash in short-term Treasurys if you think you will use it within a year. 

14. Learn the value of compound interest, or when interest earns interest because it remains invested. It allows your money to grow exponentially over time. 

15. Avoid concentration risk. Buying individual stocks can be fun, but you shouldn’t invest more than 2% of your portfolio in any one stock.  

16. Automate your investments. Then check in at least once a year or when you have a major life change to make sure your investing strategy still makes sense for you. 

17. Understand and minimize what fees you are paying on your investments. Compare similar funds’ expense ratios and look out for commissions and other hidden fees. 

18. Don’t trust anyone that tells you they know how the market or a stock will perform in the future. No one has a crystal ball. 

19. Remember that investing is a marathon, not a sprint. Get-rich-quick schemes often end up in losses.

Retirement Planning 

20. Save for retirement. The years pass faster than you expect.

21. Start by saving 1% of your salary if that’s all you can afford now, and work your way up in 1% increments. Saving for retirement may feel like a luxury or impossibility, but any amount of savings is better than none. 

22. Use standard guidelines for retirement planning: Consider setting aside 15% of your pre-tax salary for retirement if you want to retire in your 60s and maintain your lifestyle. 

23. Calculate a personal retirement goal. If you aren’t sure, retirees typically spend between 70-80% of their pre-retirement income to maintain a similar lifestyle. You can also multiply how much you think you’ll spend every year of retirement by 25, and start there. 

24. Does your employer offer a retirement plan? Evaluate the investment options because every plan is different. Then choose one that’s appropriate for you, and never let your contributions sit idle. 

25. Don’t leave money on the table. Prioritize taking advantage of any employer match offered in your retirement plan. 

26. Consider multiple accounts. If you’re eligible for an employer-sponsored plan like a 401(k) and an individual retirement account like a traditional or Roth IRA, you may want to take advantage of both simultaneously—they each have their own pros and cons. 

27. Add social security benefits into your calculations by checking your Social Security Statement at SSA.gov. Guaranteed monthly income in retirement can help you maintain your retirement nest egg much longer.   

28. Healthcare related costs are retirees’ largest annual expense. Consider investing in a Health Savings Account (HSA) if you have access to a high deductible health plan. They have great tax benefits and will help offset those large expenses in your golden years. 

29. Try to avoid touching your retirement accounts, and learn about the tax implications and penalties associated with different retirement account withdrawals. Retirement funds are generally only accessible without penalty after you turn 59.5. 

30. Plan to retire early? Understand the tax rules and penalties of accessing your investments, and consider having alternate investment accounts that you can withdraw from first if need be.   

31. Avoid cashing out your retirement plan when changing jobs (it’s called an early distribution), which can tack on taxes and fees. Roll that money into an IRA or your new company’s 401(k) plan and allow the money to continue to grow. 

Financial Wellness 

32. Honor the principles of saving and investing. It’s not about how much you make—you can make a million dollars a year and still be flat broke if you spend it all. 

33. Set SMART savings goals. Make goals Specific, Measurable, Achievable, Realistic & Timely. This will help keep you motivated and aware of your progress.  

34. Establish an emergency fund as priority one. A good rule of thumb is to save between 3-6 months worth of your essential expenses. 

35. Eliminate stress over your bills by setting up automatic payments. 

36. Avoid the pitfalls of the U.S. post office by opting for direct electronic payments.  

37. Save money by changing banks. You may reduce expenses like monthly fees by switching banks or using an online financial institution for your checking and savings accounts.

38. Earn money on your cash. Set aside what you need for regular spending, then maximize the interest you earn on excess cash by comparing high yield savings accounts, money market funds, and U.S. Treasurys. 

39. Pay yourself first. Sometimes an employer can deposit a percentage of your paycheck directly into your savings or investment account, or set up an automatic transfer for when your paycheck hits. 

40. Check your pay stub regularly. Ensure that deductions are accurate and tax withholding seems appropriate. Consult HR right away if something seems off.

41. Protect what you have. Insurance is an often overlooked part of financial health. Whether it’s adequate health insurance, car insurance, homeowners, life or disability, set yourself up for unexpected life events.

42. Jumpstart your child’s long-term savings with a custodial account.

43. Talk to your kids about money. Teaching financial skills such as budgeting at a young age can help lead to strong financial habits as they grow. Celebrate milestones together to model diligence. 

44. Acknowledge your hard work when you hit a savings balance or come in under budget. It’ll keep you motivated for future success.  

45. Take security seriously. Use strong passwords, two-factor verification, and secure internet connections when managing your finances online. 

46. Be vigilant about phishing scams, especially approaching the holiday season when fraud activity tends to increase. It can be very hard, if not impossible, to get stolen money back.

Budgeting

47. Create a budget to help you understand where your money goes every month. One way to do it: Take the money that hits your bank account, minus your expenses, equals what’s available for your goals. 

48. Keep budgeting simple with the 80/20 approach: Save 20% of what you make so you limit the rest of your spending to 80% of your income. You can also get even more detailed with the 50/30/20 rule.

49. Keep a money journal and track all of your expenses—but don’t let it overwhelm you. The goal is to build awareness of your spending habits.

50. Create funds for large and irregular expenses like the holidays, travel, camp, or car maintenance. Set aside money each paycheck or month so that the money is available when you want it.

51. If taxes aren’t automatically deducted from your paycheck, set aside part of your paycheck so you don’t find yourself in trouble come filing season. 25-35% is a good starting point (refer to last year’s taxes or speak with your accountant for a more precise estimate).

52. Make a shopping list in advance—and stick to it! Studies show you can save yourself from unplanned purchases when you have it in-hand. 

53. Overspending? Try the 30-day rule. If you want to make an unplanned purchase, set the money aside for 30 days, then revisit. Often you’ll find the impulse to spend has gone away and you’re able to avoid unnecessary purchases. If waiting 30-days feels unrealistic, start with 48 hours. 

54. Delete your online payment info. The more effort it takes to shop online, the more likely you’ll be to pause and think about whether you truly want to buy it.

55. Sometimes it’s the right time for a “cash diet.” Commit to only making purchases in cash. You’ll likely spend less even on planned purchases like groceries, and it guarantees you won’t spend more than you’ve budgeted.

56. Swap your credit card for a debit card: Research shows that consumers spend less when they see real money immediately leaving their bank account. Pay down your credit card more frequently for a similar effect. 

57. Buy store brands instead of name-brand products with the same ingredients. Tiny savings add up on frequent purchases. 

58. Beware of BOGO “deals.” Slow down and consider the price of one item; often they are marked up to cover the cost of the discount. 

59. The best rates on hotels sometimes come 15 days before you travel. Make a refundable reservation far in advance, and then check the rates again leading up to your trip. If rates have dropped, cancel the original booking for free and lock in the lower rate. 

Debt

60. Take inventory. Make a list of your debts, such as credit card bills, student and auto loans, and mortgages, and include the lender, balance, interest rate, payment date, and monthly payment amount. Then take action.

61. Consider using the debt snowball or avalanche methods to prioritize which debt to pay down first. Each approach targets focusing on one debt at a time, rather than making extra payments on multiple obligations each month. 

62. Try to avoid paying more in interest and fees. While consolidating debt can be a smart solution, doing so in a high interest rate environment might mean more dollars out of pocket now. Beware of committing to a higher minimum monthly payment if cash flow is tight.

63. Pay off your high interest rate debt—such as credit card debt—first. You’ll save more by paying off credit card balances than you can realistically expect by investing those dollars in the stock market instead. A credit card balance can also bring down your credit score.

64. Take advantage of debt that works in your favor. Low-interest, installment loans like mortgages (especially those that are fixed and below 5%) and auto loans can help you build credit. 

65. Don’t pay more than the minimum required for low-interest, fixed-rate loans. If your fixed rate loan is low enough, invest the extra dollars for a higher return. 

66. Pay extra attention to variable interest rates to avoid fluctuating payments that are out of your control. 

67. Considering a new debt? Practice paying for it. Set aside a monthly payment for a few months for insight into how a new financial expense will impact your finances. 

68. A car payment doesn’t have to be an indefinite expense. Try to keep a 60 month loan or less, and continue to drive the car once it’s paid off. 

69. Zero-percent interest car loans may mean the car price itself is marked up or there’s some other catch. 

70. Beware of credit card rewards. Avoid spending more than you would typically spend just for the rewards. Buy the perk with cash—save your bottom line.

71. Refinance. When your credit score goes up or your cash flow improves, you may be eligible for a better rate on your existing loans. Run the numbers to see if it makes sense—this strategy may have upfront costs but could lower your monthly payments.

Credit

72. Not sure how to build good credit? You’re not alone. Consider using a secured credit card, which requires payment upfront. Make sure to understand the fees.

73. Lean on family or friends to build your credit. Asking someone with strong credit to cosign for you can help you obtain a better rate, or faster approval, than what you may be able to secure on your own. 

74. Build better credit in a short amount of time when you are added as an authorized user on someone else’s account. Note: Credit scores become intertwined, and both can be negatively impacted if someone doesn’t pay the bill on time. 

75. Take good care of your credit to be eligible for loans with more favorable rates. Pay bills on time and keep your outstanding balances low compared with your limits (this metric is called credit utilization). 

76. Remember that your credit score isn’t private. Think of it as a financial report card that can be shared with future employers, landlords, and lenders. 

77. When you open a credit card, use it responsibly. Charge at least one expense per month, like gas, and pay it off in full if possible. Then continue to pay it off in full every month. 

78. Carrying debt does not benefit your credit. Credit card interest compounds daily, working against you because the debt adds up rapidly. 

79.Set a reminder to check your credit report for free once a year with these three credit bureaus: Experian, Equifax, and Transunion. Or check annualcreditreport.com, which is a one-stop-shop. 

80. Dispute credit report errors. If there’s any incorrect information, contact the credit bureau directly.

81. Ask for a credit line increase. A good repayment history, higher income and/or higher credit score can warrant an increase. A higher limit can help your credit too, as long as you don’t spend more and raise your average balance. 

Homebuying/Home ownership 

82. Renting may be smarter—most homebuyers don’t break even for five years. If you expect to move sooner, consider renting instead.

83. When thinking about home-buying, cap your housing costs. Target a total monthly payment of no more than 28% of your gross monthly income towards a home. This should include principal, interest, taxes and insurance (PITI). 

84. Know what you have available for a down payment, and what you can afford monthly for your mortgage. Keep both in mind when trying to determine your price range. 

85. Negotiate your interest rate, and shop around. The process can be tedious, but every point negotiated down on your mortgage can be a huge cost savings. 

86. Do your research before making an offer. One tried and true way to value a home is looking at “comps,” which are comparable homes in the area that recently sold.

87. Understand PMI. Private mortgage insurance is an additional monthly cost assessed by a lender in the event you put less than 20% down. It may not be a reason to wait until you can afford more, but you’ll want to budget for the extra monthly cost, which is usually 0.5–1.5% of the cost of the mortgage each year.

88. Don’t overlook closing costs, which usually range between 3-5% of the purchase price. Example: if you want to make a 10% down payment, you’ll need between 13-15% of the purchase price in cash to complete the transaction. For a more exact estimate use a closing cost calculator specific to your state. Don’t forget moving costs.

89. Get pre-qualified and include it in your offer. Obtaining pre-qualification (not to be confused with pre-approval) can start the process of determining what you can afford, and it should not impact your credit or require underwriting. 

90. Build a home emergency fund for the things you need to repair and replace, ongoing costs, and one-time costs, too. Plan for overages when setting a budget for home renovations. 

Taxes

91. Keep track of deductible expenses throughout the year to maximize your tax deductions, especially if you’re self-employed. A standard deduction is applicable to everyone; other deductions—like large medical expenses and charitable donations—are relevant only if you decide to itemize your deductions. 

92. Know the tax implications of different retirement accounts. Investing into a traditional 401k or IRA can reduce your current taxes, which saves you money now, but in retirement, you’ll have to pay taxes on your withdrawals. Compare that to a Roth 401k or IRA, which won’t reduce your current taxes, but investments will grow tax free and you’ll save on taxes in the future.

93. Consider investing into a 529 plan for your children’s education. In some states, 529 plan contributions are tax-deductible and your investments grow tax-free.

94. Save on childcare. If you have kids and pay for daycare or camps, save on your taxes by contributing to a Dependent Care Flexible Spending Account (DCFSA.) Money is added directly through your paycheck pre-tax and can be used to reimburse you for your childcare related costs.

95. Self employed and/or experience a major life event? Tax professionals are a worthy investment. Not only can they make sure you file your taxes accurately, they can also help you make strategic money decisions throughout the year. Make sure their expertise is relevant to your situation. 

96. A large tax refund isn’t necessarily something to celebrate, as it typically means you overpaid the government during the year. Think of it as an interest-free loan to the government—not the prize you’re hoping for. 

97. Getting a tax refund year after year after year? Adjust your tax withholdings with your employer to keep more of it each paycheck. 

98. Use tax software to simplify the filing process. Depending on your income, you may be able to use some services at no cost. Find more information at irs.gov.

99. Keep copies of your tax returns for reference (digital is okay!). Up to seven years is suggested if you worry about being audited. Lenders typically only ask for a two-year history when applying for a loan.   

100. Make tax filing easier. Create a physical or digital folder and collect all tax related documents over the course of the year and you’ll stress less in spring. 

BONUS: Holiday

101. Set and stick to a holiday season budget. In addition to gifts, include travel and transportation, new clothes, holiday bonuses, decorations, and fun activities (like ice-skating). Be specific. 

102. Make a list of gift recipients and a spending limit per person.

103. Shop early. You’ll avoid rush delivery costs and needing to search for last-minute, expensive alternatives.

104. Book travel as soon as you can and be flexible with your schedule for better deals. 

105. Hosting doesn’t have to be expensive. Price shop and avoid recipes with too many new ingredients. Consider a pot-luck option instead of trying to do it all yourself.

106. Shop online. You’ll avoid impulse purchases, and it’s easier to search for discounts and price comparisons. Many online retailers offer free shipping during the season. 

107. Get creative. Thoughtful gift giving doesn’t have to cost you a lot of money. You can make gifts, like art, a note or baked goods, or you can gift time by offering to babysit/pet sit or help someone with other household chores. 

108. Suggest a gift exchange. Suggest a white elephant or secret santa so everyone only needs to buy one gift that will likely be more thoughtful and exciting to receive. 

109. Avoid (or limit) self-gifting. Retailers will be bombarding you with “deals.” Resist sales and unneeded purchases. Unsubscribing works wonders.

110. Celebrate late. Consider doing your holiday gatherings a few weeks later, allowing you to book less expensive travel and buy up gifts at post-holiday sales. 

111. Be selective. You don’t have to say ‘yes’ to every invitation, or include everyone on your guest list. Keep gatherings intimate, and choose only the events you want to attend most when choosing how to allocate your dollars.  

112.  Reflect and evaluate what worked this holiday season, then eye January as an amazing time to commit to new financial goals. 

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With a dizzying amount of information available, understanding facts about the stock market can feel daunting. Luckily, we’ve compiled a list of the most interesting stock market facts for 2023 and beyond.  

To round out your understanding of the stock market, here’s what you’ll find in this article: 

• Interesting stock market facts 
• Stock market statistics by demographic
• Stock exchange statistics
• Stock market performance statistics
• Stock market statistics by country
• Stock market statistics by industry and sector
• Stock market statistics by company
• Stock market statistics: robo-advisors 
• Mutual funds and ETFs statistics
• Retirement investment statistics 

Read along for the top stock market statistics of 2023.

Interesting stock market facts

Many investors were happy enough to see the first half of 2022 come to end after the S&P 500 declined by more than 20%, turning in the worst market performance in decades. 

This has left many investors feeling confused and pessimistic about the current state of the market—but if you’re a younger investor with a longer time horizon, there’s still reason for optimism. Market fluctuations are normal and will pivot over the course of 10, 20, and 30 years, giving your money plenty of time to grow despite the current state of the market. 

To that end, here are some more interesting stock market facts to be aware of:

1. Stock portfolios and retirement accounts took a beating in the first half of 2022, with the S&P 500 falling by 21%. (Bankrate)
2. On June 13, 2022, the stock market closed at more than 20% below January highs, putting the market into a bear market. (Bankrate)
3. The U.S. represents 40.9% of the $108 trillion world stock market capitalization. (SIFMA)
4. As of March 2022, the total market capitalization of the U.S. stock market is $48,264,353.4 million. (Siblis Research)
5. The stock market usually performs the worst in September—dubbed the “September Effect,” the S&P 500 has averaged a 1% decline in September from 1928 to 2021. (Investopedia)
6. The total market capitalization of domestic companies listed on global stock exchanges was $105 trillion in June 2022. (World Federation of Exchanges x Statista) 
7. In 2022, the total market capitalization of the Global Top 100 companies is $35.2 billion. (PwC)
8. The New York Stock Exchange (NYSE) is the largest stock exchange in the world, with a market capitalization valued at just over $25.8 trillion in June 2022. (World Federation of Exchanges x Statista) 

Stock market statistics by demographic

The percentage of Americans who report owning stock in 2023 has increased from 56% in 2021 to 61% in 2023, making it the highest percentage of ownership since 2008.

When it comes to stock ownership by age group, millennials own a marginal share—just 2.4%—of all U.S. stocks compared to older generations. Take baby boomers, for example, who own 55.7% of all U.S. stocks, or Gen X, whose share amounts to 26.8% of all stocks. While stock ownership among millennials has incrementally risen over the last five years, they’re still behind older generations when it comes to building long-term wealth. 

9. Millennials own just 2.4% of all U.S. stocks, equating to about $1 trillion in Q2 2023. (The Federal Reserve)
10. Gen X owned 26.8% of all U.S. stocks in Q2 2023. (The Federal Reserve)
11. Baby boomers owned 55.7% of all U.S. stocks in Q2 2023. (The Federal Reserve)
12. The Silent Generation owned 15% of all U.S. stocks in Q2 2023. (The Federal Reserve)
13. Of the total liquid assets owned across U.S. households in 2023, 45% were in stocks, 25.3% in bank deposits and CDs, and 16.5% in mutual funds. (SIFMA)
14. Over one-third of Americans don’t own investments or investment accounts in 2022. (eMoney) 
15. 45% of U.S. households owned equities in 2023. (Federal Reserve Board x SIFMA)  
16. As of April 2023, the percentage of Americans who own stocks jumped to 61%. (Gallup)
17. 38% of Americans use a financial advisor to manage their investments in 2022. (eMoney) 
18. 84% of adults with a household income of $100,000 or more owned stock in 2023. (Gallup)
19. 63% of adults with a household income between $40,000 and $99,000 owned stock in 2023. (Gallup)
20. Only 29% of adults with a household income of less than $40,000 owned stock in 2023. (Gallup)
21. The value of U.S. households’ liquid assets lowered to $58.6 trillion in 2023, decreasing 11% year over year. (Federal Reserve Board x SIFMA) 
22. 2023 saw 60% of women in the U.S. investing in the stock market. (Fidelity)
23. Of women in the U.S. who are investing, 71% are Gen Z (ages 11 – 26),  63% are millennials (ages 27–42), 55% are Gen X (ages 43–58) and 57% are boomers (ages 59–77). (Fidelity)
24. 20% of women reported investing in new asset classes for the first time in 2021. (Fidelity) 
25. Of women in the U.S. who invested in new asset classes for the first time in 2021, 67% invested in stocks or bonds, 63% invested in mutual funds or exchange-traded funds (ETFs) and 50% invested in money market funds or CDs. (Fidelity)
26. 41% of Americans ages 18–29 owned stock in April 2023. (Gallup)
27. 67% of Americans ages 30–49 owned stock in April 2023. (Gallup)
28. 66% of Americans ages 50–64 owned stock in April 2023. (Gallup)
29. 63% of Americans ages 65+ owned stock in April 2023. (Gallup)
30. Of Americans who owned stock in 2023, 67% were non-Hispanic white adults and 49% were people of color. (Gallup)
31. Participation in employer-sponsored retirement plans was lowest among employees age 25 or younger in 2022, with 62% of those employees contributing. (Vanguard)
32. 86% of employees ages 35–64 contributed to their retirement accounts in 2022. (Vanguard)
33. Women are more likely than men to join their employer’s retirement plan, regardless of income levels. (Vanguard)

The data above shows a clear gap in investments among millennials, whether it be stock ownership or contributing to their employer’s retirement plans. But if you’re in this age group, now is one of the best possible times to start investing—with a longer time horizon until retirement, there’s ample opportunity to let your money compound over time. 

Stock exchange statistics

To understand the size of the stock market, it’s helpful to analyze specific stock exchange statistics. 

There are 60 stock exchanges across the globe, the largest being the NYSE, whose stock market capitalization nears $25 million in July 2023. Market capitalization, or market cap, refers to the total value of a company’s shares of publicly traded stock.

34. Global stock market capitalization decreased 18% in 2022, totaling $101.2 trillion. (SIFMA) 
35. In 2023, the NYSE held around 20% of all equities traded in the market, accounting for the largest share of all stock exchange operators in the U.S. (Chicago Board Options Exchange x Statista)
36. Following the NYSE, the Nasdaq held the second largest share across all stock exchanges in 2023, accounting for 16%. (Chicago Board Options Exchange x Statista)
37. The combined market capitalization for the NYSE and the Nasdaq totaled close to $47 trillion in 2023. (World Federation of Exchanges x Statista)
38. In July 2023, the NYSE held a market capitalization of $25 trillion. (World Federation of Exchanges x Statista)
39. In July 2023, the Nasdaq held a market capitalization of $22 trillion. (World Federation of Exchanges x Statista)
40. Global equity issuance decreased 61% in 2022, totaling $400 billion. (SIFMA)
41. Global fixed-income markets (bond markets) decreased 3.2% in 2021, totaling $129.8 trillion. (SIFMA)
42. Global fixed-income issuance decreased 17.5% in 2022 to $22.5 trillion. (SIFMA)  
43. Following the NYSE, the Nasdaq had the second highest global market capitalization valued at $22 trillion in July 2023. (World Federation of Exchanges x Statista) 
44. Between February 12 and March 11, 2020, the Dow Jones Industrial Average (DJIA) index dropped close to 8,000 points, but recovered to 33,832.42 points as of October 2023. (Yahoo! Finance)
45. Despite the economic downturn seen during the COVID-19 pandemic, the S&P 500 index was valued at 4,766.18 points at the end of 2021—the highest value on record. (Yahoo! Finance)
46. The Nasdaq Composite Index decreased 33% in 2022, ending the year with 10,466.48 points. (SIFMA)
47. The average daily trading volume of Nasdaq-listed stocks was 4,966 shares in 2022, totaling $239 billion in value. (SIFMA)
48. The average daily trading volume of NYSE-listed stocks was 4,603 shares in 2022, totaling $193.7 billion in value. (SIFMA)

Stock market performance statistics 

The second half of 2021 saw soaring gas prices, the continued disruption of supply chains, and increasing inflation pressures. However, a look at the most recent stock trading statistics tells us that the value of publicly traded companies is growing—a notable trend considering business growth and value is a key indicator of stock market performance. 

49. Global equity trading was valued at $41.8 trillion in Q3 2021. (World Federation of Exchanges)
50. The total market capitalization of the Global Top 100 companies hit a record-breaking $35.2 trillion in March 2022. (PwC)
51. In 2023, the total market capitalization of the Global Top 100 companies decreased by 11.1% compared to 2022. (PwC)
52. Globally, the top asset by market capitalization is gold, valued at $13.162 trillion. (Companies Market Cap)
53. The compound annual growth rate (CAGR) of the Global Top 100 companies has increased 11.7% in 2023. (PwC)
54. In 2022, initial public offering (IPO) volume was $8.5 billion, an 94% decrease from the year prior. (SIFMA) 
55. The dollar volume of average daily trading of municipal bonds in the U.S. totaled $13,135.4 million in 2022, a 21% increase from the year prior. (SIFMA) 
56. There were  50,593 U.S. municipal bonds traded daily on average in 2022, increasing 66% from the previous year. (SIFMA) 
57. The dollar volume of average daily trading in U.S. equity markets totaled $573.1 billion in 2022. (SIFMA) 
58. The average daily trading volume for equities was 11.9 billion shares in 2022, a 4.1% increase year over year. (SIFMA) 
59. Charles Schwab had $7.38 trillion in client assets at the end of March 2023 (Charles Schwab Corporation)
60. Fidelity had $4.5 trillion in client assets at the end of June 2023. (Fidelity)

Even amid the current volatility of the economy, the data above paints an optimistic picture of what to expect for the long term. And if you’re a younger investor with decades left before you retire, this is good news indeed. 

Stock market statistics by country

In analyzing stock market facts by country, the biggest takeaway to note is that the U.S. continues to dominate in terms of total value and growth rates. The U.S. stock markets are the largest across the globe and continue to represent the lion’s share in terms of global market capitalization. 

61. With a total global market capitalization share of 70% as of March 2023, the U.S. continues to dominate the majority share of global market capitalization. (PwC)
62. The market capitalization of U.S. companies in the Global Top 100 decreased 12% from March 2022 to March 2023. (PwC) 
63. By contrast, the value of the Top 100 companies from China and its regions decreased by 11%. (PwC)
64. While China’s market capitalization decreased in 2023, its CAGR has still steadily grown by 11.5% in the last 10 years. (PwC)
65. The top publicly traded companies in the U.S. by revenue equal a total revenue of $21.2 trillion. (Companies Market Cap)
66. The total market capitalization of the 311 largest Chinese companies is $5.9 trillion. (Companies Market Cap)
67. The top publicly traded companies in China by revenue equal a total revenue of $5.5 trillion. (Companies Market Cap)
68. The total market capitalization of the 349 largest Japanese companies is $4.084 trillion. (Companies Market Cap)

The impressive market capitalization of the U.S. is a golden opportunity for investors, creating ample exposure to some of the world’s most valuable companies—and the chance to invest in them.  

Stock  market statistics by industry and sector

In terms of market capitalization, the technology sector has led the pack for the last five years, increasing by $7.08 trillion since 2018. For more context, the technology sector accounted for 21% of the Global Top 100 companies with a market capitalization of $3.6 trillion—in 2022, it accounts for 34%.  

Technology isn’t the only sector showing increasing dominance, however. The same can be said for the health care sector, whose market capitalization has significantly increased since 2018. 

69. Technology companies accounted for 34% of the Global Top 100 in 2022, with a combined market capitalization of $12 trillion. (PwC)
70. Health care companies in the Global Top 100 have increased 84% since 2018. (PwC)
71. Of all sectors, the energy sector has seen the largest increase in market capitalization, increasing 57% since August 2021. Its value as of August 2022 is $3.54 trillion. (Fidelity)
72. The energy sector has also steadily grown since 2018, increasing by 151%. (PwC) 
73. The information technology sector holds the highest market capitalization across sectors, totaling $13 trillion in August 2022. (Fidelity)
74.  The basic materials, consumer discretionary, consumer staples, industrials, telecommunications, and utilities sectors account for 33% of total market capitalization. (PwC)
75. The top three leading U.S. industries in revenue in 2022 are drug, cosmetic and toiletry wholesaling, pharmaceuticals wholesaling, and new car dealers, whose combined revenue totals roughly $3.3 billion. (IBISWorld)
76. For 2022, the drug, cosmetic and toiletry wholesaling industry totaled $1.2 billion in revenue. (IBISWorld)
77. The new car dealers industry totaled $1.1 billion in revenue in 2022. (IBISWorld) 
78. The pharmaceuticals wholesaling industry totaled $1.1 billion in revenue in 2022. (IBISWorld) 
79. The health and medical insurance industry totaled $1 billion in revenue in 2022. (IBISWorld) 

Knowing how different sectors are performing on the market is a critical part of any investing strategy, and young investors would be wise to stay abreast of these trends to inform their investment decisions. 

Stock market statistics by company

Given the explosive growth of the technology sector, the same long-term growth trend can be seen in the world’s largest technology companies in 2022. 

While Apple has long held the position of the most valuable company across the globe, Saudi Aramco surpassed Apple—albeit marginally—in May 2022, reaching a market capitalization of $2.4 trillion before Apple reclaimed the spot in August. 

80.  The largest five U.S. companies by market capitalization are Apple, Microsoft, Alphabet (Google), Amazon, and Tesla, totaling roughly $961 trillion. (Companies Market Cap)
81. In 2022, Alphabet saw a market capitalization increase of 32%, surpassing Amazon for the first time since 2018. (PwC) 
82.  Apple is the world’s most valuable company, with a market capitalization of $2.58 trillion as of August 2022. (Companies Market Cap)
83. The company with the second highest market capitalization is Microsoft, valued at $2 trillion in August 2022. (Companies Market Cap). 
84.  In March 2022, both Apple and Microsoft’s market capitalization surpassed Saudi Aramco’s. (PwC) 
85. The top five publicly traded U.S. companies by revenue are Walmart, Amazon, Apple, Berkshire Hathaway, and ExxonMobil. (Companies Market Cap)
86. Walmart, the top publicly traded U.S. company by revenue, has a total revenue of $576 billion. (Companies Market Cap)
87. Of the Global Top 100 companies, Shell saw the highest rise in market capitalization, increasing 161% from 2021 to 2022. (PwC)

Understanding which companies have consistently performed well—regardless of the state of the market—is key to any successful investment strategy. While past performance is no guarantee of future results, companies that have consistently held the highest market share are a good place to start when choosing what companies to invest in. 

Stock market statistics: robo-advisors

The large-scale interest and growth of robo-advisors is tied to both the growing digitization of the financial services industry and the sustained underperformance of ETFs and falling commodity prices over the last decade. 

An ETF is a basket of securities you invest in—typically a mix of stocks and bonds—versus a single security like a stock or bond, and are bought and sold based on market share prices.

For both large investment funds and everyday individuals alike, the efficiency of automated portfolio management via robo-advisory technology has become preferable to traditional alternatives. 

88. The robo-advisor industry grew by 6% in 2021. (IBISWorld)
89.  The U.S. has the most assets under robo-advisor management by country, totaling $1.16 billion in 2022. (Statista)
90. As of 2022, there are $1.66 million of assets under robo-advisor management globally. (Statista)  
91. There are 12.6 million people in the U.S. using a robo-advisor in 2022. (Statista)  
92. Total assets under robo-advisor management increased by 16.1% globally in 2022. (Statista)  
93. Assets under management of robo-advisors are expected to reach a total of $3.22 trillion globally by 2027. (Statista) 
94. The annual growth rate of assets under robo-advisor management is projected to increase by 15% globally by 2027. (Statista) 
95. The number of people utilizing robo-advisors is expected to reach 543.2 million globally by 2027. (Statista) 
96. On average, individuals have $92,220 in assets managed by a robo-advisor in the U.S. in 2022. (Statista)
97.  Of all people using robo-advisors in the U.S., 25–34-year-olds make up the majority, accounting for 35.7%. (Statista) 
98.  Following behind 25–34-year-olds, 35–44-year-olds are the second largest age group utilizing robo-advisors at 30.6%. (Statista) 

Clearly, the growth of robo-advisors is only increasing—and if you’re a new investor, you have much to gain from utilizing them. Coming into the investment world for the first time can be overwhelming if you’ve never invested before, but robo-advisors can help fill those knowledge gaps and allow you to outsource your investing management to a professional for a low cost. 

Mutual funds and ETFs statistics

Like ETFs, a mutual fund is also a basket of securities that are bought and sold based on dollars instead of market share prices. 

The most recent data indicates that ETF ownership is strong so far for 2022. However, the same can’t be said in comparison to 2021, when U.S.-listed ETFs hit all-time records. 

This year’s lower demand for equity (stock) ETFs compared to 2021 might be attributed to rising interest rates, COVID-19 complications, and sustained global supply chain issues. 

99. In 2022, there are 2,952 ETFs listed in the U.S. (NYSE)
100. The average daily value of U.S. ETF transactions totaled $202.53 billion in June 2022. (NYSE)
101. The average daily volume of shares traded in the U.S. was 2.78 billion in June 2022. (NYSE)
102. Of U.S. adults with investments in 2022, 41% own mutual funds. (eMoney)
103. Long-term mutual funds and ETFs totaled a record $88 billion in December 2021. (Morningstar)
104. Americans invested $3 in ETFs for every $1 invested in mutual funds in 2021.  (ETF x BBH) 
105. By the end of 2021, ETFs reached $10 trillion in assets under management. (Morningstar x BBH)
106. 206 new ETFs launched in early July 2022, on track to align with 2021’s record of 450 launches. (Fidelity)
107.  Of the 206 new launches, 125 were actively managed ETFs. (Fidelity)
108. In early 2021, 16 mutual funds with over $40 billion in assets were converted to ETFs. (Fidelity)
109.  So far in 2022, eight mutual funds totaling $17 billion in assets have converted to ETFs. (Fidelity) 
110.  In 2022, 78% of investors report planning to expand more investments into active ETFs—up from 65% in 2021. (BBH)

If you’re deciding between an ETF versus a mutual fund, new investors can benefit from ETFs given their passive nature—meaning less effort is required to manage them. They also tend to be more cost effective than a mutual fund, making them ideal for younger investors who might not have as much capital to invest right away. 

Retirement investment statistics

Savings in retirement plan participants in the U.S. broke new records in 2021—growth that appears to be on track to continue into 2023. 

Part of the catalyst is the growing use of automatic solutions by retirement plan sponsors, which removes the friction of employees contributing to their retirement savings. 

Overall, defined contribution (DC) retirement plans dominate the private sector retirement system in the U.S., covering almost half of all private sector workers. 

111.  
112.  The total value of retirement assets in the U.S. reached $41.8 trillion in 2022, decreasing by 8.7% year over year. (SIFMA)
113.  The total value of U.S. individual retirement accounts (IRAs) reached $13.9 million in 2021, increasing 12.8% year over year. (SIFMA)
114.  Of all U.S retirement assets in 2021, 27.5% were IRAs, and 28.4% were in private pensions. (SIFMA) 
115.  Employer-sponsored retirement accounts are the second most popular type of investment account among Americans in 2022. (eMoney)
116. Retirement plans offering automatic enrollment have more than tripled since 2007. (Vanguard)
117.  76% of participants in Vanguard retirement plans were in plans with an automatic enrollment option in 2022. (Vanguard) 
118. Over 100 million Americans are covered by DC retirement accounts, amounting to $9 trillion in assets. (Vanguard) 
119.  For eligible employees with an annual income of less than $15,000, just 47% contributed to their employer’s DC retirement plan in 2022. (Vanguard) 
120.  By contrast, 95% of eligible employees with an income over $150,000 contributed to their employer’s DC retirement plan in 2022. (Vanguard) 
121. Retirement plan participation varies by industry—90% of employees in the finance, insurance, and real estate industries participated in their employer’s plan in 2022.  

If there’s one thing we can learn from stock market statistics, it’s that the market simply can’t be predicted. High inflation, soaring gas prices exacerbated by war tensions, and rising interest rates all contribute to the continued fall of riskier assets in Q2 2022, and investors are still trying to gauge how much longer the current bear market might last—and how much lower prices might fall. 

The good news is that consumer inflation rates are expected to level out over the next 12 months, and some of the most extreme supply chain issues are slowly easing up. Expected growth for stock earnings in the S&P 500 stands at 11% so far for 2022, higher than the average earnings growth rate of 2% in late-cycle periods seen since 1950. 

All that to say, none of these things can be answered definitively. And while stock market facts can lend a hand in forming predictions, only time will tell the true performance of the stock market for the remainder of 2024 and beyond. Our advice? Always ignore the short-term noise and think like a long-term investor. 

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Financial goals are your personal saving, spending, and investing targets. They might be things you want to achieve in the short term, a bit further down the road, or even far into the future. Goals help you determine how to allocate your income among expenses, how much to save and invest, and what success looks like. Your financial goals will be as unique as you are. Determining them can help you understand and achieve the financial future you want.

In this article, we’ll discuss:

• How to determine financial goals 
• Types of financial goals
• How to set successful financial goals

How to determine your financial goals 

How you build your money strategy is largely driven by your financial goals. When you know what you’re working toward, you can more easily make financial decisions that support your values and ambitions. Most people have multiple short, mid, and long-term goals at any given time. 

The financial goals you set will be driven by things like your lifestyle, plans for the future, where you live, family structure, and so on. They’re also contingent on your financial situation, including income, expenses, and debt. Rather than comparing yourself to other people, focus on working toward achievements that are realistic and meaningful for you. 

Keep in mind that your goals will likely shift over your lifetime as your circumstances change. For example, changes in income, family dynamics, health, and even the economy can directly impact your goals. 

The 3 types of financial goals

You can break your goals into three broad categories based on timeline, and you might take a different approach for goals in each category differently.

• Short-term financial goals: These are smaller financial targets that can be reached within roughly a year. In addition to saving over time, many people fund these goals with a one-time windfall like a tax return or bonus. 
  
• Mid-term financial goals: Mid-term goals are typically larger goals that will take one to five years to achieve. Having a longer timeline allows you to put your savings into an interest-bearing account or short-term investment to help your money grow. 
  
• Long-term financial goals: These goals will take more than five years to achieve, are higher financial targets, and will require a long-term commitment to saving and investing on a regular basis.

Examples of financial goals

So, what are the financial goals you should set? The answer to that question is unique to every individual, and it’s based on both practical considerations like age and income as well as personal hopes and desires. For most people, it makes sense to set a couple of short, mid, and long-term goals at the beginning of their financial planning journey. Then, you can check in on your goals periodically to make sure they still make sense for your overall financial plan. The examples of financial goals below can help you start thinking about the goals that make sense for your life. 

Why financial goals matter

Delayed gratification can make saving and investing hard. You have to give up spending in the short term for gratification down the road. That’s why setting goals is so important. It gives you something to work toward that makes resisting the urge to spend your money worth it. Financial goals provide purpose and energize your money moves so you can work toward the future of your dreams.

Goals also make your financial planning concrete. You’re not just saving miscellaneous sums of money for a vague future use. You have a savings plan in place to achieve something that will bring you joy or comfort. And you know exactly how much you’re trying to save.

How to set financial goals you can stick to

Your financial goals need to be realistic and motivating in order to work. So you must consider several factors when setting your goals, including your current income, expenses, and debts, as well as the life you want to live. Here are six tips for setting financial goals you can achieve. 

1. Make your goals specific and measurable

Start by making a list of goals, categorized into short, mid, and long-term. Determine the required amount and ideal timeline for each goal. The more specific you are, the more effective your financial planning can be. For example, if you want to replace your old car, research the kinds of vehicles you might want to buy and how much they cost, and consider when you’ll need to make the purchase based on how much life is left in your current car.

2. Build savings into your budget

Having a budget not only helps you manage your day-to-day spending but also enables you to plan for the future. Once you understand how much money you have left over at the end of the month after core expenses and bills, you can assign a chunk of every paycheck to each goal. You may be unable to save for everything at once, so you’ll want to prioritize. Start with your financial security goals, like an emergency fund and paying down debt, and work out from there. Once you feel financially stable, you can pivot to saving for more fun milestones alongside your very long-term goals, like retirement.

3. Establish an emergency fund

Building an emergency fund is often one of the first financial goals people work toward. That’s because having the money you need to cover an emergency can protect your other goals. An emergency fund exists so that unexpected expenses like a leaky water heater, car repairs, or medical bills don’t have to come out of your house fund or long-term savings. Experts recommend having three to six month’s worth of living expenses in your emergency fund. Once you hit that mark, you might want to focus your savings efforts on other goals, but be sure to replenish your emergency fund any time you have to spend some of it. 

4. Understand your timeline

Goals work better with a deadline. If they aren’t time-sensitive, it’s too easy to procrastinate. But if you set unrealistic deadlines, like saving up $5,000 in two months, you’ll likely never be able to achieve them. So it’s important to understand when you need the money for a goal and how much time you have to save it up. For instance, say you want to pay off $12,000 of student loan debt in one year. You’d need to spend $1,000 a month, plus interest, on those payments. If there’s no room in your budget for that, adjust your timeline to reflect what’s reasonable for your income. You might also have goals with set-in-stone deadlines, like the deposit on a new apartment when your lease is up. Work backward from that date to figure out how much money you have to save each month to have enough. 

5. Set realistic amounts

It’s one thing to dream big, but turning those dreams into reality means getting real. For each of your goals, calculate how much money you’ll actually need. For instance, say you want to put a down payment on a house in five years. Do some research to find out how much money you’ll actually need for the kind of house and location you want. If the amount is more than you can save up in that timeframe, make adjustments based on your personal priorities; you might decide to look in a cheaper area, go for a condo instead, or tighten your budget so you can put more money into savings.  

6. Revisit your goals regularly

You don’t want to set and forget your financial goals. Check in quarterly or a couple of times a year to update your goals based on shifts in income, plans, lifestyle, or new opportunities. For example, you may have been saving to buy a new car in three years, but wind up moving to a city with great public transportation, so you decide to shift your savings to a different priority. Similarly, as you achieve your goals, you can continue to add new ones, so you’re always working toward something. You have the freedom to adjust your financial goals to fit your ever-changing needs. 

The role financial goals play in your big-picture plan

Financial goals don’t have to be limited to things you want to save up for. Goals are part of an overarching financial plan that charts your current and future fiscal landscape. In addition to savings goals, you might work toward other financial goals like:  

• Getting out of debt 
• Building your financial literacy 
• Starting a rainy day fund
• Planning for retirement
• Investing in the stock market
• Reducing spending
• Improving your credit score
• Growing your money
• Preventing lifestyle creep
• Sticking to your budget
• Increasing your income
• Building generational wealth

Take control of your future with your financial goals

You don’t have to map out your entire future to start setting and achieving financial goals. You can start small: maybe for now you stash aside money for a weekend road trip next summer, start paying a bit more toward your credit card balance, and contribute a bit of each paycheck to your 401(k). As you get more confident with your budget and check some goals off your list, you can think bigger and plan further out. When you set specific, realistic goals, you’ll be equipped to take control over your finances now and over the long haul. 

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