From Feb. 22 to May 22, 2024, certain American Express cardholders can earn elevated rewards if they refer a friend for their own AmEx card, and that person applies and is approved by May 22.
AmEx cardholders who meet the promotion requirements will get an additional 10x Membership Rewards or 10% cash back per dollar spent at restaurants worldwide. The new rewards rates are valid for 3 months, or up to $25,000 in purchases. (Terms apply.)
AmEx cardholders with the following cards are eligible for this offer:
Thanks to American Express’ flexible referral rules, referral recipients aren’t restricted to applying for a card within the same family as the referring friend. For example, if you receive a referral from someone with an AmEx card that earns cash back or Membership Rewards, you may apply for any personal or business AmEx card. However, when the referring cardholder has a co-branded card such as the Delta Gold, the referral recipient may apply only for a co-branded card in the same family.
Is this a good deal?
Earning an extra 10x rewards or 10% more cash back is a great opportunity, especially when those rewards can be had with minimal effort: Sending a referral is as easy as clicking a few buttons online or within the AmEx app. As long as the recipient is approved for the card they apply for, you’ll get that temporary rewards boost.
Say you have the American Express® Gold Card, which earns 4x Membership Rewards at restaurants. If you meet the terms of the referral offer, you’ll earn a stunning 14x on dining. Terms apply.
Those rewards can be redeemed in a number of ways, but you’ll likely get the better value by transferring them to one of AmEx’s travel partners. NerdWallet estimates that 1 Membership Reward is worth 2 cents when transferred.
To view rates and fees of the American Express® Gold Card, see this page.
What happens to your bank account when you die will depend on what type of bank account it is, how you set up the account, and whether you have a will.
When the owner of a bank account dies, the transfer process is fairly straightforward if the account has a joint owner or named beneficiary. Otherwise, the account becomes part of the deceased owner’s estate and is settled during probate.
Understanding what happens to your money after you die can help you manage a bank account after losing a loved one, and also prompt you to set up your accounts in a way that minimizes complications for your survivors down the line.
Read on for key things to know about what happens to a bank account when someone dies.
How Do Banks Discover When Someone Died?
There are two main ways a bank discovers when an account holder has died:
• Family member or beneficiary Commonly, a family member will let the bank know when one of their bank account holders has died. To inform a bank about the death of a loved one, you’ll need to present a copy of the death certificate, the deceased person’s Social Security number, and proof that you can act on behalf of the estate (such as ID showing you are the account’s joint owner or beneficiary or Letter of Testamentary to show your executor status).
• Social Security Administration Funeral directors usually report the death of a person to the Social Security Administration to ensure no more Social Security checks are issued to that individual. If any checks were sent after the person’s death, Social Security will contact the bank to get the payment returned. This is another way a bank may learn about the death of an account holder.
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Sole Owner Bank Account Rules on Death
What happens to a deceased person’s bank account if they were the sole owner of the account will depend on whether or not the account has a payable on death (POD) beneficiary.
If there is a beneficiary named, the money in the account goes to the beneficiary after the sole account owner dies. Regardless of whether there’s a will and what’s in the will, the beneficiary automatically inherits the designated account’s funds upon the account owner’s death.
A beneficiary can claim bank account funds by contacting the bank and providing valid ID and a death certificate. The bank will typically then release the funds to that person and close the account. If the beneficiary is a minor when the account owner dies, someone must be appointed to manage the money on the minor’s behalf.
What happens if no beneficiary is named on a bank account? If the sole owner of a bank account dies and no beneficiary was named, the account becomes part of the deceased person’s estate (which is the sum total of the assets the person left behind). The money is then settled during probate.
Probate is the legal process for distributing a dead person’s assets, often as outlined in their will, as well as settling their remaining debts.
Joint Bank Account Rules on Death
In most cases, the surviving joint owner of a joint bank account will have automatic rights of survivorship, which grants them ownership of the entire account balance. That person can typically continue to use the checking or savings account without any interruptions.
However, the surviving account holder will still need to contact the bank and provide a death certificate or other documentation to confirm the death and update account records. Banks generally have a process you need to follow upon an account owner’s death. The surviving joint account holder may be able to remove the deceased from the account or open a new individual account.
Recommended: 11 Financial Planning Steps to Take After a Spouse’s Death
What Happens if No Beneficiary Is Named on a Bank Account?
If the deceased person is the sole owner of the bank account and did not name a beneficiary, the executor of the deceased’s will is typically responsible for handling any assets in their estate (including money in bank accounts).
The executor will typically transfer funds contained in the bank account into an account in the name of the decedent’s estate, and they may be able to access those funds to satisfy the decedent’s debts and pay probate costs. They will then distribute any remaining funds to those named in the will.
If there is no will to name an executor, the state appoints one based on local law. After paying off any debts, the named executor will distribute the money according to local inheritance laws.
Recommended: Why Everyone Needs an Estate Plan
Tips to Avoiding Complications Upon Death
There are some simple steps you can take now to make it easier for your loved ones to sort out your affairs and access your bank accounts after you die. Here are some to consider.
• Add a joint owner. Naming a spouse or other family member as a joint account holder is a simple way to ensure someone has access to the money when you die. In most cases, the joint account holder can simply take over the funds.
• Set up beneficiary designations. Most financial institutions make it easy to name a POD beneficiary on your bank accounts. Taking a few minutes to name one can mean less headaches for your loved ones down the road. Unlike a joint owner, a beneficiary cannot access the account while you’re alive.
• Write a will. Having a will still means your assets will need to go through the probate process before they can be distributed to your loved ones. But at least it ensures that the money will go to the intended person.
• Set up a living trust. A well-set-up trust can mean that your assets don’t have to go through probate. Instead, the money can go to your heirs in a more timely manner. However, trusts can be costly to set up and maintain, and may not be worth it if you have a simple estate with few assets and potential heirs.
• Consolidate bank accounts. To make it easier for your loved ones to sort through your finances, consider streamlining your accounts. Too many checking and savings accounts, especially if the accounts are held at different banks, can make settling your affairs complicated and time consuming. Consolidating your accounts also helps ensure that no account gets forgotten.
The Takeaway
The easiest way to pass the money in your bank account to your loved ones is to name them as joint account holders or POD beneficiaries. Setting up a will is also an essential step in estate planning, but it may not guarantee that your loved ones will be able to access your bank accounts quickly.
Regardless of your choice, it’s a good idea to make some smart money moves now to make life easier for your loved ones while they are grieving.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
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FAQ
Can you withdraw money from a deceased person’s account?
You can withdraw money from a deceased person’s account if you’re a joint owner of the account. Otherwise, you need to present documents to the bank to show you have a legal right to access the money in the account. For example, if you’re named as a beneficiary on the bank account, you will be required to show government-issued ID and a death certificate. If you’re the executor of the deceased’s will, you will need to present a Letter of Testamentary and a death certificate, among other documents.
How do I get money from my deceased parents’ bank account?
If you are named as the account’s beneficiary, you’ll be able to get the money from your deceased parent’s bank account by presenting certain documents to the bank, such as a government-issued ID and a death certificate. If no beneficiary is named on the account, you’ll likely need to wait until your parent’s estate is settled during probate. This is a legal process during which assets are distributed according to the deceased’s will or special laws in the absence of a will.
What happens to the bank account of a dead person?
It depends on how the account was set up. If there is a joint owner, the surviving owner will typically become the sole owner of the account.
If there are no surviving owners and a named beneficiary on the account, the funds will go to the beneficiary. If no beneficiary is listed, the account will become part of the deceased owner’s estate and settled during probate. This is a legal process during which a deceased person’s assets are distributed according to their will or special laws in the absence of a will.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
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Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Callable bonds give issuers the option to redeem the bond before it matures. They’re also referred to as redeemable bonds. Bond investors lend their money to entities or issuers for a certain period of time and in return investors receive interest on the principal. These entities typically return the borrowed principle to the bond investors by the bond’s maturity date.
An exception to this process of bond investing is using callable bonds, which allows the issuer to pay off its loans early by buying back its bonds before they reach their date of maturity. You can define a callable bond as one with a built-in call option.
Table of Contents
What Is a Callable Bond?
Callable bonds, also referred to as redeemable bonds, allow the issuer the right, but not the obligation, to redeem the bond before it reaches its maturity date. The entity that issues callable bonds has the right to prepay, or in other words, the bond is callable before its maturity date.
Issuers may use callable bonds when they expect interest rates to fall. That way, they can redeem their bonds and issue new ones at a lower coupon rate, reducing their overall interest expenses. 💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.
How Do Callable Bonds Work?
When the issuer calls the bond, it pays investors the call price or the face value of the bond, along with the accrued interest to date. After that, the issuer no longer has to make payments on the bond.
Businesses may prefer callable bonds, since they have built-in flexibility that could lower costs in the future. For example, if market rates are 5% when a company first issues its bonds but they drop to 2.5%, a bond issuer paying 5% would call their bonds and get new ones at 2.5%.
Some bonds have call protection which forbids the issuer to buy it back for a certain period of time. During this period, the company can not call their bonds. However, at the end of this period, the issuer can redeem the bond at its specified call date.
Callable bond prices correlate to interest rates, since falling interest rates make callable bonds less valuable.
Finding the Value of Callable Bonds
The main difference between a non-callable bond and a callable bond is that a callable bond has the call option feature. This feature impacts the calculation of the value of the bond. To find the value of callable bonds, take the bond’s coupon rate and add 1 to it.
For example, a callable bond with a 7% coupon would be 1.07. Next, raise 1.07 to the number of years until the bond is callable. If the bond is callable in two years, you would raise 1.07 to the power of two, which would be 1.1449. Then, multiply that number by the bond’s par value or face value.
If the bond’s par value is $10,000, you would multiply $10,000 by 1.1449 to get 11,449, which is the value of the callable bond.
Recommended: How to Buy Bonds: A Guide for Beginners
Types of Callable Bonds
Bonds have different types of issuers. Municipalities and corporations both may issue callable bonds. Here’s a look at three common types of callable bonds.
1. Optional Redemption Callable Bonds
Some municipal bonds have a redeemable option 10 years after the issue of the bond was issued. However, bonds with higher yields might have a protection or waiting period according to the bond’s maturity date. For example, a five-year bond might not be able to be recalled until two years after it is issued.
2. Sinking Fund Redemption Callable Bonds
This requires the issuer to recall a certain amount or all of the bonds according to a fixed schedule. A sinking fund is money that a company reserves on the side to pay off a bond.
3. Extraordinary Redemption Callable Bonds
Extraordinary redemption is when the issuer recalls the bond before maturity if certain specified events in the bond contract occur such as a business scenario that impacts bond revenue.
Callable Bond Example
A callable bond with a par value of $1,000 and a 5% coupon rate issued on January 1, 2022 has a maturity date of January 1, 2030. The annual interest payments investors would receive is $50. This bond has a protection feature which doesn’t allow the issuer to recall the bond until January 1, 2026, but after that date, the bond can be redeemed.
The issuer believes interest rates will decrease within the next four years and decides to recall the bond on January 1, 2026. If the investor bought the callable bond through their broker at its $1,000 par value, and the issuer chooses to redeem it when the protection period expires in 2026, they would calculate the value of the callable bond as follows:
• Take the coupon rate and add 1 to it, to make 1.05.
• Next, multiply 1.05 to the fourth power since the issuer will hold on to it for four years.
• This calculation will yield 1.2155.
• Next, multiply 1.255 by the bond’s par value of $1,000 to get $1,215, the value of the callable bond.
Interest and Callable Bonds
From the perspective of the callable bond issuer, falling interest rates are an opportunity to recall your bonds and lower your interest rate. While the investor is compensated at the outset with a higher yield or coupon rate for investing in callable bonds, they must be aware of the added risks associated with this investment.
If interest rates stay the same or increase, there’s a lower chance the issuer will recall its bonds. But if investors believe interest rates will drop prior to the bond’s maturity date, they should be compensated for this additional risk. The investor must determine if the higher yield from callable bonds is worth the risk of investment because the call feature is an advantage to the issuer, not the investor. 💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.
Pros and Cons of Callable Bonds
Like any other investment, callable bonds have benefits and risks. It’s important to keep in mind the pros and cons of investing in callable bonds when considering a long-term investing strategy.
Callable bonds are financial instruments that may carry more risk for investors than noncallable bonds (bonds only paid out at maturity) because there is the chance of the bond being called prior to it reaching maturity.
Pros
Cons
Companies issue callable bonds at higher interest rates to compensate for the risk of early redemption. This means the possibility of greater investment returns.
If an issuer calls its bonds early as a result of lower interest rates, bond investors risk not being able to find bonds with lower coupon rates. This could pose a challenge for income-seeking investors who want a reliable stream of passive income from bond investing.
One of the benefits of callable bonds is the option to call the bond early. Instead of waiting until the bond reaches maturity, the issuer can recall the bond earlier to suit their financial business needs.
Callable bond investors who pay a premium, or more than a bond’s face value risk only getting back the face value of the bond. This means the investor would lose their money on the premium they already paid.
Callable bonds have benefits that mostly favor the issuer. When interest rates fall, the company can redeem the bonds early and issue new bonds at a lower rate to save on interest payments.
Another risk is the bond’s maturity. The longer it takes for the bond to mature, the greater the likelihood for the bond to be called early, especially if there is a change in interest rates. Investing in bonds with a shorter maturity date carries lower interest rate risk.
The Takeaway
Again, callable bonds give issuers the option to redeem the bond before it matures. They’re also referred to as redeemable bonds. Callable bond investors lend their money to entities or issuers for a certain period of time and in return investors receive interest on the principal.
Some investors might consider buying callable bonds as one way to diversify an investment portfolio or to achieve higher yield, however, it’s important for investors to keep the risks associated with this investment top of mind. In an environment where interest rates are falling, callable bonds may not work for long-term investors looking for income.
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For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
FAQ
Are callable bonds a good investment?
Callable bonds may be a good investment depending on an investor’s strategy, risk tolerance, and time horizon, but the overriding interest rate environment may also determine how good of an investment they are as well.
What does it mean if a bond is callable?
If a bond is callable, it means that bonds can be redeemed or paid off by their issuer before they reach their maturity date.
What is the call rule on a callable bond?
The call rule on callable bonds refers to the ability of a bond to be redeemed or repaid by its issuer prior to its maturity date.
What happens to callable bonds when interest rates rise?
When interest rates rise, callable bonds are less likely to be called, though there are no guarantees.
Are callable bonds cheaper?
Generally, callable bonds tend to be less expensive than normal bonds because of the call option, which are of value to their issuer, and may lead to a relative discount for the buyer.
Do callable bonds have higher yields?
Callable bonds do tend to have higher yields, but often not greatly so, and there’s no guarantee that the yields would be higher than those of other types of bonds.
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Bonds got off to a slow start despite the holiday-shortened week. Yields began in slightly higher territory in Asia, but rallied back to ‘unchanged’ by the start of U.S. trading and to slightly stronger levels by the end of European trading. The 2nd half of the U.S. trading day brought better selling, but not enough to take bonds into weaker territory as of the 3pm CME close. More importantly, all of the above took place in a narrow enough range to argue against any deep analysis.
09:59 AM
Slow, steady gains all night and into U.S. hours. 10yr down 2.5bps at 4.256. MBS up 3 ticks (.09).
11:43 AM
Modest gains continue. MBS up 6 ticks (.19) and 10yr down 2.9bps at 4.252.
02:55 PM
Weakest levels of the afternoon, but still slightly positive. MBS up 3 ticks (.09). 10yr down half a bp at 4.275.
03:42 PM
More sideways over the past hour with MBS still up 3 ticks (.09). 10yr now down 1bp at 4.271.
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The National Association of Realtors (NAR) announced on Wednesday the addition of a home repair estimate app to its package of NAR Realtor Benefits for members.
Curbio, a provider of pre-sale home improvement services that requires payment at closing, will provide its “Build Your Own Estimate” mobile app to NAR members, which offers free repair estimates for home inspections upon the upload of a PDF document. Members will also “receive a free digital floor plan with every Curbio project,” according to the announcement.
“This collaboration reflects our dedication to equipping NAR members with innovative solutions that cater to the evolving needs of their clients, ensuring a smooth experience for sellers and buyers alike,” said Rhonny Barragan, NAR vice president of strategic alliances in an announcement of the deal.
Second Century Ventures, NAR’s strategic investment division, included Curbio in its “REACH” startup growth program in 2019. Later that year, Curbio won the “pitch battle” segment at NAR’s second annual Innovation, Opportunity & Investment (iOi) summit that took place in Seattle.
“Today’s sellers want to work with real estate agents who offer added value, including the ability to get their home market-ready and spruced up without having to pay upfront,” said Olivia Mariani, CMO at Curbio. “We are thrilled to provide NAR members and their clients with access to our reliable pre-listing home improvements with pay-at-closing terms.”
Founded in 2017, Curbio is based in Potomac, Md. The company also lists Comcast Ventures, Revolution and Camber Creek as investors.
NAR members can navigate to a dedicated page on Curbio’s website to claim their new benefits, and the mobile app is available on both Apple‘s iOS and Google‘s Android operating systems. The company operates within a 40-mile radius of more than 60 major U.S. markets, according to the page.
Do you shop online? If so, then you will want to use Capital One Shopping and read my Capital One Shopping Review. Capital One Shopping is one of the best coupon apps. This is a browser extension that finds coupon codes for you when you shop online. This is one of the best automatic savings…
Do you shop online? If so, then you will want to use Capital One Shopping and read my Capital One Shopping Review.
Capital One Shopping is one of the best coupon apps. This is a browser extension that finds coupon codes for you when you shop online.
This is one of the best automatic savings apps because you don’t have to do anything extra. The Capital One Shopping app does the work for you by running through available coupon codes as you check out, and then it automatically applies the best digital coupons for you and your purchase.
It’s free to use Capital One Shopping, and it is a browser extension that works with all major browsers.
You simply just shop as you normally do, and the Capital One Shopping app works in the background. I have it installed on my laptop; it works great and I am always able to find the best deals with no extra time spent on my end.
You can sign up for Capital One Shopping here.
Key Takeaways
Capital One Shopping has coupon finding, price comparison, and gives you rewards across a wide network of online retailers.
The tool is easily accessible as a browser extension or through the Capital One Shopping mobile app.
Rewards earned through the platform can be redeemed for gift cards at many popular stores.
Capital One Shopping Review
Below is my Capital One Shopping Review.
What is Capital One Shopping? How does Capital One Shopping work?
Capital One Shopping is your go-to tool for smart and easy online shopping.
Formally known as Wikibuy, this tool is a browser extension and a mobile app. You can add it to browsers like Google Chrome, Mozilla Firefox, Opera, Microsoft Edge, and Apple Safari. For when you’re shopping from your phone, the Capital One Shopping app is available for iOS and Android devices, so that you can make sure you’re saving money no matter where you are.
Here’s how it fits into your shopping routine: as you shop online, the extension automatically looks for lower prices and applicable coupon codes. If you’re thinking about buying a particular item, Capital One Shopping will let you know if it finds the same item at a better price elsewhere.
Capital One Shopping is even more rewarding too because you earn points for your purchases. These points can be redeemed for gift cards at many different retailers. So, you save money and get rewarded – it’s a win-win!
Capital One Shopping is designed to be easy for everyone, whether you’re good with technology or not. All you have to do is install it, shop, and you’ll save money. It’s that easy!
How do you download Capital One Shopping?
To start saving money with Capital One Shopping, you just need to download the browser extension or mobile app.
For your desktop, visit the Capital One Shopping website and click on the option to add the extension to your browser. If you’re on a smartphone, download the app from the Apple App Store or Google Play Store by searching “Capital One Shopping.”
You can download Capital One Shopping here.
7 Ways To Save Money With Capital One Shopping
Capital One Shopping has several different tools to make sure that you save the most money when shopping online. These tools include:
1. Automatically apply coupon codes
While shopping online, Capital One Shopping’s browser extension can automatically apply coupon codes at checkout.
This means you don’t have to look around the internet for coupons, as the tool seamlessly searches for and applies the best available codes for your purchases.
This is my favorite thing about Capital One Shopping. I love that I don’t have to look on a bunch of websites to find coupon codes. Instead, the Capital One Shopping browser extension does everything for me and helps me save money. This way, I don’t forget to enter coupon codes either, as it automatically does it for me!
According to my Capital One Shopping dashboard, this tool has saved me $1,047.26 since I started using it over 32 shopping transactions!
Screenshot of some of my rewards and savings.
2. Earn rewards points
As you shop with participating retailers, you can earn rewards points in your Capital One Shopping account.
You can then redeem these points for gift cards at different stores, giving you sort of like cash back on purchases you would be making anyway.
You simply just go to the Rewards & Savings tab when you are logged in on Capital One Shopping to see how much money you have available in shopping rewards. You can then exchange this for a gift card to places such as Adidas, American Eagle, Hotels.com, Kohl’s, Chewy, and so much more.
I recently redeemed my points for a $50 gift card to T.J.Maxx – couldn’t have been easier, as you don’t have to do anything extra.
3. Price comparison tool
Capital One Shopping’s price comparison tool helps shoppers find lower prices across different online stores.
Before you buy an item, this feature shows you where it may be available for less, sometimes including the costs of tax and shipping to give you a good idea of how much money you can save overall.
I really like this feature as sometimes the price can vary by a lot between different stores and even on Amazon. In fact, I was recently looking at furniture online, and the price difference from one store and another was nearly $500.
4. Price Protection
Note: This part of the program just ended. Here’s what they have said: “What happened to Price Protection? Capital One Shopping is no longer offering our Active Savings Monitoring/Price Protection product. We have updated our Terms of Service and Privacy Policy to reflect this change. We will still be offering many other opportunities for you to save with Capital One Shopping via our browser extension and emails.”
If you purchase an item and the price drops shortly after, Capital One Shopping tracks and alerts you to the price drops. It can help you request a refund for the difference without needing to monitor prices after you’ve made your purchase manually.
This is a nice feature, as it can save you a lot of money. I know I can’t be the only one who gets a little annoyed when I notice that something has dropped a lot in price right after I buy it. This feature can help you keep track of price drops so that you can maybe try to ask for a refund for the difference in price of an item.
For example, if you buy something for $50, but then the next week it drops to $25, you may be able to ask the online store for a refund of $25.
5. Capital One Shopping watchlist
Another great feature that Capital One Shopping offers is a watchlist.
You can add items to your Capital One Shopping watchlist and receive notifications if prices drop. It helps you be smart about when to buy things. When there’s a sale, it lets you know right away, so you can get the best deals.
To keep an eye on specific products, add them to your watchlist. When you view an item online that you’re interested in, click the Capital One Shopping icon or button to add it. You’ll get notifications, such as email alerts, if there’s a price drop or if a coupon code becomes available for that item.
6. Universal product search engine
This feature acts as a centralized search engine, comparing prices of a product across many different online stores. You can find where your desired item is selling for the least amount of money with minimum effort.
For example – if you are interested in a blender, you can simply just go straight to Capital One Shopping’s website and type in “blender” in their search bar.
It will then list out all of the deals and prices on blenders that the tool knows about. This way, you can just search for the best price on a blender on one site, instead of having to go to multiple sites to find the best deal.
7. Capital One Shopping hotels and travel
When planning travel, Capital One Shopping helps you find the lowest rates on hotels. Just like with products, it compares prices across a number of travel sites to help make sure that you’re getting a good deal on your accommodations.
You can find this feature when you are logged in on their website and heading to the Hotels tab. Then, just enter the location of where you want to travel to, the dates, and the amount of people you are traveling with.
How To Earn Gift Cards With Capital One Shopping
Capital One Shopping has a unique way for you to earn rewards that you can convert to gift cards. By using this service, your regular shopping activities can lead to even more easy savings.
With Capital One Shopping, earning gift cards is tied to the use of shopping credits. When you shop online with Capital One Shopping tools, you can earn shopping credits (also known as points or rewards) on your purchases.
Here’s how you can earn points with Capital One Shopping:
Automatic coupons – As you shop, the free browser extension automatically finds and applies coupons, which earns you shopping rewards.
Price comparison – If you buy a recommended deal, you can earn shopping credits.
Price drop alerts – When items you’ve looked at drop in price, purchasing them can also reward you with credits.
Redeeming points for gift cards
Redeeming your Capital One Shopping credits for gift cards is pretty easy. Once you’ve earned enough credits, you can exchange them for gift cards at places like Macy’s, Nike, Gap, DoorDash, T.J.Maxx, Lowe’s, and more.
To get a free gift card with Capital One Shopping:
Check your balance – You can see how many points you have on the Capital One Shopping app under the Rewards & Savings tab.
Choose your gift card – Select from the list of available gift cards within the Capital One Shopping portal.
Confirm your redemption – Follow the prompts to exchange your credits for the gift card that you want.
I honestly didn’t even know that this was a feature of Capital One Shopping until recently. I was mainly just using this site for the promo code search feature (because it is soooo nice and easy to use!) for my online purchases. One day, I logged in and realized that I had enough points for a free gift card. It’s like a nice little bonus!
Capital One Shopping Alternatives
When you’re looking for the best deals online, you have several options other than Capital One Shopping. Each alternative has unique features that might fit your shopping habits differently.
Below, you can see how Capital One Shopping stacks up against other popular sites – Honey, Rakuten, and Fetch.
Capital One Shopping vs Honey
Capital One Shopping and Honey (also known as PayPal Honey) are very similar.
Honey also has a web browser extension that automatically finds and applies coupon codes at checkout. Honey does not compare prices between different online stores, which is the main difference between the two apps.
You can sign up for PayPal Honey here.
Recommended reading: PayPal Honey Review
Capital One Shopping vs Rakuten
Rakuten, formerly known as Ebates, is a popular cash back and shopping rewards program. It differs from Capital One Shopping mainly in its cash back model. Rakuten gives you a percentage of cash back on your purchases, depending on the store. Your earnings with Rakuten are distributed quarterly, whereas Capital One Shopping provides reward points that can be redeemed for gift cards.
All you do is click on a store that you want to shop through (they have tons of stores such as Walmart, Target, Old Navy, etc.) and shop just like how you normally would shop online.
When you sign up for Rakuten through my referral link, you can get a free $10 cash sign-up bonus.
Capital One Shopping vs Fetch
Fetch Rewards is a phone app that rewards you for grocery shopping (yes, just the normal grocery shopping that you do all the time!). With Fetch, you earn points by uploading shopping receipts, which can be exchanged for gift cards.
Capital One Shopping is more versatile since it works across different online retailers and automatically applies savings at checkout, not just on groceries.
But, Fetch is great for in-person shopping. If you’re looking for the best money-saving app for groceries, I’ve been using Fetch Rewards the last few months, and it is so easy to save on groceries and other daily purchases! All you have to do is take a picture of your receipt with your cell phone, and you can easily earn points. I scan any and all receipts into my Fetch Rewards app and can easily earn rewards. You can sign up for Fetch Rewards here.
Recommended reading: Fetch Rewards Review (Is This App Legit?)
Capital One Shopping pros and cons
Knowing the pros and cons about the different sites can help you pick the right one. Capital One Shopping is great for finding coupon codes that actually work, comparing prices, and earning rewards that turn into gift cards. But maybe you like Rakuten for simple cash back, Honey for instant coupons, or Fetch for rewards on groceries.
Think about what matters most to you – getting discounts right away, having rewards, or sticking to a specific loyalty program. This way, you can choose the shopping rewards that suit you best.
Frequently Asked Questions
Below are answers to common questions about Capital One Shopping.
Is Capital One Shopping safe and legit?
Yes, Capital One Shopping is both safe and legitimate. It’s a browser extension and app provided by a reputable financial services company (Capital One), endorsed by many different trusted websites, and has great user reviews. I personally have Capital One Shopping downloaded on my laptop and it has saved me a ton of money.
Is there a fee for Capital One Shopping? Do I have to pay with Capital One for Capital One Shopping?
Capital One Shopping is free to use, with no hidden fees. You don’t need to have a Capital One account or pay with a Capital One credit card to use this service. It’s a completely separate and free service.
How long does it take to get cash back from Capital One Shopping?
The time it takes to receive cash back from Capital One Shopping can vary. Once you’ve earned enough rewards, processing for cash back typically takes a few days to a few weeks.
How does Capital One Shopping make money?
I get it – this app has a ton of really nice features that can save you a lot of money. So, what’s the catch? The Capital One Shopping extension earns money through affiliate marketing. When you buy something through the extension, the store pays Capital One Shopping a commission.
Which is better for saving money: Capital One Shopping or Honey?
It’s hard to definitively say which is better, Capital One Shopping or Honey, as both offer similar features. Your choice might depend on which platform provides better deals or rewards for the stores you shop at.
Do I need a Capital One account to use Capital One Shopping?
No, a Capital One account isn’t necessary to use the Capital One Shopping browser extension. The service is available to anyone looking to save money online.
Is there a downside to Capital One Shopping?
Some users have noted limited cash-out options and shared concerns about privacy due to the data Capital One Shopping collects for personalized deals and offers.
Capital One Shopping Review – Summary
I hope you enjoyed my Capital One Shopping Review.
So, is Capital One Shopping worth it?
Capital One Shopping is one of the best money saving apps because it automatically applies coupon c odes when you’re shopping online at both popular retailers and smaller local ones. That means you don’t have to search for coupon codes, which can save you time and money.
Capital One Shopping can be a great tool for you if you love shopping online and want to save money. Here’s what you might like about it:
Automatic coupons – As you shop, the tool searches for and applies coupons to your purchases.
Reward credits – You earn them as you shop and can swap them for free gift cards.
Price comparison – You can see if another retailer has a better price on the items you want.
Price drop alerts – You get notifications if something you watch gets cheaper.
The tool is free and works as a browser extension or a mobile app. Your shopping becomes more efficient because you don’t have to look for deals or compare prices manually – Capital One Shopping does it for you.
So, is it worth it for you to use Capital One Shopping?
For me, the answer is yes – Capital One Shopping is definitely worth it. I have had Capital One Shopping downloaded on my laptop for a couple of years now, and this browser extension makes it so easy to save money when shopping online.
You can sign up for Capital One Shopping for free here.
What is your favorite money-saving browser extension?
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Inside: Explore top high income skills that don’t require a degree. From AI to Cybersecurity to copywriting, learn how to earn big and without a traditional education.
In today’s rapidly changing economy, traditional educational paths such as acquiring a master’s degree are no longer the sole route to a lucrative career.
In my own journey, I discovered that mastering certain high-income skills (stock trading) can lead to financial success that outpaces even those with advanced degrees. This revelation underscores the value of investing time and effort into developing marketable abilities that align with industry demands.
These high-paying skills, often honed through online platforms, specialized training, and real-world experience, provide a level of flexibility. Plus an earning potential that can exceed the prospects of conventional academic education.
As such, they represent a powerful, alternate paradigm for career advancement and personal growth that you may want to check out.
Quick Answer
Typically, these are based on online jobs that include expertise in certain fields. These roles leverage the digital space to generate significant income and careers are in demand into the foreseeable future.
You can learn and develop these skills through online educational platforms, which can open up a plethora of high-paying job opportunities without the need for traditional college credentials.
High Income Skills for Tech and Digital Domination
In case you haven’t heard, AI and the tech world are the focus of most high paying jobs.
In fact, Microsoft, Google, and Apple recently stated they will take certification over a college degree.1
Now, let’s explore the various high-income skills that are currently shaping the technology sector and will move to making over six figures.
AI and machine learning
AI and machine learning are not just buzzwords! These fields represent some of the most lucrative areas in tech. As businesses seek ways to make sense of big data, professionals who can design intelligent systems and algorithms are in high regard.
The beauty is that many resources exist to self-educate in this domain, such as online courses, bootcamps, and certifications, making the path accessible for those without a formal business degree.
Best for: This field is ideal for individuals who have a strong aptitude for mathematics, statistics, and programming, and who are passionate about tech and innovation.
Mastering SEO
Search Engine Optimization (SEO) has become a coveted skill in the arsenal of every digital strategist. Why is it so invaluable? Because it acts as the linchpin for visibility in the digital space.
SEO isn’t just about playing with keywords; it’s about understanding the user’s intent, the algorithms of search engines, and the technical makeup of websites to ensure they’re discoverable.
Mastering SEO involves a cocktail of abilities: from understanding meta tags and crafting content that resonates with both humans and search engines, to building a robust backlink portfolio.
Best for: SEO is suited for those who enjoy both the analytical and creative sides of digital marketing and are interested in a dynamic, ever-evolving field.
Cybersecurity
In the digital age, cybersecurity is not just important—it’s essential. Protecting sensitive data and maintaining the integrity of computer systems against threats can be the difference between a thriving business and one that’s exposed to potentially catastrophic breaches.
Notably, cybersecurity proficiency can often be achieved through specialized certifications, bootcamps, or practical experience rather than a traditional degree. Those who commit to ongoing education and remain vigilant of the industry’s pulse become indispensable assets in any organization.
Best for: Perfect for individuals who have a knack for problem-solving, are detail-oriented, and enjoy learning about technology’s cutting edge.
Software Development
As the pillars of our increasingly digital world, software developers write the code that powers everything from mobile applications to global banking systems. The lure of software development as a high-paying skill is evident.
It’s foundational to virtually every industry, offers diverse opportunities for specialization, and provides the satisfaction of building something tangible.
With abundant online resources like coding bootcamps and tutorials, passionate learners can bypass the traditional degree route and directly jump into this lucrative and fulfilling career.
Best for: Individuals who are logical, detail-oriented, and have a strong interest in technology and its potential applications will find a career in software development both rewarding and profitable.
Mobile app development
Mobile App Development is your ticket into the heart of the booming app economy. As smartphone ubiquity grows, so does the need for innovative apps that simplify life—whether that’s for banking, shopping, or entertainment.
Given the high demand for mobile experiences, companies are willing to pay top dollar for developers who can craft intuitive and effective mobile applications. The best part is that this skill can be honed through free courses or even app-building software for those with limited coding knowledge.
Best for: Perfect for those who are not only passionate about coding but also keen on understanding and improving how users interact with technology.
Blockchain Expertise
The field of blockchain has transcended its association purely with cryptocurrencies to become a high-value asset in various sectors. Businesses seek talented individuals who can leverage this technology for secure, decentralized solutions.
Unlike many traditional roles, the burgeoning blockchain field offers the chance for self-taught experts to demonstrate their value based on their skills, portfolio, and understanding of blockchain’s practical applications.
Best for: Blockchain expertise is a high-income skill ideal for individuals who have a strong foundation in technology and an interest in how it can be used to innovate traditional business practices.
Creativity Pays Off with These High Income Skills
Graphic Design
Embarking on a career in graphic design could very well be your gateway to a creatively fulfilling and financially rewarding job market. By marrying aesthetics with functionality, you bring concepts to life, whether it’s through website visuals, logos, or digital media.
The journey to mastering graphic design can be self-directed—you can learn the principles online, through software tutorials, and practice them into existence.
Best for: Individuals with a flair for the arts who enjoy thinking creatively to solve visual challenges and like the aspect of using technology.
Video Production & Editing
In a content-driven era, where video is king, mastery in this field could land you lucrative gigs across various platforms and industries.
Whether it’s for digital marketing, entertainment, or online education, the demand is high, and the barrier to entry is lower than ever—thanks to a plethora of self-teaching resources and accessible technology.
Best for: Those who have a keen eye for detail and a passion for creating engaging, high-quality video content that tells a story.
Professional Photography
Photography captures more than images; it encapsulates emotions, stories, and moments. With the advent of high-quality smartphone cameras and affordable DSLRs, the skill of professional photography is more accessible than ever.
Whether for stock photography, events, or branding, your keen eye for composition and lighting can open doors to a rewarding career without the need for a degree.
Best for: Individuals with a passion for visual arts, a creative mindset, and a strong sense of detail are often the best fit for a high-income career in professional photography.
Copywriting
The pen (or keyboard) can indeed be mightier than the sword in today’s digital-driven world through copywriting.
Articulating compelling narratives that resonate with audiences can catapult brands to new heights, making this skill a valuable asset. The best part? You can cultivate your copywriting prowess from anywhere, thanks to online courses, ebooks, and practice platforms.
All you need is a sharp mind, a clear writing style, and a grasp of persuasive techniques.
Best for: Copywriting is a top choice for those who love writing and are curious about a multitude of topics, with an interest in marketing principles and audience engagement.
Voiceover Artistry or Podcast Production
Unlock the power of your voice and make money – a skill set that’s becoming increasingly profitable. Whether you’re voicing animated characters or hosting a thought-provoking podcast series, the audio medium is a bustling marketplace.
Podcasting, it’s about creating a compelling narrative that listeners can’t resist. While for voiceovers, it’s about bringing scripts to life. Both can be learned through online tutorials, training programs, and practice.
Best for: Individuals with a strong, versatile voice and passion for storytelling will find voiceover work and podcast production both lucrative and rewarding, even without formal training.
Marketing High Income Skills Know-How
Content Creation
Content Creation has become the cornerstone of the digital marketing world, attracting not just audiences but also significant revenue streams. As a content creator, you can weave words, videos, or images to capture attention, inspire, and inform—whether it’s through social media, websites, or other digital platforms.
My path to becoming a content creator was primarily through hands-on experience as well as through consistent practice and staying up-to-date knowledge of digital trends.
Best for: Content Creation is especially suited for those with a creative mindset, who enjoy storytelling and are adept at using digital tools to craft content for an online audience.
Social Media Marketing
This is a brilliant intersection of creativity, strategy, and communication. As a social media marketer, you’ll help brands navigate the bustling social landscape, where billions of users engage daily.
You’ll be tasked with crafting campaigns, analyzing data, and connecting with audiences in a way that drives not just likes, but also leads and loyalty—all of which you can master through free online resources and real-world practice.
Best for: Those who enjoy fast-paced, dynamic environments and have a knack for engaging with people and understanding modern communicative trends.
Affiliate Marketing
Becoming an influencer and tapping into the world of affiliate marketing seems so easy but truly it is a strategy where your persuasion skills can translate into earnings—all without a formal degree.
By promoting products or services via unique affiliate links, you earn commissions on sales. Flourishing in this domain stems from understanding your audience and aligning the products you endorse with their interests.
Best for: Those who have a passion for sales and marketing, are comfortable with self-promotion, and are interested in monetizing their digital presence.
Sales Strategies
The key to unlocking staggering profit margins and business growth is sales and this doesn’t require formal education. This high-income skill revolves around understanding consumer psychology, building relationships, and convincingly presenting products or services.
Many times, those in sales have a knack for the industry. Whether refining your approach through online courses, books, or hands-on experience, excellence in sales comes down to a blend of empathy, insight, and adaptability.
Best for: Excellent fit for outgoing individuals who thrive in competitive environments and derive satisfaction from meeting and exceeding targets.
High Income Skills That Work With People
Language translation and interpretation
This is not only about converting words from one language to another; it’s about bridging cultural divides and facilitating communication. With the globalization of business and the rise of remote work, fluent speakers in multiple languages can capitalize on a multitude of high-paying roles.
And the best part? You can often get started with just bilingual proficiency, some formal certification, and a deep understanding of cultural nuances.
Best for: Ideal for multilingual individuals passionate about language and communication, with a desire to facilitate dialogue in an increasingly connected world.
Freelance consulting in various niches
These are seasoned professionals with an avenue to monetize their wealth of experience and expertise. This thriving field allows you to empower clients with your knowledge, whether it’s in marketing, finance, HR, or any other domain.
What’s more, you can kickstart this lucrative journey with minimal prerequisites—a strong track record, a portfolio of successful projects, and perhaps some industry-recognized certifications.
Best for: Experts in their respective fields who are adept at problem-solving, enjoy sharing their insights and are looking for flexible, high-income opportunities.
Coaching
This is a skill that transforms lives and careers, catapulting you into roles where you guide and motivate others to achieve their personal and professional goals.
As a coach, whether it’s in life, business, career transition, or personal development, you can create a substantial income stream. What’s particularly enticing about coaching as a high-income skill is that it often requires no formal degree—many coaches are self-taught, certified through various programs, and most importantly, driven by a passion to help others succeed.
Best for: Coaching is perfect for individuals with a strong desire to help others, who can cultivate trust, and who possess both the self-discipline and initiative to build their own coaching business.
Public Speaking
Often touted as a soft skill, public speaking has immense potential as a high-paying expertise. The ability to captivate, engage, and influence an audience is invaluable in various professional settings—from corporate presentations to motivational speaking circuits.
The good news is that you can develop this skill through local workshops, online courses, and ample practice. Perhaps even more compelling, is how public speaking bolsters other aspects of personal development, such as confidence and clarity of thought.
Best for: Individuals who enjoy expressing their ideas, exhibit strong interpersonal abilities and derive satisfaction from influencing and inspiring others.
Real Estate
A dynamic field where you can significantly profit from the buying, selling, and leasing of property.
With the right approach and knowledge, personalized by your unique sales flair, you can achieve notable success without the prerequisites of a higher degree. It’s all about your ability to network, negotiate, and understand market trends, guided by state-specific licensing requirements.
Best for: Suited to go-getters with an entrepreneurial spirit, a passion for property, and the perseverance to cultivate a strong portfolio of clients and sales.
High Income Skills for Introverts
Stock Trading
My personal gateway to the exhilarating world of finance, where the potential for high earnings exists for those with the knack and nerve for it.
This high-stress skill—often considered one of the most lucrative skills without a degree—entails buying and selling stocks or options to capitalize on daily market fluctuations. While challenging, with diligent self-education, a cool head for numbers, and a calculated risk approach, you can make stock trading a profitable venture.
Best for: Stock Trading is particularly fitting for those who exhibit patience, enjoy learning about economics and finance, and can handle significant levels of stress without clouding their judgment. Highly recommended to take an investing course.
UX/UI Design
Focusing on crafting meaningful interactions between users and products, UX/UI designers are the architects behind the intuitive use of websites and applications.
The plethora of free resources and communities available online means you can build a portfolio and learn this sought-after skill without a degree.
Best for: Creative minds who have an affinity for technology and user psychology and who enjoy the iterative process of improving product usability and appeal.
Web development and coding
Building and maintaining the structural foundation of websites offers a variety of high-income opportunities without necessarily requiring a four-year degree. Armed with the knowledge of HTML, CSS, and JavaScript, which can be self-taught through platforms like Codecademy, you can create and innovate on the internet’s exciting canvas.
Best for: Analytical thinkers who also appreciate creative expression, and those willing to evolve with the digital landscape constantly.
Data Analysis
Transforming raw numbers into actionable insights, data analysts contribute significantly to strategic decision-making. Fascinatingly, this skill is achievable without a degree, thanks to a plethora of online tools and courses in Excel, SQL, and Python that are freely available.
With a logical mindset and an eagerness to decipher data stories, you could secure a high-income position in businesses of all stripes, from tech startups to major corporations.
Best for: Suitable for those who enjoy crunching numbers, identifying patterns, and have a deep curiosity about how information can influence business strategies.
Bookkeeping
A critical yet often understated skill that plays a foundational role in businesses both big and small. As a bookkeeper, you steward financial accuracy, track transactions, and ensure the book balance.
What may come as a surprise is that modern bookkeeping doesn’t always require a degree—there are online courses that can pave the way for a high-income career for detail-oriented and number-savvy individuals.
Best for: Those who appreciate routine, enjoy working with numbers and take satisfaction in playing a key support role in a business’s financial health.
Must Need High Income Soft Skills
In today’s competitive job market, possessing high-income soft skills can significantly enhance your career trajectory and boost your earning potential.
These soft skills not only complement your technical abilities but also ensure you are a valuable asset to any team, fostering seamless collaboration and leadership. As the workplace evolves, employers increasingly seek candidates who exhibit a rich blend of interpersonal and strategic skills that drive business success.
Problem-solving skills for critical situations are invaluable, and the best news? Whether it’s through active listening, analytical reasoning, assessing risks, or critical thinking, being adept at navigating complex problems can set you apart in the workforce.
Communication skills in professional environments are the linchpin of a thriving career. Being able to articulate your thoughts and listen to others effectively means smoother collaborations and clearer negotiations.
Time Management for efficient productivity is a transformative skill that can make or break professional success. Mastering time management means accomplishing more in less time, leading to greater productivity without the need for a formal degree.
Leadership and Team Management capabilities signal an upgrade in your professional toolkit. Great leaders can marshal a group towards common goals, fostering teamwork, and eliciting the strengths of each member.
Negotiation Skills for Maximizing Value are a powerhouse in the world of commerce, crucial for deal-making and advancing business interests. Learning the art of negotiation is possible without formal education; it’s about understanding human psychology, effective communication techniques, and strategic planning.
Creative Thinking for Innovative Solutions is a valued asset in any business context, prized for driving forward unique and effective problem-solving. This type of thinking allows you to step outside traditional boundaries and generate fresh ideas.
Stepping into the entrepreneurial arena can be your ticket to independence and potential high earnings. Entrepreneurs are the trailblazers of the business world, initiating new ventures, and driving economic growth. While there’s no fixed educational path to entrepreneurship, the journey is fueled by a diverse skill set including innovation, perseverance, management, and the ability to pivot strategies as needed.
FAQs
A skill is considered ‘high-paying’ in 2024 if it is in high demand, offers significant value to employers or clients, and requires a level of expertise that’s not easily found.
These skills typically address current market needs, technological advancements, or specialized knowledge that can drive revenue, increase efficiency, or create competitive advantages. Essentially, the rarer and more necessary the skill, the higher the potential earning power becomes.
Yes, self-taught skills can compete with a traditional degree, especially in industries that prioritize practical experience and proven ability over formal education.
Personally, I can attest to this as I learned many of these high income skills long after I completed my degree.
In fields like technology, digital marketing, or creative arts, a portfolio showcasing your work often carries more weight than a degree. Furthermore, many companies adopt skills-based hiring practices, valuing competency and initiative as key indicators of a candidate’s potential.
Which High Paid Skill to Learn Will You Focus on?
In conclusion, acquiring high-income skills is a powerful strategy for advancing your career and unlocking new professional opportunities or even side hustles. In fact, many are ways to make money online.
This is a simple way to increase the amount of money you make each month.
By embracing continuous learning to hone these in-demand abilities, you can significantly enhance your earning potential and job market desirability.
Investing in the development of high-income skills will pave the way for a brighter, more prosperous future. Just like finding a low stress jobs that pay well without a degree.
Don’t just read. Now, is the time to take action!
Source
Business Insider. “Microsoft doesn’t require a college degree for entry-level jobs.” https://www.businessinsider.com/microsoft-execs-no-college-degree-for-entry-level-positions-2020-2#ping-look-who-leads-microsofts-cybersecurity-detection-and-response-team-added-that-candidates-who-apply-to-jobs-without-a-college-degree-already-signal-a-level-of-determination-that-she-respects-3. Accessed February 18, 2024.
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Contrary to popular belief, starting an investment portfolio doesn’t require a large sum of money. In fact, with just $500 or less, you can easily kickstart your investment journey in the stock market.
12 Best Ways to Invest $500
If you’re looking for other ways to invest, but don’t have much cash, here are twelve of the best ways to invest $500 or less.
1. Micro-Investing
With micro-investing, even those with limited disposable income can join the game, starting with as little as $5. Ideal for college students or novice investors, there are a multitude of micro-investing apps available, many requiring an initial investment of $500 or less.
These user-friendly platforms offer a simple way to dip your toes into the investment world. Check out these five top micro-investing apps to start your journey today.
Robinhood
If you’re a beginner investor, Robinhood is an excellent choice. Unlike many other platforms, Robinhood has no minimum balance requirement and doesn’t charge any fees for trading.
It is also very easy to use the app. Additionally, Robinhood stands out among micro-investing platforms, offering the ability to trade in a wide range of assets, including full stocks, mutual funds, options, and cryptocurrencies.
To find out more, read our comprehensive review of Robinhood.
Stash
Stash accommodates the needs of a diverse range of investors. Upon signing up, you’ll take a quick survey to assess your risk tolerance, allowing you to determine the amount and frequency of your investments.
With Stash, you also have the power to select the industries and companies you want to invest in. For example, if you’re passionate about sustainability, you can easily choose to invest only in eco-friendly organizations.
Acorns
Investing made simple and affordable – that’s what Acorns offers. Signing up is a breeze, with no minimum balance required, and the low monthly fee of just $1
Once you’ve joined, simply connect your Acorns account to your credit or debit card. Every time you make a purchase, the app will round up the amount to the nearest dollar and automatically invest that change once it reaches $5.
Betterment
For those who want to be hands-on with their micro-investing, Betterment may be the answer. The platform takes care of the investing for you, while also giving you the option to work with a financial advisor and have a say in your investment portfolio.
Signing up is easy, with no minimum balance required for its basic plan. However, it’s important to note that Betterment charges a 0.25% monthly fee on your investments.
2. Exchange-Traded Funds (ETFs), Mutual Funds, or Index Funds
For those looking to invest $500, exchange-traded funds (ETFs), mutual funds, and index funds are all great options. ETFs offer a basket of securities that can be exchanged on the market, just like a stock. You can find plenty of online brokers that offer a wide selection of commission-free ETFs.
Mutual funds are managed by a professional broker and aim to beat a given stock market index, while index funds are designed to match the index and grow from there.
All three types of investments have low expense ratios, low fees and commissions, and offer broad, diversified exposure to the stock market.
See also: ETFs vs. Mutual Funds: What’s the Difference?
3. Buy Bitcoin
For some, investing in cryptocurrency may be too risky and volatile for their taste. However, Bitcoin has had an average growth of over 100% per year for the past 12 years! In fact, if you had invested $500 in Bitcoin five years ago, you’d have approximately $90,000 today.
If you’re interested in getting into crypto, Coinbase is a great place to start. They’ll give you $10 in free Bitcoin when you buy or sell $100 or more in crypto. Coinbase also offers ways for you to earn up to $32 worth of crypto for free.
See also: 5 Best Ways to Buy Bitcoin With a Bank Account
4. Open a Roth IRA
It’s never too late to start planning for retirement, and a Roth IRA might be the way to go. With this retirement savings plan, you contribute after-tax money to an investment account, which you can then withdraw tax-free when you reach retirement age.
However, there are a few things to keep in mind before opening a Roth IRA. An individual retirement account (IRA) is meant for long-term savings and withdrawing the money before you turn 59 and a half may result in penalties. If you anticipate needing to access the funds sooner, consider exploring alternative options.
5. Start an Online Business
If you’re looking for an unconventional way to invest your money, why not try starting an online business? Traditional brick-and-mortar businesses require a lot of capital to get up and running, but the same cannot be said for an online business.
You won’t need office space, a warehouse, or expensive equipment. In all likelihood, you won’t need to invest $500. It will cost much less than that. Here are some popular online business ideas:
Starting and monetizing a blog
Selling things on eBay or Craig’s List
Selling services like freelancing writing, editing, or graphic design
Opening an e-commerce store
Buying items and flipping them for profit
6. Use Robo-Advisors
Investing your money with a robo-advisor might be a smart choice. A robo-advisor is a user-friendly online investment platform that creates a tailored and diversified portfolio for you based on your answers to a questionnaire.
Although robo-advisors have limited services compared to working with a financial advisor and do not offer personalized advice, they have low fees and make investing with as little as $500 in the stock market accessible. Additionally, robo-advisors offer multiple investment options, including:
Roth IRAs
Traditional IRAs
Solo 401(k)s
Taxable accounts
7. Open a High-Interest Savings Account
If you’re still exploring your options and not ready to invest yet, consider opening a high-yield savings account. The best high-interest savings accounts currently pay about 3% to 5% in interest.
While the returns may not match the potential gains of the stock market, having a savings account serves as a solid backup plan and provides peace of mind for the future. Don’t let your funds go to waste – take advantage of this secure and profitable opportunity.
8. Open a High-Yield CD
A high-yield certificate of deposit (CD) is a low-risk investment option that offers a higher rate of return compared to traditional savings accounts. CDs work by allowing you to deposit a fixed amount of money for a set period of time, typically ranging from a few months to several years. In exchange for this commitment, the financial institution offering the CD agrees to pay you a higher rate of interest compared to traditional savings accounts.
Opening a high-yield CD with $500 or less is a straightforward process that can be done through a bank or credit union. You simply choose the term length and deposit amount that works best for you, and the institution takes care of the rest. As your money grows over time, you’ll earn a higher return on your investment compared to traditional savings accounts.
Just remember that CDs typically have early withdrawal penalties. So, make sure you’re comfortable with the term length and the amount you’re depositing before opening an account.
9. Invest in Real Estate Crowdfunding
Investing in real estate is not limited to traditional methods, even with just $500. A prime example is real estate crowdfunding via platforms like Fundrise.
Fundrise provides investment opportunities in both commercial and residential properties with a minimum investment of just $10. This eliminates the requirement for a large capital investment, making real estate investment accessible to a wider range of individuals.
Check out our in-depth Fundrise review.
10. Pay Down Your Debt
Reducing debt is a sound investment for securing your future, particularly concerning high-interest credit card debt. The Federal Reserve reveals that the average credit card interest rate can be as much as 15% or higher, with a low credit score only driving the APR to even more astronomical heights.
Think about it, if your APR is at its highest, you may be shelling out hundreds of dollars each month just in interest charges. But by focusing your efforts on paying down your debt, you stand to save yourself not just money, but countless headaches in the coming year. With the possibility of freeing up thousands of dollars, it’s an investment worth making.
11. Try Peer-to-Peer (P2P) Lending
Peer-to-peer lending offers a unique twist on conventional lending methods. Rather than seeking loans from traditional banks, borrowers turn to platforms such as Prosper, connecting with investors like yourself.
By participating in P2P lending, you have the opportunity to generate a steady monthly income by lending funds to individuals or businesses. The added bonus? The money you earn is deposited directly into your account, providing a convenient and hands-off approach to investing.
12. Invest in Your Financial Education
Investing in your financial literacy may be the most valuable investment you’ll ever make. For a nominal fee of just $5 to $15, you can access top-notch personal finance books or audiobooks that can transform your financial future.
Take “Rich Dad Poor Dad” for example, available on Amazon for as low as $6.82 for the Kindle edition or $11.36 for the paperback. And if audiobooks are more your style, a month of Audible membership costs only $14.95.
You can expand your knowledge on real estate investing, stock investment strategies, and fundamental money management skills to help you get out of debt and attain financial independence.
And if reading isn’t your preferred method of learning, there are plenty of affordable online courses available. With so many options, it’s remarkable how much financial education you can gain for less than $500.
Frequently Asked Questions
What is the best way to invest $500?
The best way to invest $500 depends entirely on your personal financial status and objectives. If you’re just starting out investing, consider investing in a low-cost and diversified mutual fund or ETF. These investment vehicles offer the advantage of spreading your funds across a range of stocks and bonds, mitigating the risk associated with any single investment.
Other options to ponder include setting up a Roth IRA or investing in a high-yield savings account. The choice that works best for you ultimately hinges on your risk appetite, investment timeline, and financial aspirations.
Is it possible to invest $500 in stocks?
Absolutely! With just $500, you can venture into the world of stock investing. Micro-investing apps provide the opportunity for you to invest in individual stocks or opt for an ETF that follows a particular index.
It’s crucial to conduct thorough research and seek the guidance of a financial advisor to determine the best investment strategy that aligns with your unique circumstances.
Is it worth investing $500 in a robo-advisor?
Investing your $500 via a robo-advisor can be a wise decision. These digital platforms leverage algorithms to manage your investments, offering a more passive investment strategy.
Furthermore, robo-advisors tend to be more economical than human financial advisors, making them a fantastic choice for individuals seeking to initiate their investment journey.
What are the risks of investing $500?
Starting your investment journey with just $500 can be a smart move. However, it’s important to keep in mind the inherent dangers that come with investing.
Remember, no investment is entirely risk-free and there’s always a chance of losing your funds. To ensure you make an informed decision, conduct thorough research and consult a financial expert who can guide you towards the best option suited for you.
Bottom Line
We hope that this article has demonstrated to you that investing can be simple and accessible, even with a limited budget. You can start investing immediately with a modest amount of funds. If you’re not quite ready to invest, consider paying off high-interest credit card debt, increasing your income, and establishing an emergency fund.
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Learn investment and tax strategies to help you achieve financial security and prepare for a prosperous retirement.
How can you balance saving for emergencies and investing for the future? What strategies can you employ to maximize your tax benefits and build a secure financial future? NerdWallet’s Kim Palmer and Alana Benson discuss investment strategies and tax planning to help you understand how to navigate your financial journey effectively. They begin with a discussion of investment strategies, with tips and tricks on understanding different investment accounts like 401(k)s and IRAs, leveraging compound interest, and the importance of starting investments early. Then, Alana discusses tax planning and filing in-depth, covering the intricacies of different tax forms like W-4s and W-2s, the significance of estimated taxes for freelancers, and strategies for managing capital gains taxes.
Kim and Alana delve into retirement planning and the challenges of active versus passive investing. They provide a framework for prioritizing your finances, emphasizing the creation of an emergency fund, taking advantage of employer 401(k) matches, and understanding the role of asset allocation based on age and risk tolerance. Additionally, they tackle the decision-making process in personal finance, such as choosing between paying off debt and investing, and the pros and cons of having a financial advisor.
Check out this episode on your favorite podcast platform, including:
NerdWallet stories related to this episode:
Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
Hey listener, we’ve got a special episode in store for you today. Our investing and tax Nerds recently hosted a webinar going deep into how you can level up your investing and tax strategy. So we packaged that up into a podcast episode for you. The Nerds talk about what you need to know about different investing accounts, how to get help with your taxes and more. So here’s the webinar.
Kim Palmer:
Welcome everyone. I am Kim Palmer. I’m a personal finance writer at NerdWallet where we help people make smart decisions. One important note, we are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. NerdWallet Inc is not an investment advisor or broker and does not provide personal financial advisory services. Today we are excited to talk to you about the basics of investing and taxes and we think we have some helpful info to share with you. You can always find more at nerdwallet.com or on the NerdWallet app. Our goal today is to kick off a helpful discussion about investing and tax information and tools. Alana Benson writes about investing topics including stocks, funds, and ethical investing. And now I will hand it over to Alana.
Alana Benson:
Thanks Kim. Hi everyone. Thank you for joining us today. So before we start, I just want to say a couple of things that often get forgotten when we’re talking about investing. So first, investing usually comes second to some other goals. If you’re having a hard time paying for necessities or you don’t have an emergency fund, it’s really important to focus on those things before we even start worrying about investing. Second, instead of scrimping, try to increase your income. So I didn’t start investing until I was in my late 20s, and that’s because one, I didn’t work at NerdWallet yet, so I literally didn’t know anything. And two, I was making around $25,000 a year, so I didn’t have much expendable income. And when you don’t have extra income, it’s really hard to prioritize investing and it just might not even be a good idea to do that.
When I started making more money, it was suddenly a lot more possible for me to invest for retirement. So if it’s possible for you and you want to be investing more, look for jobs that will pay you more or look into side hustles, but cutting back on your streaming services probably will not save you enough money for retirement. And finally, if you don’t have the money to invest now, that’s totally fine. Some people have serious money anxieties and others just don’t have the cash. Whatever your reason is, don’t stress too much about it. Just keep learning and when you’re able to, you can start investing. So why do we invest? What is the point of all this? And the answer is that it’s because we like money and that’s okay. There’s no shame in admitting it, I like money, most people like money. It’s because money isn’t just money. It’s not like Scrooge McDuck diving into pools of money and buying Maseratis. It’s not that.
It’s about not being stressed about your money all the time and it’s about being able to buy everything that you need and some stuff that you want comfortably without having money stress take up all of your energy. Money allows us to thrive instead of just survive and investing helps you make more money than you could ever possibly make just by working at a job. So okay, what actually is investing? This whole process is very strange. Okay. Investing is the process of money that you already have making additional money for you. And this works through what’s called compound interest. Compound interest means that your gains get a little bit bigger every year and that’s also why starting when you’re younger gives you a huge advantage and more money in the long run. So for example, you just start at that little number one in the box up there. Say you buy an investment for $100, if it goes up the average stock market return of 10%, it could then be worth $110, meaning that you’ve made $10.
Then that $10 that you earned also starts earning compound interest on top of the $100 you initially invested. That doesn’t sound like much of a profit, but imagine if you were doing it with way larger amounts of money over a way longer period of time. Now that 10% is an annualized rate, which means that you’re not going to get 10% every single year. In all likelihood, some years you’re going to finish up, some years you’ll finish down. But over the course of decades when you average all that out, you tend to get about 10%. The way you actually start investing is through an investing account. And there’s a couple of different types, but the type of investment account you have is actually really, really important because a lot of them have some pretty significant tax benefits that you want to take advantage of. So you’ve got your 401(k)s and these are offered through your employer. You add money to it and sometimes your employer matches it. So it’s basically free money. If you have a 401(k), you’ll likely choose your investments from a pre-selected list or a fund that will automatically adjust itself over time.
So this means 401(k)s are typically very hands off. IRAs on the other hand are investment accounts that you open up yourself. IRAs can be opened online through brokerages and actually at a lot of large banks, they also do that. So it’s likely you can open up an investment account just through your bank. Unlike with a 401(k), IRAs you’ll have to choose your own investments in those accounts. You may have heard about a thing called a Roth IRA or a Roth 401(k) and it’s good if you know the difference. So with a Roth, you pay taxes on your money now just like any other money that you earn and then the money you have invested inside that account grows tax-free and you can take it out tax-free in retirement. With a traditional IRA or 401(k), the money you contribute today is pre-tax.
So that is you get to deduct it from your income taxes this year. So it’s like a nice little treat this year, but then when you cash it out in retirement, you’ll owe income taxes on it. This is really, really important. I’ve seen a lot of people make this mistake. Your investment account is not an investment, so a Roth IRA, a 401(k), not an investment. So if you have a Roth IRA, that’s great, but that doesn’t mean you’re actually invested in anything. So you fund your investment account and then you buy investments from there. But I’ve heard of people opening a Roth IRA, putting in a bunch of money and then wondering why it didn’t grow over the last 10 years. So you have to purchase investments for your money to actually grow and if you don’t do it, you’ll miss out on all of those years of growth, so very important.
And there’s a couple different types of investments that you can choose from once you open and fund your investment account. So you’ve got stocks, I’m sure everyone’s heard of that, these are shares of ownership in companies and the way you make money from them is if they go up in value and some pay you a cut of the company’s profits on a regular basis. Then you’ve got bonds. This is when you loan money to companies or the government and they pay you interest. Funds, now these are very exciting because they’re basically just baskets of stocks and bonds that you buy all at once. So a fund is still a stock or bond based investment depending on the type of fund that you get. And there’s a lot of different kinds such as index funds or exchange traded funds and mutual funds, but they’re all collections of investments that you buy at one time.
And I think funds are pretty awesome because if you own a stock and that company goes out of business, you lose all of your money. But if you invest in a fund that covers 100 stocks and that same stock goes out of business, your investment is buoyed up by the other 99 companies. So again, all of these investments, stocks, bonds and funds, you buy them from your investment account and then you own them in there. All right, so let’s talk about the stock market, it’s this weird nebulous term that’s hard to understand. But the stock market is just where people buy and sell investments, but now people just trade investments online. So the stock market is made up of several what are called market indexes. Now these are basically just predetermined lists of companies and the performance of that overall list can tell us a lot about the health of the US economy.
So for example, the S&P 500, something you probably have all heard of, that’s just the list of 500 of the largest publicly traded companies in the US and it includes companies like Apple and Amazon. So when we say the stock market is down today, that means that on average most of those companies aren’t doing well. And you can’t invest in the literal stock market, but you can invest in funds that include all the same investments. So these are called index funds because they track a market index. So again, if you have an S&P 500 index fund, it should perform pretty closely to how the S&P 500 itself is actually performing. The S&P 500 goes up 10% a year on average and 6.5% after inflation. And this is just an average, so some years the market goes up more, some years it goes down less, but when done well, investing can potentially mean doubling your money every few years for doing basically nothing, which is my favorite way of earning money, by doing nothing. It’s great.
So let’s talk strategy. This is all about the way that you invest, when you put your money in and when you take your money out. So passive investing is where you buy that S&P 500 index fund and you keep adding money into it until you retire. It’s very boring, but it’s effective. So it can give you that 10% return on average over the long haul, but a lot of people want to make more than that 10%, and they do so by actively buying and selling stocks, crypto options and other high risk investments. They try to predict when they’ll be low, then they buy them and then they turn around and try to sell them when they’re high. So these people are called active traders or day traders. Only 20% of active traders make money over a six-month period. That is not a lot of people.
There have been a lot of studies over the years that show that active investing is a way less lucrative fashion than boring old passive investing with that index fund. Plus active investing is a lot more work, you have to do all kinds of research and you keep an eye on the markets and you can hypothetically earn more by actively trading versus passively earning the same amount as that historical return of 10%. But most people end up making less when they actually try it, and that’s because people are really bad at predicting things. And in order to make money on the overall stock market over the long term, you have to be really good at predicting things all the time. So maybe you make it big on one stock, but the odds of that happening again and again are very low. So let’s put all of this information together, the accounts, the actual investments and the strategy.
Here’s how financial advisors suggest you prioritize your money when you’re starting to invest. So the first thing you want to do is you’re not actually going to invest at all. The first thing is that you’re going to have an emergency fund. So this is money that you won’t actually put in the stock market, and that’s because when your money is invested, its value can change day by day. So say you have $1,000 and you want to use it for an emergency fund, but you invest it, when you have to fix something on your car suddenly, you go to check your money and its value could be $600 instead of $1,000 and that’s not good. If you put it in a high yield savings account, you can access that money at any time without risking its value. Plus right now the interest rates are really high.
So your money could be earning 4 to 5% just by sitting there. So next, you want to get that 401(k) match if it’s available to you because it’s free money. After that, it’s a good idea to look into IRAs. Both IRAs and 401(k)s have what’s called a contribution limit, which is just the maximum amount of money you can put in each of them every year. If you’re able to max out an IRA, then it’s a good call to move back to your 401(k). And the reason you switch around like that is because of the way the tax benefit works. So it’s likely more beneficial to invest in an IRA over a 401(k) if you’ve already gotten your match, if you have to choose between the two. Then if you max out your 401(k), you can move to a standard brokerage account. And this is not a list of everything you have to be doing right now.
You might be thinking, “Whoa, maxing out an IRA is $6,500, I cannot afford that”, and that is totally fine. So I like to picture it as a waterfall. So when you fill up your emergency fund, then you can start working on getting that 401(k) match. Only after that bucket is full should you then move on to investing in an IRA and so on. And wherever you’re at in your bucket filling journey is okay. It’s just nice to know what to do next when you’re ready for it. So we already talked about what accounts to invest from and the investments you can buy, but then do you just start buying a bunch of index funds or stocks or bonds? How do you know how much of each investment to get? And that is all about risk tolerance. And to understand that we have to understand how risk works over time.
If you’re investing for retirement and you’re in your 20s now, that means you have a ton of time for your investments to grow and then drop dramatically and then rise back up. So financial advisors would say you can afford to take on a bit more risk, AKA invest in riskier investments, because you have time for your investments to bounce back. Now, if you’re investing for your retirement and you’re 65, you don’t want to risk all the money you’ve been investing for years and years because you’re going to actually need to use it to pay for stuff in retirement pretty soon, so you want to protect it. And figuring out how much of each investment you should have is a fancy term called asset allocation, but it just means how much of your portfolio is in which of these investments.
And age is just a number, but typically when you’re younger, you may be able to afford to take more risk because you have more time for the stock market highs and lows to even out. So stocks, and okay, remember index funds and mutual funds are often made up of stocks so those count too, but those tend to carry more risk than investments like bonds. And an example of a 20-year-old’s investment portfolio, which includes all of your accounts so your 401(k), your Roth IRA, all of that together, that could be 100% stocks. And that’s fairly risky, but those 20 year olds are not going to retire for a long time. Now, a 65-year-old might have way more bonds because they don’t want to risk all that money they’ve earned over time. And one thing some investors do to mitigate risk is to slowly shift their asset allocation from high risk investments to low risk investments over time.
And again, I’m not a financial advisor and this is not personalized investment advice, but how much of each investment it’s good to have will usually depend on how much risk you are willing to take. And an investment portfolio can be really simple or really complicated. So you could have that one S&P 500 index fund and you purchase it from a Roth IRA, and that’s just all you do. Just if you want to keep it really simple or you can make it more complicated. So maybe you explore several stock-based funds such as international stocks and healthcare stocks and technology stocks, and you could invest in those types through a fund. So instead of buying 30 technology stocks, you just have one technology stock fund, then a small slice in bonds, and then an even smaller slice is crypto or other high risk investments. Though financial advisors have varying opinions on the safety of crypto.
So keep in mind, this is just an example and not necessarily what you should do personally, but it is really helpful to look up asset allocation portfolios through an online brokerage and see what they recommend for your specific age and when you plan on retiring. You can also talk with a financial advisor who can help guide you through those decisions. And investing is great because it can help you earn wealth, which you could spend on a boat, but more than likely one of your biggest investing goals will be retirement. And the sad truth is that in some things like retirement, they just cost so much that you’ll probably never afford them just by putting money in a savings account. And that’s why we say we have to invest for retirement. And the truth is that most people just aren’t saving enough for retirement.
So you’ll probably have a lot of expenses and you have to pay for that in retirement and some of it’s necessary like food or housing or medical care and some of it is travel or bucket list stuff, but you may not be working anymore or at least not as much as you were. And once you factor in inflation, it’s likely that a dollar today will be worth way less when you’re in retirement. And saving for retirement has gotten even more difficult because you can’t necessarily afford to live on social security. Medicare doesn’t always pay for your health needs and pensions aren’t really as common as they used to be. And because of all this, it’s really important to start investing for retirement sooner rather than later.
And if you’re early in your career, it might seem silly to worry about retiring right now, but if you start investing sooner, you actually spend less on retirement than if you start investing later in life overall and that’s because of compound interest. So our retirement calculator shows that if you start putting away $100 per month, that could grow to nearly $400,000 in 35 years. And it’s always good to know how much you should be trying to invest. When you have a long-term goal in mind, you want to know what that number is. So a retirement calculator can be a big help to figure that out, including NerdWallet’s retirement calculator. No shame, I’m going to plug it, but some financial advisors recommend saving 15% of your pre-tax income for retirement. So okay, let’s break that down. What does that look like?
So if you make $100,000 a year, again just because easy math, that would be $15,000 annually that you’re trying to save for retirement. But if you had a 5% match on your 401(k), you’d already be saving $10,000 a year between the $5,000 you make and the $5,000 your employer puts in. And then if you contributed another $5,000 to your Roth IRA, you’d already meet your target goal of saving $15,000 a year for retirement. You should also think about how much you can make during those peak earning years. If you’re younger, what career are you looking to have? You can look up what those wages tend to look like on a site like Glassdoor or ask someone in your life who is in that career path, and maybe do that tactfully because you’re asking about money. But figuring out what you want to be when you grow up may not be something you want to think about right now.
But to be honest, I studied English in college and no one told me about my job prospects. I figured that I would have to write a super famous book or be a teacher and you don’t have to have everything figured out now, but it doesn’t hurt to see how much a potential field could earn and figure out what careers are open to you. And just keep in mind that relationship between your earnings and investing like we talked about in the beginning. And if you’re later in your career, it is harder to take advantage of compound interest, but some of those investment accounts have those catch up contributions that we talked about so you’re able to contribute more after a certain age. Thank you all so much for listening to me talk very fast for a long time, and now I will hand it back over to Kim to talk about taxes. Thanks so much.
Kim Palmer:
Great, thank you so much, Alana. That was great. Someone actually asked in a pre-submitted question, “Why do I have to pay taxes?” Well, here is why. Taxes are used to pay for a lot of different things like clean water, roads, schools, healthcare, and the military. And your tax return is due every year in mid-April to the IRS. We’ll talk a little bit later about what to do if you need an extension, but in general that is the deadline. But first, let’s back up a little bit. When you file taxes, there is so much paperwork. One really important one is the W-4. That is the document that your employer asks you to fill out when you start a new job. And it plays a really big role in telling your employer how much in taxes to take out of each paycheck. It asks you things like your filing status, dependents, how much tax to withhold, and if you get a really big tax bill or a big refund, then you might want to go back and revisit your W-4 just to make sure you’re withholding enough but not too much.
There’s also the W-2, which is a document that your employer sends you to summarize how much in total they took out of your paycheck the previous year, and you’ll need to reference all those numbers when you file your tax return. If you are self-employed or you work a side hustle, then taxes won’t be automatically withheld from your paycheck, and that means you might have to pay something called estimated taxes, which is typically four times a year. In January, you’ll get something called a 1099 form that outlines how much money any company paid you, and then you’ll use that information when you file your return. And then finally, the 1040 is the main form you use when you file taxes, and we’ll drop a link in the chat for more about that. Okay, so you have all of your forms set. How do you actually file your taxes?
You can do it yourself through the IRS. You can use an online tax prep software or you can use a tax professional like an accountant or a tax preparer. If you do it on your own, you can either use paper forms or get access to brand name tax prep software through an IRS service called Free File. But it’s important to know that only people who make below a certain income qualify for the Free File program. If you use tax software like TurboTax, H&R Block or NerdWallet Taxes powered by Column Tax, many of these providers use a Q&A style to help you do your taxes and some even offer paid upgrades that connect you directly to a tax professional. If your finances are really complicated and you want some extra help, then you can also work with a tax preparer such as a certified public accountant.
You do want to make sure to ask them lots of questions and check their credentials before you agree to share your financial information. And you also want to check to see if they have a prepared tax identification number, which is an ID that’s required for anyone who files tax returns for compensation. The US does not have a flat tax system, and that means that portions of your income can be taxed at different rates. There are currently seven tax rates for federal income taxes that run from 10% to 37%. And which tax rate applies to you depends on your income and your filing status. So you might hear people say, “I’m in the 12% bracket” or “I’m in the 22% bracket”, but being in a tax bracket doesn’t mean you pay that tax rate on everything you make. And in reality, people’s income can fall into several different tax brackets depending on how much they make.
Portions or chunks of your income are taxed at different rates and some of those different taxes are then added together. So for example, some of your income could be taxed at a rate of 10%, another chunk could be at 12%. The more you make, the higher the tax rate might be on some of your income. And depending on the state where you pay your income taxes, you might pay a flat rate or a progressive rate similar to the federal structure. A small handful of states have no state income tax. If you want to pay less, you can look for tax breaks. Tax credits and tax deductions are two tools that can help you potentially minimize your tax bill, but they do work in different ways. Tax deductions reduce your taxable income. As a simplified example, a $25,000 tax deduction on $100,000 of taxable income means that only $75,000 of that income will get taxed.
Tax credits directly reduce your tax bill by the value of their credit. So this means if you owe $2,000 in taxes and you’re eligible for a $1,000 tax credit, you’ll end up owing $1,000. Tax credits tend to be more valuable because they have the potential to pack a bigger punch, so you definitely want to try to take all the tax credits you qualify for, and you could even get money back if a credit is refundable. Common tax credits include the earned income tax credit, the child tax credit, the lifetime learning credit, and the American opportunity credit and savers credit.
All right, I alluded to this at the beginning, but what happens if you’re not going to be ready by mid-April? What do you do? If you know you won’t be able to file on time before tax day, you can file for a free extension with the IRS and that gives you until mid-October to file your return. But you want to make sure that at least 90% of what you think you’ll owe in April is covered by an estimated tax payment or your withholdings. Otherwise, the IRS can hit you with a penalty for late payment. The failure to pay penalty is really no joke. It’s 0.5% of your unpaid taxes each month your payment is late plus interest. If you file late and you did not file an extension, you could also get hit with a failure to file penalty, which is 5% of your unpaid taxes each month that your payment is late. There is some good-ish news, if you file late but you don’t owe anything, you won’t get penalized but that doesn’t mean you’re not still obligated to file.
If you don’t, the IRS could file a return on your behalf and you might miss out on a refund if you’re owed one. And if your tax bill is so high that you can’t pay it off, you do have options. You can set up a long-term or short-term payment plan with the IRS.
I know that was a whole lot of information and taxes can seem scary, but we break down lots of popular tax questions and terms on nerdwallet.com. We have some time to address some pre-submitted questions from the audience ranging from about Roth IRAs to the pros and cons of having a financial advisor. And I do want to give a reminder here as we answer these questions that we are not tax or investing advisors. We are writers who focus on these fields and what we say is not investing or tax advice. So with that said, let’s dive into these questions. A question that came to us in an email was: how do you choose between paying off credit card debt and investing in saving for emergencies?
I really love this question because I think it speaks to some of the biggest challenges of personal finance, navigating these choices. And the answer is it’s really up to you. Many financial advisors say that the first step is to create a starter emergency fund, and you can read more in our article that we’ll link to, Should I Pay Off Debt Or Save? And you’ll see most people think about saving $500 to $1,000 first and then after that to consider contributing enough to a workplace retirement plan if they have access to one, and then contributing 3% to 5% of income to an IRA or a Roth IRA. And then financial advisors say people can consider focusing on paying off high interest debt and amp up investing efforts once they have paid that off. And now Alana, I’ll turn over to you. Perhaps you can answer the questions about Roth IRAs.
Alana Benson:
Absolutely. So a couple folks were wondering, before we went over everything, what a Roth IRA is and how does it work and when is it worth it to open one? So we already covered this a little bit, but again, it’s an individual retirement account and it lets you contribute money that you’ve already paid taxes on. So think about when you get your paycheck. That money has already had taxes taken out of it. So once you hit age 59 and a half and you have held the Roth IRA for at least five years, you can withdraw your contributions and any earnings, which is a fancy word for money that you earn from investing, without paying taxes again. And whether it’s worth it is up to you, especially if you’re trying to decide between a Roth IRA and a traditional IRA because it’s about when you pay those taxes and if you have a traditional IRA, you do get that tax break right now.
So that’s a personal decision. But you can also take out money tax-free from your Roth IRA later in life. So if that’s something that you are really trying to parse out, it might be good to talk to a financial advisor because they can help you with that question. We had two other questions. The first one is: how do you calculate how much money to put in your Roth IRA if you make over the maximum amount? So we didn’t actually cover this, so Roth IRAs do have income limits, but there is something called a Backdoor Roth that lets you contribute money first to a traditional IRA, pay taxes on it and then roll that money into a Roth IRA. And then our last question is: what are the pros and cons of having a financial advisor and how do you find one?
This is such a good question. The pros and cons really depend on your situation. The catchall term ‘financial advisor’ is used to describe a wide variety of people and services, including investment managers, financial consultants, financial planners. First and foremost, you always want to verify a financial professional because financial advisor doesn’t require people to be vetted. Certain things like a certified financial planner or a CFP, those actually have a very high level of education and have a certification that you can verify online. So anyone that you are talking about money with, you want to make sure that you are vetting them. And some of these people can just talk to you about your finances and some of them can actually manage your investments for you if you want that. Financial advisors, depending on the kind that you choose, can be pretty expensive. A robo-advisor is like an AI version of a financial advisor.
You just set up an account for one and then they charge you a pretty modest fee. And based on your age and your risk tolerance, it will manage your investments for you. An online financial advisor can offer more services and you can actually talk to a human being, but those do tend to cost a little bit more. And then you could go to an in-person financial advisor, depending on their credentials, that might cost even more, but sometimes it’s really nice to talk to somebody that you know and you can grow that relationship with them over time.
Kim Palmer:
Great. Thank you, Alana. And I think, actually, I can squeeze in one more question that we received. How do taxes work with investment accounts? How much do we set aside so we aren’t surprised by a tax bill? Which is a great question. If you’re selling stocks from a brokerage investment account, then you should be aware of three words, capital gains taxes. Those are the taxes you’ll pay when you sell assets for profit. Assets that you have owned for more than a year are subject to long-term capital gains tax, and the capital gains tax rate is 0%, 15% or 20% on most assets. Capital gains taxes on assets held for a year or less are subject to short-term capital gains. If you regularly trade stocks or other investments, you might be subject to short-term capital gains.
Those profits are taxed as ordinary income based on your tax brackets, which we went over before. Your final tax bill depends on a number of different factors. If you don’t want to be surprised, estimate what you’ll owe using tools such as a tax calculator or IRS worksheets. If needed, consider setting aside enough to cover the tax bill or paying estimated taxes and as always, your specific situation will differ and we are not tax professionals. We hope that you enjoyed this webinar and learned something today. If you’d like to get even more clarity on your finances and continue learning with NerdWallet, consider signing up for an account with us at nerdwallet.com. Thank you so much for joining us.
Sean Pyles: And that’s all we have for this episode. To send the Nerds your money questions, call or text us on the Nerd hotline at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected]. Here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. This webinar episode was produced by Alikay Wood, Sheri Gordon, and me. We had editing help from Liz Weston, Sara Brink mixed our audio, and a big thank you to NerdWallet’s editors for all their help. And with that said, until next time, turn the Nerds.