If you attended our Moms & Money event in May, this quote from panelist Shaang Saavedra may be ringing in your head:
“Money is like a knife,” she said. “If you use it poorly, it can kill you. But if you use it wisely, it will feed you for the rest of your life.”
Sounds scary. The point, though, is that money is simply a tool you can learn to manipulate. The more you learn, the better able you’ll be to wield it in a way that serves your goals.
NextAdvisor was founded one year ago this month, in partnership with TIME, to help readers take ownership of their money during one of the scariest times in recent memory. It’s been anything but simple. After a year of long-term unemployment, unprecedented stimulus spending, and numerous financial cliffs, our latest national survey finds the majority of people still feeling anxious about their money. Many of us have been confronting the legacies of discrimination, racism, and inequality that pervade our financial system and everyday money transactions. Meanwhile, the housing market turned insane.
Through it all, we’ve focused on small, discrete actions you can take right now.
“You’re just learning,” Saavedra continued. “You’re just getting data on how you’ve behaved in the past. And then little by little, we take that one little next step. We do things a little bit scared to move to a new mindset.”
Last year, we brought 50 smart money moves. Now, here are 40 more expert-approved ways to take ownership of your finances today—even if you’re doing it scared. It’s time to make a move.
Illustrations by Elisa Faye
Buy an index fund
If you had $500 to invest right now, where would you start? Our answer: an index fund. It’s a big group of stocks that’s designed to track the entire market. With this strategy, you’re not betting on a single company — you’re getting a piece of all of them. The other good thing about index funds is that they carry zero or very low fees at every major brokerage. And in study after study, index funds beat the performance of high-fee stock pickers. Make it easy.
Start a passive income stream
Making money while you sleep doesn’t have to be a pipe dream. Earning passive income is easier today than ever before, and many of our NextAdvisor contributors are making a killing. If you want to level up your financial life and you know that cutting expenses will only get you so far, start thinking about ways to add income. Investing in the stock market, whether on your own or through a 401(k), counts as one. Here are seven others you may not have considered — presented by contributor Jannese Torres-Rodriguez, who has made money on every single one.
Find your “freedom gap”
You could also call this number “the gap between your monthly income and your monthly expenses,” but that’s not as fun. Plus, freedom gap really gets to the point. The strategy here is to calculate the amount of money you have left over each month once all your bills are paid. When you know that figure, say $750, you can intentionally deploy those funds toward your goals. Maybe $250 goes toward paying off debt, $250 toward savings, and $250 for investing in index funds. The bigger your freedom gap, the more you can do — and the more power you have to build wealth and ultimately achieve financial independence. Credit to Mahlet Amaha, a NextAdvisor contributor and creator of @blackwomxnarewealthy, for the turn of phrase.
Take an hour to name your beneficiaries
We call this the gateway drug of estate planning. Creating a will is something 60% of U.S. adults haven’t done, possibly because it can be a daunting process. You should do it anyway, says Jill Schlesinger, a CFP and NextAdvisor contributor. But if you want to knock out a win today, there’s a more straightforward way to get started. Naming a beneficiary on your financial accounts — such as 401(k)s, 403(b)s, traditional and Roth IRAs, brokerage accounts, and life insurance policies — is often easy to do online in 15 minutes or less. There’s peace of mind at stake: even if you don’t have a will, naming a beneficiary will ensure that your assets avoid legal probate and go directly to whomever you designate.
Download YNAB (or one of these other apps)
You’ll take any help you can get, right? If a good app can help you track your money more easily, or integrate financial management into your daily routine, take advantage. Some of our favorites are Personal Capital, which allows you to track your net worth for free with graphs and charts to help you visualize your goals, and Acorns, which is a relatively frictionless way to start investing. But an absolute favorite among our contributors and experts is You Need a Budget, or YNAB. It helps you with zero-based budgeting, an extremely effective way to cut expenses and raise discretionary income. And you can start with a free version.
Find out if you’re underpaid…
Are you willing to have an awkward conversation? When NextAdvisor contributor Erin Lowry asked seven career and negotiation experts the secret to negotiating a higher salary, they all agreed on one thing: you have to be armed with information about how much your colleagues and peers make compared to you. And sometimes the only way to find out is to ask. Finding ways to have these conversations can help you discover whether you’re underpaid and give you the data you need to make your case. Check out Lowry’s piece for a copy-and-paste script that will help break the ice.
…and know your value
For every dollar a man makes, women make $.82, on average. The gap is wider for Latinas, Black women, and Native American women. For Vanessa Menchaca-Wachtmeister, a tech professional who managed to double her salary in two years, that statistic inspired an aggressive negotiation mindset. “The real game-changer was seeing through the female feeling that I’m not worthy of my money and going hard with my negotiations,” Menchaca-Wachtmeister said during a Latina Women on FIRE event hosted by NextAdvisor. “I portrayed it in my head like this: how would a straight white male who owns the world take this challenge on?” Read on for her negotiation tactics.
When this controversial trading app became one of the most popular Apple downloads of the year, we knew we had to try it. So we asked our contributing editor Farnoosh Torabi, a financial journalist and host of the podcast “So Money,” to write about her experiences using Robinhood over a period of six months. Her conclusion: the app may be fun and easy to use, but its emphasis on short-term trading over long-term investing will cost you. For investors with time and compound interest on their side, Torabi says a low-fee brokerage such as Vanguard offers a surer — and frankly, easier — path to long-term wealth.
Calculate your FIRE number
Retirement isn’t an age anymore. It’s a dollar amount. Specifically, it’s the amount of money you need to have invested in order to live off your returns and become permanently work-optional. And there’s a relatively simple formula that helps you identify yours. We asked contributor Rita-Soledad Fernandez Paulino — a married mother of two who didn’t start investing until she was 33 — to show us how she calculated her FIRE number (which stands for Financially Independent, Retire Early) and how she’s using it to retire early at 47.
Refinance your mortgage — there’s still time
Mortgage rates have been historically low for nearly a year, and plenty of people have taken advantage. But there are still 14 million homeowners who can save at least $250 a month by replacing their current mortgage with a new one at today’s low rates, according to a recent study from the mortgage data firm Black Knight. Experts predict that mortgage rates will stay low for the rest of the year, so you don’t have to rush into it. Start by learning how refinancing works.
Check your housing budget using the 28/36 rule
We love a rule of thumb. There will alway be exceptions, but it’s nice to have an expert-approved guideline. When it comes to determining how much home you can afford to buy, the 28/36 rule comes highly recommended. The idea is that your monthly mortgage payment (which you can estimate using a mortgage calculator) shouldn’t be more than 28% of your monthly pre-tax income, nor should it be more than 36% of your total debt. Unexpected costs are practically guaranteed when you’re a homeowner, so knowing that you can comfortably afford your monthly payments will help you shop for a home with confidence.
Check your credit report for free
Want to know what the credit-reporting agencies really think of you? You can find out for free, and it’s worth a look. Your credit report is a summary of all your interactions with the financial system: the debt you owe, the credit cards you’ve opened, your record of making on-time payments, and more. It’s this report that determines your credit score, which in turn determines what kind of a deal you’re going to get the next time you want to borrow money. Because of a special COVID-19 provision, you can check your credit report from each of the three reporting agencies for free every week until April 2022.
Increase your credit limit — and your credit score with it
Raising your credit score doesn’t have to take a long time. One of the quickest ways to boost it is to manipulate your credit-utilization ratio, which accounts for 30% of your credit score. The ratio is found by adding up all the debt you owe and dividing it by the amount of credit you have access to. The lower, the better. So if you’re carrying a $2,000 balance on a card with a $10,000 credit limit, you have a credit-utilization ratio of 20%. But if you raise your credit limit to $20,000, that same balance is now 10% of your total credit. For customers in good standing, raising your credit limit can be as easy as filling out a form online or making a single phone call.
Have a money talk with your partner
We hate to jump to a worst-case scenario. But if you’re married, this story by NextAdvisor contributor Dasha Kennedy is not to be missed. In it, Kennedy shares her regret that she never talked about money in her marriage, a lack of communication that ultimately led to a financially devastating divorce. “Failing to have conversations about money and marriage is a surefire way to find yourself discussing debt and divorce,” Kennedy writes. Now she’s making it her mission to help more women become financially empowered.
Invest for a child in your life
We call them the million-dollar babies. This year NextAdvisor talked to two moms who are investing for their children so early that they’ve basically guaranteed the kiddos a multi-million dollar retirement. Compound interest is the key here: over a long period of time, even a relatively small investment will grow exponentially. Contributor Mahlet Amaha plans to invest her Child Tax Credit of $2,000 a year into a brokerage account in her name with her 2-year-old son as the beneficiary. Even if she stops when he’s 18, that $36,000 contribution will multiply to a shocking $8 million when her son is 65. Check out the math. Then read financial advisor Dominique Broadway — whose 18-month-old daughter Dawsyn is on track to be a millionaire by 16 — on how you can get started, too.
Subscribe to a money newsletter
Let good money advice come to you. Email newsletters are thriving, and some of our favorite financial brains are offering free news and inspiration straight to your inbox. We like “Jill on Money,” written by NextAdvisor contributor Jill Schlesinger, for its highly relatable reader questions. For a more interactive experience, the Wall Street Journal offers an email “money challenge” with once-a-week prompts. Read more for our 10 favorites. (The NextAdvisor newsletter isn’t bad, either.)
Use your airline miles
If you’re gearing up for travel again, you know that airfare prices are rising back to pre-pandemic levels. And it may have been a while since you last checked in on the balances of your miles and points programs. We crunched the numbers on Delta, American Airlines, United, and Southwest right now, and found that miles accrued with those four airlines range in value from 1.2 to 1.6 cents. With that in mind, you can learn how to scope out a trip that will maximize your miles’ value.
Learn about crypto…
For most financial experts, investing in cryptocurrency is too speculative to recommend without a long list of caveats. But everyone agrees you should learn about it. The rise of digital currencies has the potential to upend our financial systems and the way we interact with money every day. So if you’re “crypto-curious” and wondering whether there’s a place for it in your long-term plan, the first step is to know what you’re buying. Learning about blockchain, the technology that underlies every cryptocurrency, is a good way to start.
…and then ask yourself these questions
If you’ve turned from crypto-curious to crypto believer, you might be looking for a way to add it to your investments. This is where financial experts suggest some ground rules. Because the value of crypto is volatile and without a long track record, the pros we talked to recommend limiting it to no more than 5% of your portfolio — and that’s only if you’ve checked some other boxes already, like contributing to traditional retirement savings and getting out of debt. Then, you’ll know you’re ready when you can answer these four questions.
Call your car insurance company
Every once in a while, it pays to go through your fixed monthly expenses and see where you can shave off some savings. So if you haven’t called your auto insurer in a year or more, give this strategy a try: call them and ask about getting a low-mileage discount. Many of us aren’t driving nearly as much as our policies assume. You may not even have to call. Jannese Torres-Rodriguez says she was able to update her yearly mileage on her insurer’s online portal and get immediate savings. “I think there’s a lot of room for negotiation,” she says. “The last thing they want right now is to lose your business.”
Negotiate a bill
Did you know you can negotiate your internet bill? The rent? Medical bills? Plenty of financial transactions are negotiable if you know who to ask and the right way to ask it. That’s a lesson we learned after the pandemic hit last year, when many banks and lenders became willing to agree to more favorable terms for customers affected by COVID-19. Erin Lowry, author of the Broke Millennial book series, talked to three people who negotiated a bill last year and asked them exactly how they did it. These are their tips.
Start an emergency fund…
Personal finance is personal, but some things are non-negotiable. Setting aside money for emergencies — or opportunities — is the building block of financial wellness, according to every expert we’ve talked to. The idea is to keep a few months’ worth of expenses in a high-yield savings account, where it can collect interest until you need it. Sudden expenses will throw a wrench in your money plan from time to time, and your emergency fund is the best way to keep you on track.
…and maybe one for your parents
For some of us, protecting our own financial wellness isn’t enough. We also want to support our parents or members of our communities when they need help. Jannese Torres-Rodriguez, a Latina money expert and a frequent contributor, had never heard of a “family emergency fund” before she wrote about them for NextAdvisor. What she discovered was a powerful financial tool that helps her and other women of color uphold their values of communal support without derailing their own money plans.
Get renters insurance
This is one of those things that’s not required but strongly recommended. Renters insurance doesn’t protect the house or apartment you’re living in, but it does protect the belongings you have within it. A standard policy will protect you and your things “if someone becomes injured in your apartment, there is a theft or break-in, or other accidents occur. “For example, if your home is burglarized or your dog bites someone, your renters policy will kick in,” writes NextAdvisor’s Alex Gailey, at an average monthly cost of $42 a month.
Say no to whole life insurance
“If your financial advisor is recommending you buy whole life insurance, you don’t have a financial advisor. You have an insurance salesman,” says Jeremy Schneider, the self-made millionaire behind Personal Finance Club. In all but a few scenarios, he and other experts say, it makes more sense to invest in term life insurance, which provides the same financial protection but at a much lower fixed cost. With the money you save, you can invest on your own at a higher rate of return than what a whole life policy would offer. Read on for more on life insurance and who needs it.
Calculate your child tax credit
This one is for the parents: the stimulus package passed in March included a new and improved Child Tax Credit. Unlike the previous version, this one will be partially paid out in cash throughout the year. Families who qualify will be paid up to $3,600 per child for tax year 2021, with half of it issued before the end of the year. Since payments began going out in July, take a moment now to calculate how much you’re owed and what you want to do with the money.
Bookmark this calculator
You have to see compound interest to believe it. This calculator on Investor.gov is the easiest way to visualize how money invested in the stock market grows over time. Enter a starting investment, any monthly contributions, and a time horizon — and you’ll immediately see a projection of how compound interest will multiply those investments over time. Play with the numbers and you can calculate the amount you want to invest each month to reach your FIRE number or any other goal. When you’re assuming a rate of return, keep in mind that index funds, which track the entire stock market, have historically delivered a 7% average annual rate of return.
Open a Roth IRA
There are lots of accounts that will help you invest, but a Roth IRA has something special: any money you invest in it will grow tax-free forever, provided you meet a few conditions. That means all the compound interest you earn is yours to keep, without the capital gains taxes you’d incur with a regular brokerage account or on a trading app like Robinhood. NextAdvisor contributor Rebecka Zavaleta is our resident Roth evangelist. Here she explains why she loves them so much.
Invest your contributions!
This is a beginners’ mistake that multiple money experts have flagged to us, so we’re compelled to share. Investing is a two-step process: first you contribute funds — such as to a 401(k), traditional or Roth IRA, or brokerage account — and then you invest those funds. Without that second step, your money is in “financial purgatory,” says Tori Dunlap, a 27-year-old who’s on track to have $6 million invested by retirement. If you’re stuck on choosing your investments, make it easy for yourself and buy a target date fund, which is based on when you want to retire, or an index fund, which tracks the entire market.
Take an investing course
You have to learn it somehow. Investing in the stock market offers a clearly defined path to wealth — with persistence and the right accounts in place, a long-term investor who buys index funds is essentially guaranteed to come out ahead. It’s doable, but it does require some studying. We gathered up our favorite online investing courses and tutorials, so you can peruse them for yourself. There are lots of options, some free. See what method of learning might work best for you.
Make a student loan payoff plan
Federal student loans have been in a glorious state of limbo for the last year due to the policy changes brought on by COVID-19. No payments are due and no interest is accruing until at least September 30, 2021. The reprieve has given millions of people breathing room in their budgets, while others have used the interest freeze to throw more payments at their principal. Either way, the freeze may be ending soon, and broader student loan forgiveness doesn’t look likely. Time to sit down with your loan info and make a plan.
Follow a mom
A cool mom, though. As part of our “Moms & Money” digital event in May, we introduced you to 10 financially savvy online creators who talk about all things parenting. Dyana King, who goes by @moneybossmama, will teach you how to make a monthly budget and invest for your children. Nicaila Matthews Okome is a side hustle pro. And our friend Farnoosh Torabi is an all-around financial expert who’s written on how to not raise spoiled brats. Any of them will liven up your feed with good advice and cute family photos to boot.
Save money with the $1 rule
Cutting expenses can feel like an exercise in self-torture. But one of our contributors found a way to pull back her spending without sacrificing the things she loves most. Meet the $1 rule. As debt coach Bernadette Joy explains, she gives herself permission to purchase something she wants if it will cost $1 or less per use. A $50 pair of sneakers that she’ll wear once a week for a year? That checks out. But a winter coat on sale for $75 that will be worn a few times a season? Not so much. See if her hack works for you.
Get a big, fat welcome bonus
We don’t get too caught up in the complicated world of earning and using credit card points. But some offers are just a straight up good deal. That’s the case for the welcome bonus offered by the Chase Sapphire Preferred® Card, offering a 60,000-point welcome bonus for those who spend $4,000 within their first three months. If you have a solid credit score and you’d be spending that money anyway, check out our story on the creative ways you can use those points for free travel and hotel stays.
Start a joint account. Just one, though
For couples who live together and share expenses, a joint bank account can help you divide them equitably. But stop right there, says Suze Orman. When she talked with NextAdvisor for an interview last month, Orman spoke from personal experience in saying that couples should “never, ever, ever” combine their finances completely. Instead, she recommends just one joint account for shared expenses, with each partner contributing based on their income. Having your own money is empowering, says Tori Dunlap, the 27-year-old founder of Her First $100k. “It weirdly makes you more confident in your own relationship,” she says.
Subscribe to a money podcast
Listen up. Money podcasts are the ideal one-sided relationship. You get to hear all the dirt about other people’s money mistakes, successes, and tips — all without divulging a thing about yourself. For our list of the best money podcasts, we found a mix of styles and topics. Tiffany Aliche and Mandi Woodruff’s “Brown Ambition” is a lively and often hilarious chat about careers, entrepreneurship, and more. “BiggerPockets Money” zeroes in on real estate investing. And our own Farnoosh Torabi interviews big-name guests every week on “So Money.”
Make a “noodle budget”
“Drop down and get your noodle on” is not something you hear every day, but it makes sense when Tiffany “the Budgetnista” Aliche explains it. A noodle budget is how she describes the minimum amount of money you can afford to live on every month. It’s as if you’re eating Ramen for every meal. Knowing that number is a game-changer, Aliche says, because it clarifies what you need versus what’s nice to have. In times of financial distress or uncertainty, you can cut your spending down to that level, aka drop down and get your noodle on. You can also find a medium ground between your noodle budget and your regular spending — that’s called “getting a little bit of your noodle on.”
Start a side hustle
One of the reasons Jannese Torres-Rodriguez is our favorite side hustle guru is that she doesn’t give you any excuses. You already know there are more opportunities than ever to make extra income right now — funds you can use to pay off debt, save, and even achieve financial independence. So what’s holding you back? We asked, you answered. Here, Jannese gives her response to six of the most commonly cited reasons why people don’t start side hustles, from “I don’t have time” to “I want passive income.” Plus, she made a chart with 15 ideas to get started. See? No excuses.
Speak with your dollars
Reflecting on the fight for social justice this year reminds us of the power of our collective voices. And when we spend money, we speak with our dollars. That inspired contributor Erin Lowry to research the most effective ways to support the things we care about in our everyday spending. Lowry recommends buying from local, small businesses, especially those that are BIPOC-owned. You can also find companies that support things you care about, like Patagonia, which pledges 1% of its sales to environmental causes. And if you’re on Amazon, use AmazonSmile to trigger a charitable donation every time you shop.
Know your ‘why’
Your No.1 priority on the path to success is to be clear on what success actually means to you. That’s the advice of Katia Chesnok, a 32-year-old financial educator in Miami who paid off $40,000 in 18 months after reaching an emotional breaking point. For Chesnok, success means earning passive income and having enough money to support her parents. To zero in on your “why,” Chesnok recommends imagining your life in the future, after you’ve achieved your goals. What are you doing it for?