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From the world-renowned city of Chicago to charming small towns like Galena and Peoria, Illinois offers various living experiences for its residents. But like any state, living in Illinois comes with its own set of pros and cons. Here’s a closer look at what life in Illinois entails.

Is Illinois a good place to live?

Moving to Illinois blends urban and rural living, providing residents with access to both city life and serene countryside settings, such as the Shawnee National Forest. The state has a robust economy driven by key industries like manufacturing, agriculture, and technology, along with numerous higher education institutions like the University of Illinois and Northwestern University. However, this economic opportunity comes with challenges, including fierce competition for jobs, particularly in major cities like Chicago.

Sport fans will feel right at home in Illinois, with major league teams like the Chicago Bears (NFL), Chicago Bulls (NBA), and Chicago Cubs (MLB). Whether you’re attracted to Chicago’s arts scene, its renowned museums, or its diverse dining options, Illinois is a good place to live.

Illinois state overview

Population 12,812,508
Biggest cities in Illinois Chicago, Aurora, Joliet
Average rent in Chicago $2,202
Average rent in Aurora $1,550
Average rent in Joliet $1,240

1. Pro: Diverse cultural experiences

One of Illinois’ greatest advantages is its cultural diversity. Chicago is a global city, home to a mix of cultures that contribute to its rich arts scene, food variety, and beautiful neighborhoods. You can enjoy everything from world-class museums like The Art Institute of Chicago to live blues performances in the city’s music clubs. Illinois celebrates its diversity through numerous cultural festivals, including the Chicago Air and Water Show, Taste of Chicago, and Lollapalooza.

Insider scoop: For an authentic local experience, venture beyond the big-name festivals and explore neighborhood events like the Puerto Rican Festival in Humboldt Park.

2. Con: High taxes

A notable downside to living in Illinois is its high taxes, which are frequently seen as a drawback by residents. The state has one of the highest property tax rates in the nation, with an average effective rate of about 2.07%—a crucial consideration if you’re planning to buy a home. In addition to property taxes, Illinois imposes a flat state income tax of 4.95%. While this rate is lower than in some states, the burden increases when combined with local taxes. Sales taxes are also significant, particularly in Chicago, where the total rate can climb as high as 10.25%.

3. Pro: A transportation hub

Illinois is one of the nation’s transportation hubs. The state’s central location makes it ideal for logistics and travel, with easy access to highways, railroads, and O’Hare International Airport — one of the busiest airports in the world. Whether you’re commuting within the state or heading to another part of the country, it’s easy to navigate in Illinois. Chicago, in particular, has an excellent public transportation system, including the iconic “L” train network, which connects various neighborhoods to downtown and surrounding suburbs. 

Travel tip: If you’re flying out of O’Hare, avoid rush hour traffic by taking the Blue Line “L” train straight to the airport. It’s often faster than driving, especially during peak travel times, and you’ll skip the hefty parking fees.

4. Con: Harsh winters and unpredictable weather

Illinois winters can be brutal, especially in northern cities like Chicago. The freezing temperatures, heavy snowfalls, and icy conditions make commuting difficult and increase heating costs. The weather is also unpredictable throughout the year, with frequent thunderstorms and high winds in the spring and summer. Even severe weather, including tornadoes, is common in the central and southern parts of the state.

Insider scoop: Locals know to invest in high-quality winter gear, including snow tires or an AWD vehicle to make winter driving safer. Also, it’s smart to keep an emergency kit in your car with blankets, snacks, and a shovel, especially if you’re commuting long distances in the snow.

5. Pro: Strong job market in urban areas

The job market in Illinois, particularly in cities like Chicago and Naperville, is strong. Chicago is home to Fortune 500 companies, financial institutions, and a growing tech scene. Additionally, Illinois plays a key role in agriculture and manufacturing, and healthcare and education also offer great employment opportunities. 

6. Con: Traffic congestion in urban centers

Although Illinois has great transportation infrastructure, traffic congestion can be a major downside, especially in and around Chicago. Rush hour traffic can extend commutes significantly, and the infamous Chicago gridlock is something that residents often have to navigate. Additionally, road construction during the warmer months can lead to more delays.

7. Pro: Affordable living outside of Chicago

If you’re looking for affordable living outside of Chicago, several suburbs provide more budget-friendly options while still providing access to the city. Cities like Joliet, Aurora, and Naperville are great examples. Joliet, about 45 miles southwest of downtown, has average rent around $1,240 for a one-bedroom apartment. Aurora, a bit closer at 40 miles away, offers an average rental rate of about $1,550 for a one-bedroom. These suburbs offer a balance of affordability, amenities, and convenience for those looking to live near Chicago without the high city costs.

8. Con: Air pollution in urban areas

While Illinois has beautiful natural landscapes, air quality in densely populated areas like Chicago can be problematic. Industrial emissions, heavy traffic, and other pollutants contribute to poor air quality, which can exacerbate respiratory conditions and reduce overall quality of life in some urban areas, particularly during the summer months.

9. Pro: Outdoor recreation and scenic parks

Though often overshadowed by urban life, Illinois has plenty of outdoor spaces to explore. The state is home to the Shawnee National Forest, the scenic Mississippi River, and numerous state parks that offer hiking, camping, and boating. Illinois is also part of the Great Lakes region, giving residents access to Lake Michigan’s waterfront for fishing, sailing, and beach days.

Insider scoop: Check out Starved Rock State Park for its stunning waterfalls and canyons — a hidden gem for hiking enthusiasts.

10. Con: High competition for certain jobs

One of the challenges of living in Illinois, particularly in urban centers like Chicago, is the high competition for certain jobs. With the state being home to a diverse economy and key industries such as finance, technology, healthcare, and education, many flock to Illinois in search of career opportunities. As a result, positions in these fields, especially in tech, corporate finance, and healthcare, can be highly competitive. 

Pros and cons of living in Illinois: Overview

Pros Cons
Diverse cultural experiences High taxes
A transportation hub Harsh winters and unpredictable weather
Strong job market in urban areas Traffic congestion in urban centers
Affordable living outside of Chicago Air pollution in urban areas
Outdoor recreation and scenic parks High competition for certain jobs

Source: rent.com

Apache is functioning normally

Accounts payable are bills and other short-term debts that a business needs to pay. It includes all of a company’s current liabilities (due within one year), making it a key component of small business accounting.

Understanding accounts payable and having a dependable accounts payable system is essential to running a successful small business. Here’s what you need to know.

Key Points

•   Accounts payable (AP) represent a company’s short-term obligations to suppliers for goods or services received but not yet paid for.

•   AP appears under current liabilities on the balance sheet.

•   Examples of accounts payable could include licensing costs, leasing costs, subscription services, and installment payment plans.

•   The four steps of the accounts payable process include capturing the invoice, approving the invoice, payment authorization, and payment execution.

•   Investors and lenders may look at accounts payable when deciding whether to invest in your company or approve you for a small business loan.

What Is Accounts Payable (AP)?

When a business buys goods or services from a vendor or supplier on credit that needs to be paid back in the near term, the accounting entry is known as “accounts payable.” On a balance sheet, accounts payable appears under current liabilities.

Accounts payable differs from a loan payable in that accounts payable does not charge interest (unless payment is late) and is typically based on goods or services acquired. Loan payables, such as balances on various kinds of small business loans, generally charge interest and are based on the prior receipt of a sum of cash from a lender.

In a company, the term “accounts payable” is also used as the name of the department responsible for handling vendor invoices and bills — from recording them in the general ledger to making payments to suppliers and other third parties.

Recommended: Guide to Vendor Financing

Is Accounts Payable an Asset or Liability?

In small business accounting, accounts payable is a liability since it is money owed to vendors and creditors. The account grows larger when more money is owed to vendors. When accounts payable increases, a business will typically have more cash on hand because of the delay in paying amounts owed. This typically results in a temporary increase in liquidity.

The short-term debt in accounts payable can help keep cash on hand to pay for other items, but eventually creditors will require payment.

Accounts payable differs from business expenses in that accounts payable is shown on a business’s balance sheet, whereas business expenses are shown on the income statement.

Recommended: Small Business Balance Sheets with Examples

How Accounts Payable Works

When a business purchases goods or services from a supplier on credit, also known as trade credit, payment isn’t made immediately. Typically, it will be due within 30 or 60 days, sometimes longer.

Here’s how it works:

A business will send the supplier a purchase order. The supplier will then provide the goods or services the business purchased, along with an invoice requesting payment by a certain date. The person or department responsible for accounts payable will verify the invoice against the purchase order and ensure the goods or services were received before issuing payment to their vendors.

If amounts owed to suppliers and other third parties are not paid within the agreed terms, late payments or defaults can result.

The sum of all outstanding payments owed by a business to third parties is recorded as the balance of accounts payable on the company’s balance sheet. Any increase or decrease in accounts payable from one accounting period to another will appear on the cash flow statement.

Recommended: How to Calculate Cash Flow

4 Steps of the Accounts Payable Process

Managing business finances is one of the most important aspects of running a small business. The accounts payable process has four key steps. Going through this defined process helps avoid errors and missing a payment deadline to a vendor.

1. Invoice Capture

The accounts payable process generally begins when a supplier or third party submits an invoice to the accounts payable department. After receiving the invoice, the accounts payable clerk will verify the invoice is valid and not a duplicate, code the invoice to the general ledger, and, depending on the company’s process, conduct a two-way match (in which invoices are matched to purchase orders) or a three-way match (in which invoices are matched to purchase orders and receiving information).

2. Invoice Approval

Once all the data is entered, an invoice must be approved. This involves an individual from the accounts payable department routing the invoice to the appropriate person (or people) in the company to get the necessary approval(s).

3. Payment Authorization

After an invoice is approved, the accounts payable clerk may need to get authorization to make a payment. The authorization will typically include the payment amount, method of payment, and date the payment will be made.

4. Payment Execution

Once payment is authorized, the invoice can be paid. Payment should be processed before or on the bill’s due date and may be done by check, electronic bank-to-bank payment, or credit card. Once the invoice is paid, it can be closed out in the accounting system.

Recommended: Debt-to-EBITDA Ratio Explained

Internal Controls and Audits

Internal controls are standardized operating procedures used by companies in their accounts payable process to reduce the risk that a business will pay a fraudulent or inaccurate invoice, pay a vendor invoice twice, and/or fail to pay an invoice on time.

These controls often include:

•  Purchase order approval

•  Invoice approval

•  Two-way matching (in which invoices are matched to purchase orders) or three-way matching (in which invoices are matched to purchase orders and receiving information)

•  Auditing for duplicates (which involves checking files manually or with an accounts payable automation platform to make sure duplicate payments aren’t made)

Accounts Payable Examples

Generally, any items bought on short-term credit fall under the accounts payable umbrella. This includes:

•  Licensing costs

•  Leasing costs

•  Subcontractor bills

•  Amounts owed for raw materials and fuel

•  Products and equipment received but not paid for

•  Subscription services

•  Installment payment plans

Accounts Payable vs Accounts Receivable

Accounts receivable is basically the opposite of accounts payable. While accounts payable is the money a company owes to suppliers and vendors, accounts receivable is the money that is owed to the company, generally by its customers. If two companies make a transaction on credit, one records it to accounts payable, while the other records it to accounts receivable.

Here’s a side-by-side comparison of accounts payable vs accounts receivable:

Accounts Payable Accounts Receivable
Money you owe to a vendor or other third party Money owed to you from customers
Recorded as a current liability on the balance sheet Recorded as a current asset on the balance sheet

When a business owner needs an influx of cash, accounts receivable financing is a type of financing that enables them to receive early payment on outstanding invoices. The owner must then repay the money (plus a fee) to the financing company when they receive payment from their customers.

Recommended: GAAP Explained

Trade Payables and Accounts Payables

Though they sound similar, trade payables are actually slightly different from accounts payables.

Trade payables are amounts a company owes its vendors for inventory-related goods, such as business supplies or materials that are part of the company’s inventory. Accounts payables, on the other hand, includes trade payables, as well as all other short-term debts.

The Takeaway

Accounts payable is a current liability on a company’s balance sheet. It includes all of the short-term credits extended to a business by vendors and creditors for goods or services rendered but not yet paid for. Accounts payable also refers to the department or person in a firm that records and handles purchases and payments.

Lenders and potential investors will often look at a company’s accounts payable, as well as their accounts receivable, to gauge the financial health of a business. Mismanagement on either side of the equation can have a negative impact on your business’s ability to get credit or get approved for a small business loan, and could also put your business at risk.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

Get personalized small business financing quotes with SoFi’s marketplace.

FAQ

What are examples of accounts payables?

Any good or service that is purchased by the company on short-term credit should be listed as accounts payable on the balance sheet. Some examples include:

•  Leased vehicles

•  Subcontractor services

•  Equipment

•  Materials

•  Business supplies

•  Subscription services

What is the purpose of accounts payable?

The purpose of accounts payable is to accurately track what’s owed to vendors and suppliers and to ensure that payments are properly approved and processed. Having accurate accounts payable information is essential to producing an accurate balance sheet.

What is accounts payable reconciliation?

Accounts payable reconciliation is a process in which the accounts payable department verifies that the detailed total of all accounts payable outstanding matches the payables account balance stated in the general ledger. This is done to ensure that the amount of accounts payable reported in the balance sheet is accurate.

Photo credit: iStock/Panuwat Dangsungnoen

SoFi’s marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.


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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Source: sofi.com

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A debt instrument is a contract that enables one party to loan funds to another party, who promises to repay the loan plus interest. Debt instruments are also referred to as fixed income assets because the lender receives a fixed amount of interest during the lifetime of the instrument.

Debt instruments come in many forms. Some are obvious, such as mortgages and different types of small business loans; while others are less so, such as rental leases, bonds, and treasuries. With some debt instruments, you are the borrower, such as when you take out a mortgage or open a credit card. In other cases, you are the lender, such as when you purchase a bond or treasury.

Here’s what you need to know about debt instruments, the different types of debt instruments, how these instruments work, and the pros and cons of debt financing.

Key Points

•  Debt instruments are financial assets that represent a loan made by an investor to a borrower, typically involving fixed payments over time.

•  Common types of debt instruments include mortgages, small business loans, bonds, U.S. treasuries, and leases.

•  Debt instruments come with a defined maturity date when the principal amount must be repaid.

•  All debt securities are debt instruments, but not all debt instruments are securities.

What Is a Debt Instrument?

A debt instrument is a fixed income asset that legally binds a debtor to pay back any amount borrowed plus interest. Debt instruments can be issued by individuals, businesses, local and state governments, and the U.S. government.

Businesses often use debt instruments to raise capital to purchase additional assets (such as manufacturing equipment) or to raise working capital, while local governments may do so to fund the building of infrastructure (such as a new highway or a bridge). Debt instruments also give participants the option to transfer the ownership of debt obligation (or instrument) from one party to another.

Debt instruments can be short-term (repaid within a year) or long-term (paid over a year or more). Credit cards and treasury notes are examples of short-term debt instruments, while long-term business loans and mortgages fall into the category of long-term debt instruments.

Recommended: 10 Steps to Starting a Small Business

Debt Instruments vs Debt Securities

Debt instruments are broad financial tools representing a loan made by a lender to a borrower, including mortgages, business loans, and leases. They may or may not be tradable.

In contrast, debt securities are a specific subset of debt instruments that are tradable on financial markets, such as government and corporate bonds. Debt securities provide liquidity, allowing investors to buy or sell them before maturity.

The key difference is that all debt securities are debt instruments, but not all debt instruments are tradable securities, emphasizing market accessibility and liquidity for debt securities.

How Do Debt Instruments Work?

If you’ve ever taken out a loan or opened a credit card, you probably already understand the basics of how debt instruments work. Debt instrument contracts include detailed provisions on the deal, including collateral involved, the rate of interest, the schedule for interest payments, and the term of the loan (or timeframe to maturity).

While any type of vehicle classified as debt can be considered a debt instrument, the term is most often applied to debt capital raised by institutions, such as companies and governments. In this scenario, the investor is the lender: You issue money to a business, municipality, or the U.S. government. In exchange for capital, you are paid back the amount you loaned over time with interest. Examples of this type of debt instrument include U.S. treasuries, municipal bonds, and corporate bonds.

Recommended: Lease or Purchase Equipment

Types of Debt Instruments

Below is a breakdown of some of the most common debt instruments used by individuals, governments, and companies to raise capital.

US Treasuries

U.S. Treasury Securities (also called treasuries) are government debt instruments issued by the U.S. Department of the Treasury to finance government spending as an alternative to taxation. Treasury securities are backed by the full faith and credit of the U.S., meaning that the government promises to raise money by any legally available means to repay them.

U.S. treasuries tend to be more affordable than many other debt instruments. Investors can buy them in increments of $100 either through brokerage firms, banks, or the U.S. Treasury website. There are three types of treasuries: treasury bills, treasury notes, and treasury bonds. Each treasury comes with its own maturity option.

Municipal Bonds

Municipal bonds are offered by various U.S. government agencies (towns, cities, counties, or states) to fund current and future expenditures. Programs often funded by municipal bonds include the building of schools, roads, and bridges. Think of a municipal bond as a loan an investor makes to a local government.

There are two types of municipal bonds: general obligation bonds and revenue bonds. General obligation bonds are not paid back by any revenue resulting from the completion of the project. Instead, they are paid back to investors through property taxes or overall general funds.

Revenue bonds are paid back by the issuer through either sales, taxes, or some other type of revenue generated by the project.

Municipal bonds are attractive to many investors because they are tax-exempt bonds — meaning the investor doesn’t have to pay taxes on any interest received.

Recommended: How to Buy Bonds: A Guide for Beginners

Corporate Bonds

A corporate bond is a debt security that a corporation can use to raise money. Funding is typically available to anyone who is interested. As with other bonds, corporate bonds are essentially an IOU from the company to the investor. It differs from stock in that, instead of being paid dividends when the company is profitable, investors are always paid regardless of whether the company is doing well.

Typically, corporate bond investors are paid interest until the bond matures. When it matures, the entire principal is paid back. For example, a $1,000 corporate bond with an interest rate (or coupon rate) of 5% would bring an investor $50 every year until the bond matures. This means that, after 10 years, the investor would see a gross return of $500.

With secured bonds, the company puts up collateral (such as property or equipment) as security for the bond. If the company defaults, secured bond holders can foreclose on the collateral to reclaim their money. With an unsecured bond, a holder may or may not be able to fully reclaim their investment.

Alternative Structured Debt Security Products

There are many types of structured debt security products on the market, many of which are issued by financial institutions. A common occurrence is for these institutions to bundle assets together as a single debt security product. By doing this, they are able to raise capital for the financial institution while also segregating the bundled assets.

Recommended: What Are the Different Types of Debt?

Leases

A residential or commercial lease is a legally binding contract between an owner of a property and a tenant, where the tenant agrees to pay money for a set period of time in exchange for use of the rented property. A lease is a type of debt instrument because it secures a regular payment from the tenant, thus creating a secured long-term debt.

Mortgages

Mortgages are a type of debt instrument used to purchase a home, commercial property, or vacant land. The loan is secured by the property being purchased, which the lender can seize if the borrower defaults on the loan.

As with many other consumer loan products, mortgages are amortized, meaning the borrower makes a series of equal monthly payments that provides the lender with an interest payment (based on the unpaid principal balance as of the beginning of the month) and a principal payment that will cause the unpaid principal balance to decrease each month so that the principal balance will be zero at the time of the final payment.

Recommended: What Is a Financial Instrument?

Pros and Cons of Debt Instruments

Understanding the pros and cons of debt instruments helps borrowers make informed decisions about their financing options.

Pros

Debt instruments can be mutually beneficial in that both parties become better off as a result. If a company takes out a small business loan and invests those funds wisely, for example, it can increase its profitability. Ideally, the increase in profits exceeds the cost of the loan, a concept known as leveraging in business. Borrowing money also allows a company to raise capital without losing equity.

Debt instruments also benefit individuals and governments. Without mortgage debt, many people would never be able to buy a house; without student loans, many individuals would not be able to go to college. For governments, debt instruments allow them to build infrastructure for the public good.

On the lender’s or investor’s side, debt instruments can provide a regular and guaranteed source of income and are considered a safe investment, provided the loan is secured.

Cons

But there are downsides to debt instruments, as well. Loans often come with restrictions on how they can be used and, if you don’t have good credit, interest rates can be high. Borrowing money also involves risk. Most commercial institutions will require you to put up collateral in the form of a property asset. If you lose your income or your business hits hard times and you cannot repay your loan, the lender can reclaim its debt by liquidating whatever you proposed as security, which means you can lose a valuable asset.

On the lender’s or investor’s side, debt instruments also come with risk. Unless you purchase a secured bond, you may not receive your principal back as the investor. Also, during periods of high inflation, bonds can actually have a negative rate of return. And, if you invest in corporate bonds, there is always the possibility that the issuer will default on payment.

Pros of Debt Instruments Cons of Debt Instruments
Allows companies to expedite their growth If a borrower has poor credit, interest rates can be high
Allows companies to raise capital without diluting equity Loans often come with restrictions on how they can be used
Enables individuals to buy a home or pay for college Loans often require collateral, which can be lost if debtor defaults on loan
For lenders/investors, secured debt is a safe investment Investors can lose money if bond value declines
For lenders/investors, debt instruments provide steady income Bond investors can lose money during periods of high inflation

The Takeaway

A debt instrument is a way for an investor to get a return on their money by loaning to either an individual, business, municipality, or the U.S. government. If you have a credit card or mortgage, or you own any bonds or treasuries in your investment portfolio, debt instruments play a role in your life.

Small business owners can also take advantage of debt instruments. You might not be able to issue corporate bonds at this stage of the game, but you may be able to access an affordable small business loan.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

With SoFi’s marketplace, it’s fast and easy to search for your small business financing options.

FAQ

What are some examples of debt instruments?

Common examples of debt instruments include personal loans, business loans, mortgages, leases, bonds, treasuries, promissory notes, and debentures.

What is the difference between a debt instrument and an equity?

With a debt instrument, the investor does not own any portion of the company. With equity, the investor is buying a portion of the company.

What are the features of debt instruments?

Debt instruments have three characteristics: principal, coupon rate, and maturity. Principal refers to the amount that is borrowed. The coupon rate is the interest amount paid by the borrower to the lender. Maturity is the end date of the debt instrument. It refers to when the debt is completely paid off with interest.

Photo credit: iStock/insta_photos

SoFi’s marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.


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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Source: sofi.com

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Between 2000 and 2021, the average published tuition and fees increased from the following amounts, after adjusting for inflation, according to Best Colleges:

•   $2,146 to $3,564 at public two-year schools

•   $5,638 to $9,596 at public four-year schools

•   $25,468 to $37,222 at private nonprofit four-year institutions

This article will cover the average cost of college tuition and fees in 2024, the increase in college tuition costs, the reasons for the rise of average college tuition, and college tuition options you may want to consider for yourself.

Average Cost of College in 2023-24

In 2023-24, the average published price for tuition and fees for full-time undergraduate students were as follows, according to the College Board’s Trends in College Pricing and Student Aid:

•   $11,260 for public four-year in-state institutions, $270 higher than in 2022-2023

•   $29,150 for public four-year out-of-state institutions, $850 higher than in 2022-2023

•   $3,990 for public two-year in-district institutions (including average community college tuition), $100 higher than in 2022-2023

•   $41,540 for private nonprofit four-year institutions, $1,600 higher than in 2022-2023

Recommended: Average Cost of College Tuition

Increase in College Tuition Cost Over the Last 10 Years

Generally speaking, tuition has increased in the past decade. According to data from the College Board, the average published tuition price at a four-year nonprofit university during the 2013-2014 school year was $30,094, while in 2023-2024 that number jumped to $41,540.

Reasons for the Rise of Average College Tuition

The rise of college tuition over the past few decades can be attributed to several key factors, including:

Reduced State Funding

One of the primary reasons for rising tuition costs, especially at public institutions, is the decline in state funding for higher education. As states allocate less money to colleges and universities, these institutions often compensate by increasing tuition to cover budget shortfalls.

Increased Administrative Costs

Colleges have expanded administrative staff and services, including student support, campus amenities, and compliance with federal regulations. This growth in administrative functions adds to overall expenses, which are often passed on to students in the form of higher tuition.

Expansion of Campus Facilities

Many colleges invest in new buildings, state-of-the-art facilities, and upgraded dormitories to attract prospective students and remain competitive. These capital expenditures are expensive and often lead to increased tuition to help finance the construction and maintenance of these facilities.

Rising Faculty Salaries and Benefits

The cost of faculty salaries and benefits, including health care and retirement plans, has risen steadily. As colleges strive to attract and retain top talent, these increased personnel costs contribute to higher tuition.

Student Demand for More Services

There is a growing demand from students for more comprehensive services, such as mental health counseling, career advising, and extracurricular activities. Providing these additional services requires funding, which often results in tuition hikes to cover these enhanced offerings.

Together, these factors create a complex landscape where college tuition continues to rise, making affordability a significant concern for many students and families.

Recommended: How to Pay for College

Total Cost of College Over Time

While the cost of tuition has increased over the years, the prices of room and board, books, school supplies, and other necessities have also risen. The cost of room and board has almost doubled since the 1960s, going from $6,700 to more than $12,000, according to Best Colleges.

On Campus vs. Off Campus

How much you spend on college will vary depending on whether you live at home, on campus, or off campus. The College Board found that the cost of living on campus has increased slightly faster than the cost of living off campus, such as in an apartment or house with friends.

Total Cost of College Over Time by School Type

Of course, the type of school you attend (public or private) will also affect the total cost of attendance. Over the last nearly 60 years, the average cost across all institutions has increased 135%. It increased the most at private institutions at 187% and the least at two-year colleges, at 69%.

College Financing Options

Numerous college financing options exist for students. Students can tap into various options to pay for costs. Undergraduate students received an average of $15,480 of financial aid 2022-2023, according to the College Board’s Trends in College Pricing and Student Aid.

Students may rely on scholarships, grants, work-study, and student loans, in addition to personal savings to pay for their education.

Scholarships

Scholarships refer to money received from colleges or other organizations that students don’t have to pay back. Only about 7% of students receive scholarships, with the average student who receives one getting $14,890 annually at a four-year institution.

Student Loans

Students can take advantage of federal or private loans. Federal loans are provided by the U.S. Department of Education. To apply for a federal student loan, students need to fill out the Free Application for Federal Student Aid (FAFSA®) each year.

Private student loans are provided by banks, credit unions, and other financial institutions. These are separate from any sort of federal aid, and as a result, lack the protections afforded to federal student loans — like income-driven repayment options or the ability to apply for Public Service Loan Forgiveness. For this reason, private student loans are generally considered by students only after they have reviewed and exhausted all other options for financing.

Recommended: How to Complete the FAFSA Step by Step

Grants

Students can tap into federal, state, or institutional grants. Grants can also come from employers or private sources. Like scholarships, grants typically do not need to be repaid. They are mostly awarded based on financial need, and students will generally need to complete the FAFSA to qualify for them.

Work-Study

Students can get a work-study award, which is money they must earn when they attend college. They must file the FAFSA in order to qualify for work-study and must work a job on campus to receive the money.

Personal Savings

According to Sallie Mae’s annual How America Pays for College 2024 report, 37% of students receive help from their parents to pay for college, and 11% use their own income and savings. Strategies for parents paying for college include things like setting up an account designed to help parents save for college or other educational expenses, putting work bonuses or tax refunds into savings, and setting aside funds each month to put toward college.

The Takeaway

The average college tuition continues to increase. In 2000, the college tuition at a private four-year institution was $15,470, and now in 2024 it’s $38,421. There are a number of reasons for increasing tuition rates, including factors like a decrease in state funding, lack of regulation, and an increase in operating costs at colleges and universities.

Many students rely on financial aid to pay for college. Financial aid includes federal student loans, certain grants and scholarships, and work-study programs.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

How much has college tuition increased since 2000?

Since 2000, college tuition has significantly increased, jumping about 65% between 2000 and 2021. This surge reflects growing education costs, which have outpaced inflation and wage growth, making higher education increasingly expensive and contributing to the student loan debt crisis faced by many graduates.

How much has the total cost of college increased over the last decade?

Over the last decade, the total cost of college, including tuition, fees, room, and board, has increased by about 10% at public institutions and around 19% at private institutions. This rise reflects growing expenses in education and living costs, making college significantly more expensive for students and families.

How much has college tuition increased in 2024?

In 2024, college tuition increased by 1.6% over the last 12 months. However, this number will vary depending on the institution and whether it is public or private. These increases are consistent with the ongoing trend of rising education costs, impacting students’ financial planning and contributing to higher student loan borrowing.

Photo credit: iStock/MicroStockHub

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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Source: sofi.com

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An IRA recharacterization allows you to make changes to the type of contribution you made to one IRA by transferring it to a second IRA within the same tax year. For example, you might recharacterize traditional IRA contributions as Roth contributions, or vice versa.

This process is different from an IRA conversion, which is not limited to the tax year in which you made a contribution. A conversion typically involves moving funds from a traditional IRA into a Roth IRA, not the reverse. In most cases, you would owe income tax on the amount converted to a Roth.

There are different reasons for the recharacterization of an IRA, and some important IRS rules to know for completing one.

Key Points

•   An IRA recharacterization allows you to change the type of IRA contribution made within the same tax year, such as from traditional to Roth IRA or vice versa.

•   Executing a recharacterization typically involves notifying the IRA custodian, opening a second IRA, if needed, and meeting the tax-filing deadline or extension.

•   Reasons for recharacterization may include avoiding tax penalties for excess contributions, or taking advantage of certain tax benefits.

•   A recharacterization differs from a conversion, which can be done anytime with contributions from multiple years, and typically involves moving funds from a traditional IRA to a Roth IRA.

•   Following the Tax Cuts and Jobs Act passed in 2017, a conversion from a traditional IRA to a Roth IRA cannot be reversed using a recharacterization.

What Is an IRA Recharacterization?

An IRA recharacterization allows you to treat contributions made to one type of IRA as contributions made to a second, different type of IRA. The IRS allows taxpayers to recharacterize contributions to traditional or Roth IRAs only up until the tax-filing deadline each year, assuming you meet relevant income limits and other restrictions for the second IRA account.

For instance, say you deposit money in a Roth IRA, but when it’s time to file taxes you realize that you’ve made contributions in excess of what’s allowed for your tax filing status and income (see details below).

You could execute a recharacterization to have some of that contribution amount treated as traditional IRA contributions for the tax year, and transfer the assets (and any earnings or net losses) to the second IRA.

In that scenario, a recharacterization of Roth IRA contributions could allow you to avoid the 6% excise tax penalty the IRS imposes on excess contributions.

How Do IRA Recharacterizations Work?

IRA recharacterizations work by allowing you to change your IRA contributions for the year from one type of IRA to another. The process is fairly simple; you’ll just need to notify the company, a.k.a. the custodian that holds your IRA, that you’d like to recharacterize your contributions, and open a second IRA for that purpose (unless you have an existing IRA).

You can also transfer the amount you want recharacterized to an IRA at a different institution. This is known as a trustee-to-trustee transfer. In most cases, either one of these methods is preferable to withdrawing the money and redepositing it yourself, which can be tricky and could lead to taxes and/or a penalty if you fail to transfer the money within a 60-day window.

Again, you have until the annual tax-filing deadline to complete an IRA recharacterization. If you filed an extension, then you’ll have until the October extension-filing cutoff. You should receive a Form 1099-R documenting the recharacterization that you’ll need to file with your tax return.

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Reasons for a Recharacterization

Why would you need to recharacterize IRA contributions? There are reasons for doing a recharacterization in either direction (Roth to traditional IRA, or traditional IRA to a Roth). You might consider recharacterization if you:

•   Contributed too much to a Roth IRA for the year and need to shift some of that money to a traditional IRA in order to avoid a tax penalty.

•   Made traditional IRA contributions, but later learned that you can’t deduct them because you’re covered by a retirement plan at work and your income puts you over the threshold to claim a deduction.

•   Contributed to a Roth IRA, but believe you’d benefit more from getting a deduction for traditional IRA contributions.

•   Initially contributed to a traditional IRA, but later decided that you’d prefer to contribute to a Roth IRA to enjoy its tax benefits later in life.

Sample Calculation of IRA Recharacterization

How you calculate an IRA recharacterization can depend on whether you’re recharacterizing some or all of your contributions for the year. To keep things simple, let’s assume that you contributed $5,000 to a Roth IRA at the beginning of the year. The IRA earned $1,000 in investment gains.

You’d now like to recharacterize the entire amount to a traditional IRA. You’d tell your IRA custodian that you’d like to do a full recharacterization. This strategy does not require a separate calculation of investment earnings, because the entire balance of the IRA is being recharacterized.

However, if you only wanted to convert $3,000 of your contributions you’d have to do a separate calculation to figure the amount of earnings that need to be recharacterized.

The IRS offers a formula for doing so, which looks like this:

Net Income = Contributions x (Adjusted closing balance – Adjusted opening balance) / Adjusted opening balance

If you don’t want to do the math by hand, it might be easier to plug the numbers into an IRA recharacterization calculator, or consult with a tax professional.

Pros and Cons of Recharacterizing an IRA

There are pros and cons to using a recharacterization strategy.

Pros

IRA recharacterization offers some flexibility with regard to how your IRA contributions are treated, if your financial circumstances or tax considerations change.

If you start off the year making one type of IRA contribution, you can decide to switch things up at any time before the tax filing deadline. There’s no penalty for changing your mind about what type of IRA contributions you’d like to make, as long as you’re doing so before the filing or extension deadlines.

Recharacterizing an IRA is a simpler process than converting IRA assets, which we’ll discuss shortly. There’s less paperwork involved, and since the transaction can be completed by the custodian without any money being withdrawn from your IRA, a recharacterization can be a more tax-efficient way to adjust your contribution choices.

Cons

That said, there are downsides to a recharacterization. For one thing, you’ll need to be mindful of the tax filing deadlines if you want to recharacterize IRA contributions. If you miss the tax or extension deadline, you won’t be able to recharacterize your contribution amount.

If you recharacterize traditional IRA contributions as Roth IRA contributions, you will owe taxes.

If you recharacterize Roth IRA contributions as traditional IRA contributions, you can only claim the tax deduction a) if you qualify and b) you cannot deduct any earnings on the original contribution, if there were any.

Recharacterization vs. Conversion of an IRA

Recharacterization of an IRA and an IRA conversion are not the same thing. When you recharacterize IRA contributions, you’re changing the type of contributions you made for that specific tax year.

When you convert an IRA, you’re moving money from one type of IRA to another that may include contributions from multiple years. Generally, an IRA conversion refers to moving money from a traditional IRA to a Roth IRA.

If you have a Roth IRA, there would be little benefit to doing a conversion to a traditional IRA since you couldn’t then take the tax deduction. Also, if you first converted a traditional IRA to a Roth, it’s no longer possible to convert it back to a traditional IRA, thanks to changes implemented by the 2017 Tax Cuts and Jobs Act.

Amounts rolled over to a Roth IRA from qualified retirement plans cannot be reversed either.

For example, you might have chosen a traditional option when opening your first IRA but later decided that you’d like to have the tax benefits of a Roth IRA. Converting an IRA to a Roth would allow you to make contributions to a Roth IRA if you’d otherwise be prevented from doing so because your income is too high.

As noted, you’d have to pay taxes on the money you’re converting to a Roth IRA, because the money you deposited in your traditional IRA originally was tax deductible. Roth IRAs are funded with after-tax contributions.

IRA Recharacterization IRA Conversion
How It Works Recharacterization allows you to change the type of IRA contributions you make for the current tax year. Conversion allows you to move amounts in one type of IRA to another, typically a traditional IRA to a Roth IRA.
Rules Recharacterizations must be completed before the annual tax filing deadline. Conversions can be done at any time and may include contributions made over multiple years.
Advantages IRA recharacterization allows some flexibility in deciding what type of IRA contributions you want to make. Converting a traditional IRA to a Roth IRA can allow you to take advantage of tax-free withdrawals in retirement.
Disadvantages You must complete a recharacterization by the tax filing deadline or extension deadline; you cannot recharacterize IRA contributions pertaining to one year in a subsequent year. You will likely owe taxes on converted amounts, which can increase your tax bill.

The Takeaway

Recharacterization of an IRA could make sense if it allows you to gain a tax advantage, or avoid a tax penalty for excess contributions. If you’re unsure whether a recharacterization makes sense, it might be a good idea to talk to a tax professional first.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

Are IRA recharacterizations still allowed?

Yes, the IRS still allows IRA recharacterizations. There are some limitations, however, as converted IRAs cannot be recharacterized back, after the fact. You also can’t recharacterize rollovers from a 401(k) or 403(b) to a Roth IRA either.

What is the reason for recharacterizing an IRA?

One of the most common reasons to recharacterize Roth IRA contributions is to avoid a tax penalty for having made excess contributions. It may also be necessary to recharacterize Roth contributions in order to be able to claim a tax deduction for traditional IRA contributions.

Meanwhile, one reason to recharacterize traditional IRA contributions might be that you don’t qualify for the full (or any) tax deduction, and therefore a Roth might look appealing from a tax standpoint.

What is the difference between an IRA conversion and recharacterization?

Converting an IRA means moving assets from one type of IRA to another, typically involving amounts you’ve contributed over several years. Recharacterization of IRA contributions is more limited, and it means you’ve changed your mind about the type of contributions you want to make for the current tax year. A recharacterization of IRA contributions can only be done only for the tax year the contributions were made; an IRA conversion can be done at any time.

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Individual customer accounts may be subject to the terms applicable to one or more of these platforms.

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Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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Source: sofi.com

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Thinking about moving to Maine? Known for its stunning natural beauty, rugged coastline, and charming towns, Maine offers a unique lifestyle, but like any place, it has its advantages and drawbacks. From the bustling port city of Portland to the slower pace of its remote villages, life in Maine can be rewarding but also challenging in certain aspects. Here’s a breakdown of the pros and cons of living in Maine to help you decide if this state is the right place for you.

Is Maine a good place to live?

When moving to Maine, you can expect a lifestyle shaped by the state’s natural beauty, small-town charm, and strong sense of community. The education system is solid, with institutions like the University of Maine providing higher education opportunities. Major employers in the state include L.L. Bean, Bath Iron Works, and healthcare providers like MaineHealth, reflecting the state’s mix of outdoor industries, shipbuilding, and healthcare.

Larger cities like Portland and Bangor offer a lively mix of arts, culture, and dining, while places like Lewiston and Augusta provide a more laid-back, traditional New England vibe.

In terms of weather, Maine’s winters are long and harsh, with heavy snow and freezing temperatures that make heating costs a significant consideration. But if you enjoy outdoor activities like hiking, skiing, or exploring the state’s beautiful coastline, the natural beauty and outdoor lifestyle may outweigh these challenges.

Maine state overview

Population 1,362,359
Biggest cities in Maine Portland, Lewiston, Bangor
Average rent in Portland $2,462
Average rent in Lewiston $1,300
Average rent in Bangor $1,370

1. Pro: Beautiful nature and outdoor activities

There’s plenty to explore outdoors in the state of Maine. From Acadia National Park’s rugged coastal cliffs to the hundreds of lakes and dense forests, the state offers endless opportunities for hiking, fishing, skiing, and kayaking. Whether you enjoy summer days by the beach or fall foliage hikes, Maine’s natural beauty provides year-round recreation.

Insider scoop: If you love hiking, take the trail up Cadillac Mountain in Acadia for some of the best sunrise views in the state, or explore Baxter State Park, home to Mount Katahdin, the highest peak in Maine.

2. Con: Harsh winters and high heating costs

Maine’s winters are long, cold, and snowy, with temperatures often dropping below freezing for extended periods. Heating costs can become a significant expense, particularly in older apartment buildings and homes that may not be energy efficient. Snow removal and icy roads can also make commuting challenging during the winter months.

Insider scoop: Make sure you’re prepared to handle the winters. Invest in winter gear, have a safety kit in your car, and be informed with weather alerts and forecasts.

3. Pro: A tight-knit, welcoming community

Maine is known for its friendly, close-knit communities. In smaller towns, it’s common to know your neighbors and be part of local events like farmers markets, town fairs, and community dinners. This strong sense of community is one of the state’s defining features, making it easy to feel connected, whether you’re living in a small coastal village or a larger town.

Insider scoop: Be sure to check out the Portland Farmers’ Market, one of the oldest in the country. Held twice a week, this market offers everything from fresh seafood and local produce to handmade crafts

4. Con: Limited job opportunities in some sectors

While Maine offers a high quality of life, the job market can be limited, particularly in industries like technology or finance. Many jobs are concentrated in fields such as healthcare, education, and tourism, so if you’re in a specialized field, finding employment may require some flexibility or commuting to larger cities.

5. Pro: Affordable housing and lower cost of living

Compared to other northeastern states, Maine offers relatively affordable housing, especially in smaller towns and rural areas. While Portland’s rental rates has seen rising costs, with average rent for a one-bedroom around $2,462, more budget-friendly options can be found in cities like Lewiston, where rent averages $1,300, or York, where one-bedroom rentals hover around $1,600. Overall, the cost of living in Maine is lower than many East Coast states, making it an attractive option for those looking to stretch their budget while still enjoying the state’s natural beauty and close-knit communities.

Insider scoop: If you’re looking for affordability, consider towns like South Portland or Augusta, where housing prices are significantly lower than in the more popular coastal cities.

6. Con: Long commutes in rural areas

Maine’s rural beauty can come with drawbacks, particularly when it comes to commuting. Public transportation is limited, and in more remote areas, it can take a long time to reach stores, schools, or medical services. Owning a reliable vehicle is essential for most residents, and you should be prepared for longer drive times.

7. Pro: Fresh seafood and farm-to-table cuisine

Maine is known for its incredible seafood, especially lobster, clams, and oysters. The state’s culinary scene has expanded in recent years, with many restaurants emphasizing farm-to-table dining. Portland, in particular, is becoming a food hub, offering top-tier restaurants that focus on fresh, local ingredients.

Insider scoop: For a quintessential Maine experience, visit Eventide Oyster Co. in Portland for freshly shucked oysters or head to a lobster shack along the coast to enjoy a lobster roll by the water.

8. Con: Harsh allergies in the spring

While Maine’s winters are long, spring brings another challenge: allergies. The state’s dense forests and abundance of greenery produce significant amounts of pollen, making springtime tough for those with seasonal allergies. High pollen counts can lead to weeks of runny noses, itchy eyes, and respiratory discomfort for many residents.

9. Pro: Excellent quality of life

Maine consistently ranks high for quality of life, driven by its stunning natural landscapes and clean air. The state offers endless outdoor recreational opportunities, from hiking in Acadia National Park to exploring its picturesque coastline. Maine’s emphasis on locally sourced food, including its world-famous seafood and farm-to-table dining culture, supports a healthy and sustainable lifestyle. Additionally, the slower pace of life and tight-knit communities provide a peaceful environment.

10. Con: Short summer season

While Maine’s summers are beautiful, they are also quite short. The warm weather typically lasts only from late June to early September, which can feel too brief if you enjoy outdoor activities. For the rest of the year, the weather can range from chilly in the fall to freezing in the winter, which limits the time you can comfortably spend outside.

Pros and cons of living in Maine: Overview

Pros Cons
Beautiful nature and outdoor activities Harsh winters and high heating costs
A tight-knit, welcoming community Limited job opportunities in certain sectors
Affordable rent throughout the state Long commutes in rural areas
Fresh seafood and farm-to-table cuisine Harsh allergies in the spring
Excellent quality of life Short summer season

Source: rent.com

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Looking to buy or sell an online business and are looking for a Flippa review? I have personally bought one website as well as have sold three websites in the past, and I think this can be a great way to make extra money. Flippa is a popular marketplace where people buy and sell websites,…

Looking to buy or sell an online business and are looking for a Flippa review?

I have personally bought one website as well as have sold three websites in the past, and I think this can be a great way to make extra money.

Flippa is a popular marketplace where people buy and sell websites, e-commerce stores, YouTube channels, and other online businesses.

Flippa connects buyers and sellers of online businesses, helping hundreds and sometimes thousands of deals happen each month. You can find all kinds of digital properties on the platform, from small blogs to big e-commerce sites.

But is Flippa the right choice for you? While it has many opportunities, some listings might not be as good as they seem. It’s important to do your homework before jumping into any deal.

Let’s take a closer look at what Flippa has to offer and how you can use it safely.

Please click here to head to Flippa’s website where you can buy and sell online businesses.

Flippa Review

Below is my Flippa review. Enjoy!

What Is Flippa?

Flippa is a popular online marketplace for buying and selling digital businesses. It connects entrepreneurs looking to sell their websites, apps, or online stores with potential buyers.

It’s like eBay but for websites and apps instead of physical items. You can find all kinds of online businesses for sale on Flippa.

The platform is easy to use. Sellers list their businesses, and buyers can browse or search for what they want. Flippa handles the money part to keep things safe for everyone.

Types of online businesses on Flippa

Flippa has a wide range of online businesses for sale. Here are some types you can find:

  • Websites: Blogs (such as finance or travel blogs), content sites, and niche sites
  • E-commerce stores: Shopify, Amazon, and other online stores
  • Mobile apps: iOS and Android applications
  • Domain names
  • SaaS businesses: Software as a service companies

You can find both small starter sites and big, profitable businesses. Prices range from a few hundred dollars to millions. This variety makes Flippa great for buyers at all levels.

Buying a Business on Flippa

Flippa is a marketplace where you can buy websites and online businesses. It has many options, but you need to be smart and do your homework before making a purchase.

Why buy a website?

Buying a website can be a great way to make money online. You don’t have to start from scratch. Instead, you get a ready-made business that’s already earning money. This can save you time and effort.

Some benefits of buying a website include:

  • Instant income
  • Existing traffic and customers
  • Proven business model

Many people buy existing online businesses (like blogs) and find ways to improve them so that they can make more money. For example, you may improve the blog design or add a new revenue stream to the business.

But remember, not all websites for sale are good deals. You need to look closely at each one to make sure it’s worth your money.

I have personally bought a website many years ago, and I have many friends who have bought websites as well. For me and most of my friends – we have been able to make money by buying a website that someone else created.

Recommended reading: How I’ve Turned Buying Websites Into My Full-Time Career

How to buy a business on Flippa

Buying on Flippa is pretty simple.

Here’s how you can do it:

  1. Create an account on Flippa.
  2. Search for websites in your niche or budget.
  3. Review the listings carefully.
  4. Ask the seller questions.
  5. Place a bid or make an offer.
  6. If you win, complete the payment.
  7. Transfer the website to your control.

It’s important to take your time and not rush into a purchase. Buying a business is a big decision!

How Flippa works for buyers

Flippa connects you with people selling their websites or online businesses. You can browse listings, ask questions, and make offers.

Flippa has some tools to help you such as:

  • Verified traffic data
  • Revenue proof
  • Site age information
  • Seller ratings

These can help you decide if a listing is worth your time. But you still need to do your own research too.

Due diligence for buyers

Due diligence means checking everything carefully before you buy. This is super important when buying a website.

Here are some things to look at:

  • Traffic sources: Check Google Analytics to see where visitors come from
  • Revenue: Ask for proof of income, like PayPal statements
  • SEO: Use tools like Semrush to check the site’s search rankings
  • Content: Make sure it’s original and high quality
  • Technical issues: Look for any problems with the site’s code or design

Flippa has a “Red Flag Report” that can help spot potential issues. Flippa does charge for this – anywhere from $1,500 to $2,500 per report. But don’t rely on this alone as you should always do your own research too.

The Selling Process

Selling a website on Flippa can be a great way to make money from your hard work.

Why sell a website?

You might want to sell your website for a few reasons.

Maybe you’re ready for a new project. Or you need quick cash. Sometimes, you’ve grown the site as much as you can and want someone else to take it further.

Selling can give you a big payday as websites usually sell for 20 to 36 times their monthly profit. So if your site makes $1,000 a month, you could get $20,000 to $36,000 for it!

Recommended reading: How I’ve Made $80,000 Selling Blogs

How to sell a business on Flippa

Selling on Flippa is pretty easy. First, you make a listing. You’ll need to share info about your site, like how much money it makes and how much traffic it gets.

Flippa charges a listing fee, and the fee all depends on how much you plan on selling your online business for.

When your site sells, Flippa takes a cut. This is called a success fee. It’s 10% for sites that sell for under $50,000. The fee gets smaller for more expensive sites.

You can set a starting price or let people bid. You can also set a “Buy It Now” price if you want.

Preparing your business for sale

Getting your site ready to sell is very important. You want to make it look as good as possible to buyers.

You can start by cleaning up your finances. For example, having clear records of your income and expenses is a must.

Next, make sure your site looks nice and works well, such as by fixing any broken links or errors.

In your listing, you should talk about what makes your site special. Maybe it’s a loyal audience or a unique product – highlight these things in your listing.

Flippa’s Fees and Payment

Flippa charges fees for listing and selling websites and online businesses. They have different fee structures depending on the sale price.

Below we will take a look at how Flippa’s fees work and how you get paid when selling a site.

Listing fees

When you list your site on Flippa, you’ll need to pay an upfront fee. This fee helps keep listings high quality. The cost depends on what you’re selling and your asking price:

  • Domains: $9 starting fee to list
  • Websites and apps: $15 starting fee to list
  • Established businesses: $49 starting fee to list

You can also buy extra features to make your listing stand out. These include a “featured” tag or a spot at the top of search results. These add-ons cost more but might help you sell faster.

Success fees for sales

Flippa takes a cut when you sell your site. This is called a success fee and the amount depends on how much your site sells for:

  • For sales up to $249,999: 10% fee
  • Sales between $250,000 and $499,999: 9% fee
  • Sales from $500,000 to $999,000: 8% fee
  • Sales from $1,000,000 to $4,999,000: 7% fee
  • Sales from $5,000,000 to $9,999,000: 4% fee
  • Sales over $10,000,000: 3% fee

So, if you sell your site for $75,000, Flippa would take $7,500 as their fee.

How does Flippa pay you when selling a site?

When your site sells, Flippa uses a system called escrow to handle the money. Here’s how it works:

  1. The buyer sends money to the escrow account.
  2. You transfer the site to the buyer.
  3. The buyer checks that everything is okay.
  4. The escrow service releases the money to you.

This process keeps both you and the buyer safe. You don’t give up your site until the money is there, and the buyer doesn’t pay until they get the site. Flippa takes their fee from this final amount before sending you the rest.

Flippa Scams

Buying and selling websites on Flippa can be risky because there is money involved. Some sellers try to trick buyers with fake info.

Below let’s look at common scams and how to protect yourself.

Common Flippa scams

One of the most common Flippa scams includes fake revenue screenshots. Now, there are plenty of real sites for sale on Flippa (with honest sellers), but this can sometimes be a problem on Flippa. Some sellers may edit images to show higher earnings than reality, and this trick fools buyers into paying more money for a website.

Another scam is lying about pageviews and traffic. Sellers might use bots to boost visitor numbers and this makes their site look more popular than it is.

Some people sell sites with copied content. They steal articles from other websites and this can lead to legal issues for the buyer.

How to stay safe on Flippa

Even though there are some scammers on Flippa, the majority of listings and sellers are truthful and are real. But, since money is involved, I always recommend that you be careful because you just never know.

There are some ways to stay safe on Flippa, such as:

  • Always double-check the numbers. Ask for proof of income from PayPal or bank statements. Don’t trust screenshots alone.
  • Use tools like Semrush to check real traffic. This helps you spot fake visitor claims.
  • Look for original content. Use plagiarism checkers to find copied text.
  • Get an expert to review high-priced sites. They can spot red flags you might miss.
  • Check the seller’s history. Look for good reviews from past buyers. Be careful with new sellers who have no track record.
  • Ask lots of questions. An honest seller will be happy to give you more info.

Flippa Pros and Cons

Flippa has good and bad points for buying and selling websites.

Pros of Flippa

Here are two Flippa pros:

  • Flippa has a huge group of buyers, so this means that you have more chances to sell your site. There are thousands of people who just browse on Flippa each day looking for the best deals.
  • You can find many types of sites on Flippa. They have different topics and prices, and you might find a cheap site to start with or a big one to grow.

Cons of Flippa

Here are two Flippa cons:

  • Flippa takes a big cut when you sell. They charge 10% for sites sold under $50,000. This can eat into your profits, of course.
  • There are sometimes scams on Flippa so you need to be very careful when buying.

Frequently Asked Questions

Below are answers to common questions about Flippa.

Is Flippa reputable?

Flippa is a well-known marketplace for buying and selling websites. It has been around since 2009 and many people use it. But like any online platform, you need to be careful.

Is it safe to sell on Flippa?

Selling on Flippa can be safe if you take the right steps. Make sure to use their escrow service and give honest info about your website.

Is it safe to buy on Flippa?

Buying on Flippa can be safe, but you need to be careful. I recommend that you always do your own research on any website you want to buy and don’t rush into a purchase.

What should I look out for to make sure a website I buy on Flippa is legitimate?

To make sure a website you want to buy is real, I recommend that you check the site’s traffic proof, income proof, the seller’s history on Flippa, and that you ask questions about anything that seems odd. If possible, talk to the seller directly. Don’t ignore red flags.

How much does Flippa take from a sale?

Flippa takes a cut of your sale price. For sites selling for $50,000 or less, they take 10%. The fee gets smaller for higher-priced sites.

How long does it take to sell on Flippa?

Selling time on Flippa can vary a lot. Some sites sell in a few days, while others might take weeks or months. According to Flippa, the average online business that costs less than $50,000 usually sells within 15 days, the average $50,000 to $250,000 business takes around 1.5 months, and businesses over $250,000 usually take around 2.5 months.

What are some Flippa alternatives for buying and selling sites?

You have other options besides Flippa for buying and selling sites. Some other popular ones are Empire Flippers, Motion Invest, and FE International.

Flippa Review – Summary

I hope you enjoyed my Flippa review.

So, is Flippa legit?

Flippa is a real company that’s been around for years. Many people use it to buy and sell websites and they have done over 450,000 transactions.

They also have many different categories that you can buy and sell in, such as e-commerce stores, blogs, apps, and other digital assets. Flippa’s marketplace also has many businesses in all kinds of price ranges, so you don’t need to have a ton of money saved in order to buy a business, as there are businesses for sale for less than $10,000 on Flippa all the time.

But like any marketplace, you need to be smart and careful when using it.

I have personally bought and sold a few websites over the years, and I actually just took a quick look on Flippa and saw one of those very same sites listed for sale again on Flippa – what a small world, especially since there are currently over 4,200 websites listed for sale on Flippa. Many people use Flippa all the time to buy and sell a website, and if I were needing to buy or sell right now, I would have no problem with using Flippa – it is a safe site as long as you are careful and avoid scams.

Please click here to head to Flippa’s website where you can buy and sell online businesses.

Are you interested in buying and selling online businesses?

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Source: makingsenseofcents.com