Interest is no fun unless you are earning it. When you have to pay for it, it can be a major hindrance. It’s even worse when you have capitalized interest that starts to compound. So how do you avoid that? Keep reading to learn more about how capitalized interest works and how borrowers can avoid it or pay it off on their student loans.

What is capitalized interest?

In simple terms, capitalized interest is when unpaid interest is added to the principal balance of your loan and then your lender charges your existing interest rate on the new, higher balance.

Essentially, your outstanding interest charges are added to your total loan balance—and interest is charged on the higher balance. Student loans are among the most common places to find a capitalized interest example.

Capitalized interest student loan costs can greatly increase the total cost of a loan. If you want to avoid paying more than you borrow, avoiding this type of interest is best.

How capitalized interest works on student loans

Let’s start with how a student loan works. When you take out a student loan, you’re charged interest. The interest charges are essentially the cost of the loan, as most lenders won’t let you borrow money for free!

The total cost you pay for a loan is determined not just by how much you borrow but also by the interest rate. A higher interest rate will increase the overall cost of a loan.

Additionally, the time you take to repay the student loan will affect your total costs.

Capitalized interest on student loans can further increase overall costs. As interest increases, your monthly payment goes up, making it even harder to pay back your loans.

An increased principal increases the total amount you must pay back over time. Thanks to the effects of compounding on that principal and interest. Yup, it’s one of the examples of compound interest!

Capitalized interest vs accrued interest

You might be wondering if capitalized interest is the same as accrued interest. While they’re related, they’re not the same.

Capitalized interest is the accrued interest that your student loan lender adds to your principal amount when the interest goes unpaid.

Accrued interest is interest that increases with time. Essentially, it’s the amount of interest that has grown since your last payment, but you haven’t paid it yet.

If you don’t pay the interest on your loan as it accrues, your lender can add the accrued interest to the principal, resulting in capitalization.

For instance, interest could accrue while you are in school. Thanks to deferment periods, you don’t have to pay it back until you graduate.

However, this means your lender can add your unpaid interest to your total loan balance at the end of the deferment period. They can also charge you interest on the new balance.

Capitalized interest example

As a capitalized interest example, let’s talk about it works on student loans work. Say you take out a student loan for $20,000 at 5.8% for ten years. You defer payment through 4 years of college and a six-month grace period.

The interest accrues and capitalizes, and now $20,000 is over $34,000. It’s likely to be even more when you factor in fees. The capitalized interest alone would be over $7000.

Interest can impact your life in the long term. It can make it harder to accomplish your other financial goals if you have the addition of unpaid interest. In my experience, getting out of debt is much harder than avoiding it in the first place.

Expert tip: Don’t skip over reading your loan agreement

Interest capitalization can happen on both federal student loans and private loans. To avoid it, be sure to carefully read your loan agreement so you know when interest will be capitalized. Do this regardless of whether your loan is federal or private.

How do you end up with a capitalized interest student loan?

Interest capitalization on your student loans can happen for several different reasons. Generally, interest capitalizes after a period of not paying the loan’s balance.

With federal loans, interest capitalizes when:

• The grace period of your unsubsidized loan ends
• When you consolidate your loans
• When you leave an income-based repayment plan like Pay As You Earn (PAYE)
• During forbearance or after a period of deferment (for unsubsidized loans after deferment, not subsidized)

For example, let’s say you take out an unsubsidized student loan over four years. The loan is for $27,000 with an interest rate of 4.53%. After your four years are up and the end of the grace period, six months after you graduate, you will have thousands of dollars in unpaid interest.

That means while you thought your loan was only $27,000, it’s now over $30,000. And don’t forget—you now have to pay interest on that higher balance.

How can you avoid a capitalized interest student loan?

The average cost of a four-year college is around $26,000 a year, according to Education Data Initiative, you might have to take out some student loans to cover costs.

Of course, no one wants to pay more than they have to. Capitalized interest on student loans will definitely increase your payments.

The good news is there are many ways to avoid capitalized interest on your student loans altogether.

Pay student loan interest while you’re in school

Your education is a long-term asset, and student loans may be necessary to help you earn your degree. However, that doesn’t mean your loans should define your future. If possible, start paying off your student loans while you are still in school.

Not everyone can afford to make loan payments while in school. This is why loan deferment and post-graduation grace periods exist.

However, one of the easiest ways to avoid capitalized interest is to pay your student loan interest costs even while the loan is deferred. Try to find a way to pay your interest while in school. You can avoid hefty costs when you graduate.

Make extra payments

While it might not be possible to pay off your loans while you are still in school, you can make extra payments later. Once you’re graduated and financially secure, you can lower your interest costs by paying down your balance with extra payments.

Paying extra doesn’t necessarily avoid the interest, but it does help reduce your loan balance after adding capitalized interest. The more you can lower your loan balance, the less you’ll pay in interest charges over the life of the loan.

For example, I paid off my last car loan over two years early by making extra principal-only payments every few months, which saved me over $1,000 in interest.

I got the loan with a higher interest rate than I was hoping for, so I knew I needed to be aggressive with repayment to lower the overall cost of my vehicle. Each time I found myself with extra cash, I made an extra payment on the car because I really wanted to get out of my car loan.

Additionally, if you can make any extra payments while in school, doing so can only help. If you begin to make extra money from a job or find that you have some cash available, using it to pay off student loan interest that could be capitalized is a smart idea.

Pay tuition without student loans

If you’re lucky enough to be able to, avoid student loans altogether.

Instead, you can use grants, scholarships, and work-study to pay for school. Researching alternatives to loans before going to college may be helpful.

I was lucky enough to graduate college without any student loan debt, thanks to a combination of education savings and scholarships. I chose a school that offered a range of merit-based scholarships and was known for awarding high-dollar scholarships to students with similar extracurricular resumes and grades to mine.

You may also choose to start working and going to school over a longer period of time.

Use passive income to get ahead

While you might be quite busy with your classes for the next few years and focusing on your studies is important, you can still make money. Passive income can be a great alternative to working a job while in school full-time.

How does it work?

Passive income generally requires some work to set up. After setting it up, however, your passive income stream generates revenue with little to no work from you.

There are a lot of passive income ideas for students that you can try out, including renting out your car, textbooks, and other belongings. It will help your financial situation and eliminate student loans and interest.

Know when interest will capitalize

Regarding student loan interest, a proactive approach is generally better than a reactive approach. One of the best ways to avoid capitalized interest on your personal balance sheet is to know when interest will capitalize and keep yourself out of those situations.

I suggest contacting your loan servicer or provider and asking them directly what would lead to interest capitalization. Loan agreements can vary, so situations that capitalize interest for a friend might not apply to your loan.

Going straight to the source will tell you when your interest might capitalize.

Additionally, it will tell you how you can stay away from these situations.

Negotiate with your loan servicer

Speaking of reaching out to your loan servicer, you can always try to negotiate your loans with your provider.

Whether you have federal or private student loans, you may be surprised how many interest repayment options might be available to help you avoid capitalized interest. Many providers are especially willing to work with you if you’re struggling financially.

Remember, the worst outcome that can happen is your loan servicer saying no.

Refinance or consolidate loans

A word of caution: refinancing or consolidating your loans may trigger capitalization of outstanding interest. This might not be a big issue if you snag a great rate on your new loan because you’ll save enough to cover the additional balance.

However, if your rate isn’t significantly lower, you may need to pay off outstanding interest before refinancing. Paying the lump sum of your currently owed interest before refinancing means there won’t be any outstanding interest to capitalize when you refinance or consolidate.

Get a part-time job to pay loans

Do you have some extra time around your studies? You may want to get a part-time job to use exclusively to pay your student loan interest. Depending on how much you’ve borrowed, your part-time job may not need to be a huge time commitment to help you avoid interest.

Additionally, a part-time job in your preferred industry (or even an online part time job) could help you land a full-time career after graduation—which in turn helps you avoid deferment and capitalized interest charges.

In college, I knew several people who used their part-time jobs to help pay for college and advance their future careers.

For example, a friend of mine majored in finance and worked part-time as an accounts receivable clerk at a local business.

After graduating, they had both their degree and their part-time work in accounting to help them land a high-paying accounting job. They could immediately start paying their student loans without worrying about capitalized interest from the grace period.

Why am I paying capitalized interest?

You might be paying this cost on your student loans for a few reasons. It’s important to carefully go over your loan terms so you know what triggers will cause interest to capitalize.

Some of the most common reasons you might pay these costs include:

• You’ve reached the end of your post-school grace period.
• You’ve accrued interest during a deferment period or forbearance, which is added to your balance at the end of the period.
• You switched repayment plans, and unpaid interest was capitalized.
• Your income increased, and you no longer qualify for an income-driven repayment plan.

What are the rules for capitalized interest?

The exact rules can vary based on your student loan agreements.

For example, your loan agreement might capitalize interest if you enter a forbearance period. The best way to learn the rules of your loans is to talk to your loan servicer and ask which events will trigger interest capitalization.

Articles related to interest and student loans

Did you find this information about student loans and interest helpful? Then read these posts to find out more!

• Should You Pay Off Student Loans Or Invest?
• Key Tips For College Student Credit Card Debt
• Balancing School And Work Plus Financial Tips For Every College Student
• How Do Student Loans Work?

You can minimize your interest costs with some preparation

If you want to become debt-free and pay off your student loans, one of the things you can do is avoid interest capitalization. Pay off your loans as often as you can to help with this.

Student loans are unavoidable for many students, but that doesn’t mean you should have to pay more than you agreed upon. The easiest way to pay off your student loans is to avoid extra costs, especially capitalized interest.

If, for some reason, you need to pause payments, you can use a student loan calculator to find out how much you will owe if you let the interest capitalize. It can help you decide if it’s worth letting the interest pile up.

It may seem challenging, but with some guidance and planning, you can avoid capitalization and get to work paying off your principal balance. Want to learn more? Our free 3-course bundle on how student loans work can guide you in the right direction.

The post What Is Capitalized Interest On Student Loans? appeared first on Clever Girl Finance.

Sometimes, no matter how much we think we are cutting back on spending, it’s not enough. Cutting back on things like gym memberships and Starbucks might be a good way to save money, but sometimes we need more. Instead, we need to resort to living on an extreme budget and finding extreme ways to save money.

I remember my family went through a tough time one year, and we ate nothing but chicken and rice for a full year. Why? Because my mom found a really good deal on chicken from a local farmer.

I couldn’t eat chicken for years after that, but my mom’s ingenuity helped keep food on the table even when money was tight.

If you’re looking for some ideas for saving, we’ve got you covered. Keep in mind that it doesn’t have to be forever, but over the short term, this approach can be very helpful for your finances.

Why would you want to find extreme ways to save money?

There are many reasons why you might want to find extreme ways to save money. Maybe you lost your job and have to live on your savings while you look for another job. Or maybe you want to finally pay off your credit card or other debt.

Living on an extreme budget can even be a good way to build up your emergency savings or build up your retirement savings fund. You might even find that some of these ideas not only save you money but simplify your life as well.

If you’ve fallen on hard times, it’s nothing to be ashamed of. In fact, over 37 million people live in poverty in the country of the U.S., according to the United States Census Bureau. But hopefully, these extreme money saving ideas can help you save a bit, even when times get tough.

Extreme ways to save money: 25 Ideas

So, are you ready to start cutting the budget and try out some of our extreme money saving ideas? You can try a couple or all 25. One thing is for sure: if money is tight, you will build your savings fast with these ideas!

1. Make your own toothpaste and deodorant

Did you know that you don’t need a lot of fancy ingredients to make your own toiletries? It’s very easy to make your own toothpaste and deodorant. All you need is some coconut oil, baking soda, essential oil, and a few other ingredients.

It can also be better for you, especially if you have sensitive skin and gums. Not to mention the environmental benefits. You can find some toothpaste and deodorant recipes on The Zero Waste Collective, as well as some other DIY skincare ideas.

2. Become vegetarian

Meat is expensive. Especially red meat. A quick way to save some money at grocery stores is to cut meat out of your life and become a vegetarian.

There are plenty of delicious vegetarian recipes, so you don’t need to cut down on taste, either.

Keep in mind that a vegetarian diet can be expensive if you’re buying out-of-season or are eating specialty products. And you’ll need to make sure you are getting enough protein through foods like nuts and chickpeas.

However, cutting meat can be beneficial if you are living on an extreme budget!

3. Turn off the A/C

Another extreme money saving tip is to turn off the A/C. I know this might sound too extreme. But did you know that A/C isn’t as common in some other parts of the world?

It makes sense, too. A/C takes up a lot of energy and can really drive up your electric bill. 

While turning off the A/C might not make sense everywhere in the U.S., at the very least, you can raise the temperature a little bit more than normal. Or consider a hand fan or good old-fashioned cold water clothes.

4. Lower the heating

On a similar note to the idea above, another extreme way to save money is to lower the heating. Like A/C, heating takes up a lot of energy, and the bill can be crazy, depending on the type of heating you have.

You can also try to insulate your house or apartment, which will help keep your home warmer. Put up plastic sheeting on your windows and make a door draft stopper with rice and an old pair of jeans or pants. Keep the doors of rooms closed as well, so your heating system doesn’t have to work as hard to heat up each room.

5. Mend your clothes and darn your socks

I started darning my socks as a way to be more sustainable, and I find it very relaxing. I usually darn socks while I am watching Netflix. Best of all, I haven’t had to buy new socks in nearly four years, thanks to darning.

You can use the same darning method to fix holes in your sweaters. Not only does this make your clothes look better but it also helps keep them in shape and lasting longer. You can learn something new and save your pennies!

6. Make your own cleaning supplies

Just like with toiletries, you don’t need tons of expensive products to clean. The most effective cleaning supplies are lemon, white vinegar, and baking soda.

In fact, baking soda is good for so many things around the house I always try to have at least two packets around.

Just mix up one part white vinegar and one part water, add in a lemon and let it infuse for a week. Then put it in a spray bottle, and you’re good to go!

It cleans just about anything. You can sprinkle some baking soda for tougher stains and dirt.

7. Freeze your food

Your freezer can hold just about anything and is the best resource when you’re living on an extreme budget. You can freeze fresh herbs in olive oil, freeze old bananas to use in shakes or bread, and even freeze leftovers so nothing goes to waste.

About 60 million tons of the food supply in the U.S. is thrown away each year, according to Recycle Track Systems. Freezing your food before it goes bad not only saves you money but also keeps it from sitting in landfills. Just make sure you keep track of what you have and eat it before it gets freezer burn!

8. Buy in bulk

Buying in bulk might seem counterintuitive at first, but buying in bulk can save you money in the long run. The only downside to this extreme saving strategy is that you might need more money upfront to buy in bulk.

Household items that you use often, like toilet paper, and even pantry staples like rice and pasta, are cheaper in the long run when you buy a lot of them. Practice better budgeting by adding your bulk spending into your budget in advance.

9. Get free cosmetics samples

You can sometimes get free samples of makeup and other beauty products.

In fact, my favorite lipgloss lasted me three years and was from a Sephora sample I received.

On top of that, you can actually request free samples in-store, except for a few products like mascara and lipstick. Big department store beauty counters also offer free samples too!

10. Dumpster dive

You never know what you might find in the dumpster. This one isn’t for the faint of heart, but if you’re an extreme money saver, you can find a lot of things that people throw away. That can include everything from clothes to furniture.

Just be careful about dumpster diving on private property.

11. Live with roommates

Living with others is a good way to save on big costs like splitting rent and utilities.

In fact, if you want to go really extreme, you can even share a bedroom. I did this one summer during a college internship in D.C. because, as an intern, I couldn’t afford the outrageous cost of living.

12. Use coupons

Coupons and coupon websites are still a thing and can really help you save money if you are living on an extreme budget. You can find coupon codes online these days, so do a quick Google search if you’re shopping online.

You can also watch for sales and only buy things you need, like new clothes or electronics when they go on sale. While it might seem like a lot of work at first, couponing can soon become a money-saving habit.

13. Attend networking events for free food

One extreme money saving hack I used during college was to go to opening events and networking parties. Why? For the free food.

Those days, that would often be my dinner. And I was able to network and meet some interesting people as well.

14. Stop using paper towels

Not only are paper towels bad for the environment, but they cost so much money. I always feel like the more paper towels I have, the more I need to use. A really great and cheap alternative is to use towels or even rags.

You can even start upcycling fashion or reusing clothes that are falling apart by cutting them up into rags, extending their life even more. Ditching paper towels is an excellent idea for those wanting to try extreme saving!

15. Use restaurant condiment packages instead of buying them

Every time I go to McDonald’s or Taco Bell, I feel like they give me so many condiment packages. So much so that I don’t even feel the need sometimes to buy ketchup bottles at home.

Another extreme and easy way to save money fast is to keep all the condiment packages and even ask for extras. You can even store them in your condiment bottles so you don’t have to worry about an overflow of small packages in your fridge. Saving condiments is a simple tip that doesn’t take much effort.

16. Save restaurant napkins

Getting extra napkins from restaurants is another one of those extreme ways to save money without much effort! I always ask for extras and carry a few in my purse. You never know when you’ll need them.

And why buy paper napkins when you can get them for free (well, minus the cost of the meal).

17. Brew your coffee or tea twice

This extreme money saving hack is a trick from my great-grandmother, who lived during the Great Depression. According to my dad, she would brew coffee in the morning and save the grounds to brew coffee again in the afternoon.

I’ve tried this hack, and while I find it difficult to brew my coffee twice, it’s a good trick to use with tea.

18. Always shop in the sale section

Whenever I need a new pair of jeans or a jacket, I always wait for the sale season and then head to the sales section. I don’t even bother looking at the front of the store but always head for the back. You might have to dig a little, but you’ll find what you need and save big bucks while you’re at it.

You can even find gifts for birthdays or holidays this way and save even more!

19. Take online surveys

While it might seem like everyone has an opinion on the internet, some people will actually pay you to give them your opinion. Places like Swagbucks and Survey Junkie pay you to answer surveys and sometimes even test products. It’s an easy way to earn some cashback.

20. Rent out a spare room in your home

If you have a spare room in your place, you can earn extra income by renting it out through Airbnb. The site has a calculator on its website to make it easy to figure out how much you can earn a week by renting.

Keep in mind though that you may have extra costs like cleaning. Plus, you will need to be okay with having strangers living in your house for a few days or weeks.

21. Sell your old clothes

Have an old pair of boots you thought were really cute but you never wear because the heels hurt too much? Instead of throwing them away or keeping them to collect dust at the back of your closet, you can sell them through marketplace apps like Poshmark.

It’s very easy to set up and takes very little time to maintain. Just snap a few well-lit photos, decide on your price, upload, and wait for someone to snatch up your old clothes.

22. Stop using the clothes dryer

If you want to save money, use your clothes dryer less or not at all. In the summer or whenever the weather is warm, you can dry your clothes outdoors pretty easily. In the winter, a drying rack comes in handy and saves you money on electricity.

To take it a step further, try using cold water in the washing machine. It can save energy!

23. Be mindful of your energy use

Take an assessment of the appliances and electronics in your home to see what’s plugged in and consuming energy. Be intentional about only plugging in appliances when they’re in use to save energy.

For example, the coffee pot, the toaster, and the phone charger only need to be plugged in sometimes. Obviously, some things like your refrigerator must stay plugged in constantly, but save where you can!

24. Start a garden

If you don’t mind some outdoor work and time, you can start a vegetable or herb garden to save money on groceries. Rather than purchasing these foods at the store, you can grow them in your garden!

Although there are many factors that determine the cost of a garden, you do have a chance to save money.

Here’s a great beginners guide to starting a vegetable garden.

25. Downsize your home

If you really want to lower expenses, consider downsizing your home to save on costs like rent/mortgage and utilities.

You can move to a smaller apartment or even explore tiny house living if you currently have too much space, and this adjustment will suit your lifestyle. If you are focused on an aggressive savings plan, this could be a good idea for you too.

However, if you have a large family with kids, downsizing may not work for you. Just do your research to be sure that your rent or mortgage and associated utilities will be cheaper.

Also keep in mind that downsizing a home can take time, especially if you need to sell your home or wait for a lease to end before you can downsize.

Expert tip: Extreme living does not have to be permanent

Living in an extreme way to save money can be difficult. It helps to remind yourself that this isn’t something you have to do indefinitely.

You might choose to do this for a few months while you find a new job, or for a year while you save up an emergency fund or pay off debt.

Have an end date in mind if you are trying out extreme ways to save money, and know that it will be worth the effort.

What causes extreme frugality?

Extreme frugality might be caused by necessity, or it may be that someone just really wants to save more money. There are many reasons, including job or income loss, a big savings goal, or wanting a simpler lifestyle.

Regardless of why you choose this, know that there are multiple ways to save cash!

How can I save insane amounts of money?

You could save insane amounts of money by being mindful of your spending and by being willing to make some serious lifestyle changes.

Extreme saving involves things like at-home meal planning, repairing items rather than buying new ones, learning to make your own household cleaning supplies and products, and learning how to coupon.

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If you found this article about extreme ways to save money helpful, check out these great reads next!

• 15 Extreme Frugal Living Ideas And Frugal Hacks!
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• 40 Crazy Weird Ways To Save Money!
• 33 Creative Ways To Save Money Right Now!

Use these extreme ways to save money to bulk your savings!

If you’re looking for extreme ways to save money there are lots of ways to save a bit of cash. From dumpster diving to clothes mending to taking surveys, with a bit of creativity and luck, you can easily save a few extra dollars every month.

And while it might not seem like a lot, after a few months, it will definitely add up. Get even more extreme frugality ideas here!

The post 25 Extreme Ways To Save Money appeared first on Clever Girl Finance.

Budgeting isn’t just about making sure you have enough to pay the bills each month. It’s also about planning ahead for future expenses. While you should have an emergency fund, a smart way to save money each month is to set up different sinking funds categories.

Sinking funds allow you to put money aside each month for specific things.

In this article, you’ll learn about the different types of sinking fund categories. These can help you build out your budget and live debt-free.

Why do sinking funds categories matter?

According to PR Newswire, 80% of Americans have a budget.

But many don’t have enough money saved. In fact, YouGov claims that 12% of surveyed Americans said they have no savings, and 27% had less than $1,000 in savings. 

The purpose of a sinking fund is to save cash for specific expenses. That can include one-time or irregular expenses. The cash ideally should be broken up into categories.

For example, if you have a wedding coming up, instead of using your credit card, you can figure out how much you’ll need for related expenses. Divide that amount by the number of months until the event. Then aim to save that sum every month in your “wedding budget breakdown” fund. 

Setting up a few options from our sinking funds list may help you avoid spending money on the wrong priorities. You can focus on saving a specific amount for a specific purpose every month. 

One benefit of sinking funds is that you don’t have to pay for things all at once. Spreading out the cost can reduce the pain of major expenses and stop you from going into different types of debt. 

You set aside money from your paycheck each month (or whatever frequency you decide) toward a specific financial expense. That’s to ensure you don’t go over your budget when a big event, repair, or other expensive item comes up.

Rather, you’ll save the money slowly for upcoming expenses and save yourself from taking on long-term debt. The alternative for many people is paying by credit card, and high-interest rates then compound the amount you owe. 

Setting up a sinking fund with specific categories can help you take your budgeting skills to the next level. It forces you to itemize your monthly budget even further, rather than just dumping leftover cash into a savings account. Every saving goal can have its own sinking fund. 

You know you need to create sinking funds but are you clear on the sinking fund categories you need? Here’s a list to help you plan!

18 Sinking fund categories to review

There are many sinking funds categories to choose from. And you’ll probably think of a few more besides what we’re including here. 

They aren’t just for parties and can include recurring yearly expenses, emergency bills, car expenses, appliance updates, wedding expenses (which can be costly), and more.

Keep in mind that sinking funds are just one part of your overall budget. Your budget will likely have several different budget categories to help you plan your finances overall.

That said, here are some of the more common sinking funds categories that you could incorporate into your budget:

1. Transportation

One of the biggest expenses besides housing is transportation. Whether you own a car, take public transport, or use Uber on the weekends, it’s important to budget for your transport costs.

If you own a car, you can set up a sinking fund to pay for car expenses, maintenance, and unexpected car repairs. New tires or other replacements for your vehicle can set you back hundreds of dollars (at least). 

Your car sinking fund could include money intended for vehicle registration fees, parking permits, and car insurance. You might even set aside money to purchase a new-to-you car eventually (find out: what car should I buy?).

And for those who use public transport, you can set aside money for train or bus passes or ride-sharing apps.

2. Medical expenses

Another of the sinking funds categories to establish is medical expenses. Going to the doctor is expensive, especially during an emergency.

In fact, according to Affordable Health Insurance, over half of Americans surveyed have medical debt.

Even with good health care insurance, it’s important to set up either a medical Flexible Spending Account (see “What is a flexible spending account?) or a Health Savings Account (HSA). You can use it as a medical sinking fund so you don’t end up in debt due to medical expenses.

3. Christmas and the winter holidays

Christmas is a good example of sinking funds categories that come every year. Unfortunately, many people don’t prepare ahead of time, eating into their budget or savings to pay for the holidays.

No matter how much money you spend for Christmas, Hanukkah, or other major holidays, a sinking fund category for them can ease the pressure of that time of year. It’s a saving goal with a specific deadline each year. So you can follow a sinking fund savings plan all year long or use Christmas clubs. 

Determine how much you plan (or will be able) to spend for the holidays. Then divide that amount by 12 if you plan to save money every month. (If you start later than January, simply divide the amount of money by the number of months remaining.) 

Don’t forget about things like decorations, office gifts, Christmas dinners out, and travel expenses if you go to see family. Those can go above and beyond your general holiday gift budget. 

You may still encounter unexpected costs. But by setting up a sinking fund specifically for Christmas, you can incorporate Christmas on a budget into your monthly budget all year long.

4. Vacation

Another good example of sinking funds categories is vacations. Whether you hit the road every few months, plan a big annual trip or some other vacation pattern, planning is key. By budgeting for your time off months ahead of time, you can be even more prepared and avoid taking on debt. 

If you are planning a trip to Disney World on a budget or even Europe, it can be a big life event. And you probably don’t want to put it all on a credit card. 

Create a vacation budget and, as with many items for sinking fund ideas, divide the amount by the number of months until the trip. That will allow you to take your family vacation or girls’ trip without worrying about money, so you can truly disconnect and relax.

5. Childcare

Unfortunately, the average family spends about 27% of their household income on childcare, according to Care.com. (And 59% of parents said they expected to pay more than $18,000 per child in 2023!) 

The cost of childcare will be a factor if you’re a parent. So that’s another one of the categories you might consider. You can also include other costs of raising a child, like preschool fees (find out “how much does preschool cost?”), sports and activity registration, clothes, dental and eye care, summer camps, and more. 

While some childcare-related expenses are unexpected, like when your child has a sudden growth spurt, you can prepare ahead of time for many by setting up a sinking fund.

6. Braces

Not every child needs braces, but many do. Braces are very expensive, costing thousands of dollars.

You may spend even more if you have more than one child. So it’s worth it to add this expense as a financial goal.

If you have any children or are planning on starting a family, start saving early.

7. Utilities

It might not be the most exciting item of sinking funds categories, but utilities are a necessary expense that usually fluctuates throughout the year.

For example, if you live in an area with harsh winters, your electricity bill will likely be more expensive in the winter than in the summer. However, you can consider how to lower electric bill payments.

You can plan ahead for these moments by setting up a sinking fund in your budget. Figure out the average you paid last year and split it between 12 months. That way, you’ll already have the money in your account when your bills are more expensive.

(Some utility companies arrange this for you. They’ll estimate your total bills and divide up the estimated total equally among your monthly bills for the year. You can do this yourself within a sinking fund, though, if it’s not offered by your utility provider.)

8. Self-care

While a self care Sunday here and there doesn’t have to be expensive, if you like to get specific hair or spa treatments, then it might make sense to set up a self-care sinking fund. 

Massages, nail care, laser hair removal, and more are all expenses that can add up. So, incorporate your favorite ways of treating yourself into your budget by setting up a sinking fund.

When it’s not a necessary expense, it can make you feel better to save a little bit each week or month for that specific purpose. Then, you’re less likely to neglect those special treatments or activities due to money. 

9. Special occasions

Special occasions like a major anniversary or wedding might not happen every year, but when they do, they’re often expensive.

For example, retirement parties, bar mitzvahs, quinceaneras, or the average wedding cost might be tens of thousands of dollars. Depending on your family and societal expectations. Don’t feel that you have to blow your monthly budget to impress anyone, but do consider how you want to contribute to those big moments. 

You can start saving for these events several years in advance to help spread out the cost of these one-time expenses. (If you’re like me and have a lot of college-aged nieces and nephews, those graduations and potential weddings are future expenses to consider!)

10. Annual renewal expenses

Some bills are recurring expenses that happen every year, such as annual renewals.

For example, perhaps you have subscriptions to software or other memberships. Even if you pay them in a lump sum each year, you can make sure to have the money set aside each month to spread out the budget burden. 

Write in your calendar when the payments are made. Then, you can prepare well ahead of time for anything that is a recurring expense.

11. Clothing

Unless you’re doing a no new clothes challenge, you might want to make a sinking funds category for clothing. That can include general clothing, seasonal clothing like coats or shoes, or clothing for special occasions like weddings or work events.

While you likely won’t need to buy new clothes every month, setting money aside every month can help you be prepared whenever it’s time to replace worn-out clothing. That also goes for kids’ clothing. Since they outgrow items quickly, a sinking fund for their clothes is a good idea as well. 

12. Gifts

A birthday party or anniversary presents can show your loved ones you care. But they also can rack up bills and debt if you’re not careful. Plus, you may like to give gifts for other occasions like Valentine’s Day, Mother’s Day, Father’s Day, and other special occasions.  

Thankfully, this category is usually easy to save for. The amount of money you’ll need for gifts may be lower than for other sinking funds categories. 

However, this depends on the number of people in your life, so no matter what, a budget item for gifts can help. Sustainable Christmas gifts and experience gifts for kids are great options, but that doesn’t always mean they’re free!

13. Home maintenance

If you’re a homeowner, you will definitely need to do some maintenance eventually. Home maintenance is one of the best categories because it works like an emergency fund but for the specific purpose of your home. 

A sinking fund lets you plan ahead for inevitable home maintenance bills. Unexpected bills for plumbing, windows, garage doors, or even a sinking foundation (ask me about that one!) can put a dent in your finances. 

It’s typically suggested to save between 1- 4% of the value of your home each year for maintenance. With any luck, you won’t need to spend it every year. But the flip side is that some years, you might face multiple big home expenses at once. 

Making a sinking fund for specific home repairs you know you’ll need is smart planning. It’s also something to factor in when deciding, “Should I buy a house now?” as it’s another ongoing expense.

14. Home furnishings

Sinking funds categories may also include home decor like furniture or new appliances. A new couch or bed can be very expensive. Instead of wondering where the money will come from, plan ahead.

Setting aside a bit each month in advance is much less stressful and better for your credit score. This type of sinking fund is fantastic for homeowners to have because retailers put appliances and furnishings on sale at certain times of the year. 

By planning ahead as a homeowner, you can take advantage of sales and offers while respecting your budget. 

15. Charity

One of the sinking fund ideas you might not have considered is one for giving to others. Whether you give to a church, another charity, or both, you might want to have some cash saved for a good cause in a sinking fund account.

Even if you’re not currently giving to a charitable organization, a charity sinking fund can ensure that you have the funds if you come across an organization or cause you’d like to help out with. 

Some people save a certain amount of money each month in their “giving” or “charity” sinking fund. Then, any time during the year when a GoFundMe or other giving campaign occurs, you’ll have an account to draw from when sharing your generosity. 

16. Tuition

Some sinking fund categories can include education expenses like tuition. Education is expensive, especially for private schools. Once the person reaches college, the annual cost of attendance at a four-year school is over $26,000 for in-state colleges. 

Obviously, this is a massive expense to try to plan for. While student loans may be an option, and scholarships and part-time work can help, a sinking fund started years in advance will ease a lot of headaches. 

If you send your kids to private school or are saving for their college, then a sinking fund like a 529 college savings plan might make sense, rather than a traditional savings account. (Find out, “Is a 529 plan worth it?”)

17. Pet care

Your sinking funds list might include caring for your beloved pets. Our canine and feline companions may also need some care at some point in their lives, so this is another sinking fund example. 

Besides the obvious monthly food costs, you should also plan for yearly vet visits, vaccinations, and emergency veterinary care. While some people take out pet insurance, many prefer to incorporate the cost into their monthly budget by saving it instead. 

Having a sinking fund set up for your cat, dog, or other animal can help you care for them without added financial stress. Then, if your pet becomes sick or injured, it can be much easier to manage the added expense. 

18. Emergency fund

If you do not already have an emergency fund, you should definitely set one up.

In fact, you should start to fund this category before any of the others.

Emergency funds are types of sinking funds categories that can help you pay for any unexpected expense that you weren’t planning for.

In general, it’s recommended to have about three to six months of living expenses saved up. But you can save more or less depending on your personal circumstances. Some people, like freelancers, may prefer having a 12-month emergency fund in case of volatility in their field of work. 

You should only draw from your emergency fund when financial emergencies and costs come up that you didn’t know were coming. If you need new tires or brakes on your car, that’s an emergency. If you find out you are losing your job, use your emergency fund to pay essential bills while you look for a new one. 

19. Pregnancy or adoption

Growing your family can be super expensive, whether by pregnancy, fostering, or adoption. Even in the “ideal” circumstances, pregnancy comes with a lot of additional costs. 

If you’re at the stage of your life where you’re thinking of becoming a parent, it’s not a bad idea to begin saving for that specific purpose. A sinking fund for having a child can ease a big financial burden. 

Consider not only the medical costs that you’ll incur through pregnancy but also the cost of missing work for childbirth, even if you’re considering how to make money on maternity leave. Since U.S. employers aren’t required to pay you for family and medical leave, missing several months of work can be a hardship. 

There could also be complications with fertility, which aren’t always covered by health insurance. If you decide to pursue adoption, that also can be quite costly: private adoptions range from $30,000 to $60,000. 

20. Technology upgrades

You could include this in a more general sinking funds list as “life upgrades.” Still, since technology and electronics are so integral to modern life, you can make it a separate savings category. Whenever you need to replace a smartphone, laptop, e-reader, or other tech device, you might use a sinking fund to do so. 

In particular, remember this if you rely on certain electronic devices for your job. If you are working from home or work remotely, your job almost certainly requires a reliable computer and related devices, so be ready to replace those things regularly. 

21. Fun and entertainment

Here’s one of the more fun ideas: a literal “fun” fund. You can save in an account just for things in the entertainment realm that you know you’d enjoy. You might not know exactly what event will come up, but by saving even a couple hundred dollars for it, you can be ready when something exciting is available. 

Is your favorite band from your youth going on a once-in-a-lifetime reunion tour? You could use your sinking fund to purchase tickets. It enables you to enjoy this opportunity rather than pass it up. 

Expert tip: Use sinking funds to see your savings progress

Sinking funds are an excellent way to plan ahead for costs that you know are coming up in the future. By separating your savings into individual accounts, you can gain an accurate picture of your progress toward each savings goal. 

Although budgeting in general is awesome for planning and tracking your expenses, sinking funds can provide you with specific savings guidance. You can make as many sinking funds as you wish, depending on what makes sense for your current phase of life. 

Figure out a savings target for each one and contribute something toward that saving goal on a regular basis. Seeing that balance increase each week or month in your separate savings accounts can help you anticipate the accomplishment of reaching the amount of money you need. 

What is the best way to organize sinking funds?

It’s a good idea to organize and stash the money for all your sinking fund ideas in a high-yield savings account or interest bearing account. That way, the money is easy to access and will earn interest as it sits in the account. 

Keep an eye on the balance in each sinking fund. You might set up automatic deposits from your paycheck and then start tracking savings growth monthly. Your bank may even offer an easy way to organize sinking funds within a single savings account, so be sure to check whether that’s an option. 

How much should I put in my sinking fund?

The best way to determine how much to put into a sinking fund is to decide on the total amount of money you’d like to see in the account. It may be several hundreds or thousands of dollars, depending on the type of sinking funds category. 

If you have several months to reach your saving goal, you can divide the total by the number of months to figure out how much to save monthly. This tactic works for many categories, from vacations to events to holidays.

For others, like home maintenance or the “next new car” sinking fund, you might simply settle on a dollar amount each month until you actually need the money. 

What are the sinking fund expense categories?

Basically, sinking fund expense categories are expenses that you can plan for. They’re typically not emergencies, but that doesn’t mean they’re unimportant. And they can help you to “save money live better“!

Things like annual recurring expenses, one-time occasions like weddings or vacations, and replacements of things that wear out (cars, furniture) are great options. 

What number of sinking funds should I have at one time?

There isn’t a fixed number of sinking funds to recommend because it’s a personal finance decision. You get to decide how many sinking funds would be helpful for you. 

The key to the “right” number of sinking funds is, what can you handle? If you had a dozen sinking funds, that might be an awful lot to keep track of. For some people, three to five sinking funds may be the sweet spot. 

Another option, if you have too many things on your list, is to create one large sinking fund for everything. It doesn’t help as much in terms of visualizing your progress toward a saving goal.

However, it may be better to have one sinking fund to dip into instead of stressing about organizing 15 different sinking fund ideas at once!

Articles related to saving money for specific things

If you learned more about the various savings categories and want to find out more information, check out these articles next!

• Sinking Funds: Why You Need Them. How To Set Up Yours!
• How To Use Budget Categories
• Building An Emergency Fund: A Quick Guide
• Are You Financially Fit? 6 Ways to Tell—And What To Do If You Aren’t

Sinking fund categories can help you prepare for the future!

Having a few sinking funds categories can help you manage your finances and ensure you remain debt-free.

You can save your sinking funds in a high-yield savings account, a checking account, or whatever you prefer. The main thing is that you make the calculations in advance for how much things will cost and then save accordingly.

Depending on your needs and lifestyle, you can set up a sinking fund for just about any major expense that you can reasonably anticipate. Pet care, vacations, college funds, self-care, and gift-giving are just some items that might fall on your sinking funds list. 

To take this a step further, learn more about handling money with our articles about budgeting best practices and money mindset.

The post 21 Sinking Fund Categories to Consider In Your Budget appeared first on Clever Girl Finance.

When you want to start building wealth through investments, you might be wary of the complexities associated with traditional stock picking. However, thankfully, not all investments have to be complicated or costly. With low cost index funds, you can grow your investments for a great price, so keep reading to find out more about index funds, what makes them cost-efficient, and learb about 16 popular low cost index funds. 

What is an index fund?

An index fund is a sort of investment fund, typically a mutual fund or an exchange-traded fund (ETF), designed to replicate the performance of a specific market index. These funds aim to mirror the returns of an index like the S&P 500, Dow Jones Industrial Average, or the Nasdaq Composite by holding a portfolio of securities that resembles the composition of that index.

What makes an index fund low cost?

The cheapest index funds generally have very low expense ratios, usually below 0.65%. These expense ratios are how much of the fund’s assets are used for operating expenses.

In other words, if you buy a fund for $100 and it has an expense ratio of 1%, that means $1 of your money will go towards paying for operations every year. 

Unlike actively managed mutual funds, which involve teams of financial experts making decisions about which stocks to buy and sell, index funds operate on a passive strategy. They aim to have a similar performance to a specific market index, for example, the S&P 500 or the Nasdaq. 

Because there is no active management involved, the costs associated with research, analysis, and constant trading are significantly reduced. Because low cost index funds rarely buy or sell securities, they incur fewer transaction costs. This also makes them more tax-efficient, potentially saving you even more money. 

Things to think about when selecting an index fund

While low cost is one factor to consider, there are other things to consider when investing with index funds to ensure they align with your financial goals and risk tolerance:

Investment goals

Think about your goals and determine your investment objectives.

For instance, are you looking for long-term growth, income, or a balance of both? Why do you want to invest in index funds? Knowing your financial goals can help you figure out which low cost index funds make the most sense for you. 

Risk tolerance

Assess how much risk you’re willing to take and how risk averse you are. Different index funds may track different markets with varying levels of risk, but all investing is risky.

If you’re okay with the possibility of losing a good portion of your money for a potentially high return, then certain index funds might make more sense. However, if you don’t want to take any risk, then a more conservative investment fund could be the best solution. 

Overall portfolio strategy

Before you purchase some of the least expensive index funds, consider how they fit into your broader investment portfolio. Your strategy is a type of roadmap to help you achieve your financial goals. Keep your objectives in mind, especially when the market is volatile.

Remember that diversification is key to spreading investment risk.

For example, other types of strategies might be looking at short-term investments, passive investments, or investing in a mix of low and high-risk investments.

Think long term

Long-term investing is the goal for index funds. Make sure your investment horizon matches this strategy.

If you are looking for a short-term investment of, say, less than six months, then another investment vehicle might make more sense for you. 

16 Popular low cost index funds

Index funds are one great way to begin investing in the stock market, particularly if you have stock market fear. Want to start investing in a low cost index fund but aren’t sure where to start? Here are 16 cheapest index funds that you can research.

1. Fidelity ZERO Total Market Index Fund

Symbol: FZROX

Expense ratio: 0.0% 

One of the most unique things about the FZROX is that the expense ratio is 0%. It also charges no commissions and has a zero minimum structure. This makes it among the least expensive index funds.

It was launched by Fidelity in 2018 to capture the entire stock market and includes stocks like Apple and Microsoft. However, like other total market index funds, it is also exposed to the volatility of the broader market. 

2. Schwab Total Stock Market Index Fund

Symbol: SWTSX

Expense ratio: 0.03% 

This fund by brokerage firm Charles Schwab has been around since 1999 and tracks the entire market, as measured by the Dow Jones U.S. Total Stock Market Index. It’s a straightforward, low-cost investment fund that gives investors access to the entire U.S. stock market with stocks like Meta and Exxon Mobil.

It’s a fund designed to give investors exposure to all small, mid, and large-cap companies across the country. 

3. SPDR S&P 500 ETF Trust

Symbol: SPY

Expense ratio: 0.09% 

This index fund created by State Street Global Advisors in 1993 correlates with the performance of the S&P 500.

In other words, if you were to invest in all companies from the S&P 500, like Berkshire and UnitedHealth Group, you would likely get similar results. It gives investors exposure to the biggest U.S. companies. 

4. Vanguard Total Stock Market Index Fund

Symbol: VTSAX 

Expense ratio: 0.04% 

Started in 1992, this fund by broker Vanguard provides exposure to the entire U.S. equity market. That includes both small, mid, and large-cap growth and value stocks.

In other words, it gives investors the opportunity to track all U.S. public companies, including Apple, Tesla, and Facebook. Because of that, it is also more volatile, as the fund is exposed to the overall dips in the broader stock market. 

5. iShares Core S&P 500 ETF

Symbol: IVV

Expense ratio: 0.03% 

The IVV is another index fund created by brokerage company BlackRock in 2000 that invests in large U.S. companies. It is a low cost fund giving investors exposure to 500 of the largest U.S. companies by market cap.

It’s usually for investors wanting long-term exposure to larger companies, and can be great if you’re wondering, “is now a good time to invest?”

6. Fidelity 500 Index Fund

Symbol: FXAIX

Expense ratio: 0.015% 

Fidelity created this fund in 1988, and it also aims to track the returns of the S&P 500. It keeps track of the performance of the largest companies which make up the S&P 500, which is great if you prefer a straightforward approach to investing.

7. Fidelity U.S. Bond Index Fund

Symbol: FXNAX

Expense ratio: 0.025% 

If you want to invest in bonds instead of stocks, the FXNAX does just that. Another fund by Fidelity started in 1990, it follows the price of debt securities in the Bloomberg U.S. Aggregate Bond Index.

In other words, it invests in U.S. debt, including government and corporate debt and mortgage-backed securities. 

8. Vanguard Real Estate Index Fund

Symbol: VGSLX

Expense ratio: 0.12% 

This index fund by broker Vanguard from 2001 invests in real estate investment trusts (called REITs) like Public Storage and American Tower Corp.

While real estate can be expensive, a real estate fund is one way to get exposure to the housing market without needing to buy your own property and it can be especially helpful when learning real estate investing for beginners. 

9.  Fidelity Real Estate Index Fund

Symbol: FSRNX

Expense ratio: 0.07% 

The FSRNX index fund by broker Fidelity aims to get returns that correspond to the total return of REITs and other similar real estate investments.

Created in 2011, it includes exposure to companies like Crown Castle and Public Storage. Like the VGSLX, this index fund is geared towards investors who want exposure to the real estate market. 

10.  Fidelity Total International Index Fund

Symbol: FTIHX 

Expense ratio: 0.06% 

Another Fidelity fund, the FTIHX index fund, gives investors exposure to international markets. That includes established markets like Europe and other developing markets like India.

Started in 2016, it’s designed for investors who want to diversify their investments outside of the U.S. 

11.  BNY Mellon Core Bond ETF

Symbol: BKAG

Expense ratio: 0.0% 

With no expense ratio, the BKAG is among the cheapest index funds. Started by investment manager BNY Mellon, its goal is to track the performance of the Bloomberg U.S. Aggregate Total Return Index.

12.  Schwab S&P 500 Index

Symbol: SWPPX

Expense ratio: 0.02% 

Like a lot of other funds on this list, the SWPPX index fund by broker Charles Schwab also tracks the S&P 500. This fund started in 1997, captures about 80% of the current market capitalization across the country, meaning your investments are exposed to a good chunk of the U.S. economy. 

13.   Vanguard Growth Index Fund

Symbol: VIGAX

Expense ratio: 0.05% 

This index fund by broker Vanguard focuses on U.S. companies that tend to grow quicker than the broader market. Created in 2000, it focuses on large-cap growth stocks, which means it can be a bit more volatile than other broader indexes and doesn’t always follow broader market movements. 

14.  SoFi Select 500 ETF

Symbol: SFY

Expense ratio: 0.19% 

While the SFY index fund does have a higher expense ratio than some other funds on this list, at the moment, the expenses are waived. That means you can invest in this low cost index fund at no extra cost for the time being.

The SFY fund was created by broker SoFi in 2019 and is made up of the 500 largest U.S. companies, but the amount invested in each one varies based on the growth rate of the company. 

15.  Vanguard S&P 500 ETF

Symbol: VOO

Expense ratio: 0.03% 

This ETF by broker Vanguard began in 2010 and invests in stocks that are in the S&P 500. Like other index funds focused on the S&P 500, it aims to track the index’s return.

In other words, the VOO index fund tries to have the same return as the top 500 U.S. companies. 

16. Vanguard Total Bond Market Index Fund

Symbol: VBTLX

Expense ratio: 0.05%

This index fund by broker Vanguard covers the U.S. bond market. Created in 2001, it invests in a number of investment-grade bonds, such as U.S. Treasuries and mortgage-backed securities.

It invests in a variety of bonds to represent the fixed-income market and can be thought of as a core bond index fund.

Expert tip: Look for investments with consistent track records

When investing in index funds, focus on consistency and reliability, especially when learning how to invest with little money. Look for funds that have a long track record of closely tracking their respective indices and have a history of decent returns.

In addition, carefully consider different factors like the index funds dividend yield, expense ratio, and fund size and make sure it matches up with your individual investing goals.

What is a low cost index fund?

Low cost index funds are a way to provide broad exposure to a particular segment of the financial markets without the high fees associated with more traditional investments.

A low cost index fund is a passive investment vehicle created to replicate the performance of a specific market index while keeping expenses minimal. Index funds are known for having low expense ratios.

Additionally, index funds do not rely on active stock selection, market-timing strategies, or buying individual stocks. Instead, they hold a diversified portfolio of securities that mirror the composition of the chosen index.

Are low cost index funds worth it?

Low cost index funds are often considered a smart choice for investors seeking broad market exposure with minimal fees. Over the long term, the lower costs can significantly impact returns, making them a worthwhile investment.

For this reason, including them in your portfolio can help to keep it diversified and inexpensive.

Is the S&P 500 a low cost index fund?

No, the S&P 500 is an index, not a fund, so it can’t be traded in directly. It’s a stock market index that represents a group of 500 of the biggest publicly traded U.S. companies. It serves as a benchmark for the overall performance of the U.S. stock market.

However, it’s possible to invest in the companies that comprise of the S&P 500 by investing in low-cost funds or ETFs that track the index. 

Can I purchase index funds with only $100?

Yes, it is possible to buy index funds with $100. Many index funds have low minimum investment requirements, for $100 or even less.

This accessibility makes them suitable for a wide range of investors learning how to invest with little money.

Some financial institutions also offer fractional shares of investments, which allow investors to buy a part of a share for even less than $100.

Articles related to index funds and investing

If you learned something new from reading about inexpensive index funds, check out these other articles next!

• Index Fund Investing: How it Works And Best Funds
• The Difference Between Index Funds And ETFs
• How to Grow Your Money: 7 “Must Do” Tips
• The 3 Fund Portfolio: Simple Investing That Works

Find the best and cheapest index funds for you!

If you want to start investing but aren’t sure of the best way, investing in a low cost index fund could be a good way to start.

Additionally, some of the least expensive index funds allow investors the chance to diversify their holdings. Investing in an ETF or index fund is a simple and easy way to learn how to start investing. 

Just remember that investing comes with risk. Keep working toward your long-term financial goals and even check out examples of financial goals to keep in mind and consider your risk tolerance before you start investing in low cost index funds. 

The post 16 Popular Low Cost Index Funds appeared first on Clever Girl Finance.

If you’re one of the households relying on credit cards to get through the end of the month, it might seem like you’re in an endless cycle of debt. Fortunately, even if you can’t pay off your credit cards immediately, you still have options, including learning how to negotiate credit card debt.

Credit card debt has risen to $1.03 trillion in the 2023 second quarter, according to the Federal Reserve Bank of New York. So if you have credit card debt, you aren’t the only one.

In this article, learn just how to negotiate credit card debt. Plus find out the different ways you can tackle the negotiation process. 

What happens when you don’t make your credit card debt payments?

If you have a very high credit card balance and have missed a few payments, your card company will likely reach out regularly.

If you fail to make minimum payments, you could be faced with late fees and a higher penalty APR. Missing credit card payments is getting a lot more expensive than it used to be, NPR explains.

If you don’t communicate with your credit card company, you could end up in default, resulting in your debt being moved to collections. This could hurt your credit score, making it difficult to get other loans further down the line. 

Negotiating your debt with your credit card lender can help you avoid facing default and may be the best way to get out of debt.

Credit card issuers know that when people are in a financial bind, unsecured debt from credit cards tends to be the last paid bill. They may be more willing to consider negotiating your debt so that they get some money back rather than having to sell your debt to a collection agency for pennies. 

Choosing a system to help negotiate credit card debt

Wondering how to negotiate credit card debt? There are three main ways that you can negotiate with your credit card company to either decrease your monthly payments or find a solution to help you tackle your debt. 

Hire a debt settlement company

One option is to hire a debt settlement relief company to help negotiate your debt on your behalf.

However, the Consumer Financial Protection Bureau explains that this option could be risky, as these companies ask for a high fee and don’t always deliver. Debt settlement companies can charge fees as high as 25% of the settled debt, according to In Charge Debt Solutions, which means you may end up owing more money. 

These companies claim they will negotiate with creditors to reduce the debt you owe, but they could leave you in deeper debt than when you started. If you’re considering a debt settlement company, be wary of any company that guarantees they can make your debt go away and charges you before they settle your debt. 

Consult a credit counseling company

Credit counselors advise you on your money and debt, helping you figure out a healthy debt management plan. Many credit counseling organizations are nonprofits with certified counselors.

If you’re finding it challenging to pay off your credit card debt, a credit counselor could help you come up with better budgeting and figure out the best way to negotiate your debt. Many will provide free or low-cost services, but they can charge a fee.

Be wary of any counselor who tries to push a debt management plan before they’ve taken the time to analyze your financial situation. 

Do it yourself

Another way to negotiate your credit card debt is to reach out to credit card issuers directly. While not all will negotiate with you, it doesn’t hurt to reach out and try.

One of the most common ways of negotiating is asking for a debt settlement or debt adjustment. This is when you pay a reduced amount in full to settle the debt. 

Before you start to negotiate or begin a debt reduction strategy, consider any possible consequences, especially as it will affect your credit score. And if you lower or defer your monthly payments, it could take you longer to pay off your debt.

If creditors accept your settlement offer, they will report your debt as paid-settled to credit bureaus, which can impact your credit report for up to seven years. 

How to negotiate credit card debt

Negotiating credit card debt might seem intimidating, but it doesn’t have to be. With some organization, you can easily reach out to your credit issuer directly. The worst thing that will happen is that they say no, and you are still where you left off.

Want to learn how to negotiate credit card debt yourself? Keep reading and follow our step-by-step guide.

1. Confirm your account balance

Before you start negotiating with a credit card issuer, it’s essential to have a clear understanding of your current account balance. Go over your credit card statements to get an accurate picture of the total debt you owe.

Confirming your account balance will provide you with a starting point for negotiations and help you set realistic money goals.

2. Figure out the type of debt settlement you want

There are a few different ways to settle credit card debt, each with its own positives and negatives. Some of the most common debt settlement options include:

Lump-sum settlement

In this approach, you negotiate to pay off a portion of your debt in a single payment. The credit card company agrees to consider your debt paid in full with this reduced amount.

Payment plan

Alternatively, you can negotiate a structured payment plan that allows you to pay off the debt over a set period of time. This can make the debt more manageable.

While it may take time to pay off your debt, it can be worth it in the long run.

Workout agreements

A workout agreement is an opportunity for a borrower and a lender to make a contract that changes the terms of the loan. This may happen if the borrower hasn’t been able to pay the loan.

You can keep this in mind as an option if you think that your lender would be willing to work with you.

Hardship programs

Another option to consider is a hardship plan. A hardship program may be possible if you are experiencing a financial struggle and can’t afford your credit card debt.

Experian explains that a hardship program with a credit card issuer may allow a later payment or lower the APR for the card for a time, among other things.

Be sure that you know exactly what you’re agreeing to if you decide to do this. Hardship plans often offer temporary help, but you will still need to pay back the money.

3. Find out if you qualify for relief

Before or during your call with your credit card issuer, ask them about any relief programs they might offer for individuals struggling with debt management. Doing this may help alleviate some of your debt stress.

Some credit card companies have hardship programs to help temporarily lower your interest rate or waive certain fees. This can be a great way to buy some time while working on a more permanent solution.

4. Contact your credit card issuer

Once you’ve decided on the type of settlement you’re aiming for, it’s time to contact your credit card issuer. You can usually find their customer service number on the back of your credit card or on your monthly statements.

Prepare by practicing what you want to say with a friend or family member. Make sure to have your account information ready when you call. 

5. Define the terms of your payment plan or debt solution

If you want a payment plan, be prepared to negotiate the terms.

Explain your financial situation honestly and propose a payment plan that you believe you can realistically adhere to. The credit card issuer could be willing to work with you to create a plan that suits both parties.

If you don’t want a payment plan but have another option in mind, like a lump sum payment, make sure you know exactly what you’re agreeing to first.

6. Review

After your initial conversation, don’t just wait for a response. Try following up with the credit card issuer to check on the progress. They may come back to you with a number or payment plan larger than you want to pay, so be prepared to renegotiate again. 

Persistence can show your commitment to resolving the debt and might encourage them to take your case more seriously. Make sure to keep the dialogue civil and respectful during the negotiation process. 

7. Get everything in writing

Once you’ve reached an agreement with your credit card issuer, getting the terms in writing is crucial.

This protects both parties and ensures that there’s a clear record of the agreement. Ensure the document includes details such as the settled amount, payment schedule, and other relevant information.

Expert tip: Make a plan for what to ask for when you negotiate your debt

When negotiating your credit card debt, make sure you are clear about what you want, whether that’s lower payments, a debt settlement plan, or debt relief. Be respectful and persistent while negotiating. 

It wouldn’t hurt to write down all of your questions and any ideas you have about debt repayment prior to speaking with the credit card issuer. You can also take notes as you talk with them, so you remember everything important that you discuss.

Keep in mind that settling your debt can impact your credit score so make sure it’s the best way to tackle your debt. 

Be aware of credit card debt scams

Unfortunately, people struggling with financial hardship can attract scammers. These scammers often offer quick fixes that sound too good to be true.

Always verify the legitimacy of any debt relief agencies or services before sharing your personal and financial information.

If something sounds fishy or too good to be true, it probably is. Watch out for red flags of debt settlement scams, such as unsolicited debt relief robocalls, requests for upfront payment, result guarantees, or a general lack of clear explanations about the debt settlement. 

Does negotiating debt hurt credit?

Yes, negotiating debt can hurt your credit score. That’s because creditors report any debt settlement to credit bureaus as paid-settled.

This tells other creditors that you weren’t able to pay off your credit in full, and it can stay on your credit report for seven years, states Lending Tree. 

What percentage will credit card companies settle for?

When learning how to manage credit card debt, the percentage that credit card companies settle for varies, but in most cases, it’s between 10% and 50% of the loan’s original value, Investopedia explains.

In some cases, according to Experian, you need to pay as much as 80% of the debt owed.

What percentage should I offer to settle debt?

A good rule of thumb for the percentage you should offer to settle the debt for is 30% to 50% of the original credit amount.

However, the amount that the issuer accepts will vary on several factors, including the total loan amount and how long you’ve had the credit card. 

How much does the average credit card debt settle for?

On average, credit card debt settlements cover 10% to 50% of the original debt amount, though this can vary.

Remember, though, that creditors are not obligated to accept an offer and reduce your debt, so you may end up having to settle for more. 

Is it possible to negotiate a credit card debt settlement myself?

Yes, you can negotiate a credit card debt yourself.

In many cases, you’ll need to offer a lump sum, so once you have enough set aside, you can contact your creditor directly and make an offer. 

Articles related to credit card debt

If you learned a lot from reading about credit card debt, check out these other great articles!

• Is Debt Consolidation A Good Idea?
• How To Pay Off Credit Card Debt Fast: 18 Tried And True Methods
• How To Get Out Of Credit Card Debt
• The Best Way To Get Out Of Debt For Good

Take charge of your finances by negotiating your credit card debt starting today!

Now that you understand how to negotiate credit card debt, you can take proactive steps toward regaining your financial wellness. By knowing how much you owe, deciding on the type of debt settlement you want, and being persistent, you can confidently reach out to your credit issuers.

Remember that open communication, honesty, respect, and persistence are key elements of successful debt negotiation. Overcoming debt and managing your money is a huge part of achieving success in life, and you can do it!

The post 7 Tips For How To Negotiate Credit Card Debt appeared first on Clever Girl Finance.

Are you trying to figure out how to make money without a job? Or maybe you’re tired of your 9-to-5 job and yearn to do something else with your life. Thankfully, the 9-to-5 job is on its way out because you don’t need to work a boring desk job to make a living anymore!

And even if you do have a full-time job, there are plenty of side hustles that can help you earn some extra cash to use towards paying off your debt and bulking up your savings accounts.

When I say job, I mean the desk job that makes you work particular hours. For instance, working at a bank or grocery store. However, there are so many other ways to make a living on your own schedule when you want to know how to make money without a job.

31 Ways to make money without a job

Some of these ideas are web-based, and you can work from anywhere. Others might require special skills or that you live in a specific location. You can use these ideas as a springboard to come up with even more ideas for how to make money without a job.

1. Become a freelance writer

Do you enjoy writing? Maybe you used to have a blog, or you’re always correcting your friend’s spelling mistakes when they text you. If so, then you might want to think about becoming a freelance writer.

Freelance writing is one of the best ways to earn money without a job because it’s lucrative and flexible. According to the Bureau of Labor Statistics, the median pay for freelance writers is $69,510 a year, or $33.42 per hour.

Also, you don’t necessarily need an English or journalism degree to begin. You can often find businesses looking for writers on social media sites like Twitter and job boards like Indeed and build your portfolio that way.

All you really need is an internet connection. And best of all, since you’re a freelancer, you get to set your own hours and decide who you want to work with.

2. Start a blog

Blogging is an interesting way to make money online without a job. So if you’re passionate about a specific topic and are good at writing, becoming a blogger and starting your own blog can be a great option for you to share your expertise. You get to be your own boss, writing blog posts about whatever you want and whichever topics you enjoy.

For instance, if you prefer a variety of topics, then you could start a lifestyle blog. And it’s really easy and cheap to set up using a blogging service like WordPress.

You can make a lot of money with blogging, especially if you have a lot of followers and use affiliate marketing. Affiliate marketing is when you link to products, and that company gives you money for every person who buys those products after clicking on the link on your blog.

However, blogging can be a lot of work in the beginning. You’ll need to know about things like SEO, marketing, and promoting your articles on a social media account or two.

You can also add Google AdSense to earn ad revenue. Blogging is a lucrative side hustle and can be fun too.

3. Earn cash back

Who doesn’t love free money? When you use cashback apps or cards, you basically get paid to do your regular shopping. Several banks and credit cards offer this service, so check to see if yours has this offer.

You can also check out sites like Rakuten, which gives you a discount or cashback when you shop at any of their thousands of partner stores. Others, like Acorns, let you earn cashback when you shop and put that money towards your investing account. And the great part is this takes less time than a part-time job, but you can earn a bit of money.

Be careful not to spend money on things you don’t need or can’t afford. While cashback is a great way to earn extra money, it’s designed to get you to spend more cash. And going into debt just to earn a bit more money is not a strategy I would recommend.

4. Become a virtual assistant

A virtual assistant is someone who works for others as an assistant, but virtually. For example, they might help organize schedules, set up phone calls, handle social media, manage blog content, and more. Best of all, it can all be done from the comfort of your own home.

It’s easy to get started. Just figure out what skills you think you can offer your clients.

Start with just a few, like social media management or email management. Then, you can look for work at places like Upwork and slowly build up your skillset and clients from there.

5. Become a dog walker or pet sitter

Are you an animal lover wondering how to make money without a job? Then why not get paid to spend time with some furry friends!

You can earn money by offering to walk dogs and pet-sit for pet owners in your city or town. Pet sitters make around $38,366 annually or possibly more, depending on your location.

Start by advertising around your neighborhood and using social media. Find groups of animal lovers on Facebook in your city. Or you can join pet sitting sites like Rover to make money fast.

6. House sit

If you want to travel full time and don’t want to pay for a hotel, then think about house sitting. You not only get paid to stay in a nice house, but you can also use the opportunity to travel or visit an area you’ve been thinking about moving to.

There are several sites to find people looking for house sitters, including TrustedHousesitters and Nomador. You may need to take care of the owners’ pets, water the plants, and clean the house, but it’s not that bad of a deal considering those are things you would probably do in your own home.

7. Sell handmade items on Etsy

Do you like to craft or paint? You can sell your handmade items on Etsy. Etsy is an online marketplace for users who make and sell their own creations.

You can sell anything from crocheted dolls to paintings, house decor, vintage items, and jewelry. And with a little bit of SEO knowledge and marketing, you can even make a living out of it.

8. Sell your used items

Selling your unused items is a great way to make money without a job; it’s easy, and it will declutter your home too!

If you have gently used items, you can sell stuff using apps like Vinted and Facebook Marketplace or even hold a garage sale. If you’re selling online, make sure to take good photos and accurately describe the item, including any defects.

You can sell pretty much anything – your old clothes, electronics, old furniture, books, and even shoes and purses. You can generally expect to sell items for anywhere from 30-70% of the original cost. So why not turn that clutter into cash!

9. Invest in real estate

Real estate is one of the more traditional ways to earn money. If you go the traditional route of buying a property and renting it out, you will need a lot of upfront capital. But you can generally get your mortgage covered and then have a little bit of extra money leftover.

But not everyone wants to be a landlord. So instead, you can invest in real estate through crowdfunding services like Fundrise and Roofstock. You can even invest for as little as $500.

The platforms take care of operating the properties while you earn money through quarterly dividends. And you’ll also gain money as the properties you’ve invested in appreciate in value.

10. Babysit

Babysitting isn’t just for high schoolers. If you love kids or even have a few of your own, you can set up a babysitting or nanny service. In some cases, parents may ask you to have CPR certification or even require early childhood education.

You can ask family members, friends, and even your neighbors if they need a sitter. There are online sites like Care.com where you can find babysitting jobs in your area. Often you will get paid right away, so you don’t have to wait a few weeks to get a paycheck.

11. Invest in dividend stocks

Wondering, “how can I make money without a job?” One of the best ways to grow your wealth over time is to invest in stocks. While investing in the stock market often takes time, you can accelerate that growth by investing in dividend stocks.

Dividend stocks are shares of a company that gives you income for holding onto their stock, often on a quarterly basis. So, you are rewarded for holding onto the stock.

You will need to do research on investing to find the best dividend stocks for you.

12. Become a transcriber

Do you type really fast and are a good listener? Do you remember everything, even when it was said years ago? Then transcribing might be perfect for you because these are the skills that can help you succeed in this role.

A transcriber converts audio into text, and the average hourly rate for transcribers is $18 an hour. You can choose your hours and work from home or anywhere there is WiFi. All you need is a reliable computer and fast internet service.

You can use sites like Crowdsurf, Transcribme, and Rev to find transcribing gigs.

13. Make YouTube or TikTok videos

It’s easy to create and upload videos on YouTube and TikTok. All you need is a bit of creativity and a smartphone. If you’ve always wanted to have your own show or a daily vlog, it’s easy to do so by making YouTube videos for your own YouTube channel.

You can also get paid on YouTube through ads and affiliate programs. You’ll need to reach a certain amount of subscribers and views to start earning money.

TikTok is another platform where you can earn money through affiliates. Again, you’ll need to have a decent number of subscribers.

The key to both YouTube and TikTok is to create quality content consistently. You’ll also need to use the right keywords in your title and description, as well as interact with viewers to foster your community.

14. Rent out your home on Airbnb

This is a great hack for how to make money without a job. If you have a spare room or guest house, renting it out on Airbnb could be an easy way to earn money without a job.

All you need to do is sign up on the platform, take good-quality photos, decide how much you’ll charge and how many people you can accommodate, and go from there. Help people have a great vacation and make some cash.

You can choose your own dates for when you want to have guests. It’s relatively inexpensive to get started, but you will need to pay Airbnb fees and either pay to have a cleaner or take care of the cleaning yourself.

15. Write eBooks

Have you always wanted to write a book? You no longer need to have a million Instagram followers or a publisher to have your own book. In fact, the total revenue from eBooks should soon reach $14.16 billion, so writing one can help you make money without a job.

With Amazon, you can publish your book on Kindle without having to pay a dime! While eBooks are priced lower than traditional books, there are no overhead costs. And with the number of people buying eBooks through Amazon, you’ll likely earn some extra money, especially if you promote your book yourself on social media.

16. Make money flipping items

Have you heard of house flipping? Well, you can do the same thing with other items. Flipping is when you find cheap items, improve them, and sell them for a higher price.

You can find cheap items at thrift stores, restore them, and then resell them for a higher price. For example, you can find old furniture, repaint it (perhaps with a unique design) and then sell it online. You can even sell your items on Etsy or use Craigslist, eBay, or Facebook Marketplace to sell to people in your area.

17. Become a notary public

According to Zippia, there are approximately 7,000 Notary Publics working in the United States. Notaries play an important role in the U.S. by handling mortgage signings, notarizing trust documents, and more. It’s a good choice for how to make money without a job.

Notaries are independent contractors, so you can set up your own business. It’s also just a great skill set to have in your arsenal, and you can combine it with other services, like being a virtual assistant.

Keep in mind that each state has different rules for what you need to become a notary, so look up the rules for where you live.

18. Lose weight to make money

Want to lose a few pounds and need to know how to make money without a job? Why not get paid to do it?

With HealthyWage you can do just that. All you need to do is sign up with HealthyWage, and set a goal weight, and limit.

You can place a bet on yourself, from $20 to $500 a month. Once you achieve and maintain your goal, HealthyWage will pay you money, which can be as much as $10,000. Which is an excellent way to earn money and get healthy too!

19. Start a coaching business

Have you successfully started your own business? Do your friends and even strangers keep asking you for career advice? You can start a coaching business and get paid to help others achieve their goals.

There are many types of coaches, so first, you’ll need to decide which kind of coach you want to be.

For example, a life coach helps clients with their life goals, while a business coach helps entrepreneurs expand their companies. You can even become a financial coach to help others with their finances or a fitness coach and help others lose weight. So get started making money for your knowledge!

20. Rent out your car (Turo)

Need help paying your monthly car payments? You can earn extra cash by renting out your car on Turo.

You don’t even need to lend your car often. Hosts can cover their payments if they rent out their car as little as nine days per month.

Turo allows private car owners to rent out their cars via their online marketplace. It’s an easy way to earn money without a job, and you can even rent it out while you are working from home!

All you need to do is sign up for Turo, list your car, and determine your price. You get paid via PayPal within five days and earn 65% to 85% of the trip price.

21. Take online surveys

If you’re serious about how to make money without a job, there are a lot of online survey sites where you can make money by taking surveys.

You can also look for focus groups in your area that are looking for feedback on specific items or services. Companies will often pay users to try new brands or give feedback as part of their market research.

So try out Survey Junkie or Swagbucks and other survey sites and see how much money you can make as one of your side gigs.

22. Become a mystery shopper

If you like shopping for different merchandise, you can become a mystery shopper. You can mystery shop and share your experience to earn some cash. It’s a great side hustle if you’re wondering how to make money without a job, and maybe you’ll get to shop in your favorite stores, too.

Most of the time you can apply online. You’ll likely need to meet the company requirements, as well as provide your resume and answer questions about your previous shopping experience.

23. Sell textbooks

If you’re a student looking to get a head start on the next semester, you can sell your textbooks. Textbooks are a lucrative business, with the industry valued at $3 billion. Students spend on average $1,200 a year for textbooks.

Many students purchase textbooks used and will appreciate the opportunity to buy them cheaper. A good place to begin is Chegg.com.

24. Do photography

Do you enjoy taking photos, and are you asking, “how can I make money without a job?” If you have a bit of talent and a camera, you can easily make money doing photography. Photographers make an average of $33,968 a year according to Zippia.

Do photo sessions for weddings, anniversaries, birthdays, and more. Or if you want to take photos and sell them without all the extra time involved, also try selling your photos to sites like Shutterstock. So many use businesses leverage stock photos on their websites so this can be quite lucrative.

25. Sign up for TaskRabbit

TaskRabbit is a site that connects people who need small, odd jobs done with people who can accomplish them. That can include going grocery shopping, helping out around the house, or even helping someone move.

If you are a skilled gardener, can help people move things, or excel at home maintenance, you can make some money from TaskRabbit. You’ll need to use the mobile app to create an account and go through the verification process, which includes an ID check.

26. Rent out parking or storage space

If you have some extra space that’s just gathering dust, rent it out. A lot of people need a parking space during the day, and maybe yours is empty while you’re at work. And for those that have extra storage space in a garage, you can rent that too.

To get started, try an app to find someone to rent the space. However, always use caution and be careful about who you work with.

27. Deliver with Grubhub

Food delivery is fun and simple. You pick up orders for people, drive the food to them in your car, and make money. On average, drivers make about $15 an hour, but you can make more depending on when and where you work.

You can also work whatever hours you want to with Grubhub. You have the option of working on the side whenever you want, so it’s a great way to supplement your income.

28. Make your own app

Those who have the knowledge can create an app and earn money. New apps are made all the time, so if you see a problem that can be solved with an app, such as habit tracking or financial organization, try it out. You can make money through in-app advertising, in-app purchases, or a subscription model.

There are several free courses on how to create an app that you can check out!

29. Start a gardening or landscaping business

Your neighbors or friends might need someone to help keep their yards looking nice. So starting a landscaping business that offers services like mowing lawns, tending to a gardens, and watering flowers can make you some cash.

To get started you’ll need to provide your own materials, like cutting shears, a leaf blower or a lawn mower. Try adding this to your skill set, especially in the spring and summer months. You can even offer winter services, like snow removal, pressure washing, and tree pruning.

30. Become a tutor

If you know a lot about a specific topic and enjoy sharing your knowledge with others, then tutoring good be a great way to make money without a job.

There are a lot of options when it comes to starting a tutoring business. You can work through a school or franchise, or teach students at your home or even the local coffee shop or library. You can tutor online through tutoring websites like Wyzant or Tutorme.

31. Do graphic design

Do you have a creative knack and are good with computers and design? Then doing graphic design could be a way to make some extra cash. You’ll need to already have some basic graphic design knowledge. If you don’t, you can consider enrolling in a graphic design course or watching tutorials on Youtube.

You can sell your designs online, such as through Redbubble or Gumroad. You can sell physical items like stickers or prints, or digital products like printables, coloring pages, or planning guides.

You can also do graphic design for others by offering your services on platforms like Fiverr and Upwork.

Expert tip

If you want to make money without a job, find something you are passionate about and good at. While you’ll still need to work to earn money, doing something you enjoy is not only rewarding, it helps you stay motivated throughout the process.

Can you make a living without a job?

If you want to make money without a traditional 9-to-5 job, it is possible. The best way to make money without working is to earn passive income through investments. However, you can also make money by working non-traditional jobs, like tutoring, food delivery, renting out your home, and more.

How can I make $1,000 a week without a job?

There are many different ways to make $1,000 a week without a job, like renting out your home through Airbnb, becoming a freelance writer, working as a notary public, or becoming a virtual assistant.

However, it takes time to build up any kind of revenue stream and it won’t happen overnight. If you want to make some extra cash, you’ll need to come up with a long-term strategy and put in a lot of work at the beginning to make it work. Once you’ve established this, you can work toward making it a full-time income.

What is the fastest way to make money without a job?

If you’re looking for the fastest way to make money without a job, then consider taking on quick and short assignments, like filling out online surveys, becoming a mystery shopper, or babysitting. You will often get money soon after completing tasks, making it an easy way to make money fast.

Which of these jobs will earn money the fastest?

The jobs that earn money the fastest are the ones that pay you once you complete a task. Online surveys, renting out your home on Airbnb, getting cash back, renting out storage space, delivering food, or renting out your car are just a few ways that you can start making money quickly.

Articles related to making money

Did you find this article on how to make a job helpful? If so, check out this related content for more ideas!

• 7 Types Of Blogs That Make Money
• The 27 Best Jobs For Stay At Home Moms
• How To Become A Blogger: 8 Steps For Success
• 9 Money Truths You Must Know

You can make money without a job!

So with a little bit of research and creativity, it’s easy to find out how to make money without a job. From pet sitting to writing services and selling used items, there is something out there for you.

So say goodbye to having to work from 9-to-5 and wondering, “how can I make money without a job”, and say hello to a flexible work schedule doing something you love!

As you try out these ideas, you can also research what to do with the money you earn. You can start investing and also begin budgeting weekly to keep track of your income.

The post 31 Ways How To Make Money Without A Job appeared first on Clever Girl Finance.

Have you been asking yourself lately, “Should I quit my job?” Well, quitting a job is a decision that shouldn’t be taken lightly, but that doesn’t mean it’s out of the question. Rather, it’s important to have all the facts before you make a choice that affects your future so much.

Besides the financial impact of quitting, it could also have an impact on your long-term career goals.

In fact, 80% of people who quit their jobs during the Great Resignation actually regretted doing so.

Keep reading to find out the best reasons to leave a job and what to consider before you quit. Also, take our short quiz to help you decide if it’s time for you to look for a new career or not.

7 Signs it’s time to quit your job

There are many reasons people leave their jobs.

In some cases, it’s for personal reasons, while other times, it might be related to the job itself. Here are some of the most common signs that you should quit your job.

1. Toxic environment

Working in a toxic environment is a big sign that you should quit. If you have a lot of conflict at work, or your boss or colleagues are bullying or manipulating you, then it might be a good sign to quit.

Being in a toxic environment is not only unenjoyable, but it is also stressful and taxing on your mental health. A toxic environment can lead to or contribute to anxiety, depression, or possibly other mental health issues.

2. No growth

If you’re stagnating at work and aren’t being challenged, then it could be a sign that you should quit. It is common to advance as you progress in your job, whether that means taking on more challenging projects, getting a promotion, or learning how to ask for a raise or other benefits.

If you’ve been at your job for a few years and have expressed to your boss that you’d like more responsibility, but they haven’t listened, then moving on could make sense.

3. No support

If your boss is not very supportive and doesn’t have your back when work gets stressful, then chances are it’s not a great work environment. Or perhaps your colleagues or boss discourage you from taking on more responsibility or are unsupportive of the extra education you want to pursue for your career.

It can be frustrating if you feel a general lack of support from those around you at work. It may be time to look for something else if you’ve talked to your boss and they aren’t helping you to feel like a valued member of the team.

4. To switch fields

Another common reason people quit their jobs is to change careers. If you’ve been considering a different career path, then quitting could make sense.

While you switch fields, it could be that you need to go back to school or get certified for your new career and are unable to balance your current job.

Depending on the type of career you want to change to, try starting a side hustle or freelance to support your transition to a new career.

5. Lack of passion

Sometimes you may find that you just aren’t interested in your career choice anymore, and that’s okay! A lack of passion or dissatisfaction at work is common.

In some cases, you might find that you don’t fit the work culture or you just don’t like the company’s leadership style. In that case, deciding to find a new job could be a good solution.

6. To go back to school

I left one of my first jobs as a reporter because I wanted to go to grad school in London. It was a difficult decision because I loved my job. But I knew I wouldn’t have the same opportunity again, and I would have regretted it if I didn’t take a leap of faith.

Going back to school to further your career and increase your career opportunities is a legitimate reason to want to quit your job, even if it’s a career you love!

7. To relocate

While relocating for a job is less common than it was a few years ago, it’s still a good reason to quit a job. Maybe your partner got a new job in a different city, or maybe you want to move to be closer to family.

Regardless of the reason, moving is an acceptable reason to want to leave your job, especially if high-paying remote jobs aren’t common at your company.

Things to consider when deciding, “Should I quit my job?”

Quitting isn’t a decision that should be taken lightly. Here are a few things to consider if you’re wondering, “Should I quit my job?”

Why do you want to quit?

First, ask yourself why you want to quit your job.

Is it for personal or professional reasons? Are you unhappy at your job because of the work you do or because of a colleague? Or are there personal things going on in your life that are affecting your work life?

Try to determine if the reason you want to quit your job is external or internal. It’s normal to not be happy all the time at your job.

Knowing if it’s just a lull that will get better or if it’s something that has been going on for a while will help you determine if quitting your job is the answer.

Do you have another job offer?

Before you quit your job, it’s best to have another one lined up. Do you have another job offer, or are you still job hunting? Before leaving, try to get another job.

If you’re quitting to go to school, then getting a job might not be an option, or you might want to consider getting one of the best work-from-home jobs to help pay for college expenses.

Are you financially stable?

Another consideration to think about before deciding if you should quit your job or not is your finances. If you’re living paycheck-to-paycheck, quitting your job might not be a good option.

If you don’t have another job lined up, try to have at least three-to-six months of necessary living expenses saved up in an emergency fund.

The same goes for debt. Quitting your job when you have a lot of debt and very little savings can mean it will take longer to pay off what you owe, even knowing the best way to get out of debt.  

Do you have dependents?

When you’re single and don’t have any dependents, then you will have more flexibility than someone who has kids or is thinking of starting a family.

f you have dependents, think about what impact it will have if you quit your job. Do you have enough savings, and are you financially stable enough to support them?

What about your benefits?

Do you have good benefits at your current job? If you do, then you might want to carefully consider your next steps, especially if you or a dependent rely on those benefits.

There’s no guarantee that your next employer will offer the same benefits, like health care, a retirement plan, or remote work options. If you heavily rely on those benefits, then you may need to reconsider your options before you quit.

Can you renegotiate with your employer?

In some cases, the issues you are facing at work can be solved. Before you put in your notice, try to talk to your boss or manager about why you are unhappy at work. Talk to the HR team about the possibility of getting a raise.

If you feel stuck because you aren’t growing or are bored, ask for more responsibility at work. Letting your employer know that you are unhappy may solve the issue so you don’t have to worry about quitting your job.

Expert tip: Get your finances in order before you quit your job

If you are going to quit your job, make sure that your finances are in order first. Try to have a few month’s worth of monthly expenses saved in your emergency savings.

In addition to having a job lined up before you give your notice, also consider your next career move.

Doing all of these things ensures that you leaving your job doesn’t affect the rest of your life negatively. You can instead focus on the present and what’s next.

Take our “Should I quit my job” quiz

Still unsure if you should leave your job? Answer the questions to this short “Should I quit my job” quiz to help you figure it out!

1. Do you get anxious or depressed at work?

2. Are you bored at work?

3. Do you often count down the hours you have left to work?

4. Do think you aren’t making good use of your skills?

5. Do you feel unappreciated at work?

6. Do you feel like you don’t share the same values as your colleagues?

7. Do you not get paid enough for the work you do?

If you answered yes to most or all of these questions: You might want to consider looking for a new job.

If you answered yes to just a few of these questions: You might want to do some further reflection to get really clear.

Answered no to most of these questions? Then maybe quitting your job doesn’t make sense for you right now. However, if you are reading this article, perhaps a break or vacation can help you reset.

Should I quit my job if I am unhappy?

If you are unhappy with your job, it might make sense to look for another job or find ways to cope before you are able to quit. Being unhappy at work can take a toll on your mental health. Find out what to do when you hate your job, even if it takes you a while to find a new career.

Is it okay to quit a job suddenly?

It’s usually not the best idea to quit a job suddenly. In many cases, you’ll need to give at least two weeks’ notice before you leave as most job contracts require this.

You don’t want to be subject to any income losses or burn any bridges as a result of quitting your job suddenly. If you want to leave, try to get another job first so that you don’t end up struggling financially.

Can I leave my job for mental health reasons?

Mental health is important, and it’s okay to quit your job for mental health reasons. Sometimes we all need a little bit of time off to slow life down, especially if you’re suffering from burnout. If this is how you are feeling, be sure to seek the right kind of support to get you through.

Whether it’s speaking with a trusted friend or colleague or working with a mental health professional, there are many ways to get support with mental health concerns.

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• Tips For Dealing With A Toxic Boss

Think carefully before quitting your job and do it the right way!

If you’re still wondering if you should quit your job after taking our “Should I quit my job quiz”, then take some time to consider why you want to leave and your career aspirations.

There are many reasons, whether that’s because you are unhappy or you want to go back to school. Regardless of the reason, make sure your finances are in order as well as your money mindset before you leave your job. Your bank account and investments will thank you later!

The post Should I Quit My Job? How To Know And What To Consider appeared first on Clever Girl Finance.

Do you dread waking up every day and showing up to work? Do you want to know what to do when you hate your job or better yet how to quit a job you hate? There could be a variety of reasons you hate your job.

For instance, maybe you have a toxic boss, your boss is too demanding or you just are uninspired by the work you do. With many people working 40 hours or more a week, it’s dreadful to have to spend that much time in an environment you hate.

It can also be detrimental to your career in the long term. And there are massive psychological effects of hating your job, including physical and mental ailments like insomnia and depression.

Doesn’t sound great, does it? Unfortunately, not all of us can afford to quit our jobs right away. Find out what to do when you hate your job and our tips for hanging in there until you can quit.

Signs you hate your job

No job is perfect. There are things you might dislike about your day-to-day job. As a freelance writer, I dread having to deal with taxes and administration work every quarter.

But how can you tell when dreading your job is really a sign that you hate your job? Here are a few signs you hate your job:

You get anxious at the end of the weekend

We all get the Monday blues but if you spend your Sunday evenings anxious and upset thinking about the start of the workweek, chances are there is something more to it than the dread of Monday. One of the most obvious signs you hate your job is if you agonize over the thought of having to go back to work.

Your productivity and focus have decreased

If you’re unhappy at your job you might find yourself taking longer to complete tasks than you used to. This could also be due to outside factors, such as a noisy workplace or unpleasant colleagues. You may also find it difficult to focus if you’re dissatisfied with your job.

You’re constantly stressed

One of the biggest signs you hate your job is being stressed all the time. It’s a side effect of being in an environment you hate. It could do with the amount of work you are being asked to do or from working in a toxic workplace. 

Psychological effects of hating your job

If you work at a job you hate you could experience psychological effects and be dissatisfied with life. Around 40% of the U.S. population is unhappy at work, so remember that you’re not alone. There are many others who are also experiencing the same things as you.

If you stay at a job you hate for too long, it could affect your mental health. Here are some of the psychological effects of hating your job:

Stress

When you work in an environment you don’t like, you may feel the need to hide your negative feelings. That can put added stress on yourself. Too much stress can have a negative impact on your overall health.

You might start to feel irritable, feel less focused, and unable to concentrate on your job. Chronic stress can even lead to physical ailments like headaches, nausea, and general pains.

Insomnia

If you are always worried about work and going to work the next day, that could have an impact on your ability to sleep. You could also end up having work-related nightmares, leaving you disoriented and restless the next day.

Anxiety

A toxic work environment could lead to a lot of worry and fear about your day-to-day situation. You might find yourself constantly worried or overreacting to situations. Anxiety can even lead to you being jittery.

Your heartbeat might race even when you’re sitting down and can even lead to anxiety and panic attacks. Anxiety is one of the most damaging psychological effects of hating your job.

What to do when you hate your job

If you find yourself in a job you hate, then it’s important to take steps to remedy the situation. While quitting your job is the quickest fix, it might not be possible right away. Here are some suggestions for what to do when you hate your job.

1. Set small, daily goals

It can be difficult to stay motivated throughout the day if you really dislike your job. One way to overcome that is to focus on the small things. Choose just one or two small things to focus on each day. You can make those goals as personal as you want and even connect them to your broader goals.

2. Find a work friend

Spending time with people we get along with can make even the most boring of jobs bearable. If you don’t already, find a work friend. Someone who you can check in with. Grab coffee or have lunch with them.

Being social is not only good for your mental health, but it will also make your workday much more enjoyable.

3. Decorate your work desk if you can

The space I work in is really important to me. If you work in a cubicle and are able to, bring some things to remind you of the things you love. That can be photos of loved ones, a plant, or art. I fill my desk with artwork from my friends, as it gives me joy to look at art made by people I know.

4. Take a break

We all need to get away from the mundane. Try switching up your routine. Go for a walk during a Zoom meeting, or take an extended lunch break.

You can also check with your boss or HR manager about changing your desk. You might not have a new job but changing your location can help make things bearable until you’re able to quit a job you hate.

5. Talk to HR

If you’re unhappy at work because of the people around you, then talk to the HR department. If you have a colleague that is creating problems and is toxic, chances are HR will want to know.

There is no need for you to be silent about a stressful or harmful situation. Many large companies even have policies in place to report things confidently.

6. Set boundaries with your colleagues

Do you get constant emails or messages from colleagues who expect you to drop everything and solve their work issues? Set clear boundaries with them. Set up a process so they know how to get the information across to you without calling you at 10 PM.

And make sure to be strict about those boundaries. Turn off your email and Slack notifications. Or better yet, delete them from your phone during the weekend.

7. Practice mindfulness and gratitude

One thing to do when you hate your job is to practice mindfulness and gratitude. Being present even for ten minutes a day can have a huge impact on your health and general well-being.

Spend some time in the morning before you arrive at work to be in the present. And if you have an especially bad day, take a break and focus on your breathing. A job is just a job and it doesn’t need to define you.

8. Do some self-reflection

Think about why you don’t like your job. Ask yourself specific questions about why you are showing signs of hating your job.

Some of the questions you can ask are whether the reason you hate your job has to do with your and not the job. In other words, are you bored? Is there something happening in your personal life? Have you lost interest in your career?

9. Don’t stop doing your best work

It’s easy to slack off if you don’t love your job. But even if you hate your job, you should still do your best work. Being mediocre will only make things worse and could hurt your long-term career success.

Instead, keep doing your best even when you don’t enjoy what you’re doing. It can help you feel better about the situation and help you grow.

10. Stay positive to improve your morale

Low morale is one thing that can cause you to be unhappy at your job. One of the things you can do when you hate your job is to try and stay positive.

Positivity is a powerful thing. By focusing on the good to get through difficult times, you can become a much happier person. It might not fix your work problems, but it can make things easier to cope with until you’re able to find a better job.

11. Vent to a trusted friend, career coach, or therapist

While you should keep any negative thoughts about your job off of social media, it doesn’t mean you can’t vent about it in private to those you trust.

Sometimes talking about all over complaints and annoyances can help you feel better. While venting won’t fix your frustrations, it can help reduce your stress and anger. But make sure to vent in moderation. Too much venting can actually increase your chronic stress.

Expert tip: Set goals, stay positive

If you have a job you hate but you can’t quit yet, set small goals, stay positive, and seek support from trusted friends or experts to make your experience more bearable.

How to quit a job you hate

If you hate your job, it’s time to do something about it. Even if your boss is giving you signs that they want you to stay, leaving might be best for you. Before you quit your job though, it’s important to have a plan besides just knowing what to do when you hate your job. So, let’s dive into how to quit a job you hate!

Step 1. Update your resume

When was the last time you updated your resume? Make sure your resume is top-notch. Add any work-related skills you acquired at your current job. Triple-check and then check again for any grammar or spelling mistakes. You don’t want a simple typo to be the reason your resume was skipped.

Step 2. Save money

If you quit your job before you have another one lined up, it’s important to save some money. Or maybe you need a break and want to take some time off before your next career move.

Either way, make sure you have an emergency fund and three to six months of living expenses saved up before you quit. That way you can take your time finding a job you truly enjoy.

Step 3. Apply to new jobs

The smartest way how to quit a job you hate is to have another one lined up. Check job boards like Linkedin and Indeed for openings in your area or network with friends and family. You can even ask for recommendations or job leads from former colleagues.

A lot of companies are open to remote job positions. So don’t let location hold you back during your job search. Be sure to check out our completely free course “How to Find a Higher Paying Job!”

Step 4. Inform your employer

Whether you have another job offer or just want to take some time off, you need to let your employer know that you are quitting. First, check your work contract to find out if there is a minimum notice period. For most employees in the U.S., the notice period is two weeks.

So if you can, try to tell your boss in person or on a video call. Keep the tone as positive as possible. There’s no need to tell your boss you dislike working for them.

You may need to ask them to write letters of recommendation or confirm your employment details later. You’ll need to follow up with a resignation letter and send a copy to your boss and the HR department.

Step 5. Say goodbye to your colleagues

Let your colleagues know that you are leaving and tell them goodbye. Send individual emails if you can to let them know you enjoyed working with them. If you worked with a difficult toxic coworker there is no need to send them a personal email but you should try to leave on as good a note as possible.

Is it OK to quit your job if you hate it?

Yes, it’s perfectly okay to quit your job if you hate it. Before you do, make sure quitting is the best option. It’s best to find another job before you quit to ensure financial stability. In some cases though, like a toxic work environment, quitting might be the best option for your mental health.

What are the signs of hating your job?

Some of the signs of hating your job include: dreading going to work on Mondays, disliking your boss, working on autopilot, finding excuses to avoid going to work or work-related events, having negative thoughts about your company or colleagues, your work quality is decreasing, and feeling undervalued or burnt out.

How do I get over hating my job?

If you hate your job and want to get over it, you can try to practice mindfulness and consider the positive aspects of your job. Identify specific goals and celebrate your small achievements. Try to use the opportunity to improve your skillset. Make sure to set boundaries about your work/life balance.

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Be savvy and survive a job you hate until you can quit!

Knowing what to do when you hate your job can make things much easier to bear until you’re able to quit.

Find a way to change up your routine, find work friends, and practice mindfulness. And with some planning and patience, you can quit your job and find a better opportunity.

However, remember to always remain professional and leave on good terms so you will be able to use this job as a reference for the future if needed!

The post What To Do When You Hate Your Job: 11 Tips Until You Can Quit appeared first on Clever Girl Finance.

When we think of someone being rich vs wealthy, we might think it’s the same thing but it’s not. For some reason, the words rich and wealthy are often incorrectly used to describe the same thing.

The two words might seem like synonyms, but they are completely different. It’s hard to spot the difference, but being rich and being wealthy are not equal. So, let’s dig into the difference between rich and wealthy.

What does it mean to be rich?

Being rich means having a lot of money or a high income. It comes down to how much cash you have in your bank account. But just because you’re rich, doesn’t mean you are wealthy.

In fact, being rich can often mean that you are spending a lot of money. It can also mean that you have a lot of debt e.g. high-interest credit cards, car payments, personal loans, etc,

It doesn’t matter how much money you have if your expenses are higher than your income. Being in debt is definitely not something to aspire to!

People who are rich might drive a fancy car, live in an amazing house in the best part of town, or have a high-paying job, but it comes at a cost. If you make $200,000 a year but spend $225,000 a year in expenses, you might seem rich because of your high salary, but you’re on your way to going broke.

As a matter of fact, plenty of celebrities have gone broke, some because of their rich lifestyles which lacked sustainability.

What does it mean to be wealthy?

When it comes to being rich vs wealthy, being wealthy means not only having enough money to meet your needs but being able to afford not to work if you don’t want to. It’s about amassing assets and making your money work for you. In other words, it’s having a significant net worth.

Wealthy people don’t necessarily own the latest gadgets or cars or throw lavish parties. What they do have, is a lot of assets, such as real estate, investments, cash, and financial stability. They think about building wealth, not owning more possessions.

For example, if your monthly expenses are $5,000 per month, and you have $30,000 in savings, then you have about six months’ worth of wealth. If you invest that $30,000 and you end up with $5,000 a month in investment revenue, you are wealthy.

And when asking “What is the difference between rich and wealthy”, wealthy people have money habits that are something to consider. For example, wealthy people choose to be cautious about expenses and plan out their finances.

The most wealthy people in America are often business owners. Elon Musk, Jeff Bezos, Bill Gates, and Warren Buffett are all worth multi-billions. (Fun fact: Buffett is considered a frugal billionaire!).

Despite his massive wealth, he still lives in the Nebraska home he bought in 1958 for $31,500 and didn’t switch his $20 flip phone for an iPhone until 2020.

What is the difference between rich and wealthy?

So, what is the difference between being rich and being wealthy? Well, there is a bit more to being rich vs wealthy than how much money you have in your bank account.

1. Net worth

It’s possible for someone who makes less than a rich person to actually be wealthier than a rich person with a fancy car and the latest fashion designs. The best measure of a person’s wealth is their assets and debt.

In general, a wealthy person will have a large net worth. A rich person might have a high income but if they have a lot of debt, their overall net worth will be low or even negative.

2. Expenses

Rich people tend to spend a lot of money, but wealthy individuals save and invest most of their money. Wealthy people might have a lot of money, but they don’t spend it all in one go.

And they certainly don’t use debt unless it’s for a very clear purpose, such as an investment in a house.

3. Investment

Rich people don’t necessarily adjust their lifestyle to ensure future wealth. They might buy the latest gadgets or increase their lifestyle inflation instead of investing.

A wealthy person saves as much money as possible and invests it in assets. That might mean buying real estate or investing in the stock market. Regardless of how they invest, wealthy people know that in order to grow their wealth, they need to turn their cash into assets and create a high net worth. They focus on making this a sustainable lifestyle.

Expert tip

The quickest way to become wealthy is to pay off your debt. That’s because debt can eat into your disposable income, making it harder for you to save and invest.

Prioritizing your debt repayment by paying more than the minimum and finding ways to earn more to pay off additional debt is key. Don’t forget to put aside emergency savings while you do this.

How to become wealthy

Now you know the difference between rich vs wealthy. So, if you want to become wealthy, there are a few things you can do to get started. Don’t just focus on how big your paycheck is.

You also want to avoid schemes that sell you ideas to get rich quickly. Instead, follow these steps to eliminate debt and have the right mindset when it comes to amassing wealth.

Keep track of your net worth

Your net worth is what determines your wealth. If you want to become wealthy then you should keep track of your net worth. The higher your net worth, the more wealth you have.

You can track your net worth using a net worth calculator or by deducting your liabilities from your assets. In other words, the things you own minus the debt you owe. If you have a lot of debt, try to pay it off to increase your net worth score.

Save 10 to 15% of your paycheck every month

The first step to becoming wealthy is to save a portion of your paycheck every month, no matter how much or how little you make. Always set aside at least 10% to 15% every month.

You can set up your bank account so that a portion of your paycheck is deposited directly into your savings. It’s an easy way to save without even needing to think about it.

If you struggle with saving, try a savings challenge, or look at your budget and find out where you can eliminate expenses.

Pay off debt, starting with high-interest debt

So another of the key differences between being rich and wealthy is being debt-free. If you want to be wealthy, you need to be debt-free in order to have financial freedom. Focus on paying off your debt, starting with high-interest loans such as credit card debt.

Find out if it makes sense to refinance your student loans or mortgage for a better interest rate. You can also look into things like student debt forgiveness. Make becoming debt-free your number one priority!

Invest as soon and as much as you can

One of the quickest ways to grow your wealth is to invest it. Of course, investing comes with its own risks, but there are plenty of options available.

You can use an automated service like a Robo-advisor, get investment advice from a broker, or invest in things other than the stock market, like physical assets.

No matter what you do, do something, even if you start investing a small amount of money! You can even put your money in a high-yield savings account to accrue interest until you’re ready to invest it.

Make your money work for you. Remember investing is one of the main differences between being rich vs wealthy.

Don’t splurge on unnecessary expenses

The key to growing wealth is being frugal and living within your means. In fact, you should live far below your means so that you can invest your extra income and savings. Your spending habits are a huge part of a wealth mindset.

That means resisting the urge to buy those designer jeans or buying the latest iPhone model when an older model will work just as well. Be smart about what you spend your money on and only buy the things that you not only need, but that will also last in value.

Think about your long-term financial goals and assets

What is another difference between being rich and being wealthy? Long-term goals and assets. Growing wealth is a long-term commitment. It’s not something that happens overnight.

It could take you years to build up your wealth and that’s okay. When things get tough, remember your long-term goals and why you chose to try to become wealthy in the first place.

Long-term wealth requires really thinking through how your purchases and investments today will affect you in the future. That means that the difference between being rich and being wealthy is that wealthy people spend time growing their income streams and investment portfolio and building up passive income, in order to make their future the best it can be.

Build passive income streams

Another way to build up your wealth is to build passive income streams. Passive income is money you receive without having to go to a day job. For example, dividends from your investments, or rental income from real estate.

Wealthy people often do not have to work traditional jobs because they make income in other ways. With passive income, you can earn money no matter where you are, even if you’re out on the beach.

Is wealthy considered rich?

Being wealthy and being rich are two different things. Being wealthy means being financially independent and having a large net worth. When you’re rich, you have a high income but you could also have a lot of debt so it doesn’t necessarily mean you are also wealthy.

How much money is wealthy?

There’s no set dollar amount that defines someone as wealthy, as wealth is determined by how high your net worth is.

However, according to a wealth survey by Charles Schwab, most Americans consider being wealthy as having a net worth of at least $2.2 million, but most people who say they feel wealthy have a net worth of $560,000.

Can a person be rich and wealthy?

The answer is yes. You can be rich and wealthy, although the two terms are slightly different. If someone has a high income, then they are often considered rich. If that person also has other revenue streams and a lot of high-value assets, then they would also be considered wealthy.

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Wealth is a mindset: Improve yours starting today!

So, what is the difference between rich and wealthy? When it comes to rich vs wealthy, being wealthy doesn’t start with a huge wallet full of cash.

Wealth starts with the right money mindset. Save a portion of your income, focus on becoming debt-free, and invest early and often.

If you want to be wealthy, you need to always think about your long-term goals.

Do you want to retire early? Own a few houses? Travel?

When thinking about wealth, don’t just focus on your income, but focus on building up your investments and assets to last you a few lifetimes. Your financial plan is key to wealth building.

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The fear of facing a recession is always overwhelming. Unfortunately, recessions are something we can't control on a personal level, and as a result, you’re probably a bit worried. However, you can prepare for a recession financially by switching your career path into a recession-proof job or business.

Recession-proof businesses can thrive despite an economic downturn. Which in turn means more financial stability for you!

If you worry about financial security or want to start a business, then consider looking at recession proof industries.

But before we dive into what industries are recession proof, let's discuss what a recession means.

What does a recession mean?

A recession happens when there is a temporary widespread drop in spending. This is because consumers become concerned about the economy or have lost their jobs and means of income.

It is officially defined by economists as a fall in the gross domestic product (GDP) for two consecutive quarters. GDP is how overall economic activity is measured for a country. When a recession is officially declared, it’s usually already been going on for a few months.

The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.”

That means recessions can impact a wide variety of industries across the board. Which is why it's important to consider businesses and industries that are recession proof.

What are recession-proof businesses?

Recession-proof businesses are usually in industries that are not severely impacted by a decline in the economy. These industries are usually ones that everyone needs, even when finances are tight.

Businesses in industries that provide staples are the type of businesses that tend to do best when the economy heads south. For example, businesses in homes and vehicle repairs, public services like plumbing and electricity, grocery, etc, all tend to do well.

So, if you’re looking for recession-proof business ideas to switch into, then keep reading to find out which ones have the best chance of riding out an economic storm.

Industries that are recession-proof

Below are some specific industries that are resistant to recessions and are likely to support you even through difficult circumstances.

• Baby products and child care
• Healthcare
• Education
• Technology
• Food and drinks, groceries
• Repairs
• Finance
• Legal
• Pets
• Cleaning
• Digital Marketing
• Beauty industry
• Funeral services
• Real estate investing

14 Recession-proof businesses to consider

Based on the list of the above recession proof industries, let's go over some actual business ideas. It may surprise you what makes the list of recession proof business ideas.

However, these are products and services that are in demand even during a recession. Here are 14 good businesses to start in a bad economy:

1. Baby products

Baby products are one of the industries that are recession proof. After all, if you have a baby when the recession hits, that’s not going to prevent you from needing diapers and bottles.

Many parents will cut down on their own expenses before they cut back on buying things for their children. While they aren’t totally recession-proof, children's products tend to be recession-resistant.

Parents might not be able to spend hundreds of dollars on toys at Christmas during a tough year, but they will still buy presents. Babies grow fast and constantly need new clothes. And kids will always want a new pair of shoes to wear to school come September.

If you are looking at starting a business that can withstand a recession, then consider something that caters to kids and especially babies.

2. Food and beverage

Food and beverage are also recession proof industries. Because even during a recession, people need to eat. While people may cut back on splurges like eating out at restaurants, they will still splurge on core food staples.

Sales at grocery stores, candy sales, and alcohol sales all tend to increase during a recession.

Why do these recession proof businesses thrive despite money being tight? Because items like chocolate are what a buyer will consider "affordable luxuries" during tough times! So, people will still treat themselves to these items before splurging on a bigger purchase.

For instance, did you know that Snickers Bars were invented during the Great Depression? It shows you how much we crave sugar when our stress levels rise!

Grocery stores are a good sector to be in, as people tend to eat in more. That means they will spend more time on home-cooked meals. And of course, people will always need toothpaste, laundry soap, and other staples no matter the economic situation.

3. Retail consignment

When things get tough, one of the first things people cut down on are new clothes. But that doesn’t mean people want to give up their love of shopping.

Secondhand stores saw a 31% increase in sales during the last recession even as other retailers’ sales dropped. In fact, the thrift store craze stayed after the recession was long gone. Plus, it’s just as popular to buy used clothes as it is to buy new ones.

People also try to save on electronics, jewelry, musical instruments, and more by purchasing them preowned. Retail franchises and other second-hand shops such as pawn shops are good businesses to start in a bad economy.

4. Courier and delivery services

People will always need mail. This is why courier and delivery services are among the top recession-proof businesses. Courier and delivery services tend to be less vulnerable than other sectors to a recession.

Even though sales might decline, there is a need to send packages. And with more and more people turning to buying and selling secondhand online, the need for delivery is likely to rise.

Some businesses might even outsource their courier services needs. So, whether it's raining, the sun is shining, or there is a recession, there is always a need for delivery services.

5. Childcare/daycare

Remember what I said earlier about baby items being recession-resistant? This is also true for childcare. While it can be difficult for parents to pay for things like daycare costs when budgets get tight, it’s still a necessity for many families, especially when both parents work.

Even if a parent loses a job or has to cut back on hours, they may opt to keep their kids in childcare. There are a lot of benefits for younger children to be in a safe and secure environment, especially when there is a lot of change going on that they might not understand. So childcare services are one of the industries that are recession resistant.

6. Health and senior services

Healthcare and other services for seniors are generally recession resistant. Home care is growing by billions of dollars, and health is a practical and necessary industry even in a recession. If you're looking for good businesses to start in a bad economy, the healthcare industry makes the list.

Demand is likely to continue as more and more people in the Boomer generation reach retirement. Seniors will still need help with basic needs as they get older and that’s unlikely to change when a recession hits.

Even if seniors aren’t living in a care home, they may need to hire a caregiver to help around the house or run errands for them. So basically any industries working with seniors can be great recession proof business ideas!

7. Technology and IT

If anything, quarantines and social distancing have shown that there will be even more demand for technology in the coming years.

Telecommuting and working from home are only likely to get more popular, especially with so many businesses realizing it’s possible and saving on overhead costs like rent.

The popularity of working from home is also likely to increase demand for businesses that cater to IT, as companies everywhere need to spruce up their telecommunications.

Even doctors are turning to technology as they urge patients to call in instead of going to the hospital.

Technology support for at-home services and companies is also becoming recession-proof businesses.

8. Repair services

Even in the best of times, things break down. No matter what, something will always need repair!

During a recession, people may even turn to repairing things instead of buying new things, or at least holding off as much as possible. This is why repair services make the list for good businesses to start in a bad economy.

Companies that focus on repair services for necessary items like auto mechanics, roofers, plumbers, and other home repair businesses are likely to see just as much work during a recession as when times are good.

Automotive services that fine-tune their services to their customer's needs do especially well during a recession compared to companies that are more specialized.

9. Cleaning services

No, I don’t mean home cleaning services are going to rise during a recession. But other areas that are legally required to have cleaning services tend to be recession-proof. Any workplace has to have a cleaner- a bank, office spaces, classrooms, hotels, and lobbies.

Usually, these services are outsourced to a cleaning company. Even if a company has to cut back on its employees, it will still need a cleaner.

Corporate cleaning companies are considered recession-proof businesses because they provide a steady source of income, even when the economy crashes.

10. Accounting services

Accounting services are another sector that will be in demand even when times get tough. In fact, they might be in even more demand during a recession as businesses use their services to find ways to cut down on costs.

Even during a recession, businesses will still need to pay their bills and keep track of payments and revenue. They aren’t likely to get rid of the person who knows the numbers.

If you’re good with math, then turning to financial planning or accounting or opening up a similar company could be one of the best recession proof businesses to start!

11. Freelance services

When a recession hits employers turn to freelancers as an alternative to hiring full-time employees. So, freelancing is one of the best recession proof industries to consider.

The great thing is you can diversify your services so you can create multiple streams of income. For instance, you could become a virtual assistant and be a freelance writer as well.

That way, you aren't relying on one type of job for all of your income! And you can even start freelancing with no experience.

12. Pet care business

The American Pet Products Association recently made $100 billion in yearly sales! So, pet care and supplies like pet food are shown to be recession proof businesses now.

Another reassuring and heart-warming fact is that 52% of pet owners said more of their money goes towards their pets than themselves!

Vet visits, grooming sessions, and essential pet products can flourish despite facing economic uncertainty. So, consider these areas for recession proof business ideas!

13. Real estate

If you're an investor thinking about recessions, consider real estate investing or property. For example, owning a property that you rent out is still likely to do well in a recession, because people still need places to live, though it isn't a guarantee.

You may also consider REITs (Real Estate Investment Trusts) that pay dividends. It could make you an income even during uncertain times.

14. Self care and beauty

Surprisingly, self care and beauty make the list for a recession-resistant business. While they aren't necessities, beauty salons are popular even during recessions.

While people are unlikely to spend a large amount of money on beauty items, they will probably spend on affordable things like a manicure or haircuts.

Consider one of these recession-proof businesses for a financially secure future!

These industries that are recession proof offer opportunities during times of economic recession. Although things might be tougher, it's definitely possible to move into a recession-proof career or build a successful recession-proof business during trying times.

Learning how to build a successful business could be how you thrive during a recession. And of course, knowing how to budget and save up cash is also very helpful for tough times. You can learn more about earning money and managing it well from the Clever Girls Know podcast.

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