At the end of 2025, Americans carried a record $18.8 trillion of household debt. While interest rates have ticked lower, a 30-year mortgage is hovering around 6%, and credit cards charge over 20% on average.

Debt is a reality for the vast majority of Americans, making Debt Awareness Week (March 16-22) a good time to remember that, for most of us, the goal shouldn't be "no debt," but rather, making sure your debt is working for you.

That's because while debt can certainly be problematic, it's not inherently good or bad. It's best viewed as a tool that can help optimize your financial strategy.

An auto loan may allow you to buy a car that you need to drive to a job, a business loan could lead to building a successful business, or you could strategically use leverage to gain tax benefits.

How do you keep debt a friend and not an enemy? Here are some tips to help make sure your relationship with debt stays healthy.

1. Know the difference between 'good debt' and 'bad debt'

Debt can be good or bad based on its characteristics and how it's used.

Is it affordable or expensive? Look at your interest rate to figure out how much it's costing you. Higher rates (especially those above about 8%) are more likely to be bad debt, while lower rates tend to be good debt.

How much do you have? In general, lenders like to see debt payments including a mortgage be less than 35% of your monthly gross income, and debt payments without a mortgage be less than 20% of your monthly gross income.

If your debt payments are straining your budget or lenders are wary of lending you money, it's a sign you have bad debt.

What are you using it to buy? If you're using debt for everyday expenses like eating out frequently or vacations you otherwise couldn't afford, you might be fueling a lifestyle out of reach rather than improving your financial situation.

A good use of debt is to buy things that help you generate income (like that car that gets you to work) or for things likely to grow in value (like a business or home).

Considering using this week to inventory your debt (type, amount outstanding, interest rate, payment) and determine how much falls into the good vs bad categories.

2. Optimize any debt you have

Now is a great time to check in on whether your existing debt is optimized, which won't reduce the amount of debt you have, but it could reduce your payments or interest owed.

There are three optimization strategies.

• Refinancing debt. Paying off an existing debt using new debt of the same type that has different terms, such as refinancing a mortgage or auto loan
• Swapping debt. Paying off an existing debt using new debt of a different type that has different terms, such as using a home equity loan to pay off credit card debt
• Consolidating debt. Paying off multiple existing debts using new debt to combine several payments into one, such as consolidating federal student loans)

To make the most of these strategies, you'll generally need to have a good credit score.

And before you move a balance, you should consider any associated fees, the change to the total interest you'll pay over the life of the loan, new terms and conditions and the impact on your credit score.

When optimizing debt, it can be especially helpful to work with a trusted professional like a financial adviser, who can also help you avoid any bad actors looking to take advantage of individuals who have debt.

3. Know when to pay down debt … and when not to

First things first: Always make your minimum payment.

If you're wanting to pay down debt faster because you have problematic debt or simply because you're debt-averse, you might be tempted to put every spare dollar toward paying down debt. But that's not always the best use of your surplus.

For example, if you have nothing in your emergency fund, you might want to prioritize that until you have at least a few hundred dollars or one months' worth of expenses. That way, if an unexpected expense pops up, you're not immediately going back into debt to afford it.

Alternatively, if your debt has a low interest rate, such as a 3% mortgage, you might get a better return on your money by investing it.

Once you determine how much extra you do want to put toward paying down debt, there are largely two strategies for prioritizing which debts to tackle first:

• The avalanche method, where you pay debt with the highest interest rate first
• The snowball method, where you pay debt with the lowest balance first

There are very strong opinions about which of these is best. While we advise starting with the highest-interest debt, paying off small balances can be very motivating for some. Ultimately, you should do what works best for you.

4. Use debt strategically

While many of us need debt to buy a home or car, as wealth increases, it becomes more of a choice. At this point, it can help you build your assets while also potentially providing tax benefits.

If the alternative is selling assets to fund an investment opportunity or make a purchase, you might want to consider whether borrowing would be more advantageous.

For example, selling an asset often comes with a tax consequence. You may owe capital gains tax on a stock sale, and it can be substantial if you have a low-basis investment.

Or you might have to pay income tax if withdrawing from a pretax retirement account. A loan may allow you to stay invested and defer the tax consequence of selling.

Another example is if you own an illiquid asset, which might come with substantial selling costs that a loan could let you avoid.

Using debt responsibly should help you meet your financial goals, rather than hinder them. And Debt Awareness Week is the perfect time to take stock of how debt is — or isn't — working for you.

Related Content

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• How to Use Good Debt (While Identifying and Avoiding Bad Debt)
• A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)
• Extra Cash? Should You Pay Off Debt or Invest?
• Seven Ways to Manage Your Financial Stress

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In these complex times of economic and interest rate uncertainty, many homeowners are choosing to stay put through it all.

Some are strategically holding on to a low mortgage rate in an unpredictable market. Others are prioritizing stability, maintaining their sense of control while the economic pendulum swings.

But staying in place doesn't mean standing still. A growing number of Americans are tapping into one of the most powerful yet underutilized assets they own — home equity. At the same time, many homeowners may not fully understand the tools available to them.

According to a recent survey from TD Bank, 30% of homeowners can't correctly identify what a home equity line of credit (HELOC) is, and 34% can't define a home equity loan.

A HELOC is a line of credit that lets one borrow money using the available equity in one's home as collateral. It offers the flexibility associated with a line, allowing the borrower to draw and repay funds as needed.

Rates are typically lower than other forms of credit, such as credit cards and are variable tied to the Wall Street Journal Prime Rate plus or minus a margin. Once utilized, many HELOCs allow for the balance to be moved to a fixed rate, with a set repayment term and monthly payment.

By contrast, a home equity loan provides a single lump sum amount, also secured by the home. Home equity loans typically have a fixed rate and term from the start, giving homeowners consistent and predictable monthly payments.

The current lack of awareness represents a potential missed opportunity. When used responsibly, home equity can serve as an adaptable financial resource, a strategic debt management tool and can even be an investment in the future.

When homeowners understand how to make their equity work for them, they can make confident choices that align with their financial goals.

A modern financial resource

American households have been under sustained financial pressures, which have only amplified over time. Inflation, interest-rate volatility and lingering debt burdens have left many families searching for ways to create financial breathing room, and home equity products have emerged as potential solutions.

In fact, 86% of homeowners who use home equity products, such as HELOCs and home equity loans, consider them an important part of their financial plan.

Unlike higher-interest forms of borrowing, these products allow homeowners to access the value they've built in their homes, providing a cushion that can be used for major expenses, renovations, unexpected emergencies or other financial needs.

In an environment in which cash-flow flexibility can matter as much as long-term savings, this option might make sense for homeowners.

When used as one piece of a broader financial plan, it can provide both stability and opportunity, two qualities that are often in short supply when markets are uncertain.

A key to simpler debt consolidation

While home equity products can help homeowners with one-time expenses, they're also proving valuable as a tool for long-term debt management amid higher interest rates. For context, according to Experian, the average nonmortgage debt balance in 2024 was $23,066.

To manage these debts and ease the pressure, homeowners might consider consolidating their debt into a single loan with a lower rate, without realizing their home equity could help make that possible.

HELOCs and home-equity loans allow homeowners to consolidate multiple high-interest debts into a single, lower-rate payment. This can free cash for savings, investments or other priorities, transforming home equity from a static asset into an active part of a financial toolkit.

With home equity loans' fixed rates and defined repayment terms, homeowners have the clarity to plan around consistent monthly payments. That can make it easier to build a realistic budget and stay on track to pay off debts within a set time frame.

Reaching higher home values through renovations

Beyond serving as a financial safety net or debt-management tool, home equity products can also empower homeowners to invest in their futures. For many households, the home represents their primary asset; responsible access to this asset is of paramount importance.

Tapping into that equity can be an affordable way to maintain and protect a property's value, whether that means replacing an aging roof, upgrading outdated appliances or remodeling a kitchen or bathroom. These kinds of investments tend to pay off over time, improving homeowners' daily lives while helping their home hold or increase in value.

Knowing that they can proactively improve their financial standing, rather than being beholden to market conditions, can give homeowners a tangible sense of progress and confidence in their broader financial goals.

As markets continue to evolve, more homeowners are recognizing that they don't need to look beyond their front doors to find financial flexibility. With the right strategy, the equity they've already built can become one of the most powerful tools for navigating whatever comes next.

Related Content

• How Much Would a $50,000 HELOC Cost Per Month?
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• Four Ways To Use Your Home Equity To Boost Your Retirement
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• This Is How You Can Turn Your Home Equity Into a Retirement Buffer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Women have long been the chief operating officers of their households — the ones who remember the dentist appointments, plan the birthday parties and keep everything running thanks to countless tabs open 24/7 inside their heads.

I get it, because I'm a wife and mom first. But we can't let the invisible labor and emotional burden of the day-to-day stand in our way of long-term planning.

Married or not — and it should be noted that more Millennials are unmarried than previous generations at the same age — women need to be the chief financial officers of their households. The stakes are high.

Women, on average, live longer than men. And women are projected to control two-thirds of America's wealth by 2030, according to a 2025 report by McKinsey & Company.

That shift is already underway and makes 2026 an ideal year for women — single, married, divorced, widowed, raising a family or empty nesting — to shore up their finances and plan for their future.

Here are six savvy financial moves women at every age and stage of their financial journey should make this year.

Savvy Move No. 1: Organize your documents now

Often, people wait until tax time to tidy up their financial lives, but this annual ritual represents only part of the picture.

What if everything related to your financial life and life in general — not just the things you need to hand to your accountant or access for your tax filing — was organized all year long, year after year?

Imagine the space in your brain you'd free up knowing that receipts, account statements, insurance policies, powers of attorney and other estate planning documents, birth certificates, passports, Social Security cards and more were all in one place?

You can do this electronically, of course. But there's something about the assurance of having hard copies on hand. You can create your own filing system or check out products like the Nokbox, which offers fireproof boxes with files labeled for everything you need to organize.

You could do this in one afternoon and call 2026 the year you truly got your financial house and your life in order.

Savvy Move No. 2: Tackle debt and make savings automatic

Pay down your debt and begin to save 20% of your gross income.

Many financial advisers will favor saving over paying down debt if you can make more in interest on money you sock away.

And, of course, not all debt is equal. Your mortgage is different than your credit cards.

Still, too much debt can impact you psychologically and make it harder to get to your bigger financial goals, so plan to knock it down so you can build up your savings.

Ways to make your savings automatic include contributing the max to your employer-sponsored retirement plan and directing a certain portion of money each month to your emergency savings (or cash equivalent) account and 529 education plans if you are saving for college.

Making it automatic keeps you from automatically spending it.

Savvy Move No. 3: Build a cash cushion

Building on the savings theme, it's always a good time to beef up the "heaven help us" account. Strive for having six months' worth of living expenses available in case of emergency.

People often think that means in case of a job loss, and that's a big one. But other stuff can happen, too. You could need to step back at work to care for a child or aging parent.

There are other ways to ensure cash flow beyond savings. For example, it's smart to have a home equity line of credit in place for emergencies, just so long as you don't spend it all on home projects, credit card debt or vacations.

This line of credit can be a lifeline and also buy you time to build up your cash cushion.

Savvy Move No. 4: Protect yourself

Review your insurance coverage — life, health, disability, auto, property and casualty. Are beneficiaries up to date? Do you have enough? Are there policies you don't have in place but should?

Ask yourself what has changed. If you're starting a family, it might be time for you or your partner to add a term life policy to replace future income in a worst-case situation.

Or perhaps you have life insurance but not disability insurance. Did you know you are more likely to become prematurely disabled than to die prematurely?

Or, if you have a new teenage driver in the house, you might consider taking out an umbrella insurance policy.

Savvy Move No. 5: Audit and review investments

You should understand the purpose of and timeline for each investment — along with your risk tolerance — so that you can determine the right asset mix for each investment portfolio.

For example, perhaps your first baby is now a high school senior; it's probably time to dial down the aggressiveness of that 529 college savings plan.

Maybe you plan to retire sooner than you originally anticipated, or you just got a dream position and plan to extend your career.

Either way, you will want to adjust the asset allocation and corresponding level of risk on your retirement plan investments.

Savvy Move No. 6: Dare to dream

Please take a moment to dream big. Not just about 2026. But about what you want for your life years into the future.

Why are you working so hard right now? What is your "why"?

Short-term, tactical goals are nice. But the big picture — retiring when you want, vacationing when and where you want, starting a business, buying a beach house, living abroad, setting up a philanthropic organization or foundation — is even richer.

If you know what you're working, saving and investing toward, the better your chances for staying on the path to getting exactly what you envision and deserve in 2026 and beyond.

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• I'm a Financial Planner: This Is How Smart Women Can Plan for Financial Freedom Despite Life's Curveballs
• Financial Planning: Sisters Should Be Doin' It for Themselves

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

You worked hard all year and were awarded an amazing bonus. It's time to go on a shopping spree and treat yourself — because you only live once, so why not live it up?

Let me stop you there: Don't spend it all in one place. Of course it's important to treat yourself, but within reason.

There are most likely buckets that need to be filled to help set you up for success with your end-of-year and 2026 financial goals.

Here are five smart things to do with your year-end bonus.

No. 1: Pay down debt

If you've been living beyond your means, it's vital to pay down debt.

Credit cards, which charge extremely high interest rates, should be considered a priority to be paid off first. Otherwise, you're losing money by paying these fees.

Mortgages, student loans, and auto loans often charge lower interest rates, so those are usually fine to pay off monthly.

However, before making another large purchase, it's important to pay down these expenses.

No. 2: Contribute more to retirement savings

If you aren't contributing to or maxing out your retirement savings accounts — think 401(k), IRA, Roth IRA, etc. — then I would look hard at making a nice contribution to one of these accounts.

Keep in mind the contribution limits of 401(k)s ($23,500 in 2025), and traditional and Roth IRAs ($7,000 for individuals under age 50, $8,000 for individuals 50-plus).

Because of compound interest, your contribution can pay off when you reach the point of thinking about retirement. Your future self will thank you.

No. 3: Bulk up your emergency funds

Most financial advisers will likely recommend that you have three to six months of living expenses in your emergency fund in case someone loses a job, gets sick or has an unexpectedly large expense.

This fund allows you to take care of yourself and your family without having to stress or touch investment accounts or those that are hard to access.

A year-end bonus would be a great way to start or replenish an emergency fund. Start small and build on it over time.

Life happens, and it would be great to be more prepared next time you have an emergency.

No. 4: Fund a future expense

Something I started doing is to anticipate and plan for two big expenses that happen every year, way before I need the money: holiday gifts and summer camps for our children.

I started allocating part of my budget every year to set aside for these two major recurring expenses. I budget for the camps through my flexible spending account (FSA), but I have also started putting a portion of my year-end bonus into these future expenses.

I invest the money in a high-yield cash account, then pull my FSA money only twice a year to pay myself back, then invest that, too.

It can be a win/win and help take the stress of high expense periods away from me and my family.

No. 5: Save for a big trip, house project or fun purchases

Most of the other recommendations were very responsible, so here's something a little more fun (in a responsible way).

Have you always wanted to go on a trip, remodel your kitchen or buy e-bikes so you can ride to the beach? Now is the time to start a "fun fund." If you don't plan for it, it will never happen.

Consider putting a portion (or all) of your year-end bonus into a high-yield savings account. Contribute to it regularly, and before you know it, you'll be ready to check that thing off your bucket list.

This year, when you receive that year-end bonus check, take a breath and think about how these funds might impact your financial future.

Instead of buying a toy your kids will forget or an expensive bag that will only be in style for a few years, consider your long-term financial goals.

Saving and achieving your financial goals is fun, too — it just takes a little planning.

If you need more help deciding how to invest your year-end bonus, contact your financial adviser to help you get started.

Related Content

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• How to Make the Most of Your Bonus (and Other Variable Income)
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• Three Steps for Couples Navigating the Money Maze

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Emergency funds play a huge role in financial well-being.

Vanguard research shows that setting aside $2,000 can boost your financial stability by 21%. If you add three to six months' worth of expenses, you get another 13% bump, even after factoring in income, debt and other assets.

An emergency fund is the money you set aside to cover unexpected expenses during unforeseen circumstances, such as a job loss, medical situations and house repairs. But if you're oversaving for this fund, that can be a problem, unlikely as it might seem.

How come? We'll discuss the hidden risks of maintaining an overly large emergency fund, because saving too much could hurt instead of help.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

The problem with saving too much

Vanguard's report speaks volumes. It's wise to save to establish financial stability.

However, oversaving for your emergency fund can be problematic. You're missing out on other monetary opportunities that could potentially grow your wealth and provide a higher quality of life.

Signs you're saving too much:

• You've got more than a year's worth of expenses sitting in savings
• Your investment accounts and retirement funds aren't where they should be
• You focus on stashing cash instead of knocking out high-interest debt
• You feel uneasy about moving money into investments that could grow faster

Among the hidden financial risks of oversaving for your emergency fund:

1. Lost financial growth

When all your extra money sits in a basic savings account, it likely earns little interest.

Better options include a high-yield savings accounts with interest rates of up to 4.35% or in stocks, bonds, mutual funds and real estate investment trusts (REITs).

Andrew Bates, COO at Bates Electric, recommends establishing high-yield savings and investment accounts after building an emergency fund. He believes it's one way to avoid losing the financial growth you deserve.

"Parking too much cash in your emergency fund means you're missing out on real growth," Bates says. "A smarter move is to use high-yield savings for liquidity and put the rest into investments like stocks or REITs, where your money can actually work for you."

2. Potential inflation risk

As prices go up every year, savings slowly lose value, especially if you live in cities hit hard by inflation. As of August 2025, the inflation rate in the U.S. is 2.9%.

If your savings account for your emergency fund earns only 2%, your money is actually shrinking in terms of purchasing power. The more cash you stockpile, the bigger this hidden loss becomes.

Leon Huang, CEO at RapidDirect, suggests beating inflation through investment diversification instead of putting extra money in an emergency fund.

"Keeping too much in low-interest savings is like letting inflation chip away at your money," Huang explains. "Diversifying into assets like stocks and bonds helps preserve and even grow your purchasing power over time.

"Remember, don't let your savings sit idle when they could be working harder for you."

3. Financial opportunity cost

Every extra dollar in your emergency fund is money not working elsewhere. It's just sitting in a low-yield savings account when that money could be growing or improving your finances.

Use it to pay off high-interest debt, prepare for retirement or buy your dream home or start a business, for example.

The message is clear: Oversaving for your emergency fund means missing out on several opportunities.

Learn from Edward White, head of Growth at beehiiv. When he earns extra money from his income or business, he considers balancing various aspects of his finances.

"Cash that just sits in a savings account isn't doing you any favors," White says. "Redirecting that money toward paying off debt, building retirement funds or investing in your next big project creates real financial progress. At the end of the day, money should be a tool for growth, not just a safety net."

4. Psychological mindset trap

There's a line between being financially secure and overly cautious. Having a substantial amount of money can feel reassuring.

However, you could end up being financially trapped. For example, you avoid paying off loans and making investments because you're clinging to that "safety net." Over time, this mindset can hinder your financial progress.

Take it from Raihan Masroor, founder and CEO at Your Doctors Online. He once feared making investments and expanding his business by going digital. However, he quickly learned that this mindset means not making financial progress.

Masroor warns against the psychological trap of oversaving. "Clinging too tightly to cash can make you overly cautious and stall your growth.

"I've learned that avoiding investments or expansion out of fear doesn't protect you, but keeps you stuck. True financial security comes from balance, not from hoarding money."

Finding the sweet spot

The reason you're saving for an emergency fund is to prepare for unexpected situations or manage your fluctuating income. But if you've saved enough to be financially prepared for the rainy seasons, you can use extra cash for other financial opportunities.

Start by saving just enough for your emergency fund. There's no set amount for an emergency fund. The target largely depends on your income and expenses, as well as dependents and overall lifestyle.

According to most financial experts, the general rule is simple: Build three to six months' worth of living expenses.

This means that if you suddenly lose your job, for example, you can cover expenses such as bills and groceries for three to six months, or until you find new employment.

What to do with extra money

Once you hit your emergency funds target, use your extra money for other financial opportunities:

Debt payments (credit cards, personal loans, mortgage, etc.). It's more practical to use your money to settle debts, whether you're paying off credit cards or personal loans. It doesn't make sense to oversave for your emergency fund if you haven't zeroed out your debts.

Specific savings (education, real estate, travel, etc.). Put extra cash into a high-yield savings account, which will exponentially grow your money. You can also use this money to invest in your dream house, finance your children's future education or even find deals on your travel in 2025.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

Basic insurance (health insurance, life insurance, etc.). To protect yourself from financial risks, it's wise to invest in different types of insurance.

Consider getting medical coverage, whole life insurance, a dental policy and/or pharmaceutical benefits. Think of these as secondary emergency funds.

Investment diversification (stocks, bonds, mutual funds, REITs, etc.). It's a good idea to get strategic about your investments by diversifying your portfolio. Not only will this help grow your money, but it also reduces your financial risks.

Wrapping up

Building an emergency fund is one of the first steps to establishing your financial security. But if you oversave for this fund, you might lose investment growth and face inflation risks. You might be psychologically trapped, missing out on many financial opportunities.

Build three to six months' worth of living expenses, then, allocate extra money towards loans, savings, insurance and investments.

When it comes to money, it's a numbers game — be wise about saving and investing.

Related Content

• Saving for Your Emergency Fund: As Easy as 1-3-6
• The Seven-Day Financial Reset: A Simple Plan to Get Control of Your Money, From an Expert
• I'm a Financial Adviser: This Is How You Can Save for Big Goals Even if You Feel Like You're Barely Getting By
• Extra Cash? Should You Pay Off Debt or Invest?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Being debt-free is a financial badge of honor. With American household debt at $18 trillion at the end of 2024, it's easy to understand why.

People seek the peace of mind that comes from knowing no one has a claim on their paychecks (except the IRS).

What if living a debt-free life isn't the best option?

A neutral tool

Debt isn't inherently bad or good; it's a financial tool that can be used to further your goals if you understand the processes behind it. When used correctly, it can increase your net worth, enhance your earning power or generate long-term returns.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

The trick isn't to avoid debt like the plague, but to know when and which type is worth taking on.

We'll discuss several scenarios in which taking on debt is a smart, strategic move. Learn which types of debt make the most sense in each case, what to watch for and how to evaluate these decisions.

1. Take on a mortgage in a favorable market

In the first quarter of 2025, the American homeownership rate was 65.1%, a decrease from 65.7% at the end of 2024. This means that fewer people, especially first-time buyers and younger adults, can afford to own the house in which they live.

Higher mortgage rates and a limited housing supply are among the main contributing factors, but the fear of incurring debt also exacerbates this situation.

For most people, homeownership is the biggest financial decision they'll ever make. It's also one of the most misunderstood when it comes to debt.

A mortgage puts you into six figures of debt, but it's also one of the few loans that can make you wealthier over time.

Unlike rent, which goes straight into someone else's pocket, mortgage payments gradually build equity, which grows as your home appreciates in value.

"Over the years, I've helped thousands of people move. Based on my observations, homeowners tend to be more focused on the future than renters," says Adrian Iorga, founder and president at Stairhopper Movers. "They're investing in their property and their community, not just paying to live. That mindset shift from renting to owning makes a big difference in long-term wealth and lifestyle."

When it makes sense

Factors that make taking a mortgage a good investment include:

• Interest rates are relatively low or stable
• You plan to stay in the home for at least five to seven years
• Your monthly mortgage payment is manageable within your income
• You understand all costs involved, in the short and long term
• You're buying in a high-demand or appreciating market

If you're not yet sure if buying a home is the right step, maybe this fact will help you decide: The wealth of a typical homeowner in America is almost 40 times larger than that of the typical renter, according to the Aspen Institute.

2. Invest in education or high return on investment (ROI) skills

College graduates are more likely to be employed than high school graduates and will earn, on average, $1.2 million more over their lifetime.

Most people are aware of this through their own experiences in the workforce, which is why the global student loan sector is currently undergoing a growth phase.

As a parent, you want to ensure your child has all the opportunities they need to be successful in life. Still, the increase in the costs of higher education drives more students towards taking out loans, which ties down a young adult before they start a proper career.

"I've seen firsthand, through my clients, how borrowing large amounts for low-return education can create decades of financial strain," says Conrad Wang, managing director at EnableU. "When debt doesn't lead to real opportunity, it becomes a trap. This is why it's crucial to weigh the long-term value of what you're financing."

This doesn't mean you shouldn't invest in your education or skills. When used strategically, education debt is a high-return investment that continues to support your growth for years to come.

When it makes sense

If you're pursuing a degree or certification in a high-demand, high-income field — technology, health care, finance or the skilled trades — debt can be a smart move. Fields with strong job placement rates and a reasonable cost-to-earnings ratio are especially worth the investment.

Bonus tip: Take advantage of grants, scholarships or employer tuition reimbursement first. If you do take out a loan, devise a clear repayment plan based on your expected income after graduation.

3. Use business debt to further your goals

"Debt and entrepreneurship both carry risk, but when paired strategically, they can unlock serious growth," says Shan Abbasi, director of business development at PayCompass. "As an entrepreneur, you can use borrowed capital to scale smarter, improve operations, and boost revenue. It's all in the intention behind the debt."

Business loans should be used to scale operations, hire talent, invest in equipment or expand into new markets. Borrowing to cover ongoing losses or unclear expenses often leads to deeper debt, not growth. If you don't know how the loan pays for itself, you're better off.

When it makes sense

The best time to think about taking a business loan, such as a Small Business Administration (SBA) loan or a line of credit, is when you already have a profitable or proven business model. Even then, you shouldn't jump on the first funding opportunity that comes your way.

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Explore all options and choose the most cost-effective financing solutions. Put together a clear and realistic plan for how the borrowed funds will generate more income and if you'll be able to repay the loan even if growth is slower than expected.

4. Bet on strategic investments instead of lifestyle upgrades

It's tempting to use debt for a flashy car, a kitchen remodel or that two-week dream vacation to the Maldives. While some purchases might feel like upgrades, they rarely pay you back.

As Michael Melen, co-founder at SmartSites, puts it, "When I started SmartSites, I invested most of my personal finances into building the business. It meant sacrificing short-term comforts like luxury vacations or splurges, but I had a clear vision of where we were headed. That focus paid off. The smartest investment is in your future."

If you're not interested in entrepreneurship, you can focus on things such as energy-efficient home improvements, rental property upgrades that increase cash flow or certifications that boost your earning power.

When it makes sense

Regardless of what type of project you're funding, make sure you can handle the monthly payment without jeopardizing your emergency fund or retirement contributions.

Shop around for the most favorable loan terms, and choose only projects that either increase your income or reduce long-term expenses.

The bottom line

In the real world, strategic debt is a powerful tool for building wealth. Whether it's investing in property, education, business, or smart upgrades, the key is borrowing with intention and a clear ROI.

There is no such thing as "bad" debt; rather, it is debt taken without a plan and for the wrong reasons. Make it work for you, not against you.

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• A Guide to Debt: Good vs. Bad and Tips to Better Manage It
• A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)
• Extra Cash? Should You Pay Off Debt or Invest?
• Seven Ways to Manage Your Financial Stress

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Medical debt might seem as though it’s a problem limited largely to people who lack adequate health insurance coverage.

But even those who have a health plan could find themselves struggling to pay bills.

According to a 2023 study from health care advocacy organization The Commonwealth Fund, 30% of adults with employer coverage were paying off debt from medical or dental care, as were 33% of those with Medicare, 33% of those with an individual or Affordable Care Act marketplace plan, and 21% with Medicaid.

Cutbacks to Medicaid funding in the One Big Beautiful Bill Act, which became law over the summer, have raised concerns that more people will find themselves immersed in medical debt.

“It’s such a common burden because of the complexity and lack of affordability in our health care system, even if you have insurance,” says Ruth Landé, vice president of provider relations at Undue Medical Debt, a nonprofit organization working to alleviate the burden of medical debt.

If you rack up big bills while you’re still subject to your health plan’s annual deductible, you might be on the hook for thousands of dollars before your insurance coverage starts — especially if you have a high-deductible plan.

Even after insurance kicks in, the out-of-pocket costs for co-payments, co-insurance, or charges for out-of-network care can stack up.

Hospital stays and surgeries or serious illnesses that require inpatient care, such as appendicitis or a heart attack, often have hefty costs for patients. Bills for room charges, surgeons, anesthesia, or imaging can quickly accumulate.

Emergency room visits are also a driver of medical debt, although thanks to the federal No Surprises Act, patients can’t be billed more than the in-network rate for emergency care, even at an out-of-network hospital or if some of the providers are in network and some are out of network.

Treatment for chronic illness is another common culprit. Conditions such as diabetes, cancer, heart disease, asthma and autoimmune disorders require regular care, tests and medications, and ongoing expenses for treatments such as insulin, chemotherapy and dialysis can add up.

Insurance plans might cover only certain treatments, medications or specialists. Some newer or specialized drugs or therapies might be only partially covered — or receive no coverage at all — and the specialists you prefer to visit might not participate in your insurer’s network, resulting in substantial out-of-pocket expenses for you.

Costly medical bills might feel insurmountable, but the worst move you can make is to ignore them or forgo care that you need out of fear of going into debt.

According to the Commonwealth survey, nearly two in five working-age adults had delayed or skipped needed health care or a prescription drug in the past year because they couldn’t afford it. If you’ve received a medical bill that you can’t pay, or if you’re already in debt, you can take action to get some relief.

Confirm that the charges are accurate

Make sure that you truly owe the charges you’re being asked to pay. Review copies of your bills, explanations of benefits (EOBs) and other communication from your insurance company and health care providers as soon as you get them.

Insurance companies typically send EOBs in the mail, but you can also usually find them by logging in to your account on the insurer’s online portal. If you can’t locate an EOB for a medical service you received, call your health care provider to be sure it has your insurance information and that it billed the insurance company.

Look for problems such as duplicate charges, charges for services you didn’t receive, incorrect information about you and any medical conditions you might have, and billing for an out-of-network provider when you visited an in-network one.

If you notice that your insurance company paid for a service you didn’t receive, you should point that out, too; even though you might not owe any money, incorrect billing can still be a problem for you because it could cause denials of future claims if the insurance company thinks you already had certain treatments.

Keep in mind that if you get a bill long after you received a medical service, it might be because of ongoing disputes between health care providers and insurance companies, says Landé.

Reach out to the provider or insurance company as soon as possible if anything looks out of place or you don’t understand your charges — and consider doing so by e-mail to keep a paper trail. If your insurance company is denying coverage that you believe you deserve, you can appeal it.

If your health care provider or insurance company fails to resolve inaccurate bills, you can file a complaint with your state’s department of health (find its website at www.usa.gov/state-health), its department of insurance (https://content.naic.org/state-insurance-departments) or, sometimes, its attorney general (www.naag.org/find-my-ag).

These entities can review your complaint, and they might contact the provider or insurer to investigate, though the extent to which they take action to help you will vary by state.

For example, the Illinois Department of Insurance reviews complaints about insurance billing and can take corrective action if necessary, as does the New York State Attorney General’s Health Care Bureau.

Create a payment plan

Once you establish that you’re responsible for a bill, the next step is to figure out a plan to pay it. If you can’t afford it up front, make that clear to the health care provider.

“Providers often just don’t know the economic circumstances of folks. But if they do, they can classify your care as charitable care or offer financial assistance,” says Landé.

Even if you have health insurance, you might qualify for assistance. They might forgive a portion of your bill or, in some cases, the entire amount. Most providers also allow patients to set up zero-interest payment plans.

If you need some extra guidance, consider reaching out to a nonprofit organization such as Dollar For, which offers free help navigating medical financial-assistance applications.

Although it might be tempting to pay a medical bill with a credit card — especially if the bill is unexpectedly large and you don’t have money readily available to pay it — avoid doing so at all costs, says Landé.

If you carry a balance from month to month on your card, you’ll likely pay interest on that debt at a steep rate — an average of 20%, according to Bankrate.

Manage a debt in collection

If you don’t work out a plan to pay a medical bill, the provider might eventually turn the debt over to a collection agency. In some cases, a collection agency might track you down and legally require you to pay under the threat of being sued. Sometimes debt collectors also threaten wage garnishment, meaning your employer could withhold some of your pay to cover the debt.

If you have a medical debt in collection, pay only what you can afford. Don't stop taking medications, visiting your doctor, or paying for housing and utilities. A good general rule is to spend no more than 3% to 6% of your gross income on out-of-pocket medical bills, says Landé.

Debt-collection agencies can work with you to create a payment plan. You might also want to get help from a credit counselor. To connect with one, go to the website of the National Foundation for Credit Counseling.

If a debt-collection lawsuit is filed against you, respond either personally or through an attorney by the date specified in the court papers.

To preserve your rights and the chance to fight a court order, respond promptly. Consider enlisting the help of a legal aid organization such as the Legal Aid Justice Center.

Know your rights

Your state could offer legal protections when it comes to the collection of medical debt. Many states restrict health care providers’ ability to sue patients for their medical debt, often by regulating whether or how they can send debt to collection agencies.

On the federal level, the Fair Debt Collection Practices Act bans debt collectors from using abusive, unfair or deceptive methods.

In recent years, both policymakers and the credit industry have made efforts to lessen the impact that medical debt has on your credit.

Some states (California, Colorado, Connecticut, Illinois, Maryland, Minnesota, New Jersey, New York, Rhode Island, Vermont, Virginia and Washington) have laws in place that prevent or restrict the reporting of the debt to the credit-reporting companies (Equifax, Experian and TransUnion).

In January, under the Biden administration, the Consumer Financial Protection Bureau finalized a rule that banned the inclusion of medical debts on credit reports and prevented lenders from using medical information in credit decisions.

The rule was supposed to go into effect in March. But under the Trump administration, the CFPB no longer supports the rule, and it faces legal challenges from credit-industry groups.

Still, the credit-reporting companies have made policy changes that limit how medical debt might appear on credit reports. Credit reports no longer list medical debts that have been paid, unpaid medical debt that is less than a year old, or medical collections of less than $500.

Major credit-scoring models have altered their formulas to lessen medical debt’s negative effects on the scores. Unpaid medical debt has a smaller impact on FICO scores than other unpaid debt, for example. (Note that if you paid a medical bill with your credit card, that debt is typically not classified as medical debt.)

Make a plan now to avoid debt later

If you have solid health insurance, you can make moves to help you avoid falling into debt in the first place. Preventive care, such as regular check-ups, can ward off expensive health issues. Most health insurance plans must cover certain preventive-care services at no cost.

“Take advantage of your annual wellness visit or annual physical and get to know your preventive benefits,” says Tatiana Fassieux, education and training specialist for California Health Advocates.

Get to know your family history, too, says Fassieux. Even if you’re healthy now, being aware of whether certain medical conditions run in your family may help you assess your risk for future needed care, she says. The U.S. Surgeon General’s “My Family Health Portrait” tool can help you gather information about your family health history and learn about your risks.

If you anticipate that your health care needs might increase in the coming years, consider how your insurance plan would cover you. Compare premiums and deductibles to find the balance of monthly costs and maximum out-of-pocket expenses that will work for your budget.

If you expect to use health care services frequently, you may want to steer clear of a high-deductible health plan unless you have enough money in savings to fully cover the deductible. HDHPs have been associated with statistically significant lower use of evidence-based clinic visits, laboratory tests and prescription drugs for individuals with chronic illnesses, according to a recent study by the Journal of the American Medical Association.

For planned medical services, you should familiarize yourself with the up-front costs — and that starts with knowing the ins and outs of your insurance coverage. Before you receive a treatment, verify that all the providers involved are in-network under your plan. It’s not uncommon for one provider, such as your primary care doctor or surgeon, to be in-network, while others, such as the anesthesiologist or radiologist, are not.

Reviewing coverage in advance with a provider who will be on your care team may help you avoid unexpected costs.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Whether you're buying gas, groceries or clothes, you now have the option to defer payments over several months through installments, rather than pay in full at the time of purchase.

These Buy Now, Pay Later (BNPL) services, from firms such as Klarna and Affirm, can be tempting when money is tight: Their promise of interest-free borrowing is compelling.

Traditional 0% interest loans have been common for decades. Thousands of people take advantage of them to fund expensive home repairs or renovations.

By enabling large expenditures without having to spend down a savings account, they help buyers afford what they need, such as a roof replacement, and help the sellers make more sales.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

However, that 0% interest comes with a well-disclosed catch: Pay off the loan by the deadline or be charged interest from the beginning of the loan.

For those organized and responsible enough to meet the deadline, these loans can be a wise financial decision: Why not keep your money working for you as long as possible?

However, failure to repay loans on schedule has resulted in financial hardship for less organized people.

It's important to carefully consider your approach to credit before taking out any loan, but especially for loans with unfavorable terms, should you miss a deadline.

New 0% territory

The relatively new "0% loan" environment of BNPL, with shorter-term, lower-cost purchases, represents a seismic shift in the marketing and use of such loans. Often, payments must be made every week until the loan is discharged a month or two later.

As such, BNPL is frequently marketed to would-be borrowers for much smaller loans. It's now even possible to buy lunch on a six-installment weekly repayment plan.

What's worrying is that taking out small loans for lunch might not seem like debt. This is dangerous thinking. Anytime you borrow money that you are required to repay, regardless of whether or not interest is charged, it is debt.

Viewing it otherwise can lead you into trouble, as you may keep racking up "not debt" to the point where you can no longer afford the weekly payments.

That's when the risky side of BNPL rears its head: As with traditional 0% loans, missing a payment can result in painful financial penalties.

A missed payment can lead to late fees of about $30, according to Consumer Reports. If you financed a $5 sandwich, for example, that's the equivalent of 600% interest for just one late payment.

With many short-term BNPL loans, you have six opportunities to miss payments. That could turn into a very expensive sandwich.

Pros and cons of BNPL

Used responsibly, BNPL can be a good stand-in for a depleted, or never-started, emergency fund. Most financial advisers tell their clients to have a healthy emergency fund to cover unexpected expenses, such as car repairs or hospital bills.

But it can be difficult to set aside money for the "what-ifs" in life, and more than one unplanned expenditure can drain your savings quickly.

If you're in need of emergency purchasing power, BNPL can be useful as long as you know you can keep up with the required payments.

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The problem lies in using BNPL for ordinary purchases, such as lunch, gas or groceries. As with other transactions in which cash doesn't change hands, it's easy to lose track of how many purchases you've made and how much you've spent.

Without careful recordkeeping, it's all too easy to overspend, resulting in burdensome installment payments and an endangered credit score.

How to avoid financial trouble

To avoid this happening to you, make sure you understand the terms of any loan you take out:

• Beyond the interest rate, what penalties will you incur if you accidentally miss a payment?
• What other fees or costs are associated with the loans?
• Do you need the loan in the first place, or are you simply tempted to keep money in your own account as long as possible?

By asking yourself these questions before taking out a loan — BNPL or otherwise — you could save yourself significant unplanned expenses and damage to your credit score.

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• Can Buy Now, Pay Later Plans Help You Build Credit?
• The Hazards of Buy Now, Pay Later
• Klarna Buy Now, Pay Later Is Coming to a Walmart Checkout Screen Near You
• How to Take a Break Without Breaking the Bank

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Editor's note: This is the last of a four-part series about wealth planning for different generations. Part one was Talkin' 'Bout My Generational Wealth: Baby Boomers, part two was Come as You Are: Wealth Management for Gen X, and part three was Bouncing Back: New Tunes for Millennials Trying to Make It.

In the last months, I shared wealth planning tips for different generations. This final installment focuses on Gen Z — a generation especially dear to me as it happens to also include my children.

As I think about the financial journey that they are about to begin, I hear Olivia Rodrigo's "Drivers License" in my head, with themes of youthful exploration and the uncertainties that come with it.

Generation Z, born from 1997 to 2012, is entering adulthood in a time of economic and global tremors, technological advancements and a very different career landscape than the one that generations prior faced.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

Just as obtaining a driver's license symbolizes new freedoms and responsibilities, so does the journey toward financial independence.

'Work From Home': Embracing the gig economy

The rise of the gig economy is redefining traditional employment — leading many Gen Zers to work as freelancers, independent contractors or part-timers.

Some of this trend is by choice, and some is a result of the evolving employment market. Like everything, this move to the gig economy is going to provide workers with interesting opportunities, but some daunting challenges as well.

Without a steady salary that a typical full-time employer would provide, it is even more important for this generation to have a sound budget and financial plan in place. Two key considerations are:

Budgeting for variability. Establishing a monthly budget that accounts for fluctuating income is crucial. Allocating funds for essentials, savings and discretionary spending can help provide financial stability should income flow vary due to the nature of your work.

Building an emergency fund that could last for at least six months is a helpful benchmark.

Tax preparedness. Unlike traditional employees, "gig" workers must manage their own tax withholdings. Setting aside a portion of each paycheck for taxes is a prudent way to manage and prevent year-end tax surprises.

Note that in certain cases, they may need to make quarterly estimated tax payments throughout the year to avoid underpayment penalties. Therefore, it is not only about having the liquidity to pay the taxes, but also satisfying the timing of such payments.

When your income is variable, rather than a steady income stream, it can make it harder to manage your day-to-day life. A focus on sticking to a budget and making a financial plan is even more important.

The traditional ease of having a payroll system with automatic deductions is not available for those in this category.

Be proactive! A degree of discipline is required to ensure you're following your budget and financial plan.

'Good 4 U': Maximizing tax-advantaged accounts

Starting early with tax-advantaged accounts can yield long-term benefits.

Understandably, retirement may seem like a far-away idea for this generation just entering the workforce. However, the long-term benefits realized from tax-deferred or tax-free compounded growth are significant.

The earlier you start, the more you can maximize the benefits of these tax-advantaged accounts. Two possible considerations include:

Roth IRA. Ideal for young earners, Roth IRAs allow after-tax contributions to build future tax-free growth. These accounts have an income threshold by which one is prohibited from contributing.

In 2025, that income limit is $150,000 for a single person and $236,000 if you are married filing jointly. If your income is higher, there is a phase-out. So, with an income level of $165,000 or above (or $246,000 for married couples), you are prohibited from making a Roth IRA contribution.

Many early-career Gen Z individuals fall below these thresholds and should take advantage of this opportunity while it's eligible to them.

Health savings account (HSA). Another tax-advantaged account that may not be obvious is the health savings account, or HSA, which offers triple tax benefits — tax-deductible contributions, tax-deferred growth and tax-free withdrawals for qualified medical expenses.

While many young people may not see a need for significant health care expenses on a yearly basis and may therefore assume that this is not applicable to them, a longer view is beneficial.

Having a conversation with your children about the costs associated with a serious health event (cancer, injury, etc.) can be illuminating for them.

HSAs can be flexible because the money held in the account can be invested and withdrawn later in life. With that perspective, an HSA is more like a "retirement" account for future health care expenses.

Note that HSAs are available only to those with high-deductible health plans, meaning a deductible of at least $1,650 for individual coverage or $3,300 for family coverage in 2025.

'When I Was Older': Illuminating retirement planning

The evolution of the employment market and compensation trends suggest that few Gen Zers will have a pension upon retirement.

Independent contractors and gig workers do not have the benefit of an employer-sponsored 401(k) plan or company contribution match. Therefore, this group may have to consider self-created retirement accounts.

In addition to the Roth IRA and HSA mentioned above, a SEP IRA and Solo 401(k) are also good options. The type of account will depend on your income level, contribution amount and your financial circumstances.

Regardless of the vehicle, it is important to be vigilant and make regular and consistent contributions. Without the (often) forced discipline of an employer-sponsored plan, where contributions are automatically drawn from a regular paycheck, the onus is on the individual to ensure proper funding.

'Save Your Tears': Understanding debt management

The rising cost of education has left many Gen Zers with significant student debt. Navigating student loans and other debts requires strategic planning about many factors, chiefly:

Loan awareness. It's essential to understand the terms, interest rates and repayment options of your student loans. Certain loan forgiveness and subsidy programs may be available, depending on your situation.

Although interest rates have risen in the last years, keeping an eye on the prevailing market interest rate is a good idea. If rates do drop, it could present an opportunity to consolidate student debt at a lower rate.

Interest deduction. Not all debt is equal. There is some "good" debt because it qualifies for a tax deduction.

For example, one may deduct up to $2,500 of student loan interest, with income phase-outs starting at $80,000 for a single individual ($165,000 if filing jointly) in 2025. The availability of a tax deduction reduces the effective cost of the debt.

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In contrast, interest on "bad" debt, such as credit card debt, is not tax-deductible. If cash flow is an issue, then repaying non-tax-deductible debt should be a priority.

'Truth Hurts': Prioritizing financial literacy

In this age of information overload, discerning accurate financial advice is vital.

Many young people in my kids' generation get their news and information from social media. Consider the rise of the so-called "finfluencer" — a social media influencer who offers financial-type advice.

Many apps and robo-financial platforms also provide basic financial information. If all else fails, there is also ChatGPT, which is readily available to answer almost any question. There is no shortage of "advice" one can get on this topic.

Financial literacy is more than knowing definitions — it is about creating an understanding about how financial rules and strategies apply to your situation.

It is, therefore, vitally important to verify information through reputable sources and consult with (human) professionals to understand the nuances when necessary.

I often remind young adults of a phrase I learned early on in my career … you don't know what you don't know. That is why it is critical to question what you read and see, verify information with trusted sources and seek out advice with a critical eye.

The bottom line for those in Gen Z? With challenges come opportunities.

Like all previous generations we discussed in this series, Gen Z will navigate the complexities of modern finance and find their own levels of growth and stability.

Just as that driver's license opens the road to new adventures, smart financial decisions will pave the way to a secure and prosperous future.

Wilmington Trust is not authorized to and does not provide legal or tax advice. Our advice and recommendations provided to you are illustrative only and subject to the opinions and advice of your own attorney, tax adviser or other professional adviser.

Related Content

• Nine Key Tips Self-Employed and Gig Workers Should Know About Retirement
• Median Income by Generation: How Do You Compare?
• 10 Best Places For Gen Z To Buy A Home
• The Wealth-Building Powers of Health Savings Accounts (HSAs)
• A Little-Known Tax-Free Way To Help Pay Your Student Loan

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When most people hear about building wealth, their thoughts often turn to billionaires, mansions or viral success stories.

A select few imagine themselves beating the market and chasing risky investments, while others think that living like a monk for 10 or so years is the right approach.

In reality, building wealth is none of these things. At its core, building wealth means increasing your net worth (your assets minus your debts) over time and doing it in a way that gives you freedom, stability and options.

Financial prosperity is not something someone stumbles upon on a lucky day. Instead, it's a consistent exercise of developing habits, using smart tools and making decisions that push you in the right direction.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

And here's the good news: If you've got 10 years, you've got time.

Today, I'm here to help you create a blueprint for achieving real financial progress in the decade to come. For deeper insight, I've also consulted with a few industry experts, so buckle up and let's get you started on the path to building wealth.

Set a clear financial baseline and direction

Before you can build wealth, you need to know where you're starting from.

Start by answering these five questions:

• How much do I earn each month (after taxes)?
• What are my expenses (fixed and variable)?
• Do I have any high-interest debt?
• What do I currently have saved, and where is it?
• What's my credit score?

A clear view of these financial aspects helps you identify strengths and weak spots in your financial strategy.

"Most people keep disorganized records and have no real sense of their income, expenses or liabilities," says Ian Gardner, the director of Sales and Business Development at Sigma Tax Pro.

"What I've learned after working with countless tax professionals over the years is this: Understanding your financial baseline is the first step to building wealth."

Get comfortable with budgeting

Once you know where you stand, it's time to build the plan for where you want to go. Here is where a well-designed budget comes in.

Oftentimes, we associate budgeting with restricting spending, but you can change the meaning. Don't look at it as cutting expenses, but as giving your money direction.

You can establish whatever budgeting rules work for your needs, but for beginners, I recommend two easy-to-follow rules:

1. The 50/30/20 rule. This is a simple yet effective way to break down your after-tax income:

• 50% for needs (housing, groceries, bills)
• 30% for wants (dining out, entertainment, travel)
• 20% for savings and debt repayment

It's not a rigid formula, which makes it a great starting point. Once you get into the habit, you can tweak your ratios to match your goals, like shifting more into savings as your income grows or wants decrease.

2. The "pay yourself first" rule. This rule teaches you to treat savings and investments as non-negotiable bills. Automate them if you have to.

"Too many people wait to save 'what's left over,'" says Gary Hemming, Owner & Finance Director at ABC Finance, "and there's rarely anything left.

"Experience has taught me that those who consistently grow their wealth aren't necessarily the highest earners. The ones who pay themselves first are. It's a simple habit, but it builds financial discipline and long-term security."

Savings and investments are some of the most powerful wealth-building tools you have. And yet, we often treat them as optional.

For instance, even if about 60% of Americans have some retirement savings, only 30% are confident they've managed to save enough, according to Gallup.

For automation, I strongly recommend ditching any manual methods you're using to track your cash flow. Budgeting apps like YNAB (You Need a Budget) and Empower make it easy to link your accounts, track spending and visualize where your money's really going.

Break the debt cycle

Before you can grow your wealth, you have to identify and stop the financial bleeding, and high-interest debt is often the biggest wound.

Credit cards are the usual culprits here, with average APRs hovering around 20% to 25%, which far outpace what most investments could earn.

If you carry a $5,000 balance at 24% interest and make only minimum payments, you could end up paying more than $7,000 in interest and still owe money years later.

According to an Experian study, Americans carry an average of $6,730 in credit card debt, and more than 40% of cardholders carry a balance month to month. That kind of debt doesn't just hold you back — it quietly erodes your future wealth.

Jason Pack, chief revenue officer at Freedom Debt Relief, puts it well when he says, "High-interest debt seeps into your entire life. We often see clients who delay major life milestones, like buying a home or starting a family, because debt is dictating their decisions.

"Compounding interest and minimum payments can turn a manageable balance into an out-of-control financial spiral before you even know it."

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In short, the best thing you can do to start building wealth is to focus on paying off your debt as fast as possible. If you don't know how, consider consulting with a fiduciary financial adviser.

Earn more, learn more: Your wealth grows as you do

If you're serious about building wealth in 10 years, you can't rely solely on managing spending and reducing debt. These are essential first steps, but you also need to adopt a growth mindset when it comes to income and financial literacy.

This is a lesson you can learn from any successful individual, regardless of their field of interest and goals. Michael Melen, co-founder of SmartSites, emphasizes the importance of having a growth mindset: "This has been one of the most important drivers of success for us. Like most beginners, we didn't have all the answers, but our commitment to learning, improving and staying adaptable helped us move forward. A growth mindset creates momentum."

The same goes for your wealth-building journey. Your commitment to expanding your income capacity and knowledge will be your driver.

Whether you're working a traditional 9-to-5 job, freelancing or building a business, always look for opportunities to increase your earning potential.

That might mean:

• Asking for a raise based on performance and market value
• Learning high-value, in-demand skills (like coding, digital marketing or data analysis)
• Starting a profitable side hustle or freelance gig
• Turning a hobby into a small business

Even modest income boosts, such as an extra $300 to 500 a month, can fast-track savings, debt payoff and investing when used wisely.

Financial literacy is a force multiplier

The difference between building wealth with the extra income you earn and blowing it on things that lose value the moment you take them off the shelf lies in knowing how to grow your money.

"Most people don't realize how limited their financial literacy is until it starts costing them," Shawn Plummer, CEO of The Annuity Expert, notes. "I've seen smart, capable individuals miss out on thousands simply because they didn't understand basic financial tools.

"But once they become aware, there's often a mindset shift. They get curious, take control, and that's when real progress begins. In my view, financial literacy empowers anyone at any age."

Learn how compound interest works. Understand risk and reward in investing. Get clear on taxes and how to legally minimize them. The more you learn, the more confident (and profitable) your choices become.

You don't have to go back to school for this, but you should consider looking into reliable courses, certifications and talking to personal finance experts. Sure, one hour with a financial consultant is more expensive than listening to respected podcasts, but these are high-return investments in yourself.

The $500 you spend today may give you the knowledge and confidence to earn $5,000 more next year.

At the end of the day, wealth-building isn't just about what you do with your money — it's about who you become in the process.

Assess your current situation. Cut off debt. Level up your income. Level up your knowledge. And watch how quickly your financial future transforms.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Eighty percent of Americans are concerned about affordability of everyday living costs regardless of income level, according to consumer research from Equitable.

And that was before the stock market took a plunge and tariffs shot up, both of which could kickstart another period of high inflation.

With key purchases and even necessities increasingly out of reach, going into debt might seem likely.

It's incredibly common already: According to TransUnion's Q4 2024 Quarterly Credit Industry Insights Report, American households had an average of $263,923 in mortgage debt, $24,373 in auto loan debt, $6,580 in credit card debt and $11,607 in personal loan debt, not to mention student loans or medical debt.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

The problem? This debt can spiral out of control as interest payments pile up, making loans more challenging to pay back and credit harder to access. After all, Fortune reports, nearly 1 in 5 Americans have maxed out their credit cards.

According to the New York Fed, almost two-thirds of credit cardholders carry debt month over month, paying an average of 23% in interest — meaning these purchases are ultimately far more expensive than the sticker price.

While it might seem like a tough time to manage debt, the reality is that this is a crucial moment to get it under control. In the long run, handling debt effectively offers financial freedom, flexibility and the ability to weather hard times and enjoy your hard-earned money.

Here's how to get started.

Step No. 1: Avoid unnecessary debt

Steering clear of unnecessary loans might seem obvious, and it may not feel like helpful advice when you're trying to manage your existing debt. But especially when times are tough, it's worth remembering that just because you can access a certain amount of credit doesn't mean you should.

Consider what you actually need vs where you can cut costs.

For example, if you're looking to buy a house in the next few months, you may hear lenders refer to the "30% rule," which recommends that your monthly housing payment should not exceed 30% of your gross monthly income.

If you make $10,000 a month before taxes, you might think this means your budget is $3,000 a month and look at property that fits that price range.

A safer approach, however, would be to set a smaller budget that meets your needs, even if it means not getting everything you may want.

Instead of searching with the maximum allowable budget, look at properties with monthly payments that equal just 20% of your net take-home pay (or about $1,500 in this example, assuming a $7,500 monthly income after taxes).

The extra cash you save by avoiding unnecessary debt will not only give you financial breathing room, but also can enable you to pay back other debts.

Step No. 2: Calculate with clarity

To get a handle on how to repay your debt, you need to know exactly what you owe and when.

Assemble specific information about your balances, the interest rates on your loans and the terms of said loans. Calculate how long it will take to pay off your loans at the minimum monthly amount and how much interest will be paid to the lender under this framework.

If you're able, try to restructure your debt. Work with your lenders to see if you can get a lower interest rate. You should also consider whether consolidating or refinancing your debt saves you interest payments over time.

Once you have this information in hand, prioritize:

• Mathematically, debt with the highest interest rate should be paid down first to minimize the overall amount you will pay in interest.
• Emotionally, you can also consider attacking the debt with the lowest balance first, so you have a quick win to sustain you.

Whichever route you choose, you should calculate how much you are able to put toward repayment every month and commit to that plan.

Step No. 3: Make payments and boost income

Once you've done the calculations and finalized your payment plans, the next part is easy (at least on paper): Pay back your debt.

If you can, look for opportunities to boost your income, too, be it through extra hours at work, side hustles or a part-time job. If you receive bonuses or gifts, resist the temptation to buy something you don't need.

Instead, put that amount toward repayment. And if you're really ready to go the extra mile to become debt-free, you can even consider downsizing your home (including by selling and moving to a cheaper rental) or downgrading your car.

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Putting even a little extra money toward your repayment efforts each month can make a big difference.

For example, if you have a $10,000 credit card balance with an 18% annual rate, it will take more than 15 years to pay down that amount (and you would pay nearly $19,800 in interest alone) if you paid $160 a month.

But if you paid an additional $50 a month? You would pay off that debt in half the time — a little over seven years — and would save about $12,000 in interest. It adds up.

Remember, whatever amount you pay, make sure it's at least enough to cover the interest.

All too often, people simply pay their card's minimum payment amount without realizing it might not be sufficient to cover the accrued interest. At that rate, they'll never pay off the balance.

Short-term pain, long-term gain

Paying down debt will require short-term sacrifices, and it can take an emotional toll. But when times get tough, just remember: You're securing a debt-free future and your financial freedom.

I promise it'll be worth it.

This article, which has been written by an outside source and is provided as a courtesy by Stephen B. Dunbar III, JD, CLU (AR Insurance Lic. #15714673), Executive Vice President of the Georgia Alabama Gulf Coast Branch of Equitable Advisors LLC, does not offer or constitute, and should not be relied upon, as financial, investment, debt management or legal advice. Equitable Advisors LLC and its affiliates do not make any representations as to the accuracy, completeness or appropriateness of any part of any content hyperlinked to from this article. Your unique needs, goals and circumstances require the individualized attention of your own tax, legal, debt management and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors LLC and its affiliates do not provide tax or legal advice or services. Stephen B. Dunbar III offers securities through Equitable Advisors LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN), offers investment advisory products and services through Equitable Advisors LLC, an SEC-registered investment adviser, and offers annuity and insurance products through Equitable Network LLC (Equitable Network Insurance Agency of California LLC). Financial professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. AGE-7957140.1(05/25)(exp.05/29)

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Editor’s note: This is the third article of a series about wealth planning for different generations. Part one is Talkin' 'Bout My Generational Wealth: Baby Boomers, and part two is Come as You Are: Wealth Management for Gen X. Part four will address financial planning for Generation Z.

Just as a great club DJ crafts a mix that transitions smoothly between tracks, effective wealth management for Millennials involves navigating a landscape marked by a mix of modern challenges and rebounds.

For a primer on how to craft a great music playlist, I recommend watching the movie High Fidelity.

The Millennial generation, also known as Gen Y, was born from 1981 to 1996. They are now 29 to 44 years old and find themselves in the midst of the wealth accumulation phase of life.

This article, the third in a series drawing inspiration from iconic songs, moves from the grunge of Nirvana to the digital beat that has defined a generation shaped by early economic upheaval.

Using the sounds of our time, I have a few recommendations to keep the music hopping and make this time of life an important period of wealth creation.

'Rolling in the Deep': A dark economic backdrop

The first song of a playlist is important, and this playlist’s first song is pretty dark.

This generation’s entry into adulthood accompanied the 2008 financial crisis, which echoed the somber tones of Adele’s "Rolling in the Deep" — where opportunities for growth and prosperity seemed deep in the abyss.

Just as this age group was graduating from college and entering the workforce, the market downturn of the financial crisis disrupted early career trajectories, which in turn delayed wealth building and stability.

Despite technological advancements and economic recoveries, real wage growth has not kept pace with inflation, widening the gap between financial expectations for adulthood and reality.

The relative wage stagnation has forced many to face the grim music of financial instability, delaying this generation from advancing from saving to investing.

'Can’t Hold Us': Strategic financial beats

Despite a slower start and continual economic uncertainties, the second song on Millennials’ playlist, by hip-hop duo Macklemore & Ryan Lewis, will help improve the mood a little.

Using the high-energy song “Can’t Hold Us” as motivation, sound financial planning can help this generation push forward.

Foundations of financial planning. Effective financial planning for Millennials involves a comprehensive understanding of both income and expenses. It's crucial to create a budget that accommodates longer-term savings goals, while still managing day-to-day expenses.

This generation also needs to consider how they can use financial planning tools and technology to better track their progress and adjust their plans in real-time.

Navigating homeownership. The impact of past economic instability has left many Millennials cautious about buying that first home. Post-Financial Crisis, higher housing prices, coupled with more stringent lending standards and heightened mortgage interest rates, have meant that many in this generation may delay or forgo home purchase.

For those opting out of immediate homeownership, investments in real estate investment trusts (or REITs) may provide a less burdensome way to benefit from real estate appreciation and income without the direct challenges of a significant down payment and mortgage payment.

Emergency funds. Creating an emergency fund is essential for mitigating risks associated with sudden job loss or unexpected financial expenses. This fund acts as a financial buffer that can help maintain stability during economic downturns or personal crises.

For Millennials, who value security but may face more frequent career transitions, having an emergency fund of at least six months is a critical component of a sound financial plan.

Debt and cash management. With student loans being a significant burden, understanding how to manage and prioritize different types of debt is essential for financial health. Millennials should focus on paying down high-interest debts first, as these are costlier over time.

Knowing how to leverage debt effectively — such as choosing when to refinance or consolidate — can also lead to significant savings and better credit scores.

Some debts are also better than others when taking into consideration the possibility of potential tax deductions, which could enhance your bottom line.

Remember: Money is fungible, so be smart about which debt to pay down first.

Education savings. For those with young children, it’s never too soon to start saving for the next generation.College Maximizing tax-preferred savings vehicles like 529 plans can greatly reduce the future burden of education expenses.

By starting early, Millennials can take advantage of tax-free, compounded growth, making it easier to manage higher-education costs for their children.

Retirement savings. Given this generation is expected to not only live longer, but also work longer to enjoy a well-funded retirement, Millennials need to be strategic about their retirement planning.

This involves not only saving but also investing wisely to ensure that their retirement funds can withstand longer periods of inflation and potential market fluctuations.

A diverse portfolio that includes a mix of equities, bonds and other investments can help achieve the growth needed to support a longer retirement.

'Count on Me': Young families require estate planning

Last up for this playlist: Can it be anyone but Bruno Mars?

In addition to securing one’s financial future with a sound estate plan, this generation also needs to start thinking about their families’ future — and recognize that there are others who are counting on them for support — financial, emotional and otherwise.

Many Millennials have started families and have small children. While their assets level may not be at the point where significant and complex tax planning is necessary, please keep in mind the following “musts” for families with young kids:

Guardianships. At this stage in life, the most critical part of an estate plan is arguably naming a guardian for your minor children. Without a properly executed will in place naming a guardian, this decision would be determined by the courts.

In most cases, interested parties, including family members or friends, will likely step in and petition the court to be appointed as guardian — but this would cause unnecessary delays and uncertainty at a time when stability for young children is most needed.

This is such an important decision and provision in the will that I often advise clients to name at least two layers of successors should your first and second choice not be able to serve.

Risk mitigation. From a risk mitigation perspective, life insurance is a critical component. If a parent were to pass away and his/her income is cut off, would there be enough of a reserve to take care of the family going forward?

Here is where a simple term insurance policy may be helpful. The premiums are relatively inexpensive when the insured is young and healthy. I often get asked, how much insurance coverage do I need? That depends on what problem you’re trying to solve.

One recommendation is to identify a financial need, consider its associated time horizon, and then back into the number.

For example, if you’re looking to have enough insurance coverage to pay off your mortgage and/or college tuition, what is the amount you need today, assuming a reasonable rate of return, that would cover your mortgage and your children’s future college expenses?

Once you have the amount in today’s dollars, then you can price out how much those premiums would be and adjust from there to fit your budget.

Millennials and Gen Ys got off to a challenging start. But with proper planning, the future can be as bright as Beyonce’s catchy “Break My Soul,” which talks about finding a new drive, fresh motivation and a new foundation.

Many Millennials have navigated successfully the choppy waters of a post-financial crisis world and moved into the wealth accumulation phase.

No reason that the last song in this generation’s playlist can’t be a great one!

Up next: We move to Billie Eilish and continue with the financial journey of Gen Z, born from 1997 to 2012.

Wilmington Trust is not authorized to and does not provide legal or tax advice. Our advice and recommendations provided to you is illustrative only and subject to the opinions and advice of your own attorney, tax advisor or other professional advisor.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Trying to dig yourself out from underneath a growing pile of high-interest debt can often feel like you’re working hard to defeat something that will never truly end. Once you shovel out a nicely sized hole, a high interest rate fills it right back in, adding a little extra on the top.

Add trying to save money toward your future goals, and you have what seems like an impossible task to achieve. However, it’s a real challenge many people are facing — and one that is possible to overcome.

Whether it's student loans, credit cards or personal loans, paying down debt without sacrificing your long-term financial goals requires a smart, strategic approach.

Here, financial industry experts from Kiplinger Advisor Collective offer tips for how to best navigate this all-too-common obstacle, as well as how to build momentum, reduce financial stress and make meaningful progress without putting your future on pause.

Boost your income
“One key tip for paying down high-interest debt while saving is to boost your income beyond the interest payments. Use skills or side hustles to generate extra cash, directing it to debt first and then savings. This works because exceeding the interest rate accelerates debt reduction, freeing up funds faster for future goals without sacrificing savings momentum.” — Dr. Clemen Chiang, Spiking

Try the 'debt snowball' method
“Use a debt repayment strategy like the debt snowball method: Pay minimums on all debts, but throw extra cash at the smallest balance first. Once that balance is paid off, roll that amount into the next debt. Meanwhile, contribute enough to get a 401(k) match and build a small emergency fund. This keeps you motivated, eliminates high-interest debt and ensures you're still growing wealth!” — Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management

Lower your interest rates
“One powerful strategy is to reduce your interest rates. Refinancing a mortgage from 7% to 5% or transferring credit card debt to a lower-rate card saves money instantly and accelerates how fast you attack the principal. It’s not just about paying — it's about paying smart. Lower rates create a margin to invest and build for your future while still knocking out debt.” — Justin Donald, Lifestyle Investor

Follow the 50/30/20 rule
“Implement the 50/30/20 rule: Allocate 50% of your income to needs, 30% to wants and 20% to debt repayment and savings. If possible, direct financial windfalls (for example, bonuses and tax refunds) toward high-interest debt while maintaining steady retirement contributions. This balances debt reduction with future financial security, preventing lost investment growth.” — Greg Welborn, First Financial Consulting

Ensure you're paying down your actual balance
“Use a balance transfer credit card to avoid paying interest for up to 21 months. This way, your entire monthly payment goes toward reducing your actual balance, and nothing is wasted on interest fees, so you pay debt down faster. Compare balance transfer cards to find the option with the longest no-interest term that meets your needs and credit rating.” — Andrea Woroch, Woroch Media Inc. / Andrea Woroch

Leverage the 'avalanche' method and automation
“Use the debt avalanche method by listing your debts from the highest to lowest interest rate and then attacking the most expensive one with every extra dollar you can spare while making minimum payments on the rest. At the same time, automate putting a small, consistent amount into a savings or investment account. This way, you’re not just reacting to financial pressure but also taking proactive steps toward the future.” — Zain Jaffer, Zain Ventures

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Many people were caught off guard when inflation surged in 2021 and 2022. And though things have cooled substantially since then, the impact was (and still is) painful for some.

It’s hard to prepare for such a significant surge in prices across such a wide spectrum — from gas and groceries to utilities and housing costs. (And, let’s face it, we had gotten used to the inflation rate hovering around 2% for several years before it spiked to 9.1% in June 2022.)

But the reality is inflation should always be a factor when it comes to planning your finances.

Even when inflation is low, you can expect the cost of goods and services to rise over time and affect your purchasing power.

This is why it’s essential to have a financial plan that helps you keep pace with inflation — whether you’re a young professional working and saving for your future or a retiree trying to get the most from your savings.

Here’s a look at how inflation can affect both your pocketbook and your portfolio, along with practical strategies to help you stay financially resilient.

Erosion of purchasing power

One of the most immediate effects of inflation is the reduction of purchasing power. As prices rise, the same amount of money buys less. That can put a financial strain on just about everyone, especially low- or moderate-income workers and retirees on a fixed income.

Both younger workers as well as retirees and soon-to-be retirees can benefit from thoughtful budgeting, cutting out unnecessary expenses and carefully weighing their priorities before making major purchases.

Younger workers may also want to focus on increasing their earning potential through skill development, career growth and strategic investing.

Impact on investments and savings

Inflation can erode the real value of savings, which makes it crucial to invest in assets that have the potential to outpace rising prices. Market volatility can make “safe” investments (CDs, savings accounts, etc.) seem more appealing to investors of all ages.

But you may actually be losing money if those investments can’t keep up with inflation. A carefully planned portfolio mix that aligns with your time horizon and risk tolerance can help you stay secure while also earning enough to combat rising costs.

For example, investing in diversified and long-term growth assets, including equities and real estate, can help younger workers grow their money for the future.

Signing up for your workplace retirement plan also is an easy way to make investing automatic — and you can take advantage of your employer’s matching contributions to accelerate your savings.

Contributing or converting to a Roth IRA can also be a smart way to mitigate both tax and inflation risk in retirement.

Meanwhile, retirees and soon-to-be-retirees should consider a diversified portfolio that might include dividend-paying stocks, Treasury inflation-protected securities (TIPS) and other income-generating assets designed to keep pace with inflation.

Effects on the broader economy

Although the effects of inflation may feel very personal when you’re paying for your groceries or checking your bank balance, inflation also influences the economy as a whole.

When inflation rises, central banks often respond by increasing interest rates to slow down excessive price growth. Higher interest rates can make borrowing more expensive for businesses and individuals.

This is why, when possible, younger workers should comparison-shop for the best loan offers and lock in lower interest rates. This can help with the cost of buying a home or car or starting and growing a business. Keeping your credit in good standing can help you score the lowest rates.

Retirees and soon-to-be retirees should build a balanced portfolio that can withstand changes in interest rates and inflation. A financial professional can help stress-test your portfolio to determine if you’re prepared for retirement risks like market volatility and inflation.

Dealing with debt in an inflationary environment

While inflation increases the cost of goods and services, it can also reduce the burden of certain types of long-term debt. Those with fixed-rate mortgages and student loans may benefit, for example, but retirees need to be cautious about taking on new debt.

Younger workers with too much debt may want to prioritize paying off high-interest credit card debt while maximizing the long-term benefits of low-interest, fixed-rate loans.

Retirees and soon-to-be retirees can also benefit from managing their expenses and keeping credit card balances low, as well as avoiding excessive borrowing that could strain their retirement income.

Inflation-proofing your plan for the long haul

Investing and saving wisely, managing debt strategically and building a reliable income stream you can live on now and in the future can help ensure long-term financial security.

If you don’t know where to start, a financial adviser can assist you with creating or assessing your overall financial plan. They can also help you identify and implement appropriate inflation-fighting strategies.

Inflation is a natural part of the economic cycle, but it doesn’t have to derail your financial goals. By taking proactive steps to mitigate its effects, both retirees and those who are still working to build their wealth can navigate inflationary periods with confidence.

Kim Franke-Folstad contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Financial planning isn’t just about making money — it’s about making smart choices at every stage of life. As a financial adviser, I’ve seen firsthand how the right decisions (and the wrong ones) can shape your future. Every decade has financial challenges, and avoiding common missteps is as important as growing your assets. Here are some of the biggest financial pitfalls to avoid in your 30s, 40s and 50s.

Your 30s: Building a strong foundation

Your 30s are often a time of career growth, major life milestones and increased financial responsibility. The decisions you make now will set the tone for decades to come. According to Ascensus, starting to save at age 25 instead of 35 can result in nearly double the retirement savings by age 65. Pitfalls to avoid:

Neglecting retirement savings

It’s tempting to put off saving for retirement while managing student loans or a mortgage, or starting a family. However, delaying contributions means missing out on compound growth. If your workplace offers a 401(k), take advantage; if they offer a company match, even better. Save at least what they are willing to match and target an overall saving of 15% to 20% of your gross paycheck.

At this age, you can still enjoy the magic of compound interest, so be sure to take advantage of that while you can.

Overspending on lifestyle upgrades

A higher income often leads to lifestyle creep — bigger homes, nicer cars and expensive vacations. While enjoying your hard-earned money is important, avoid stretching your budget too thin. Prioritize savings and investments before increasing discretionary spending and spend some time defining your goals and what they mean for you.

Relying too much on debt

Credit card debt, car loans and personal loans can add up quickly, eroding wealth-building potential. Have an aggressive plan to eliminate those loans, starting with the highest interest rates first. Consider automating your payments so you never miss one. Do your best to avoid taking on any additional debt by creating a budget that works for your lifestyle.

Your 40s: Maximizing growth and stability

Your 40s should be a time of peak earning potential, but financial missteps can now lead to long-term consequences. Use this time to take proactive steps towards your finances to make sure you’re on track to enjoy your golden years. Pitfalls to avoid:

Not increasing retirement contributions

If you started saving in your 20s and 30s, great. But as your income grows, so should your retirement contributions. If you get a raise, consider increasing your savings by the amount of your raise or most of it. This also helps prevent overspending and lifestyle creep. If your workplace 401(k) allows employees to enroll in automatic contribution increases, sign up, and your savings will automatically increase by a certain percentage (often 1%) each year.

Not protecting your assets

As you build wealth and acquire valuable assets like a home or a car, it’s crucial to help safeguard them against unexpected risks. Without appropriate property and casualty insurance, you could face significant financial losses due to accidents, natural disasters or lawsuits.

Ensure you have adequate coverage and appropriate policy limits to protect yourself. If you own a home, consider adding an umbrella policy — an extra layer of liability protection that extends beyond the limits of your auto insurance and homeowners insurance. This added coverage can help shield your assets from potential costly legal claims.

Not getting serious about having an estate plan

Many people assume estate planning is for older individuals or people with significant assets. However, unexpected events happen all the time. It’s important to have a will, power of attorney and advance health care directive. These documents will select who will be in charge and set the rules for the distribution of your assets.

They also allow you to nominate guardians for your children should something happen and allow you to choose loved ones to make financial and medical decisions on your behalf.

Your 50s: Preparing for retirement

With retirement getting closer, your 50s should be about solidifying your financial security. Here are some things that are sometimes overlooked. Pitfalls to avoid:

Underestimating healthcare costs and longevity

It’s no secret that people are living longer lives, and retirement can be more dynamic and active than it was for older generations. However, what may not come to mind right away is that we need to prepare financially for these longer lifespans and potential health-care costs, which can sometimes reach hundreds of thousands of dollars.

To help stay ahead and prepare for future medical costs, explore options like health savings accounts (HSAs), Medicare planning and long-term care insurance.

Taking on too much risk — or not enough

Some investors in their 50s take excessive risks in an attempt to “catch up” on retirement savings, while others become too conservative. A well-balanced portfolio should reflect your risk tolerance, time horizon and retirement goals.

A financial adviser can help you adjust your investment strategy accordingly. And don’t forget to rebalance your portfolio periodically, especially when there are significant market movements.

Not having a clear retirement plan

Retirement isn’t just about reaching a certain number in savings — it’s about knowing how and when to withdraw assets efficiently. Failing to plan for taxes, withdrawal strategies and Social Security optimization can leave money on the table.

According to retirement plan provider Fidelity Investments, the rule of thumb is to save 10 times your income if you want to retire by age 67 — including anything in a retirement account and investments. Work with a financial professional to create a road map for sustainable retirement income. Review your retirement plan to help make sure you’re on track for your goal date. Crunch the numbers and figure out what you’ll need to live on during retirement and assess how close you are to that number.

If you determine that you’re behind, that’s OK — there’s still plenty of time to correct. Involve your financial adviser during life milestones for guidance to help with a smooth transition.

Every decade contains different financial pitfalls. But if you’re proactive, disciplined and strategic, you can take steps to avoid them and build a financial future designed to provide security, flexibility and peace of mind. No matter where you are in your financial journey, the best time to make smart money decisions is now.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

As we look to the rest of the year ahead, it’s a great time to revisit your finances and position yourself to make the most of your workplace benefits and broader financial life. We all know money can be a source of stress — especially after holidays — but your finances can also become a source of empowerment by taking thoughtful steps today to build for the future you want.

First, consider the goals you want to prioritize this year. According to the CFP Board’s Debt and New Year's Resolutions Report, the top financial goals of Americans in 2025 are to reduce debt (42%), save for a major purchase such as a car, home or vacation (21%) and work toward long-term goals such as retirement planning (14%), building an emergency fund (11%) and developing or updating a financial plan (7%).

Prioritizing your financial well-being can set you up for financial success in the long run, but like any new habit, it will take time and practice. So, here are three ways to help yourself make the most of your finances in 2025 — and, in turn, help you move toward a more secure financial future.

1. Holistically review the year ahead

Between gifts, celebrations and travel, it can feel difficult to get back on track financially after the holidays. If you overspent, don’t be too hard on yourself. Take a deep breath and move forward. As a first step, review any holiday spending, gifts and bonuses, as well as income sources, debt payments, credit cards and bills.

If you aren’t sure how to track your monthly income and expenses, consider using online tools such as debt calculators, retirement calculators and budgeting apps. You likely have access to these tools through your workplace. If not, you may also be able to create a budget through your credit card app.

Next, separate fixed and variable expenses. Think about crucial payments like housing and groceries vs nice-to-haves, such as taking a vacation. One easy method is the 50-30-20 budgeting rule: 50% of your budget would cover needs, 30% wants, and 20% savings and investments. Break it down by month, paycheck, or any way that’s compatible with your lifestyle.

Assess what your long-term financial goals are and create a timeline of when you’d like to achieve them. For example, are you planning to buy a home? Is your family complete, or do you anticipate having more kids? Are you setting aside money for college? What age would you ideally like to retire?

No matter how distant your long-term goals seem, it’s crucial to invest in your financial future at every stage of life. The longer you invest, the more you’ll allow your returns to compound — and potentially build in your nest egg by the time you retire. According to our latest Wealth Management Pulse Survey, most people are primarily saving in the long term for retirement (71%), an unknown emergency (53%) and simply because it's the right thing to do (45%).

2. Take advantage of employer benefits, including educational resources

The workplace is an accessible way to invest in your financial future: According to our State of the Workplace Financial Benefits Study, most employees (89%) consider workplace financial benefits essential in meeting long-term financial goals. Take the time to understand any workplace benefits that are available to you — including health insurance, retirement benefits such as an employer 401(k) match, life insurance, disability insurance and more.

Assess your current financial status, including any wiggle room to allocate paycheck deductions and savings toward different benefits. For example, if your company offers a retirement benefit such as a 401(k), enroll — and make sure to max out any available employer match, if possible. If you’re planning to pay for a college education, take advantage of resources such as tuition reimbursement or workplace 529 programs. From there, you’ll be better able to identify areas where you can apply workplace benefits more effectively.

Your workplace may also offer additional benefits, such as discount programs, an emergency savings account match or equity compensation, which can potentially help you cut costs to free up your budget and build savings or investments over time.

Also, use any educational resources that your employer provides so you can better understand how your workplace benefits can help you address various financial challenges. Many companies offer webinars, events and on-demand content as a part of their benefits throughout the year. Even if you’re a veteran employee who has been around for a while, it’s usually worthwhile to participate so you don’t miss out on any new opportunities, updates or helpful information.

3. Prepare for the future and the unexpected

Keep in mind that life is unpredictable; one of the easiest ways to prepare for whatever life throws your way is to set money aside for emergencies. If you don’t have an emergency fund already, consider setting aside even $10 a month to start building in case of a rainy day. An emergency fund can help keep you financially afloat in unforeseen life circumstances, such as a change in your family’s employment situation or a medical emergency.

A good baseline is to set aside three to six months’ worth of living expenses in a separate, easily accessible account — such as a savings account, money market account or CD account. But your lifestyle can change over time, so if you have an emergency fund make sure it’s still adequate for your current needs. Ask your employer if they offer an emergency savings account match or any additional savings, budgeting or financial planning support.

If you aren’t sure where to start, talk to your employer: Our research shows nearly nine in 10 HR leaders offer financial wellness programs to help counterbalance work-life stressors. Your employer may be able to help answer questions, provide information to help you take advantage of your workplace benefits and even direct you toward additional resources to help you navigate your financial life. Additionally, you may have access to a financial coach or advisor through your employer’s financial wellness or retirement program.

Revisiting your finances near the start of a new year may be overwhelming, and new goals work only if you stick to them, but you won’t regret investing in your financial future.

This material has been prepared for informational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

This material may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the material refers to website material of Morgan Stanley Wealth Management, the firm has not reviewed the linked site. Equally, except to the extent to which the material refers to website material of Morgan Stanley Wealth Management, the firm takes no responsibility for, and makes no representations or warranties whatsoever as to, the data and information contained therein. Such address or hyperlink (including addresses or hyperlinks to website material of Morgan Stanley Wealth Management) is provided solely for your convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through the material or the website of the firm shall be at your own risk and we shall have no liability arising out of, or in connection with, any such referenced website. CRC# 4169466 1/2025

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Over the past decade, I’ve worked with all sorts of people preparing for retirement. What’s interesting is I cannot find a reliable correlation between income received from employment in relation to how much someone has saved. Some have higher incomes with little savings for retirement. Some have never made more than a modest income while living a happy life and have saved more than seven figures for retirement.

Everyone’s situation is different. The financial variables are endless. However, over the years, I have noticed a theme between those who have enough saved for retirement (based on their expectations) and those who do not have enough.

To be clear, the word “enough” in relation to retirement savings is a very subjective term and should be assessed on an individual basis. Also, I want to clarify that in each situation, the individual or couple made more than their total basic expenses. There is a tipping point everyone needs to reach before they can afford to start saving for retirement. However, once a person crosses that threshold, based on what I have seen, their ability to save for retirement seems to have more to do with how they manage their cash flow than anything else.

The following are three common cash flow mistakes I have noticed many people make. These mistakes can hurt your ability to enjoy your life in the present while also saving for retirement.

Mistake No. 1: Automating your budget

When you automate your budget, you can create cash flow blind spots. Many of my wealthiest clients seem to have one common behavior: They manually track every transaction. They know exactly where their money goes. They notice when certain expenses, such as auto insurance, utilities or certain subscriptions, go up. They are not old-school because they are older. They do not resist using apps because they hate technology. They manually track everything because they want to know where their hard-earned money is going.

Manually categorizing and sorting every transaction raises your cash flow awareness, which allows you to make more informed decisions. You cannot fix problems if you don’t know what they are. Manual categorization is key to helping you have more control and awareness over your monthly cash flow.

If you don’t want to use a spreadsheet to manage your budget, consider using an app called Cash Flow & Capital. It’s the only one I have found that automatically uploads your transactions while allowing you to manually categorize them within your custom spending plan.

Mistake No. 2: Not shopping around

It is easier to assume the price you pay for a specific service is the best price and that you don’t need to check it again. The reality is you have a lot more power over price than you may realize.

For example, have you ever considered switching phone carriers? It may seem scary at first. However, when you understand the difference between companies like Mint Mobile and AT&T or Visible and Verizon, you may realize that you are paying for more features than you need. Sometimes, it may make sense to switch and save money.

Another example is shopping for insurance. This is tricky because insurance is not an investment. When you pay more, you typically have more coverage or benefits. This is why you hear certain commercials warning you about “cut-rate insurance.” That said, you get to decide what you are willing to pay for and what you don’t want to pay for.

Shopping around can make a big difference in your savings. Let’s say you make a few adjustments and end up spending $250 less per month. If you invest that $250 per month ($3,000 per year), assuming a 7% growth rate, you’d have about $41,000 after 10 years or $122,000 after 20 years. If you identified and adjusted $1,000 per month of unnecessary expenses or inefficiencies, that could mean $165,000 in 10 years or $491,000 in 20 years.

If your quality of life is not negatively affected by making a few adjustments, then why not take the time to shop around? It’s not just about saving for retirement. It’s about having more control over how you spend your money.

Mistake No. 3: Holding on to too much bad debt

Not all debt is bad. In my opinion, debt that is associated with an asset that can appreciate in value, like your home mortgage, can be a good thing. Another way to say that: You appreciate debt that is tied to something that appreciates in value.

Bad debt, in my opinion, is any debt associated with something that depreciates in value, like a car. Bad debt also includes credit card debt because it doesn’t really have any value tied to it. Another way to spot bad debt is any debt that has a high interest rate. As a rule of thumb, if your interest rate is 1.5 times more than the 10-year Treasury yield, your interest rate may be a little higher than is desirable. Consider paying down that debt as fast as possible or refinance it at a better rate.

Many times, we rationalize the payments on bad debt without realizing how much of our cash flow is taken up by interest. If you have debt that is tied to something that is losing value or has a higher interest rate, pay it off as fast as you can. Free up your cash flow so you can be more productive with your money.

Conclusion

To quote Benjamin Franklin, “Beware of little expenses; a small leak will sink a great ship.” Sometimes, the answer isn’t more income — it’s better cash flow management. You cannot solve problems you do not know exist. Track your cash flow. Identify any imbalances. Create systems that can guide you on your path to success. If there’s a spending addiction, allow your cash flow management system to help you spend within your means as you heal along the way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

There’s a lot of talk about debt and whether it is good or bad. As a general rule, when discussing money matters or, really, anything in life, whenever superlatives are used, something is probably missing from the conversation. The reality is debt is just a tool that allows you to use other people’s money for your benefit (or detriment).

This article is intended to clarify when it may make sense to take on debt and when it may make sense to avoid debt. In addition, I hope to offer some clarity on two types of debt that seem to be in the news a lot: mortgages and student loans. My intention is to teach the underlying principles of debt so you can make healthier personal financial decisions.

What is good debt?

Good debt, in my opinion, is any debt that is used to acquire an asset that is expected to appreciate in value. In other words, you appreciate debt that is associated with something that appreciates in value (e.g., your home).

Second, to qualify as good debt, it must have a reasonable interest rate. As a rule of thumb, I like to think that a reasonable rate would be anything around 1.5 times the current 10-year Treasury yield or less.

Lastly, good debt does not compromise your overall quality of life. That means you can afford to make payments comfortably. It is important to live within our emotional and economic limits. That means your debt does not stress you out.

What is bad debt?

Bad debt, in my opinion, is any debt used to acquire a depreciating asset. Bad debt can also be any debt that has a high interest rate (think credit card debt). Once you take on bad debt, it becomes challenging to pay off.

Bad debt can overwhelm your budget or spending plan while preventing you from being able to save for the future. Too much of a good thing, even if it may look like “good debt,” can be bad. If you have bad debt, pay it off as fast as you can. Consider cutting back on dining out, going on vacation or taking on any other non-essential expenses so you can free yourself from the influence bad debt has over you.

Find a system that can help you pay it off as fast as possible. If you want an app that can help you get rid of bad debt while gaining a better understanding of how to manage your cash flow, I’d recommend Cash Flow & Capital. It was designed to help people develop a healthier relationship with money.

Sometimes, it can be difficult to determine if taking on debt is a good thing or a bad thing. Here are a few examples that may be able to help you understand where the line is.

Mortgage debt

Real estate can be a wonderful investment. Whether you are looking to buy a home for yourself or to rent to tenants, there’s a good chance you don’t have sufficient cash for the purchase. That’s where mortgages come in.

You need a place to live. That means you are either paying rent or paying a mortgage. Let’s say you have enough of a down payment, but the mortgage payment would still be more than your rent payment. Is it still worth it?

The basic question is, “Can you afford the payments?” If the payment fits in nicely with your overall spending plan, then all is well. If your payment causes you to tighten the belt, then it might not be a good idea.

Over time, you’ll be able to pay down the debt while the home appreciates in value. If you can pay down the mortgage more aggressively during the first few years, it can help you pay off your mortgage significantly faster than had you made the minimum payments.

All things considered, a mortgage often falls under the “good debt” category, especially when you consider rent as the alternative. Also, the home equity you build can be used to buy your next home. Lastly, if you pay off your home before you retire, then you don’t need to be worried about that expense in retirement.

Student loan debt

Another type of debt that I believe could be considered either good debt or bad debt is student debt. Let me explain.

According to the National Center for Education Statistics, a 25- to 34-year-old who works full time and has a high school diploma is expected to make up to $41,800 per year. If that same person were to go to college with the intention of getting, say, an engineering degree, their income potential would increase to $76,000 out of college. As these individuals gain experience, they may be able to increase their income to $130,000 or more.

In this situation, the individual is the asset, or investment, that can appreciate in value. Because their new skill helps them become more valuable in the workplace, they increase their overall earning potential. As mentioned earlier, you appreciate debt that is associated with something that appreciates in value, even if that is you.

Let’s run another example. Let’s say someone wants to go to school to become a teacher. Student debt may make sense if you can get a job where the state pays off your loan for you. Make sure you understand the options available to you and the probability of getting hired. When you take on debt, you take on risk. It is possible not to get hired in the field you desire.

Lastly, let’s discuss a situation where student debt would be considered bad debt. If you wanted to go to school and get a degree in something that may not give you in-demand skills for the workplace, your expected income may only be slightly higher than if you had gone straight into the workforce with a high school diploma.

This may sound harsh, but the reality is some degrees may not give you sufficient or relevant skills to increase your earning potential once you graduate to rationalize the risk or financial burden of student loan debt. In this situation, it would be better to go through school slowly while working at the same time. That way, you can pay as you go without taking on the burden of student debt.

Student debt should also be considered bad debt when the debt is so high that it can’t be paid off in a reasonable amount of time. Even if you are going to school for a skill that is in demand, you can still take on too much student debt.

In my opinion, students should consider student debt as the last resource to help them get through college or trade school. Consider paying for your education by applying for scholarships while working part time or full time. You can also help lower your education costs by first getting an associate degree at a community college before getting a bachelor’s degree or higher at another college.

Conclusion

There are many other forms of debt, good and bad. However, in the end, it is important to understand that debt is nothing more than a tool. When you take on debt, you take on risk. That risk must be rationalized by associating itself with an asset that has a high probability of appreciating in value. All debt should be limited so that it does not overwhelm your personal cash flow and overall quality of life.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When you have extra money, it can suddenly become a problem. Why? Instead of enjoying the windfall, you may face a difficult decision: Should you pay off your debts or invest the money? This is a valid question, and the answer may be: both.

Here's the thing: Investing is optional — you don't have to do it. Debt is a different story. If you don't pay it off on time, the interest adds up and your debt grows. With this big difference between managing debt and investing, the next step may seem clear. Before making any decisions, consider what it means to invest and what it means to have debt.

Investing

You’ve got plenty of investment options — stocks, bonds, mutual funds and more. Want to take it a step further? Consider investing in startups. Right now, industries like artificial intelligence (AI), health care and fintech are booming. Think of startup investing as financially backing an IT team that’s creating an online banking system or a health care app that could lead to potentially serious returns.

However, you should know that the investment market, whatever it is, can be volatile:

• The stock market fluctuates all the time: One day you're up, the next day you're down
• Startups can go over budget early or demand might not materialize for the product

Having a solid investment management strategy is essential. And remember, investing is a long game. Seeing meaningful results can take three to five years or more.

Before you invest, consider first setting aside money in an emergency fund. This should be money in a separate account that will allow you to pay your everyday expenses for three to six months.

Debt payment

Did you know that your credit score can have a huge impact on your financial security? A good credit score (670 or higher) signals to banks, landlords and even employers that you are reliable and trustworthy. A lower score could mean you won’t be considered for loans, rentals or even employment. Your credit score also can affect your insurance premiums.

Your credit score is based on how you manage payments on your mortgage, credit cards and personal loans (such as for your car) as well as the amount of credit available to you and how much you’re using. A person who makes payments late, misses payments or stops paying altogether will have a much lower credit score. A person who makes regular on-time payments and has a lower debt load will have a higher credit score.

Interest rates on credit card debt are usually much higher when compared to what investment returns you could get.

Debt repayment vs investment: Which is right for you?

Here are some ways to manage extra money depending on your financial and personal situation.

For young families with children

Families who are balancing debt and future goals while also finding themselves with some extra money may benefit from:

• Paying off high-interest debt (over 6%)
• Investing a smaller portion of your extra funds (while also paying off debt) in growth-oriented accounts. These could be exchange-traded funds (ETFs) or tax-advantaged accounts such as 529 college savings plans to save for your children's education or a Roth IRA to save for your own retirement.
• By combining both options, you can reduce your debt while also looking to the future with peace of mind.

For people approaching retirement

As you approach retirement age, debt and investments need to be balanced with special care. Consider:

• Paying off debt from cash reserves or investments not tied to retirement savings.
• Using investments and/or savings to cover your living expenses to avoid early reliance on Social Security. Each year you put off claiming your Social Security benefits (until age 70), your check could be 8% higher.
• Getting a reverse mortgage. This option is available to people age 62 and older. To thoroughly understand the benefits and drawbacks of a reverse mortgage, you should discuss the concept with a financial adviser.

For singles

Even when you’re the only one depending on your financial security, it’s key to stay disciplined and consistent. If you have expensive debt — typically high-interest credit cards — start by paying that off. Explore options such as balance transfers or refinancing to lower your interest rates and make repayment more manageable.

Adding a side hustle can also be a smart move, giving you extra income to tackle debt faster while building financial security.

Last but not least

When you have extra money and need to choose between paying down debt and investing, everyone, no matter their personal or financial situation, should consider the following:

• Adjustable interest rates. Credit card debt often has a variable interest rate. That means that when the prime rate goes up, so does the rate on your debt. Usually, the new rate affects only debt that you acquire after the rate increase.
• How you feel matters. Paying off debt reduces stress and gives you a sense of financial freedom. For many people, this peace of mind can outweigh investment returns.
• Compound interest. This is when you earn interest on both the initial investment and any previous interest it has earned, meaning your money is likely to grow faster.

These are some of the considerations to think about if you find yourself with extra money and are trying to figure out whether to pay off debt and invest. You shouldn't take this article as a complete guide, though. It is best to seek the advice of an experienced financial adviser to make sure your money is working for you in the best way possible.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

As 2025 kicks off, many of us are making our resolutions for the new year. But as you ponder your fitness goals or a new skill you want to learn in 2025, you should also make a resolution to improve your finances.

Here are a few financial goals you could aim for in 2025.

1. Find easy ways to save

Many people are struggling to make ends meet due to the high cost of living, making it difficult to save for future emergencies or retirement. More than a quarter of adults in the United States say they have no emergency savings, the highest since 2020, according to Bankrate.

Everyone has different savings goals. Are you saving up to buy a house? Do you want to add more to a retirement account? Or do you simply want to build up your savings? Whichever you choose, you need to start with a plan.

The first thing you need to do is take a look at your budget. Are you spending more each month than you are making? Are there areas you can cut back on? Cancel any unused subscriptions or streaming services that you don’t use. Try making coffee at home and skip the $7 daily latte.

Consider putting money into a high-yield savings account, a certificate of deposit (CD) or a money market account. High-yield savings accounts allow you to grow your money faster than a regular savings account.

Unlike many other investment options, you can easily withdraw money from these accounts if you suddenly need access. The best savings rates for high-yield accounts are close to 5%. That means if you deposit $10,000, you’ll have an additional $500 in one year without doing anything else.

If you’re just starting your savings journey, start small. Put 5% of each paycheck into whatever you're saving towards, this could be retirement savings or an emergency fund. A little is better than nothing. When you feel more comfortable or if you get a raise, you can increase your amount to 10% or 15%.

2. Avoid adding to your debt

A great financial goal for 2025 is to avoid adding any debt. Currently, credit card debt in the United States is sitting at an astonishing $1.17 trillion. The more debt you have, the more interest you are paying, which is money you could be using to pay yourself. Even with recent rate cuts, interest rates remain high, making it harder for people to pay off their debt. This is not only keeping many Americans in debt for longer than they should, but also preventing them from progressing toward owning a home, building up their emergency savings or saving for retirement.

No matter what type of debt you have, you need to have a plan for paying it off. The two most popular strategies for attacking debt are the avalanche method and the snowball method. Using the avalanche method, you pay off the highest-interest debt first and then roll that payment into the next highest debt. The snowball method is where you tackle your debt by balance, from lowest to highest.

3. Improve your financial knowledge

When you were growing up, how much were you taught about money and finances? If you are like most people, it wasn’t much, if any. But don’t panic, it’s never too late to learn something new and improve your financial literacy.

Try reading articles, websites or books dedicated to personal finance. This is a quick and easy way to learn more about topics you might not know much about. Also, look into local organizations or financial firms in your area that may host workshops or webinars on various financial topics.

4. Choose an accountability partner

Just like with any goal or resolution, we’re much more likely to stick to it if you have a partner to tag along with. An accountability partner can check in with you as needed and offer encouragement and advice when you start to slip. Letting others know that you are trying to save money can help you cut back on spending as well.

Instead of friends reaching out to go to dinner, they might offer to host a dinner at their home saving you both money. If you are more of a competitor, try turning this into a game with your partner. Whoever pays off a loan first or saves the most during a certain period, owes the other person coffee.

A financial adviser can be one of the best accountability partners. They can help you with many aspects of your financial picture to outline your goals and ensure you stay on track in 2025.

Drake & Associates is an independent investment advisory firm registered with the U.S. Securities & Exchange Commission. This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may view this report. Neither the information nor any opinion expressed it so be construed as solicitation to buy or sell a security of personalized investment, tax, or legal advice. The information cited is believed to be from reliable sources, Drake & Associates assumes no obligation to update this information, or to advise on further development relating to it. Past performance is not indicative of future results. Registration as an investment adviser does not imply a certain level of skill or training.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Why would a bank take $15,000 out of a client’s account with no explanation or any chance for the client to stop the action?

That’s the question my friend asked herself after receiving a distressed call from her son, an accomplished entrepreneur. What happened next highlights the danger of relying too heavily on credit.

A cautionary tale

My friend’s son has started several successful businesses and worked in various fields, but as an entrepreneur, his income can be cyclical, sporadic and, at times, volatile. He’d called in a rare panic, blurting out information he usually wouldn’t share so freely and confessing that $15,000 had been stolen from one of his accounts.

My friend is nothing else if not a very protective mother bear; she doesn’t necessarily become involved in her son’s escapades, but because he seldom shared this type of information with her, she became concerned. She wanted to know what was going on, and eventually, he shared the story in painstaking detail.

As it turned out, even though he had maxed out all his credit cards while in between business ventures, he’d put together a plan to go to Europe and said he kept an account with $15,000 that was now gone.

When my friend asked how this money had been stolen, he told her it had been taken directly from his account without any warning or explanation.

She asked if the bank was applying it to his credit card debt.

He said that wasn’t possible because the credit card debt had been through a different bank.

She wondered if there was a paper trail proving the bank took the money without his authorization. If so, he could request it be returned to his account.

She kept asking questions until he specified which account and bank the money had disappeared from. The answer took her by surprise because she didn’t even know he had accounts with that bank.

She dug deeper and soon discovered that no, in fact, he did not have a checking or savings account with that bank.

But he did have a credit card. And that card had $15,000 of available credit — the money he’d been “saving” for his trip.

What had happened was not that the bank had stolen his money. When all his other cards were maxed out, his credit score had gone down, so the bank lowered his credit limit. That wasn’t his money, and it hadn’t been stolen; it had never been his to begin with.

No, he insisted. That was his money. He was saving that credit as his only source of income.

But what is income?

Credit doesn't provide an opportunity to save

Income is generally defined by its function: providing consumption and saving opportunities.

I’ve always maintained that credit cards are not an alternative source of income.

While having credit available on a credit card does offer a way to provide ourselves with consumption, it does not offer us a saving opportunity. Much the opposite, in fact, most of the time.

Under certain conditions, credit can offer us a way to leverage our money. If we use our credit cards to make purchases, we will have a clean and easy paper trail of what we’ve purchased and when. Credit cards also offer many perks as incentives compared to other payment methods.

How to use credit cards to your advantage

That said, there are only two ways to use credit cards to your advantage:

• If you pay your card off in full before the end of the billing cycle each month, you will receive your rewards and incentives. It can be easier to pay one monthly bill than to account for each expense.
• Often, credit cards provide promotional offers of no interest or fees on purchases within a specific time if you pay the monthly minimum payments.

Both options are available, but you must understand the specific terms and conditions precisely. Once you exceed these parameters, the interest, fees and penalties are costly because interest is calculated continuously and compounded. Paying the total amount doesn’t eliminate the average daily balance calculations, so it can take several months, with no additional charges, to clear your account.

Credit is not income

Thinking that having credit available means you have another source of income, as my friend’s son had done, is misguided. Income is earned a) in exchange for labor or services, b) from selling goods or property or c) as profit from investing.

Credit is not income.

Just because you have the credit available doesn’t mean you have the income to pay the debt, and the bank lowering your limit doesn’t mean they are stealing from you.

Credit cards are not an alternative source of income.

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The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

The transition from the carefree days of summer into the more structured rhythm of fall and the school year is a great opportunity to reassess and rebalance.

After a season full of vacations, outings and unplanned expenses, it’s normal to feel the effects of a financial hangover. Attaching your “why” to the excesses can help you realize the motivation behind them. You aren’t wrong for wanting to create lasting memories with your loved ones, bond with your friends on nights out or dive deep into hobbies that bring you joy. Don’t kick yourself for overspending. Instead, I think it’s more useful to find ways to fulfill your need for joy and connection in a way that squares with your financial reality.

In any event, you are certainly not alone. Between May 2023 and 2024, the average price of sports event tickets alone jumped from $204.91 to nearly $249.27, according to the U.S. Bureau of Labor Statistics. So, if you had the exact same kind of summer fun as you did last year, it’s safe to say that you had to pay more for it.

Start by telling the truth

All progress starts with truth, so before we can move forward, we need to see where we stand. It’s time to review the numbers. How much did you spend versus what you budgeted? Did you dip into savings or rely on credit cards more than anticipated?

First, review any outstanding debt from summer expenses. If credit card balances have crept up, now’s the time to create a repayment plan to avoid high interest charges. Effective strategies to pay off debt can include the “Avalanche Method,” paying off the debt with the highest interest rate first, or the “Snowball Method,” where you start by paying off the smallest balance first. If your emergency fund took a hit, consider rebuilding a three- to six-month cushion before tackling any discretionary spending. Your goal is to protect yourself from more financial strain down the road.

Again, we’re not trying to beat ourselves up over summer costs that got away from us. Acknowledge the parts of your financial plan that are still on track. Where did you stay on budget or even manage to save a little money? Most budgeting apps allow you to generate reports over time. The more you use them, the more you can identify positive trends. Identify your financial strengths so you can create a plan that aligns with your long-term goals.

Practical steps for rebalancing your budget

With your financial standing clear, it’s time to rebalance or revise your budget. This might involve reworking your budget to better reflect your lifestyle or setting aside money throughout the year for bigger expenses.

Consider setting up a specific “summer fund” within your budget. Allocate a small portion of your monthly income toward this fund so you can establish ahead of time what your spending limit will be. Ideally, you avoid both the financial stress of overspending and the temptation to splurge on impulse purchases. And you don’t have to limit this strategy to summer spending, either. You can do the same kind of early budgeting for the winter holidays too and reap the same benefits.

Whether you prefer a more informal approach or want to use technology to assist with tracking your expenses, the key is to find a system that works for you. There is no one-size-fits-all method. Budgeting apps and traditional methods, such as spreadsheets or a dedicated notebook, can help you get a clear picture of your financial situation and plan effectively for upcoming expenses.

Align your budget with your life's purpose

Your summer spending habits might indicate bigger patterns of spending and saving in your financial life. Cutting back and tightening your belt will only get you so far without zooming out to look at your values and long-term goals. Think about the choices you made over the summer — what brought you the most happiness? What activities or experiences were worth every penny?

Alternatively, consider where you might adjust. Were there expenses that didn’t bring much value or could have been done differently? By recognizing these patterns, you can make more intentional financial decisions going forward.

The shorter days, cooler weather and turning leaves that mark the beginning of fall are a good psychological signal to reset and reflect on your spending habits. Don’t punish yourself for overshooting your budget … and if you don’t have one, it’s never, ever too late to start. Life never turns out the way we expect, and that includes our financial lives too. You’ll know you’re on the right track when your financial plan has enough flexibility to account for the odd splurge or setback without throwing the rest of your life into turmoil.

Investment advisory services offered through SEIA, LLC. Securities offered through Signature Estate Securities, LLC member FINRA/SIPC. 2121 Avenue of the Stars, Suite 1600, Los Angeles, CA 90067, (310) 712-2323.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When it comes to financial planning there are so many ways to attack it. Additionally, I find one of the hardest things for people to do is to prioritize their needs. Oftentimes, individuals conflate importance with immediacy, as in the sooner something is approaching, the more important it must be. Although I certainly understand this mindset, I don’t believe it is the appropriate way to handle one’s finances.

I’d like to take a stab at listing in order of priority how, I believe, we should be looking at our finances. Naturally, it is not one-size-fits-all and, of course, I, nor anyone else, can tell you what is most important to you.

1. Protect yourself and your family

To me, the biggest and most important thing you should focus on first is protecting yourself and your family from a tragedy that could derail everything. This usually means making sure you have appropriate insurance coverage. Let’s face it — you can always work longer and make more money, but only if you are physically able.

All too often, I see individuals who are in a terrible bind because they didn’t have a contingency plan with proper insurance. Life, disability, long-term care, health, property and casualty — these are the basics of a good foundation to build off of. Without proper insurance, you are building a financial plan on a house of cards.

2. Get rid of destructive debt

Next on my list is bad debt, like credit cards. I want to make a clear distinction — I am not referring to mortgages or car loans. Rather, I’m referring to those credit card debts with high interest rates. These can simply crumble a family financially and need to be addressed.

You need to have a well-thought-out plan to eliminate high-interest debt, and it is equally important to ensure that you don’t end up back in this hard-to-recover-from place.

I rank this as a top priority because people can be stuck with high credit card debt for years, especially if they make only the minimum payments.

3. Save for emergencies

Simply put, you should have three to six months of expenses saved in an emergency fund that’s easily accessible. Many times, people end up with high-interest credit card debt simply because one unexpected expense broke their finances. Having a nest egg or slush fund to insulate you from that situation is highly important.

4. Save for retirement

Finally, something fun to talk about, right? There is an epidemic in our country, and that is that most people don’t have enough savings, or aren’t saving enough, to ensure they can afford a comfortable retirement.

You cannot borrow for retirement, and at some point, you might be forced to retire. The last thing you want is to be staring down a 30-year retirement but unable to afford the lifestyle you’re accustomed to.

Additionally, the sooner you start saving and the more effort you make in this area, the better your options will be to live the retirement of your dreams.

5. Focus on other savings goals

Now that emergency and retirement savings are on target, you can focus on other savings priorities, whether they be college for your children, a second home or a big project. These items aren’t critical to your financial plan, and there are generally other means to achieve these goals, such as borrowing for college.

I am not suggesting these shouldn’t be important to you now, as they may seem more important to you than how comfortable your far-off retirement will be. But everyone will need to retire, yet everyone won’t need a secondary home.

6. Consider paying off constructive debt

It is probably a tie for me on the next, and last, two categories. I’ll give a slight edge to paying off constructive debt, like a mortgage or car loan. If you have a low mortgage rate, though, I see very little benefit to aggressively paying off a home, except for the peace-of-mind factor. After all, if you are mortgage-free, you’ll have fewer fixed expenses heading into the next stage of your life, which can leave you feeling mentally clearer and more able to continue making good financial choices.

7. Give to charity

It might seem messed up to have charitable giving as the least important piece of your financial plan. Certainly, a great argument can be made that it is the most important, and I even have clients who prioritize this over almost anything else. I get it and actually highly admire those people.

That said, if I am looking out for my client’s finances first and foremost, like I’m supposed to, and the things above aren’t in a good spot, giving money away seems, well, conflicting at best.

Let the debates begin, but I’m sticking to my story that this is what I feel works best for most people. There are exceptions to every rule, and people can always shuffle this deck to their own circumstances. This is just my opinion on what I’ve seen work best in my 20-plus career.

Hope you enjoyed it, and stay wealthy, healthy, and happy.

Diversified, LLC does not provide tax advice and should not be relied upon for purposes of filing taxes, estimating tax liabilities or avoiding any tax or penalty imposed by law. The information provided by Diversified, LLC should not be a substitute for consulting a qualified tax advisor, accountant, or other professional concerning the application of tax law or an individual tax situation.

Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.

A copy of Diversified’s current written disclosure brochure which discusses, among other things, the firm’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Life insurance can be a tricky topic to navigate for anyone. For some, it's an important financial tool that can help them protect themselves and their loved ones in the event of an untimely death, while for others, it’s simply throwing away money for something that most likely won’t happen anytime soon. There are different reasons why you may want to consider getting life insurance or increasing the coverage you already have.

This article will discuss why life insurance is essential and what benefits it brings to you and your family’s future.

Why is life insurance so important?

About 50% of Americans say they don’t have life insurance because it’s too expensive, according to research by Forbes Advisor. And, according to LIMRA, 42%, or more than 100 million Americans, say that their life insurance coverage is insufficient. Most reservations against life insurance usually stem from the stark difference between present cash outlay and future benefits. This could be because of:

• A lack of understanding about how life insurance works
• Not knowing the types of life insurance and what works best for your needs
• Hesitancy in paying cash today for a far future event
• Paying for something that you, yourself, will not receive in the future

True enough, most life insurance payouts will not benefit the policyholders because, as the name suggests, life insurance is based on the policyholder’s life and can be claimed only upon their death.

Albert Kim, vice president of Talent at Checkr, says, “A compensation package with life insurance policy in place is now one of the most non-negotiable terms jobseekers are looking for from their potential employers. This emphasizes how important the role life insurance plays, especially at an age where funeral costs are only getting more expensive.”

Kinds of life insurance

Depending on your need, policy length, premiums and benefits, many types of life insurance are available. Some of the most common:

• Term life insurance. This type of life insurance covers the policyholder for a fixed policy term, typically 10, 20 or 30 years. The premium and coverage usually do not change for the term, and the policy is renewable after the term has expired (usually with an increase in premium).
• Whole life insurance. This is usually more expensive than term life insurance. It has a cash value (saving) component and keeps the policyholder insured for as long as the policy is active and premiums are paid.
• Universal life insurance. Like whole life insurance, this also has a cash value component, which can earn interest. Compared to the first two, UL insurance features flexible premiums and benefits that can be adjusted over time.
• Final expense life insurance. If your goal is to help your loved ones cover your end-of-life medical bills and funeral and burial expenses, this life insurance offers more affordable premiums, even for older and less healthy individuals.
• Variable life insurance. This is a permanent policy whose cash value is invested in assets such as mutual funds. Because of this, the cash value may rise or fall, depending on the market.

The right type of life insurance, based on your needs and goals, gives you the peace of mind of leaving your loved ones financially free and secure. Here are some reasons why you need it, courtesy of small-business owners who know the score:

1. To protect your income

If you are the sole income earner in your family, life insurance is crucial for you, more than anyone else, to secure your loved ones' financial stability in case of your untimely demise.

According to Roman Zrazhevskiy, founder and CEO of MIRA Safety, “Adequate life insurance coverage helps ensure that breadwinners' children, parents or families receive monetary compensation upon their death that would last them just enough until they can earn income on their own to pay for household and other necessary expenses otherwise paid by the deceased policyholder and breadwinner.”

2. To protect your family and beneficiaries

Everyone works hard to give their families the life they dream of. However, accidents and unfortunate events are unavoidable, and nobody can predict when something might happen to you.

Nora Sudduth, founder and owner of Nora Sudduth Coaching, says, “Aside from business coaching, I find it important to emphasize to my clients the importance of leaving a legacy not only to their business, but to their families — and that is by making it a point that no amount of sales or marketing ROI (return on investment) can ever replace time spent with family and making sure they are comfortably living despite any unforeseen emergency.”

3. To cover final expenses

One of the benefits of life insurance is to help your loved ones cover the costs of your burial arrangements after your death. According to the National Funeral Directors Association, a funeral with viewing and burial costs an average of $8,300, and a funeral with cremation costs an average of $6,280.

Kyran Schmidt, co-founder of Outverse, says, “Most people don’t realize it, but AI has significantly lifted a huge burden among employees burdened by repetitive work that adds to the physical and mental stress causing sickness and death among many workers.” He adds, “A work life insurance policy only covers final expenses, but not the grief and loss your family lives with for the rest of their lives.”

Final expense life insurance covers not only burial, funeral or cremation expenses, but also final medical, nursing and legal expenses.

4. To help pay off debt

Your debt doesn’t go away when you die. When a lending institution has unpaid debt, it may go after your remaining assets or estate to settle that debt, potentially leaving your family less to rely on. Even if debt collectors are prohibited from transferring any liability for your debt to your surviving loved ones, hearing from debt collectors can still stress your family.

"With the help of life insurance, your family may use your insurance proceeds to help reduce the burden and stress of settling your unpaid debts or (keeping) debt collectors from touching your remaining estate,” says Chris Aubeeluck, head of sales and marketing at Osbornes Law.

5. To donate to charitable institutions

Aside from your loved ones, you can also use your life insurance payouts to provide more for a charitable institution or nonprofit organization. There are many ways you can do this, including:

• Charitable giving riders. A rider on your life insurance policy provides that a qualified institution will receive a percentage of your policy’s face value after your passing, subject to maximum limits.
• Gifting your policy. Gifting life insurance policies will allow your donee to receive the full policy amount. As a donor, you will also receive tax advantages by reducing your total taxable estate and your estate tax.
• Naming a charitable institution as beneficiary. One of the most common ways to provide life insurance proceeds to a charitable institution. This reduces a donor’s taxable estate and gives you all the cash value benefits while you are still alive for permanent life insurance policies with added cash value that functions similar to investments, while giving the lump sum amount of the payout to your charity or charities of choice.
• Gifting policy dividends. If you don’t want to give the full amount of your policy but still want to gift a portion of your benefits to a charity, you may donate the dividends from the cash value of a permanent life insurance policy. Doing this allows you to retain ownership of the policy but also benefit from tax advantages of the donation.

Erin Acheson, vice president of Business Intelligence at ZeroEyes, says, “It is important to remember that in assigning, gifting or naming charitable institutions as beneficiaries, they must meet the IRS’ qualifications on charitable contributions as outlined in 501(c)(3) as a qualified organization, especially when you mean to take advantage of the tax benefits of contributors to charitable institutions.”

6. To provide access to cash

Some types of life insurance, like whole life and universal life insurance, offer a cash value together with your normal life insurance death benefits. Simply put, your premiums for life insurance with cash value are generally more expensive than ones with no cash value, because your premiums are divided between your cash value and life insurance benefits.

Policyholders who purchase policies with cash value components can benefit from this arrangement by having immediate access to cash in case of an emergency, through partial surrenders or withdrawals of the cash value (which may decrease the death benefit).

The insurance company may also allow the policyholder to take out loans against the policy or use the cash value to pay policy premiums.

According to Tom Golubovich, head of Marketing and Media Relations at Ninja Transfers, “Cash value components aren’t new in life insurance policies, as many policyholders get them to get two-in-one benefits in one premium payment.” He adds, “Although, it is important to read the fine print before agreeing to any cash value-inclusive policies to better understand the tradeoffs it entails with your actual life insurance benefits.”

Life insurance policy premiums are highly dependent on your age, gender and overall health, so the younger and healthier you are when you buy life insurance, the lower the premiums you’ll have to pay to get the maximum death benefits.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

With student loans, rising housing costs and the ease of credit card use, it’s become all too simple to get into debt. In fact, it’s estimated that about two-thirds of U.S. adults carry some form of debt. And while being debt-free can provide some much-needed emotional freedom and relief, getting out of that debt can sometimes feel like a gargantuan task, especially if you've accumulated a large amount. 

But according to the financial experts of Kiplinger Advisor Collective, paying off debt doesn’t have to be intimidating. If you’re ready to tackle your debt and take charge of your finances, consider these best practices for making debt repayment easier on you and your wallet. 

Gain a clear understanding of how debt works
“Learn how debt products work. Find the interest rates, repayment terms, fees and penalties in your agreements. Learn about alternate repayment options like consolidation or deferment. Research the consequences of nonpayment (e.g., interest, fees, credit impact). With a clear picture of how your debt works, you can make a plan to deal with it that works for you, and it won't feel so intimidating.” — Dana Miranda, YOU DON'T NEED A BUDGET

Take the 'snowball' approach
“Big debt usually doesn't happen all at once. The opposite is true as well. Start small. Begin with your smallest credit card balance, pay it off and then add that payment amount to the next-largest debt. The math says to pay the highest balance and interest first, but math doesn't always tell the whole story. Human emotion matters, too. If you don't see progress and then give up, the math doesn't matter.” — Rod Griffin, Experian

Use tech and expert advice to get organized
“I would recommend leveraging a debt management app and expert advice to make debt repayment easier and less intimidating. Debt management apps can help you track payments, set reminders and visualize progress. Additionally, consult with a financial adviser to receive personalized strategies for negotiating better terms with creditors. This way, you can manage a less stressful debt repayment plan.” — Jabin Geevarghese George, Tata Consultancy Services Ltd.

Change your mindset and habits around credit
“Getting out of debt does not have to be a gargantuan task; getting into overwhelming debt is a gargantuan task. To get out of debt, stop using credit. If you don't have the cash in the bank, you can't afford it. Pay at least the minimum on each obligation, but focus on debts charging the highest interest first. Finally, always remember that credit cards are not an alternate source of income.” — Deborah W. Ellis, Ellis Wealth Planning

Pay attention to your interest rates
“Generally speaking, you need to know the monthly (or whatever makes sense) debt service amount that you are comfortable with — and sure to make — and then commit to that. However, what complicates this strategy is the interest rate you signed up for. If it is high, you should retire that debt as soon as you can, or else you will end up in a situation where you are not really retiring the debt.” — Zain Jaffer, Zain Ventures

Leverage any savings with the 'snowflake' method
“Try the ‘snowflake’ technique to tackle debt: Sell unused items, cut back on habits and apply any savings to your debt. Quick wins build momentum and confidence, making the larger debt feel less daunting.” — Amrita Choudhary, Wasabi Technologies

Break repayment into manageable steps
“Break debt repayment down into manageable steps by creating a detailed budget and prioritizing high-interest debts first. Use the ‘snowball’ or ‘avalanche’ method to stay motivated with quick wins or interest savings. This approach makes the process less overwhelming, provides a clear road map and helps maintain momentum, making debt repayment more achievable and less intimidating.” — Stephen Nalley, Black Briar Advisors

Look into debt forgiveness or relief programs
“Research lesser-known debt forgiveness or relief programs that might apply to your specific circumstances. These might include certain government grants or nonprofit initiatives.” — Manoj Kumar Vandanapu

Share your experience with others
“Budgets and financial prioritization are important to set yourself on the right path, but staying on the path is the hardest part. I recommend sharing your experience and journey with others by seeking out a mental and emotional support network. Debt reduction is a long process, and it can feel like running through molasses. Don't go it alone and you are more likely to succeed.” — Stephen Kates, Annuity.org

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The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

If you needed a small loan to fund car repairs, buy a new car or make crucial kitchen renovations, where would you go?

You could certainly go to a bank, but the application process may take longer than expected, and the requirements might be more stringent for those with fair credit. If you’re just starting out, or if you are on the journey to enhance your credit, an online marketplace lending platform could provide a smoother, more successful experience for obtaining the funding you need to achieve your dreams while improving your overall financial well-being.

We at Prosper introduced peer-to-peer (P2P) lending to the U.S. in 2005, and nearly 20 years later, our personal loan platform has facilitated more than $26 billion in loans for more than 1.5 million Americans.

A wider range of access to loans

The introduction of P2P lending in 2005 was a breakthrough in giving a wider range of Americans access to loans that help them meet financial needs, consolidate their debt and more. It also provided an opportunity for individuals to expand and diversify their investment portfolio beyond conventional options and achieve solid returns by investing in “notes,” or shares, of borrowers’ unsecured personal loans.

To meet the growing demand in this space, P2P lending, which originally focused on retail investors, expanded to include institutional investors under a broader umbrella called marketplace lending.

Below is a list of the top five advantages over traditional lending that some marketplace lending providers, and specifically P2P lending, can offer:

• Easier qualification for those with fair or poor credit. P2P loans are typically unsecured loans provided by investors to individual borrowers or small businesses. Consumers with fair or less-than-ideal credit scores may qualify for these loans much easier than they can with bank loans — and may be able to obtain lower interest rates.
• Fast, seamless online application process. P2P and other online marketplace platforms allow consumers to apply online for loans and identify the loans that would be the best fit for them, in a matter of minutes. Depending on the platform, potential borrowers can, after creating an online account and obtaining an interest rate estimate, authorize a “soft pull” credit check that won’t impact their credit scores — and all before formally applying for a loan. Some online lending platforms can also undertake “soft pull” credit checks after applications have been submitted, further protecting borrowers’ credit scores.
• Flexible terms. Depending on which marketplace lending platform a borrower uses, they can customize their monthly payments and rates — and can even make changes to their payment dates after loan agreements are signed, without having to provide a reason. Certain platforms may also offer multiple ways for borrowers to make payments, ranging from phone or mail to mobile apps and electronic fund transfer.
• Getting money fast. Certain lending platforms enable borrowers to receive their money as quickly as the next business day.
• Solid returns for investors. P2P lending enables borrowers and individual investors to succeed and grow together. Usually, when the borrowers begin making monthly payments and interest, the money is distributed to the contributing investors, minus any platform and servicing fees. The loan payments from borrowers can provide a source of passive monthly income for investors. Furthermore, investors may have the opportunity to invest in loan listings for as little as $25.

Consumers need to proactively protect themselves from bad actors in this space, and the personal finance marketplace in general. A good rule of thumb is to always vet the lender/company, read customer reviews, take the time to read and understand the loan terms in-depth and check the lender/company’s cybersecurity measures. The latter is especially important for keeping personal information well-protected.

Household debt has been climbing

The benefits that peer-to-peer lending holds over traditional lending are impressive — and they couldn’t come at a better time, given that U.S. household debt has been increasing. During the first quarter of 2024, total U.S. household debt increased by $184 billion to $17.69 trillion, according to the Federal Reserve Bank of New York. Americans’ mortgage balances rose by $190 billion to $12.44 trillion, and their auto loan debt increased by $9 billion to $1.62 trillion. Meanwhile, Americans’ home equity lines of credit rose for the eighth consecutive quarter since the first quarter of 2022, increasing by $16 billion to $376 billion.

In addition, the New York Fed reported that almost 9% of annualized credit card balances and 8% of annualized auto loans entered into delinquency during the first quarter of this year.

With Americans’ debt balances only continuing their upward trajectory, P2P lending can provide a viable, advantageous alternative for obtaining the money they need to achieve success and improve their financial well-being.

Prosper's borrower payment dependent notes (“Notes”) are offered pursuant to a Prospectus available at: prosper.com/prospectus. Notes are not guaranteed or FDIC-insured, and investors may lose some or all of the principal invested. Investors should carefully consider these and other risks and uncertainties before investing.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Having a fluctuating income can make managing your money and saving for the future especially tricky.

Whether you're a freelancer taking part in the gig economy or an entrepreneur with a small business, learning how to manage income that varies from month to month is crucial, especially considering the gig economy is expected to grow.

The statistics paint a very clear picture:

• The number of freelancers could grow from 76.4 million this year to 90.1 million in 2028, according to Statista.
• The global gig economy could grow from $355 billion in 2021 to $1.9 trillion by 2031 at a 16.18% compound annual growth rate (CAGR), according to Business Research Insights.
• There are 33.3 million small businesses in the U.S., accounting for 99.9% of all companies, according to the Small Business Administration.

So if you’re a freelancer or small-business owner or plan to become a freelancer or start your own business, here are eight financial management tips from business experts for how to deal with income fluctuations.

1. Track income and set a flexible budget.

If you track your income, you can set a flexible budget to meet your needs and wants, regardless of how much you earn. Monitor your income for the next six months to discover the range of your earnings. That allows you to set your monthly budget to cover all your expenditures. You might find you can even afford to take a break without breaking the bank.

Thomas Medlin, co-founder at JumpMD, shares how his team initially struggled with their finances at the onset of their intelligent health care referral software business: "It was difficult to find potential clients who'd avail of our products and services, more so to establish a consistent income. So, we tracked our income and expenses for the next six months and managed to set a flexible budget. And the rest is history."

2. Have multiple income sources.

Having a fluctuating income from only one source can be pretty scary because you lack a financial backup when there’s an emergency. So, whenever possible, it's best to have multiple sources of income.

Sure, you can have the highest-paying job even without a degree. But what if you lose it without warning? Side hustles can help you diversify your income.

Sergey Taver, marketing manager at Precision Watches, recommends taking advantage of the gig economy: "Since the pandemic, we've hired freelance contractors who can handle various facets of our business, like marketing and advertising. And we've learned that most of these contractors handle multiple freelance jobs with various clients. That allows them to survive and thrive financially — the reason why the gig economy is booming!"

3. Build your emergency fund.

The key to building your emergency fund is to multiply your monthly budget by six. Should an emergency strike, you can survive for the next six months.

This financial trick is especially helpful for those with income fluctuations. Suppose you're a freelancer being paid per hour but have managed to work for only a few hours due to sickness. With an emergency fund, you have a financial backup to cover your expenses.

Derek Pankaew, founder of Listening.com, makes the case for having an emergency fund: "It's something you should prioritize, especially if you have an inconsistent income. As you don't know exactly what's going to happen for the next few months, always stay on top of your finances. Remember, emergencies can strike anytime, so better be financially prepared than sorry."

4. Save money regularly.

Once you've built your emergency fund, you must consistently set aside money for savings. No matter what you earn or whether your income fluctuates, make saving part of it a financial habit, as it can pay off in the long run. You should save at least 10% of your total earnings on a regular basis. A wealthy mindset always prioritizes savings over expenses.

Logan Mallory, vice president of marketing at Motivosity, promotes the value of savings, whether on a personal or business level: "No matter how regular or irregular your income is, you must save for the future. It's not about depriving yourself of your needs and wants; it's about knowing what to prioritize. Ultimately, you'll develop good financial habits that will make a difference in your finances and life in general."

5. Invest to grow money.

Once you've established your emergency fund and are saving consistently, it's time to take your finances to the next level. Consider investing, whether through stocks, bonds or real estate investment trusts (REITs), to grow your money. You can even get insurance to protect yourself from financial losses.

For example, invest in a 529 for your children's education if you’ve started building your family. To save for retirement, consider signing up for your employer’s 401(k) plan or creating a SEP IRA or a solo 401(k) if you’re a freelancer.

Grant Aldrich, founder of Online Degree, advises diversifying your investment portfolio: "Investment is still a risk at the end of the day, so take a calculated one. Even if you have an emergency fund for financial backup, you still want your money to grow over time. It's best not to put all your eggs in one basket; distribute all your financial resources to minimize your financial risks."

6. Manage your debts wisely.

In financial management, the message is clear: Avoid debt whenever possible. But of course, debt is sometimes inevitable, especially if you have fluctuating income. So then your goal should be to pay it off as soon as possible. You might also consider the option of debt consolidation.

Brooke Webber, head of marketing at Ninja Patches, highlights the value of debt consolidation: "If you are spiraling into a financial abyss due to several debts, (consider applying) for a favorable loan with a lower interest rate. Use the lump sum to settle all your debts so you'll only have one loan to pay off."

7. Cut expenses and earn extra income.

Key to managing fluctuating income is to earn more than you spend. One way to help with that is to cut your monthly expenses, such as by eliminating subscription services you’re not using and making coffee at home rather than stopping at Starbucks.

You could also get an energy audit to find ways to boost your energy efficiency and save on utility bills.

On the flip side, there are many ways to earn extra cash to help boost your income and cover your expenses.

Jerry Han, CMO at PrizeRebel, recommends getting online jobs that capitalize on your interests and passions to supplement your income: "If you have a knack for writing, you can take freelance content writing or copywriting jobs. Also, join affiliate marketing by promoting products on social media and getting commissions. Or, if you have an entrepreneurial mindset, you can build your online store via an e-commerce platform."

8. Plan for the future.

Finally, financial planning is a critical part of the overall equation. You should plan for the future even if your income fluctuates. The ultimate goal is to achieve financial success and stability.

Financial planning isn’t a set-it-and-forget-it exercise either. You need to revisit your financial plan regularly to adjust it for life events and ensure that it’s up to date.

Sturgeon Christie, CEO of Second Skin Audio, makes the case for constant financial planning for small businesses, which is also true for individuals: "We take financial planning seriously at our skincare clinic. We want to ensure that our business thrives in the long run by meeting our clients' needs. Also, technological advances and industry trends constantly impact our clinic, so we must keep up with these changes for continued financial success."

Wrapping up

Managing your finances can be a bit tricky if your income varies from month to month. By taking the above tips from business experts into consideration, you can rise above the financial challenges that go with income fluctuations. Not only will they help you meet your daily needs, but they’ll help you grow your money over time and set you on the road to achieving the financial security you deserve.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Financial freedom is a goal many Americans spend decades working to achieve. Being liberated from debt while sustaining the lifestyle you crave can be an amazing feeling, however, getting there isn’t easy.

Finances can be confusing, and unfortunately, a majority of us weren’t properly taught about them in school. According to a recent survey from Experian, 3 in 5 adults feel their limited understanding of credit and personal finance has led them to make financial mistakes, setting them back $1,000 or more. To avoid making these costly mistakes, you must become financially educated.

We all know we need money to live, but being financially intelligent goes deeper than that. Financial literacy is the ability to understand how to manage your finances. Learning how to budget, build savings, manage debt and invest are important skills that can aid you in becoming financially independent through your working years and into retirement. These skills can also help you avoid creating poor spending habits or making foolish financial decisions.

Start by measuring your cash flow

One of the first steps to mastering your finances is identifying your cash flow. A common misconception is that your cash flow is only the amount you're bringing home each pay period, but it’s not. To calculate your cash flow, take your total monthly income and subtract your monthly expenses.

Being knowledgeable about what you have coming in versus what is going out will help you recognize whether you’re living within your means. If you’re not, you will need to evaluate your spending habits. Once you know your cash flow, the next step is to create a budget, then stick to it.

Next, get serious about saving

Understanding how to properly save is a component of financial wisdom. Building savings comes with some obvious benefits, such as covering emergency costs or providing a financial cushion in the event of a job loss, but it also allows you to grow your wealth and prepare. The sooner you start saving, the longer that money has to grow. High-yield savings accounts are an option. These accounts typically have higher interest rates, allowing you to grow your savings at a higher rate than a traditional account.

The importance of saving should be recognized early, if not, you will find yourself unprepared for the future. It is better to start saving today than procrastinate years down the road and then try to play catch-up.

Look ahead to retirement

Another important savings strategy is building a retirement account. With the reduction of pensions and the uncertainty of Social Security, many feel we’re headed toward a crisis. The National Institute on Retirement Security found that in 2024, 79% of Americans agree there’s a retirement crisis, up from 67% in 2020.

Many companies offer an employer-sponsored 401(k) plan with matching contributions, and you should also check into opening a separate retirement account, such as a Roth IRA or brokerage account. This will help ensure you can actually afford to retire. In any of these retirement vehicles compound interest is your best friend. Think of compound interest as interest on interest. The money is earning interest on the principal sum of your deposit, and with compound interest, that interest is earning interest too.

Put a dent in your debt

Managing debt is a useful skill, especially at a time when more Americans are struggling to pay it off. According to data from the Federal Reserve Bank of New York, the rate of credit card delinquencies has climbed to 10.7%, the highest it’s been since 2012.

Accumulating debt isn’t bad so long as it can be managed. If you begin charging more than you can afford to pay off each month, you're heading down a slippery slope. To avoid this, create a payment plan for repaying that debt. Don’t use credit cards to pay bills, or to pay off other delinquent accounts. It might seem tempting in the short term, but it’s harmful in the long term. Accruing too much debt will keep you in a vicious cycle that can be extremely difficult to dig your way back out of.

Know the risks and rewards of investing

You’ve probably heard about the importance of investing, but understanding how it works is all part of becoming more financially literate. There are several different ways to invest. Some people invest in the stock market, while others purchase real estate. Regardless of how you choose to build your wealth, it’s important to know that every venture carries financial uncertainty and that each product has its own rate of return. To ensure an investment is right for you, figure out the level of financial risk you’re willing to take and compare that with the rate of return. The rate of return is the net gain or loss of an investment over a certain amount of time.

Taking care of your finances can be an overwhelming process. It can be uncomfortable and confusing, but your financial health should never be neglected. Learning how you relate to money and the true purpose of money can give you freedom and peace of mind around how you use it.

Consider talking to a professional. You don’t and shouldn’t try to do it all alone. Taking a personal finance seminar is another step to educating yourself. This will give you the knowledge and tools to make financial choices that are in your best interest.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

You may have heard the saying, “Don’t work for your money, let your money work for you,” but what does that really mean? When it comes to personal finance, it means taking action to avoid having “lazy money.”

The term lazy money refers to funds you’ve earmarked for retirement that are not actively working to generate returns. One of the most common examples of lazy money is cash that’s sitting in a low-interest savings account, earning minimal interest. It may not seem like a big deal, and you might even feel you’re being “safe” by having that extra cushion, but lazy money can hurt you financially, limiting your ability to grow your wealth.

To effectively manage your money, it’s important to know the difference between saving and investing. Saving refers to money that’s earned but isn’t spent. Saving is crucial for financial stability, but that doesn’t mean you shouldn’t diversify your portfolio. While it may be more secure and insured, keeping all your money in a low-interest savings account minimizes its potential to grow. And even worse, it may be losing value due to inflation. “If you’re not moving forward, you’re moving backward,” as the adage says.

When you invest your money correctly, you’re essentially making the money you’ve earned grow. Investing in securities, mutual funds, stocks and bonds can increase your wealth, but it can also bring more risk. The market is volatile, which means you have the potential to get great returns, but that also means you could lose some — or even all — of your principal. That’s why it is so important to diversify your portfolio.

Once you appreciate the difference between saving and investing, you can begin to develop a plan of action that suits your needs. Here are some steps you can take to start making your lazy money work for you:

Grow your retirement fund

Retirement is one of the biggest goals for working Americans, but making sure you have a big enough nest egg to sustain your lifestyle can be daunting. If you have extra money sitting around, consider increasing your 401(k) contribution. Most employers will match your contributions up to a certain amount, so try to get into your employer’s pocket as much as possible, as it’s free money for your benefit.

If you don’t have a 401(k) — or even if you do, and you want to maximize your saving potential — consider opening an individual retirement account. IRAs can be opened through a brokerage firm, bank, credit union or mutual fund provider. Even if you have an employer plan and have maximized your annual contributions, you can still also have your own IRA and contribute to it, whether it’s a traditional IRA or a Roth IRA.

Pay off debt

Additional funds that are not going toward an emergency fund can be used to pay down or pay off debt. Paying off debt won’t necessarily grow your money, but it will boost your credit score, saving you a lot of money on interest in the long run. Plus, it gives you the freedom to grow your nest egg.

Invest

Making the right investments can double or even triple your wealth. Consider purchasing stocks, bonds, mutual funds, ETFs, annuities, cash value life insurance, even real estate or cryptocurrency. But remember, with any investment there’s risk.

Before investing, make sure you understand how much risk you’re comfortable taking. A financial adviser can help address your concerns, ensuring you make the right investment for you. You should revisit your risk tolerance every few years, as your life, situation and investment time horizon will likely change over time.

Seek out 'safe money' options that yield more than bank accounts

Banking products such as savings accounts, money markets, and certificates of deposit can be attractive to more conservative investors or those who may want to stay away from the market during times of volatility. Many of these are completely liquid and insured by the FDIC for up to $250,000. However, there are other options with little to no downside market risk. Products like multi-year guaranteed and fixed index annuities, principal-protected and structured notes, and indexed universal life insurance all have the potential to generate greater returns.

Build and diversify your portfolio

Once you’ve identified your risk tolerance, you can begin building and growing your portfolio. Investing in multiple accounts and securities can maximize your earnings while minimizing your risk, but be sure to consult a financial adviser first. The last thing you want to do is put your finances in jeopardy by making the wrong choices. An independent professional can help you create a portfolio that supports you and your loved ones.

Making your money work for you is one of the keys to financial success. Allowing your money to become “lazy” limits you from reaching your goals, prevents growth and can even cost you, depending on the state of the economy. Once you’ve taken care of your bills and contributed to an emergency savings fund, utilize the rest in a way that financially benefits you. Maximizing your dollars instead of letting them become stagnant can help improve your financial situation and increase your financial freedom.

Investment advisory services offered through Brookstone Wealth Advisors, LLC (BWA), a registered investment advisor. BWA and Beckett Financial Group are independent of each other. Insurance products and services are not offered through BWA but are offered and sold through individually licensed and appointed agents. Index or fixed annuities are not designed for short term investments and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Throughout my career, I have observed firsthand the ebbs and flows of the economy and its profound impact on the financial lives of consumers. In recent years, a troubling trend has emerged: a significant rise in the reliance on credit cards, fueled by soaring prices for essentials. This shift has pushed many Americans into deeper debt, as highlighted by the New York Federal Reserve, which shows a record $1.1 trillion in U.S. credit card balances in the fourth quarter of 2023.

With 45% of American adults burdened by credit card debt, the situation is dire. The about 25% year-over-year surge in credit card balances, coupled with a 16% drop in total repayments, is alarming. These figures are not just mere statistics; they symbolize a potential long-term financial crisis for consumers. The challenge is multifaceted, fueled by an environment of high interest rates and inflation, which only serves to prolong the debt cycle for many.

Take action by getting help

It's crucial that consumers facing debt not shy away from their financial realities. Banks and credit unions provide resources designed to aid in debt management, including financial education and personalized coaching. Consulting in-person with your bank or credit union’s debt management expert can build a partnership, giving individuals an opportunity to regain control of their financial futures.

Debt management programs can also play a critical role. Offering a blend of budgeting assistance, financial planning and negotiation services, these programs can provide a roadmap out of debt.

However, consumers must approach these services with caution. Some claim to lower your outstanding debt through negotiation, which can be expensive and carry hidden costs and potentially adverse implications for credit scores and taxes.

Go back to the basics

When looking to get out of debt, return to basic financial principles. Set and stick to a budget. Do the math and sort out the cost of essentials, including utility bills, each month. Assess your discretionary expenses and make some tough decisions. What can you do without as you work to draw down your debt? Then set goals for the next year.

As part of your discussions with a trusted financial professional, determine how much debt you can pay off over the next year. Both exercises will help you live within your means, reduce dependency on credit and enhance overall life quality.

Make smart decisions and avoid traps

With a plan in place to pay down your debt, it’s important to make smart financial decisions to avoid digging yourself into a further hole. When you have to make a significant purchase, say replacing your home’s furnace, consider what makes more sense — running up your credit card balance by five figures or opting for a loan.

I advocate for a prudent approach: If repayment within a short time frame is unrealistic, securing a loan with a more favorable interest rate and structured repayment plan may be more advantageous. Shop around for a good rate. Oftentimes, credit unions offer better rates than some of the major banks.

The popularity of Buy Now, Pay Later (BNPL) reflects a changing landscape in consumer finance. While these services offer an alternative to traditional credit, they are not without risks, particularly for those in fragile financial positions. A recent survey from the New York Fed found that 43% of households with a credit score of 620 or less have used BNPL.

Many times, people turn to this option due to credit card delinquencies or because their credit application was denied. If you miss a payment using one of these services, the debt may grow more exponentially than it would with a typical credit card. Be sure to fully understand the terms and potential consequences before considering this option.

The broader impact

The repercussions of debt extend far beyond finances. It affects individuals' mental and physical wellbeing, their capacity to save for the future and their freedom to make significant life choices. Consider the effects of facing deep debt:

• Not able to save for large purchases, like vehicles
• A depleted emergency fund, which can leave a person vulnerable to unexpected monetary obligations
• Retirement contributions left short, sacrificing the future
• No vacations
• No saving for your child/children’s education
• For younger folks in debt, it’s very hard to save for a house
• Decreased credit scores, leading to higher debt

The surge in credit card debt should serve as a wake-up call for a collective push across banks and credit unions toward enhanced financial literacy programs, support, and a culture of responsible borrowing. Leaders in the financial sector should remain committed to guiding consumers through these turbulent times.

Through education and support, we have the power to help consumers facing steep debt to turn their financial lives around and to set the next generation of consumers on the path toward financial responsibility.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Not surprisingly, saving or earning more money was among Americans’ top New Year’s resolutions for 2024, according to a YouGov poll. Most people have probably already broken that by now, but that doesn’t mean you can’t still try to save more money this year. And you’re more likely to succeed if you try to make small and gradual changes and find little ways to make big impacts.

For example, try writing down everything you spend every day for a week or a month. You’ll probably find that even something as small as a $3 cup of coffee can add up to a big expense when multiplied across a month or an entire year.

Below are a few tips to consider for helping you save more money this year. They may seem obvious, but they are too often overlooked.

1. Make a budget.

No matter how simple it is, any set budget can help you save money in your everyday life. Those savings can be used to meet long-term goals like buying a home or paying down debt.

But just setting a budget isn’t enough — you need to put effort into staying on track. In addition to keeping tabs on day-to-day expenses and income, a good budget should also include expenses that can be easily forgotten, such as annual car registration fees, holiday gifts or morning coffee runs.

A good tip for establishing a budget is to use the 50/30/20 rule — 50% for needs (such as housing, automotive and health care expenses), 30% for wants (like entertainment) and 20% for savings, investments and debt repayments. If you can allocate more than 20% of your income to savings and investments, you will be in a better position over the long term.

Writing down your activity in a journal can help you stay on track, and you can also utilize spreadsheets and budgeting apps. In addition, a family member or close friend who is aware of your budgeting goals can help keep you on track by holding you accountable.

2. Contribute to an emergency fund.

Would you be able to cover an unexpected $1,000 medical expense for yourself or your child, or pay for a new water heater when the old one suddenly breaks down? If not, you’re not alone; many Americans would be unable to meet these types of emergency expenses.

That’s why creating an emergency fund is so vital for your financial well-being. A useful rule is to calculate how much money you would need to cover three to six months of household expenses and use that as a target amount for your emergency fund.

3. Make a plan for managing debt.

Debt doesn’t have to be something inherently shameful. It isn’t necessarily your enemy. Just like when dieting, there are good calories and bad calories. Spending money is actually a normal and healthy occurrence, and at the end of the day, not all debt is bad for you. The problem arises when you don’t pay it back on time.

Without a formalized plan for managing debt, you can incur greater expenses by making minimum payments on your credit cards and paying more each month than necessary. Or you may unnecessarily max out your credit cards altogether — hurting your credit score on top of spending more.

A debt consolidation loan through a trusted platform like Prosper can help you pay down high-interest credit card debt by combining the debts into a single loan with a fixed payoff schedule. You may also prefer to start off repaying small balances and then work up to paying off larger ones.

4. Stop paying for subscriptions you don’t use and shop around for those you do.

How many subscriptions do you have? From streaming services to gym memberships, monthly subscriptions can add up quickly. According to Deloitte’s 2023 Digital Media Trends survey, almost half of U.S. consumers believe they pay too much for streaming video on demand services, and about one-third of U.S. consumers plan to reduce the number of such services they use.

Even individual monthly payments of $10 or $20 for services you don’t use that much can add up to hundreds of dollars per year. Check all of your credit card, debit card and spending accounts like Venmo for regular charges. There are also services that can do this for you.

Besides considering whether a subscription service is worth the cost, you can shop around to find a less expensive service. Or, just as you can negotiate directly with creditors on payment schedules, you can also negotiate directly with service providers to find ways to cut their subscription rates.

5. Avoid overusing credit cards.

Credit cards are extremely beneficial tools. If you are new to credit cards, you can build up your credit score and potentially benefit from rewards as you pay off your purchases. But those with high credit limits can encourage you to live beyond your means. Minimum payments generally cover only the interest on credit card bills, and when credit card debt is stacked on top of automotive or student loans, the burden can be very heavy.

Credit cards with low-balance transfer interest rates and strong rewards programs can help you reduce your credit card balances.

If you’re looking to take control of your money, companies like Prosper have credit cards that welcome less-than-perfect credit, with no security deposit required, and offer generous credit lines you can access immediately.

6. Check your credit reports regularly.

Your credit profile can be accessed by lenders, landlords, potential employers and others — and any errors or ugly surprises can cause you to lose out on that dream purchase, a new apartment or the job you’ve always wanted.

You are entitled to free credit reports once a year from the three main credit bureaus (and you can easily request them at www.annualcreditreport.com). Just because everything looked fine last year doesn’t mean you should forget about reviewing your credit report this year. Any errors that you notice must be dealt with as soon as possible.

Just because your New Year’s resolution to save more money and improve your financial well-being this year might have collapsed already, the above tips are easy to adopt to get you back on track, and luckily, they don’t require massive changes to your daily life.

The Prosper Credit Card is an unsecured credit card issued by Coastal Community Bank, Member FDIC, pursuant to license by Mastercard® International.

All personal loans made by WebBank.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Chasing credit card rewards when you're in debt is surprisingly common. Two-thirds of Americans in debt try to maximize their credit card rewards, according to a new study by Bankrate. It's tempting to rack up miles or points to earn a vacation or cash back, but there's no way to win at that game if you're in debt. 

"Chasing rewards while you’re in debt is a big mistake, says Ted Rossman, senior industry analyst at Bankrate. "The average credit card rate is a record-high 20.75%. The typical rewards payout is in the 1 to 5% range. It doesn’t make sense to pay 20% or more in interest just to earn 1, 2 or even 5% in cash back or airline miles." 

Almost half of cardholders are succumbing to credit card debt, according to another recent Bankrate survey. Given the high average interest rates cited by Rossman, indebted cardholders can quickly find themselves unable to dig out of the debt hole. 

Of course, some people turn to credit cards out of desperation when they can't make ends meet. Others slowly slide into debt before they realize they are in trouble.

Chasing credit card rewards

Here's how cardholders responded to the Bankrate survey about their credit card rewards strategy. A staggering 67% of those who carry a balance every month say they "make every effort" or "make some effort" to maximize their credit card rewards.

This is your brain on credit cards

It's well-established that people tend to spend more money when they pay with a credit card instead of a debit card or cash — up to twice as much. The neuroscience behind this behavior was murky until a 2021 MIT study scanned subjects' brains as they used a credit card or cash. When using the credit card, the section of the brain responsible for pleasure and the anticipation of pleasure (the dopaminergic reward center) lit up. 

What else has this effect on the brain? Drugs like cocaine and amphetamines. So, using your credit card essentially gives you a shopping high. Add cash back or airline miles to that effect, and it's easy to see how those in debt might be tempted to use their rewards credit cards even when it is irrational.

Paying off debt also feels good

Out-of-control debt is a burden that stresses relationships and physical and mental health. Debt can also exacerbate existing problems, such as addiction or depression. So it stands to reason that getting out of toxic debt can be a relief. But it may also boost cognitive and psychological function according to a National University of Singapore study. 

Researchers worked with a non-profit group that paid off some of the debt accounts of poor, highly indebted subjects. After three months, test subjects performed significantly better on cognitive tests and decision-making. They also had less anxiety. The study also found that the number of debts was almost as stressful as the amount of debt, so reducing total indebted accounts can also benefit brain and psychological health.

For those in credit card debt, this reward is much healthier than miles or points. 

Are rewards credit cards for you?

If you hear the siren song of a cash back or travel rewards card and you currently have credit card debt, just say no. 

“Ideally, you'd revisit your credit card strategy every year or two to make sure that you're using the optimal products for your spending habits," said Rossman. Credit card interest rates "should be the primary consideration if you have credit card debt. If you're debt-free, then go for rewards."

While it may be tempting to turn to "debt relief" services if you carry a balance each month, there are better ways to pay off credit card debt. Although it may seem counterintuitive to turn to another credit card for help, a balance transfer credit card with a long pay-back period could be a lifesaver — if you know you can develop a payment plan and stick to it.

Don't cut up your cards to avoid temptation. You should probably first consider keeping your credit cards active to protect your credit score. And if you or a partner struggle with compulsive spending or other behaviors that keep you in debt, consider seeing a financial therapist for a healthier relationship with money.

Read More

• How to Pay Off Credit Card Debt
• What Is Financial Therapy? A Way to a Healthier Relationship with Money
• How Many Credit Cards Should I Have?
• Best Rewards Credit Cards

Across the country, employers are competing fiercely for talent. According to recent data from the U.S. Chamber of Commerce, more than 34 million workers quit their jobs in 2023. Young people, in particular, are switching companies — or careers — if it means a higher paycheck or better hours.

Employers worried about recruiting and retaining employees have a new tool at their disposal, thanks to a federal law that went into effect at the start of the year. As of January 1, the SECURE 2.0 Act permits employers to "match" any payments their employees make toward their student loan balances with tax-advantaged contributions to their retirement accounts.

Employers should take advantage. Doing so can allow them to make a difference in their employees' financial security now and in the future. And that can make them an attractive destination for talent.

Student loan debt load is heavy

Student debt is a millstone for American workers. The nation's collective student debt load is roughly $1.73 trillion, according to the Federal Reserve. On average, borrowers pay between $200 and $299 monthly toward student loans.

That debt burden weighs on their mental and financial health.

A recent survey from Morning Consult found that more than nine in 10 young adults who continued with education after high school faced stress over money and finances that affected their physical and mental wellness. Of that group, 86% said student loans were a contributor to that stress.

Nearly half said student debt impacted the amount of money they contributed to their 401(k)s. Of that group, more than four in 10 said student loan debt caused them to withdraw money from their retirement accounts.

Those kinds of decisions can have severe long-term consequences. Just $10,000 contributed at age 25 grows into more than $100,000 by age 65, assuming a 6% annual return. Waiting until age 35 to set aside that money drives the total return at age 65 to just $57,000.

Young workers are looking for employers who can help them overcome that math. According to the Morning Consult survey, seven in 10 said they were very interested in a workplace benefits plan that offered contributions to a 401(k) if an employee made payments on their student loans.

That's more than the share who said they were very interested in hybrid work, paid family or parental leave or help with childcare costs.

Further, over half of those surveyed indicated that a 401(k) contribution for student debt repayment would have a "significant impact on their decision if choosing between multiple job offers."

What young adults are looking for

In other words, the new benefits authorized by SECURE 2.0 are exactly what young adults are looking for. Rarely do businesses have the chance to simultaneously tackle a pressing societal problem and expand their pool of talent.

There's already real-world evidence demonstrating how effective these programs can be. As of 2021, nearly one in five U.S. companies — including Google and Hulu — offered some form of student loan assistance to employees. This assistance includes enabling employees to cash in unused vacation time and apply it to their student loans and giving employees with school debt money to put toward their loans.

Abbott implemented a first-of-its-kind program in 2018 when we launched Freedom 2 Save with special dispensation from the IRS. This program inspired the student loan provision of SECURE 2.0.

Under Freedom 2 Save, employees who apply at least 2% of their salary toward paying down their student loans receive a 5% company contribution into their 401(k) annually. Over 2,800 Abbott employees have enrolled and received more than $7 million in total contributions to their 401(k)s.

Paying down significant amounts of student debt

Employees who participate in the program overwhelmingly say it makes them feel that we care about them as people, not just workers. Some have paid down as much as $60,000 in debt in just a few years.

The program also aids a diverse set of graduates, with over one-third of enrollees using it to pay off loans from a non-bachelor's degree.

Our experience can serve as a blueprint for companies planning on taking advantage of the flexibility offered by SECURE 2.0.

Student debt relief initiatives can aid not just workers but employers, too. They should resolve to make them part of their recruitment and retention strategy this year.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

“I read the news today (oh boy).”

These iconic opening lyrics from The Beatles song “A Day in the Life” resonate as much today as they did in 1967. In today’s rocky economic environment, elevated interest rates, high inflation and slow wage growth have contributed to historically high levels of financial stress, low feelings of financial wellness and a steady depletion of pandemic-era savings.

In a time of growing individual financial responsibility contrasted with a rapidly changing financial landscape, the importance of workplace financial coaching has never been more significant. As employees navigate complex financial decisions, from managing debt to saving for retirement, the role of employers in providing financial education and support has evolved into a crucial component of the modern workplace.

The changing economic landscape

The global economy is in the midst of a decades-long transformation, with some of the biggest fractures exposed during the pandemic and haunting us through today. The traditional job security of previous generations has given way to a gig economy characterized by temporary and freelance work — leaving many workers without traditional employment benefits like retirement plans or health care coverage. The pensions of old have also given way to retirement plans, employer-sponsored or not, where the onus of contributing and saving is on the individual.

Complicating the issue, financial markets have also become more complex. From cryptocurrencies to intricate investment instruments, the average person is now confronted with a multitude of choices that can significantly impact their financial well-being.

So while individuals bear greater financial responsibility in this new economic reality, they are also expected to navigate a higher level of complexity. Workplace coaching can fill the gap by arming employees with guidance, education and a stronger understanding of personal finance.

Changing employee expectations

The modern workforce increasingly values employers that offer more than just a salary — employees seek comprehensive benefits packages that support their financial well-being. As a result, businesses are under pressure to attract and retain talent by offering more holistic employee support.

Workplace financial coaching addresses this demand by offering a range of benefits. Firstly, it helps employees reduce stress and anxiety related to their financial situation, which the American Psychological Association reports is a top stressor across the country. When employees are worried about money, their job performance and overall well-being can suffer.

Secondly, financial coaching aids in retirement planning. With the responsibility for retirement funding shifting to individuals, employees need assistance in negotiating retirement accounts, investment strategies and risk management.

Lastly, financial coaching supports responsible debt management. Many employees grapple with student loans, credit card debt and mortgages. Understanding how to manage and reduce debt can lead to improved financial stability.

By providing financial coaching benefits, employers can mitigate their workers’ financial stress, alleviate burdens and equip them with the knowledge and tools to make informed decisions about their financial future — leading to happier, more productive workers.

Broader societal implications

The benefits of workplace financial coaching transcend individual employees and directly influence society at large. When employees are financially secure, they are less likely to require social safety nets, such as unemployment benefits, food assistance and housing subsidies. Reduced dependence on these programs lightens the financial burden on taxpayers and government resources.

Moreover, financially secure individuals are more likely to make responsible financial decisions that benefit the people around them. They can invest in education, contribute to local economies and support community initiatives — fostering individual well-being, but also contributing to the economic growth and stability of the nation.

Workplace financial coaching also addresses the growing wealth gap. As individuals acquire the knowledge and skills to manage their finances more effectively, they are better equipped to accumulate wealth and build financial security. This narrowing of the wealth gap will reduce economic disparities across the board and lead to a more equitable society.

Challenges and implementation

While the benefits of workplace financial coaching are numerous, implementation must be done right. Employers need to ensure that coaching programs are tailored to meet the diverse financial needs of their employees. A one-size-fits-all approach may not be effective, as different individuals may face unique financial challenges.

Moreover, financial coaching programs should be accessible to all employees, irrespective of their income level. It is crucial to avoid creating a situation where only higher-income employees can access valuable financial guidance or being seen as targeting a specific at-risk population at the exclusion of others.

Additionally, the effectiveness of financial coaching programs needs to be measured and adjusted over time. Employers should regularly assess the impact of these programs on employee well-being and financial literacy, making the necessary improvements and modifications.

Workplace financial coaching is more important than ever

Workplace financial coaching addresses the challenges of a rapidly changing economy on so many levels. Where employees are empowered to make informed financial decisions, employers can attract and retain talent and reduce financial stress among their workforce. At a larger scale, this workplace benefit contributes to a more equitable society.

As the world navigates an increasingly complex financial landscape, workplace financial coaching stands as a vital tool for fostering individual and societal prosperity.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In elementary school, we learned that opposites attract and had fun seeing that principle in action as we played with magnets in science class. The same level of delight is often experienced when we meet someone who is different from us — the further they are from our end of the spectrum, the more interesting we find them. What we do not expect is the challenge that presents in our approach to finances. Everyone has their own views and tendencies surrounding money, some innate and some learned. Understanding each other is paramount to a couple’s success in this area, and the discipline of behavioral finance is the key.

What is behavioral finance? Investopedia defines behavioral finance as “an area of study focused on how psychological influences can affect market outcomes.” But it is more than that. Have you perhaps wondered why one person is aggressive in their investments, while another is conservative? Or why one is a spender and one a saver? These behaviors, among others, are innate and come from our experience with money, stemming from our childhood.

The way we make financial decisions, our spending habits and even our goal motivations are all driven by automatic behavioral biases, such as herd following (mimicking the financial behaviors of the majority) or familiarity bias (such as investing in what you know). This does not mean that we always behave in the same way. Indeed, education, experience, environment and different situations will cause us to act differently from our “hard wiring,” but that natural side of us never leaves.

The key is to understand it so we can work from our strengths and remain aware of our blind spots. In order to achieve a happy and healthy partnership, it is equally important to have insight into those of our significant other.

How perspectives and priorities can differ

As a wealth manager, I serve many couples who come to the table with extremely different perspectives on money. There are many different ways in which your financial perspectives and priorities can differ. Here are just a few:

Relationships vs. information. A person who is oriented toward relationships will want to focus on a balanced life, keep the conversation easygoing and maintain flexibility, whereas another will have a great need for details, logic, structure and rules. This difference is seen in the overall approach to financial planning.

While not always the case, an individual geared toward relationships can sometimes focus more on the present than the future, not giving as much attention to how current spending, for instance, affects the long-term plan. Conversely, one focused on details and structure can get buried in analysis and have difficulty moving forward with investment decisions.

Desire to delegate vs. desire to control. When one wants to delegate everything to a third party, like a financial adviser, and the other wants to maintain control, decisions can become one-sided. The person who wants to delegate to the adviser may abdicate to the partner and withdraw from the financial planning process altogether.

It is always optimal for both individuals to be fully aware of their financial circumstances and have an equal voice in decision making. Too often, a surviving spouse finds themselves ill-equipped to navigate the details of the couple's financial landscape or, worse, learns that there are not enough assets to carry them through the rest of their lives.

Desire to spend vs. desire to budget. This is one of the most common causes of friction between couples, especially if there is also a desire to spend on lifestyle items. Lifestyle spending does not necessarily mean an extravagant lifestyle, although it can. However, something as simple as buying coffee on the way to work every day is a lifestyle spending decision that may quickly deplete the budget.

If it is important to one spouse and not the other, one may feel that his or her needs are unimportant. The same is true for everything from date nights to vacations to where you choose to live.

Content vs. ambitious. When one person has ambitious goals, and the other is bent toward contentment, it can be interpreted as a lack of concern for the future. Neither is right and neither is wrong, but this can be another form of financial conflict in the relationship, especially if one partner is bringing in significantly more money than the other.

Impulsive vs. planned. From a spending standpoint, this simply means impulse spending vs. following a set budget. From an investment standpoint, making emotional decisions as markets ebb and flow typically leads to a loss of assets more often than staying the course.

Conservative vs. aggressive. The issue of risk tolerance (the degree of risk an investor is willing to endure) can be challenging to navigate when creating an investment strategy. It is not sufficient to simply implement a moderately aggressive portfolio, because then neither party will be served well. One will worry about market volatility, while the other will be worried about missing out on growth.

It is best to begin with agreed-upon goals and let the plan dictate the strategy. Also of note is the difference between risk tolerance and the propensity for taking chances. Occasionally, I see a client who has a high propensity for risk but a low tolerance for living with losses, further illustrating the need for self-awareness.

What you can do to manage differences

In the above examples — and in virtually every interaction — communication is key. Coming to an understanding of how each person was raised and what their experiences are with money will empower you to celebrate your differences and enable you to work together on your financial plan, rather than work against each other.

As Valentine’s Day approaches, consider what you can do to enhance your financial relationship with your partner. Begin with self-awareness (get your complimentary natural behavior profile here) and be ready to embrace your unique profile. Be open to accepting feedback from your partner about your blind spots. Last but not least, consider working with a financial adviser who is well-versed in the discipline of behavioral finance.

Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Merit Financial Group, LLC, an SEC registered investment adviser. Merit Financial Group, LLC and Merit Financial Advisors, are separate entities from LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Kelly Gallimore is solely an investment advisor representative of Merit Financial Advisors and not affiliated with LPL Financial. Any opinions or views expressed by Kelly Gallimore are his/her own and are not those of LPL Financial. This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

We’ve all seen the TV commercials for companies that offer “debt relief” or “debt adjusting” services for people suffocating under the weight of crushing debt.

For consumers feeling like they are in over their heads, hearing the words “debt relief” can seem like the answer. But there is no such thing as a magic wand for making debt disappear. While debt settlement companies often advertise that they can negotiate with creditors to reduce the amount consumers owe, working with them carries potential long-term risks.

The Consumer Financial Protection Bureau (CFPB) has compiled a lengthy list of possible legal and financial risks associated with debt settlement companies, which include:

• Consumers being charged high fees — sometimes as much as 25% of their total debt balances — even though in many cases, the companies may not be able to settle all of their debts.
• Potential negative impacts on the consumer’s credit score and hindering the consumer’s ability to get credit in the future.
• Some creditors refusing to work with the debt settlement companies chosen by consumers.
• Consumers being encouraged to stop paying their credit card bills, even though doing so would cause them to incur penalty interest, late fees and other charges — likely causing creditors to ramp up their debt collection efforts, to the point of filing lawsuits.
• Consumers being instructed to transfer money into a bank account managed by a third party, for which they could incur fees.
• Consumers falling prey to scams, since some debt settlement companies falsely claim to be government-affiliated or nonprofit organizations. Others may try to circumvent fee regulations by encouraging people to sign up in person or online.

When a consumer stops paying their debt, they may incur late fees on their credit card accounts and loans, and their annual percentage rates (APRs) may go up. And every time a consumer misses a payment, their credit score may drop and their credit reports may display the missed payments for seven years.

Furthermore, any amount forgiven through debt resolution companies can be considered income — which could hit people in their wallets on Tax Day.

Financially healthier options for managing debt

As we see above, the CFPB has outlined many reasons why debt settlement companies can leave consumers in more debt, not less.

There are several different alternatives to working with companies offering outright debt relief. Although these options don’t claim to make debt disappear, they can help consumers pay down their credit card and other debt, while managing — rather than diminishing — their credit scores and profiles.

1. Apply for personal loans.

Consumers can apply for funding to meet expenses and consolidate debt online via lending platforms such as Prosper, where I am the CEO. Personal loans between $2,000 and $50,000 like the ones offered through the Prosper platform are fixed-rate for a fixed period of time (either two, three, four or five years) and have no prepayment penalties, so they can be paid off as soon as possible.

They also give borrowers the flexibility to choose the option that works best for them, checking loan rates and eligibility doesn’t affect consumers’ credit scores — and once approved, the money goes straight into consumers’ existing bank accounts.

While personal loan monthly payment amounts may be higher than those required by debt resolution companies, the loans themselves are designed to help consumers manage their situation and improve their overall financial health.

2. Work with nonprofit credit counselors.

A certified, not-for-profit credit counselor can work with a consumer to help craft a debt management plan. But that’s not all — they can also provide services for improving credit scores and better managing personal finance, such as creating effective budgets or sitting down to review credit reports and offering tips for raising scores. Most nonprofit credit counseling services are available at no charge; lists of certified counselors can be found at www.NFCC.org or www.ConsumerCredit.com.

3. Negotiate with creditors on their own.

Credit card companies and other creditors would always rather consumers pay something instead of nothing. Reaching out to creditors on their own to negotiate a new payment schedule or rate can go a long way to helping consumers pay down as much debt as they can, while pacifying creditors’ aggressive collection efforts.

4. Meet with a bankruptcy lawyer.

A bankruptcy attorney can help consumers understand whether or not bankruptcy would be a viable option for them under the law. Some bankruptcy lawyers will offer advice to potential clients in initial meetings for free.

Credit can be a helpful tool if it is used the right way. With the power of education, consumers can find the best way to strategically reduce their debt without seriously damaging their credit over the long term.

All personal loans made by WebBank.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

For many people, the new year represents new beginnings and the opportunity for a fresh start in different areas of their lives. It’s also a great time for a financial checkup. Consider creating and carrying out a list of financial to-dos for the year ahead.

From taxes to asset allocation to legacy planning, there are several areas of wealth management to consider — and they can be difficult to course correct once they’ve veered off track. Here are five steps you can take to stay on top of your financial wellness — and carry that momentum all through the year.

1. Take time to evaluate your goals.

Start by putting pen to paper and mapping out your expectations for the new year — or, if you’ve already done so, revisit them. If you’re intent on increasing your savings account balance by $10,000 before year-end, for example, figure out what it will take to achieve that goal. Some simple napkin math will give you a sense of what your monthly 2024 budget should look like.

When it comes to choosing your financial goals, don’t just jot down a few cursory nice-to-haves. Going away for a long weekend can give you the perspective and renewed focus you’ll need to start crafting a roadmap for the year ahead.

2. Focus on debt reduction.

No one likes to be saddled with unpaid debt. To get a fresh start in 2024, try to get free of debt — or at the very least, try to pay down high-interest debt like credit cards and personal loans as soon as possible.

Once that’s done, you can reassess what is your largest debt obligation. For many people, this may be their mortgage. Sure, refinancing is an option, especially as mortgage rates begin to cool. But if you have extra cash on hand, consider mortgage recasting — that is, making a lump-sum payment toward its principal. Doing so can lower your interest expense over the life of the loan and help you get debt-free quicker.

Settling financial obligations can be difficult, but it’s possible with some clever budgeting. High earners making over $160,200 may end up fully funding their Social Security contributions early through payroll deductions. If you’re one of them, you could plan to set aside 6.2% of your paycheck — the percentage you were paying into Social Security — for clearing debts afterward.

If you received a lump-sum payment from an inheritance or bonus, diverting it to pay off debt may also be a great option. The benefit of investing these sudden windfalls often doesn’t outweigh the risk of letting interest accrue unchecked.

3. Reevaluate your portfolio.

In case the financial landscape remains rocky in 2024, make sure your portfolio aligns with your tolerance for risk. For example, if your goal at the beginning of last year was to carry a 80/20 portfolio by the end of the year (meaning, hypothetically, 80% of your assets are in stocks, and the remainder is in fixed income assets), your assets may bring you closer in line to a 60/40 or 70/30 portfolio. For 2024, you’ll want to revisit the allocation of your assets to support your intended financial goals.

Next, consider savings opportunities that your employer may offer. For example, if you didn’t fully max out annual retirement contributions via your company’s retirement plans (401(k)s, 403(b)s) last year, consider doing so in 2024. Don’t forget to capitalize on profit-sharing plans as well.

4. Get a head start on your taxes.

Tax season is just around the corner, and as you look back over the past year, you might as well prepare to file now — it could save you a lot of time and hassle.

Start by meeting with your accountant, who can help you calculate your annual spending. Be sure to track any realized gains and losses from your investments and what impact they may have on your current income tax situation. You should also think about making contributions to your simplified employee pension plan, assuming you have one and have yet to max out its limit.

Now is also a great time to reflect on how you can better prepare your 2024 taxes. You can start by finding ways to reduce your taxable income altogether. If you’re eligible to itemize your deductions, for instance, consider leaning on charitable contributions. And if you have a large estate, you can work with your own tax and legal advisers to consider gifting it to your kids or grandkids this year to reduce estate taxes.

5. Block out time for accountability.

We’ve all experienced the following in some form or another: You kick off the new year with a renewed sense of resolve and commitment, only to slowly lose sight of your goals as the months pass by. That’s why you need an effective way to hold yourself accountable all year.

The best way to do that is to block out a monthly time on your calendar in which you’ll assess your progress toward your year-end goals. That time should be shared with somebody who will hold you accountable — a good friend, a co-worker or a significant other, for example. What matters most is that you will listen to that individual. Then, raise the stakes by writing a check to a charity of their choice and handing it off to that person. If you renege on your financial check-ins, that individual can mail that check off to the charity — and if you stick to your financial goals throughout the year, they can return the check to you.

Taking some time to set your financial milestones for 2024 will allow you to finish the year strong — and put you in position to start 2025 even stronger.

This article, which has been obtained from an outside source and is provided as a courtesy by Stephen B. Dunbar III, JD, CLU, Executive Vice President of the Georgia Alabama Gulf Coast Branch of Equitable Advisors, LLC, does not offer or constitute, and should not be relied upon, as financial, investment, tax, legal advice. Your unique needs, goals and circumstances require the individualized attention of your own tax, legal, and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors, LLC and its affiliates do not provide tax or legal advice or services, nor do they endorse, approve, or make any representations as to the accuracy, completeness, or appropriateness of any part of any content linked to from this article. Stephen B. Dunbar III offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN) and offers annuity and insurance products through Equitable Network, LLC. Financial Professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. AGE-6174135.1(12/23)(exp.12/25)

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The journey toward achieving financial stability and reaching long-term goals can often seem overwhelming. However, I advocate for an approach centered on small, manageable steps. This method is not about overnight transformations; it's about cultivating consistency, patience and setting achievable short-term objectives that cumulatively lead to significant long-term results.

Embarking on your financial journey

For those defining their financial journey in 2024, the initial step is crucial — designating a family chief financial officer (CFO). This role entails a comprehensive assessment and ongoing monitoring of the family's financial status, including income, expenses, debts and savings. 

It’s essential to set clear, realistic goals, whether it's saving a specific amount, reducing debt or making wise investments. The family CFO should also develop a simple, realistic budget that aligns with these goals, ensuring the family's financial aspirations are grounded in their current financial reality.

Setting financial goals at the beginning of a new year can be a game-changer. The key is to make these goals specific and measurable. Some potential goals include:

• Build and maintain an emergency fund. Commit to setting aside a fixed amount from each paycheck to build an emergency fund, or utilize direct deposit to systematically save for unexpected expenses that pop up throughout the year. Putting aside $75 to $100 each paycheck can end up making a difference when you least expect it. If that feels like too much, designating any amount toward savings will always set you ahead.
• Reduce credit card debt. This requires a strategic approach. Calculate your total debt and plan monthly payments, aiming to significantly reduce, if not entirely clear, the debt by year-end. Be sure to account for limited use of your credit cards through the next 12 months. If eliminating all of your debt seems out of reach, consider paying down 50% or 75%.
• Keep close tabs on your financial standing. Monitoring your credit score and continually educating yourself about personal finance are also vital components of this process. Regularly review and adjust your financial goals, be it monthly or quarterly, to ensure you maintain focus and keep yourself accountable. The family CFO can be responsible for sharing key information with the family, as well.

Budgeting: A cornerstone of financial planning

Effective budgeting is a cornerstone of financial planning and aligns perfectly with the philosophy of taking small steps. A practical approach is the 50/30/20 rule, where 50% of income is allocated to necessities, 30% to wants and 20% to savings or debt repayment. 

This strategy, however, is not set in stone; it requires regular adjustments to adapt to life's ever-changing circumstances. Small, monthly budget tweaks are far more effective and manageable than overhauling your budget sporadically or insisting your budget remain the same, despite changes to bills or your lifestyle.

Tools to help: Professionals, technology and education

Financial institutions, particularly credit unions, play a pivotal role in supporting members on their financial journey. Many credit unions offer personalized advice, educational workshops and a range of resources tailored to individual needs. Engaging with financial experts at your institution can provide insights and direct you to relevant tools and information, enhancing your financial literacy and decision-making skills.

Financial education is fundamental in understanding the importance of small steps in your financial journey. It empowers you to make informed choices, fostering a sense of long-term financial responsibility. Understanding financial concepts, tools and strategies not only helps in setting realistic goals but also in identifying potential shortcuts and avoiding pitfalls.

In today's digital age, technology is a valuable ally in tracking financial progress. Budget-tracking apps and financial tools can provide a clear picture of where you stand in relation to your goals, allowing for timely adjustments.

Overcoming obstacles and celebrating successes

One common challenge in financial planning is the tendency to set overly ambitious goals. Break down your goals into smaller, more manageable milestones to maintain motivation and momentum. You can manage both by setting clear, meaningful goals and celebrating small victories along the way.

My team at Affinity Federal Credit Union has witnessed numerous success stories where individuals and families have achieved significant financial milestones by focusing on small steps. One inspiring example is a family who treated financial planning as a collective activity. They held monthly family meetings to discuss progress and challenges, involving everyone in the decision-making process. This not only kept them on track toward their financial goals but also instilled positive financial habits in the younger family members, preparing them for future financial success.

The path to financial stability and achieving your goals doesn't have to be daunting. By embracing small, manageable steps and leveraging the support and resources available, you can confidently navigate this journey. Remember, it's the cumulative effect of these small steps that leads to significant achievements in your financial life.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The average American has $21,800 in personal debt exclusive of mortgages, according to Northwestern Mutual’s 2023 Planning & Progress Study. However, digging deeper into the data, it’s clear that people in the U.S. are traveling in divergent directions on the debt highway.

More than four in 10 (43%) say they’re currently carrying close to or at their lowest level of debt ever — a fantastic achievement in today’s high inflation economic environment. However, more than a third (35%) of people say they're carrying close to or at their highest level of debt ever — with credit card debt making up more than double any other source of non-mortgage personal debt. People who carry personal debt say 30% of their monthly income goes toward paying it off, and most also expect to remain in debt for years.

U.S. consumer debt is nearly $5 trillion, according to the Federal Reserve, and it’s top of mind for most Americans. More than six in 10 people say they are prioritizing paying down their debt vs putting savings first.

It’s encouraging to see personal debt levels ticking down a bit: Average personal debt totals are down $8,000 since 2019. But the best news is this: Anyone can reduce their debt if they decide to act intentionally. These are five ways to look at debt and how it can affect your finances.

Define your ‘good debt’ and ‘bad debt’

Many people believe all debt is bad debt, but the truth is that some debt can be nice to have and even beneficial to helping people achieve their long-term goals. Good debt tends to have a low interest rate and helps borrowers reach important financial goals, such as a student loan or a mortgage.

Get interested in interest rates

Many people who want to pay down their debt are not sure where to get started. The first and best place to look is at interest rates. It’s wise for people to audit all the debts they have before acting — and consider them altogether as part of one cohesive and comprehensive plan.

Another positive step is to consider refinancing debt at a lower rate. If you have good credit, you might qualify for a personal loan, consolidation loan or a refinance of your student loans. You might also consider transferring your credit card debt to a new card with a 0% introductory rate and no balance transfer fees. This can help you save money on interest while you pay off your debt.

Set your strategy

Once the audit is complete, the next step for anyone is to select a debt repayment strategy that is right for them and their unique plans. Two popular strategies that many people use are:

• Debt snowball. In this strategy, people start by paying down debts with the smallest balance first, while also making minimum payments on all other debts. Each time people pay off a debt, they move to the next one with the smallest balance and so on. For someone who feels emotionally overwhelmed by the variety of debts they hold, this approach can feel compelling and empowering.
• Debt avalanche. In this approach, people start paying off debts with the highest interest rate first, while also making minimum payments on all their other debts. Once they pay off the balance with the highest interest rate, they move to the balance with the next highest interest rate and so on. This strategy is ideal for someone who wants to unemotionally follow the math and improve their net worth as efficiently as possible.
  

Watch for wealth-building opportunities

While paying down debt may always feel like the right move, sometimes it may actually make better sense to save or invest. For instance, if someone has debt with a 3% interest rate, but they can earn 5% in a savings account, they can grow their net worth faster by saving. It’s vital to think critically about your debts and the opportunities you have.

Manage debt as part of a comprehensive plan

The road to a debt-free lifestyle and secure financial future can be complex. Many routes are bumpy and filled with difficult choices. Clarity on which path to choose is attainable, especially for those who have the help of a financial adviser. Knowing what you can spend now vs save for later can help anyone reduce worries, build financial confidence and get closer to financial security.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In today's increasingly complex financial landscape, working on your financial goals and wellbeing requires more than just willpower to spend less and save more. It should include a strategic approach to utilizing the resources that your financial institution offers that can provide the vital support and knowledge needed to effectively navigate your financial journey.

These resources often encompass a wide array of financial education programs, personalized services and products that are intentionally geared to bolster your ability to reach your goals, smoothing the path toward financial stability and growth.

A resource that is often underestimated is financial education. The modern financial environment is full of intricate concepts that, once understood, can significantly alter your financial perspectives and view of your financial wellbeing. Most financial institutions strive to boost financial literacy by offering resources like classes, interactive tools, webinars, and on-demand digital content. These features aim to deconstruct complex financial topics into digestible, comprehensible pieces, spanning various topics from managing credit and savings to understanding investments and retirement planning.

Despite the apparent value of these resources, they tend to be underutilized. This unfortunate trend can be attributed to various factors, including a lack of awareness, cost misconceptions, competing priorities or even a hesitance to seek assistance. However, by embracing these educational tools, you can enhance your financial confidence, navigate issues such as credit management, understand investment strategies and handle debt effectively.

Credit and debt counseling can help

Another invaluable resource available through many financial institutions is credit and debt counseling. These services play an instrumental role in guiding you toward a healthier relationship with your finances and planning for the future. Counselors can aid in managing credit effectively, improving credit scores and developing efficient debt-repayment strategies. They can also help you work toward financing a large purchase or using and managing debt effectively.

Financial institutions also offer a variety of incentives and programs designed to encourage saving and investing while supporting you in achieving financial milestones. Resources such as high-yield savings accounts, rewards programs, matching contributions, and reduced loan rates can help you grow your savings, earn higher returns, and minimize the costs associated with financial products.

Even as the digital age has seen many banking services transition online, the importance of face-to-face consultations cannot be overstated. Personal interactions offer opportunities for tailored advice and guidance, addressing your unique financial circumstances and needs. This level of personalization is particularly beneficial when making significant financial decisions, such as buying a home or a car. All told, the optimal approach for many people may involve a combination of in-person meetings and digital interactions, depending on the complexity of your financial needs, preferences, and circumstances.

Resources for retirees and pre-retirees

For retirees and pre-retirees, making the most of your financial institution's resources includes strategic decisions about liquid savings. One of the primary financial objectives in this life stage is ensuring that these funds remain safe and accessible while generating the highest possible interest. Strategies to achieve this delicate balance include confirming that your funds are insured by a reputable authority, such as the FDIC, consulting with a financial adviser, considering the impact of inflation and exploring various types of accounts and financial instruments.

Your financial institution is uniquely equipped to guide you through these considerations and decisions, providing the resources and expertise to help you make informed choices.

Remember — financial institutions are partners in your financial journey. They offer a comprehensive array of resources, tools and services designed to support you in achieving your financial objectives. By leveraging these resources and incorporating them into your fiscal strategies, you equip yourself with the knowledge, tools, and confidence necessary to navigate your financial journey, make informed decisions and work effectively on your financial goals and wellbeing.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Americans' credit card debt reached a new high this summer, according to a new report from the New York Federal Reserve released Tuesday. 

Credit card balances rose by $45 billion in the second quarter, according to the report, resulting in a peak $1.03 trillion. In the first quarter, that number was $986 billion, making this a 4.6% increase. That increase came alongside an increase in total household debt over the same period to $17.06 trillion. 

"Credit card delinquencies continue an upward trend, a growing sign that consumers are feeling the pinch of high prices and lower savings balances than they had just a few years ago," Elizabeth Renter, data analyst at NerdWallet, said in response to the NY Fed's report, according to CNBC. 

Inflation has been easing in recent months but is still a factor for Americans. 

David Payne of Kiplinger explained, "The easing mostly happened because big price increases that happened just over a year ago are no longer in the year-over-year calculation, but there has been a gradual slowing of monthly price pressures since the beginning of 2023, as well." Food prices, for example, are still generally high, but the price increases on those categories are slowing down. 

Meanwhile, the Federal Reserve continued raising interest rates in July in its continued attempt to combat inflation. That means that interest rates on credit cards have also been on the rise, making it even more important to pay off credit card debt. 

Strategies to pay off credit card debt

To pay off credit card debt, Kiplinger recommends taking a few steps:

• Find your credit score to be able to assess your options
• Figure out the extent of your debt like by using a spreadsheet to see the combined balances on multiple credit cards. This accounting should also include the interest rate on each card
• Choose the right approach to pay off your debt. This could be the "avalanche" approach, beginning with cards with the highest interest rates and balances, the "snowball" approach, beginning with paying off low-balance debts first to fuel your motivation, or the "blizzard" approach, where you start with a snowball and move to the avalanche

If you are working through credit card debt, as the data shows, you're clearly not alone. This New York Fed report comes shortly after a WalletHub study said American credit card debt was over $1.1 trillion. 

That study further said that Alaska ranked first as the state with the highest credit card debt, followed by the District of Columbia and Colorado. Each had a median credit card debt of over $3,000. 

Related Content

• Alaska Ranks No. 1 As State With Highest Credit Card Debt
• How Do Credit Cards Work? APR, Interest and Fees Explained
• How to Pay off Credit Card Debt

In 2022, the average American owed almost $102,000 and paid more than 9.5% of their disposable income on debt. That same year, American households owed approximately $17 trillion in total debt, up $2.75 trillion from 2019.

Let's face it: America has a debt problem. I believe that bad debt habits persist due to our country's financial illiteracy. This guide is aimed to help you understand the differences between good and bad debt and give you basic techniques and recommendations for managing and paying off your debt.   

Good vs. bad debt

Good debt can help your long-term finances, whereas bad debt hurts or ruins it. Good debt examples include:

Mortgages: Whether for your home or an investment property, mortgages buy assets. As a mortgage is paid down, equity (the difference between the property’s fair market value and the loan total) builds and can be used to sell or borrow from.

Student loans: Data shows that a college degree can significantly boost a graduate's lifetime wages, making student loans acceptable debt.

Home equity loans and lines of credit: If you own real estate, you can borrow against your equity for long-term financial gain. Home equity debt can be used to upgrade a home, buy another property or pay off higher-interest debt.

It’s important to note that good debt is still debt, so use it wisely. A few helpful tips include:

• Keep mortgage payments below 36% of income.
• Keep student loan payments below 10% of estimated monthly after-tax income.
• Home equity loans and lines of credit often require a minimum loan-to-value ratio of 80%.

The idea is to ensure you still pay off good debt over time and manage it cash flow-wise.

Bad debt should be avoided or used with good financial habits. Bad debt includes:

Credit cards: Credit cards allow you to spend money you don’t have and carry hefty interest rates. Credit cards can simplify cash flow management, but you should use them only if you can pay them off every month. 

Personal loans: Personal loans are a good alternative for consolidating and paying off high-interest debt because they have a fixed duration and payment and lower interest rates than credit cards. Avoid using them for unnecessary things such as pricey vacations or new outfits.

Buy now, pay later loans: Online retailers provide BNPL loans at the moment of sale. These loans let you make numerous interest-free payments for a charge. This idea seems great in theory, but if you make many BNPL purchases through different services or merchants in a short time, that could result in more debt than you initially meant or can afford.

Healthy debt management

Before taking on debt, plan ahead. What is your debt goal? Will it help or hurt your finances?

A debt-to-income ratio under 35% is considered healthy. Keeping your debt-to-income ratio in this range ensures your monthly income can meet your debts. If your debt-to-income ratio is higher than that, then now’s a good time to plan repayment.

Here are some generally healthy habits and best practices to establish with your debt:

• Budget your household to understand your cash flow.
• Pay credit cards off in full every month.
• Autopay recurring debt installments to avoid late payments.
• Plan to repay high-interest debt.
• Avoid using debt for lifestyle expenses.
• Always have three to six months of living expenses in financial reserves for emergencies.
• Track your loan balances, interest rates and minimum payments, and refinance to a cheaper rate when possible.

Strategies to pay off debt

Life happens, and we sometimes get into lousy debt despite our best efforts. A plan helps discipline these situations. Three main debt payment strategies include: 

Debt snowball method: This method prioritizes smaller balances over interest rates. Mathematically, this strategy is not the most cost-effective or time-saving, but it might feel simpler to attain psychologically with smaller wins gained earlier on and can often free up cash flow faster by removing those lowest sums.

Debt avalanche method: This method promotes paying off highest-interest-rate balances first regardless of balance size. By paying off the higher-interest-rate balances, debt is paid down faster, and more costs are saved on interest. 

Debt consolidation method: Managing various loans, credit cards and other debt can be difficult with all the different payments and due dates. For these situations, debt consolidation may be the most preferable option.

The most typical debt consolidation technique is to use a personal or home equity loan to pay down higher-interest debt. In general, the goal of debt consolidation is to lower your monthly payment to free up cash, convert your variable-interest debt to a fixed rate and/or lower your interest rate to simplify repayment and get out of debt faster.

Wrapping up

Debt might help or hurt your long-term finances and can have serious implications, so be mindful of its use. In today's world, it's tempting to utilize debt to finance purchases or make investments, but it's important to assess the pros and cons to avoid any long-term damage. Debt can help you reach your financial objectives, but only if you understand its implications and make informed decisions first.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

With April designated as Financial Literacy Month, we are reminded not to take any personal financial knowledge we have for granted. According to FINRA, as of last year only one-third of Americans have a working understanding of interest rates, mortgage rates and financial risk. That staggering number unfortunately helps drive Americans deeper into debt — and puts them in need of debt management.

According to Bankrate, 35% of American adults carry credit card debt from month to month. This type of debt can hold people back from achieving both their financial goals and enjoying a life well-lived. So how do we work to create a healthy nation of financially stable adults?

Keeping active tabs on your personal financial situation requires both short-term and long-term planning.  When economic times are healthy, there’s a natural propensity to loosen the reins on one’s spending. However, to avoid having to make possibly difficult decisions when (not if) economic times become tough, there are good behaviors you can maintain regardless of the current economic environment to protect yourself from financial harm. 

Here are three tips on how to do just that:

As has been often quoted by many business experts, if you can’t measure performance, then you can’t improve it.  This principle also directly applies to your own financial situation.  There are a variety of ways nowadays to track your financial health — namely your assets and liabilities as well as your ongoing cash flow.

There are free apps you can use, such as Mint, that make it simple and easy to track your budget. Setting it up might take some time, but this helps build a solid foundation for your personal financial situation. Once you know where you’re coming from, you can make a plan for where you want to go.

Once you have a handle on your expenses, the highest priority is to create an emergency savings account that contains at least three to six months of your average monthly expenses. If your job and/or industry is volatile, then try to save nine to 12 months of your typical monthly expenses. These funds should be set aside in a standalone account instead of commingled with your primary savings or checking accounts. Doing that will hopefully eliminate any temptation to use your designated emergency funds for non-emergencies.

If you put these funds into a high-yield savings account, your money can work for you while it waits for a (hopefully distant) rainy day.

You should then aim to save and invest 10% to 20% of your after tax take-home income to achieve your goals, such as retirement and a future home purchase. For those new to investing, you can either work with a financial adviser or start with some simple, trustworthy trading apps, such as Betterment or Public.

Personal debt can take several forms — the most common examples are education and mortgage. Unfortunately, it can take many years to satisfy these types of loan obligations and at a final cost much higher than originally anticipated. So it’s important to develop a plan to resolve each form of debt and stick to the plan as much as possible. 

If you have multiple forms of debt and you’re unsure which one to prioritize, focus first on those with the highest interest rates. Paying those off quicker will reap the highest financial reward for you.

Credit card debt tends to be the most damaging to your credit score and the hardest to bounce back from. Once you pay down your debt, try to avoid any credit card debt in the future by automating monthly payments and purchasing only items you can pay for, if you opt to use a credit card, by the time your next credit card payment is due.

Financial literacy is a spectrum of knowledge we all will grow and learn throughout our lives. And with more apps and information available to us than ever before, we can work to create a society where we all benefit from financial prosperity, rather than drown in debt or feel held back from achieving our financial goals.

This April, take action and teach yourself something new about money. Or better yet, have a fearless conversation with your kids so that they are better equipped as adults to budget and invest. Your retirement plan will thank you for that one!

Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Teaching kids, teens and young adults about how to handle their money is one of the greatest gifts you can give your children. It’s an education that pays dividends (sometimes literally!), and not just when you share the knowledge. Financial literacy benefits us over the entire course of our lifetimes, as there’s never a point at which we’re not making important financial choices and decisions as adults.

 While much of the education your kids receive can come from leading by example, modeling smart money habits and sitting down to explain bigger concepts and financial ideas, we also learn by failing. As your children become older teenagers and young adults, it might be worth letting them mess up just a bit.

 Good mistakes that provide learning opportunities allow us to experience consequences – as long as those consequences aren’t so detrimental as to be prohibitively expensive or extremely difficult from which to recover. To be clear, “letting” your kids make mistakes doesn’t mean letting them crash and burn. It means stepping back enough for your children to actually experience their failure, but then offering the support they need to quickly regain their footing.

 Here are a few money mistakes that can teach powerful lessons, if you allow your children to learn them by going through it themselves.

No matter where you are in life, you need to understand your cash flow: money coming in, and money going out. That’s where keeping a budget – especially as you enter young adulthood and take charge of your own finances for the first time – is extremely helpful.

A budget (or budgeting system) means you maintain awareness of what your money is doing day to day. The better you track your cash flow, the more informed you’ll be about your financial situation, and the better the quality of your decisions is likely to be.

For an older teen, college student or young adult, budgeting can seem like a chore, extremely boring or both. But when they fail to budget, they miss the opportunity to truly understand their money and where it goes each month.

Living without a budget is a big money mistake, but it’s worth letting your kids make it so they understand how difficult it is to live without any kind of structure or system to keep their cash flow under control.

If they continue to struggle on their own, you could offer to sit down with them and give them a peek at your own budgeting system. Offer to help them get started on a platform like Mint or You Need A Budget. And talk to them about how their money is a tool that they can use wisely to get more of what they want … but only if they manage it well. Budgeting is a first step.

A budget doesn’t just help people spend more thoughtfully. It also introduces some organization into what otherwise quickly turns to chaos. And financial chaos can get expensive.

 When you are financially disorganized, you’re more likely to miss payments, get hit with late fees, forget to move cash to savings or investments, and ignore problems that could snowball into bigger issues over time. You don’t have to let it get to that point before offering to help – but giving your kids a chance to see how expensive financial disorganization can be could provide the incentive they need to get serious about implementing and maintaining a system.

 Again, you can offer support by sharing how you organize and structure your own money. Your kids may not copy your style exactly, but it can get them thinking. You can also encourage them to try out different methods, because there really is no one “right way.” The best system is the one that actually works for you.

 You can also go over their finances with them and point out what they could automate. Automation removes some of the room for human error (or forgetfulness), and reduces the number of decisions your kids have to make each month.

It is hard to see your kids barely getting by when they live paycheck to paycheck. But before you jump in with a bailout from the Bank of Mom and Dad, it’s worth considering why they are struggling.

 In some cases, they genuinely may not earn enough in their first year out of college to pay for much more than basic expenses. If your child is going through that, your own parenting and financial philosophies will inform whether or not you want to intervene. Some parents believe letting their kids go through some scrappy years is character-building; others will want to pave the way a bit so their children don’t have to fight as hard as they did when they were that age.

 But there are other times when your young adult (or even older adult) children are living paycheck to paycheck because of their own choices about how they use the money they earn.

 In this case, they may spend what they earn today on what they want in the short-term – leaving little to nothing left over for longer-term goals or priorities like saving for retirement, or for shorter-term desires like joining in on a family trip where they need to pay some of their own way or buying their own house.

 Instead of jumping in to fund some of these bigger costs, let your children realize on their own that living paycheck to paycheck means only being able to do very short-term things. If all their money goes toward lifestyle expenses in the present, it’s going to be difficult to build wealth.

 What can you do to support a change? First, avoid bailing them out or paying for bigger, more expensive things (like a house) for them. Explain that if they want something that will cost more than what they can afford between paychecks, they need to develop a savings habit for themselves and work toward those goals over time.

 Then, try introducing the idea of creating a gap between income and expenses. By spending less than they earn, your kids can start to build up a little extra cash in their accounts at the end of the month. They can then use that money to save up for a goal, fund emergency savings or contribute to investments to grow wealth for their financial future.

It is really frustrating to watch a kid of any age take their hard-earned allowance money, or cash gifts from birthdays, or salary from their first job and blow it on something you know doesn’t align with what they truly value.

 But spending mindlessly because we can is a bit of a rite of passage. When you’ve lived most of your life not having your own resources, it’s extremely exciting to finally have money of your own to do whatever you want with … which is also the challenge! When there are no guardrails or rules anymore, it’s easy to veer off course.

 You shouldn’t lecture your kids on what a good use of money looks like. Plus, that’s not nearly as effective a teacher as realizing they wasted a precious and limited resource – money – on something stupid that they later regret.

 Letting your kids experience some buyer’s remorse may help them think more carefully before their next spending spree. And in the meantime, you can help … just don’t tell them what’s important. Instead, ask them about their goals, priorities and values. See if they can articulate what’s most important to them. Once they have a clear picture of that, you can suggest ways they could use their money that actually align with those stated values (rather than spending on the stuff that doesn’t matter so much).

 If you see your kids veering toward these kinds of money mistakes, pause before intervening. Letting them handle the situation on their own can be painful to watch in the short term. In the long run, however, it could leave them better equipped to manage their finances successfully.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA. 

Student loan debt is not just holding back young adults. It’s increasingly an issue for older people, sending many of them into default and threatening retirement plans for some. In fact, people aged 60 and older are the fastest growing age segment of the student loan market, according to the Consumer Financial Protection Bureau.

And, according to the Federal Reserve Bank of New York, almost 23% of student debt was held by people aged 50 and older as of 2021.

An analysis from the CFPB found that 39% of consumers aged 60 and older who have student loan debt failed to take care of health care needs such as prescription medicines, doctors’ visits, and dental care because they couldn’t afford it, compared to 25% of older consumers without a student loan. And according to the Biden administration, a third of seniors with student debt was in default.

“This is a really big issue,” says Erik Kroll, a certified financial planner whose company is called Student Loans Over 50, a subsidiary of Hilltop Financial Advisors, “This delays and destroys retirement dreams and adds a lot of stress and anxiety for someone. People in this age group with high balances, when I talk to them, are almost always embarrassed by the amount of loans they have, and it sometimes comes with a sense of hopelessness.”

Paul S. Garrard, founder and president of PGPresents agreed: “I would say (it’s) a significant challenge.” He said it’s a combination of older borrowers still paying their own loans and also loans they borrowed on behalf of their children, known as Parent PLUS loans, or even private loans on which they cosigned. PG Presents is a consulting company that offers independent student loan counseling.

“Parents owe a lot for their children's educations,” said Heather Jarvis, an attorney specializing in student loan law and executive director of Fosterus, a nonprofit organization operating student loan repayment assistance programs. Jarvis said 3.7 million families borrowed upward of $104 billion in Parent PLUS loans used to help pay for their children’s undergraduate educations.

It’s not clear how many older borrowers have loans from their own education versus Parent PLUS loans they took out on behalf of their children. Kroll, said, in his experience, “it really seems like the vast majority of this cohort has loans because of putting their kids through school. About 90% of my borrowers in this cohort are due to loans for kids."

A further complication for older borrowers, Jarvis noted, is that they tend to have higher medical bills, complicating their efforts to repay the loans.

According to the Department of Education, 2.5 million borrowers aged 62 and older owed a total of $101.4 billion in student loan debt as of the second quarter of 2022, for an average of $40,560 per borrower. Another 6.4 million borrowers aged 50 to 61 owed a total of $286.6 billion, an average debt of $44,781.

Student Debt an Urgent Matter for Older Borrowers

Garrard said the debt is a pressing issue for older borrowers because, “respectfully, younger borrowers are simply not faced with the urgency of planning for retirement.”

He said the government’s pandemic-induced suspension of student debt payments has, ironically, put some older borrowers in a bind by shortening the time they have to repay their debt. “While the CARES Act (and its continued expansion) has helped many borrowers, it has also contributed to complacency among many who have simply not been paying any attention to their debt since the due date keeps getting pushed back and at no cost to the borrower,” he said.

It could be worse, though. Until 2021, older borrowers faced the potential of having some of their Social Security benefits seized if they went into default on their student loans. The government stopped these kinds of collections last year. However, it’s possible they may resume.

This is especially concerning because “The government’s own data show that benefit offsets push seniors into or further into poverty, ” said Ben Kaufman, director of research and investigations for the Student Borrower Protection Center.

Older borrowers default at higher rates than younger borrowers, according to a presentation by the National Center on Law and Elder Rights. Default rates are 69% higher for borrowers aged 50 to 64 and 116% higher for those 65 and older, compared to borrowers younger than 50,

Michael and Patricia Can’t Plan for Retirement

Two of Kroll’s clients, Michael and Patricia, are a married couple, both aged 53, who live in Milwaukee. Michael is a custom building contractor; Patricia is a preschool director. We’re not using their last names to protect their financial privacy. They have $141,000 in student loan debt for their older son, who just graduated last year. Their younger son starts college in the fall, and they plan on taking out loans for his education as well.

Michael said he was surprised by “the dizzying complexity of rules and insensibilities that make up the current student loan structure. If you don't have access to a CFP (certified financial planner) who knows that landscape, it's like having a broken compass on a cloudy day.”

While Michael said his older son will assume responsibility for making payments on the loans they took out for him, Michael added that he and his wife “honestly can't even think of retirement without getting closer to the goal line of having the loans paid off.”

A Loophole for Parent Borrowers

Paying back Parent PLUS loans can be a complicated endeavor. And knowing the loopholes can make all the difference, according to Kroll. “You have a ton of complexities in the system,” Kroll said. “It’s not simple by any means, so it’s really hard to understand.” On top of that, “You have loan servicers in the past who have given poor and misleading information. Now the government is trying to fix wrongs.”

A big issue is that the government offers five different kinds of Income-Driven Repayment Plans, or IDRs, which are designed to let borrowers repay their loans at a rate that is based on their income and obtain forgiveness once they’ve made the required number of payments over a set number of years.

The plans have different rules, some more favorable to borrowers than others. The most expensive plan is known as the Income Contingent Repayment Plan or ICR. This plan caps payments at 20% of discretionary income and ends the repayment period at 25 years.

Then there’s the Income-Based Repayment Plan, known as an IBR. According to the Education Department, for the IBR Plan, the monthly payment is 10% of discretionary income for people who borrowed new loans on or after July 1, 2014. For people with older loans, the monthly payment amount under the IBR Plan is 15 percent of discretionary income.

Parent PLUS borrowers are eligible for the more expensive ICR, but not the other, less-expensive options. And to become eligible for an ICR, Kroll explained, the Parent PLUS borrower has to consolidate the loan into a direct student loan.

However, there’s a trick that could open the door to other repayment options. If the loans are consolidated twice, Kroll said, they are no longer considered Parent PLUS loans, making them eligible for other repayment plans.

In order to do this, the borrower must have more than four Parent PLUS loans. Kroll said this is common for people who, say, take out a different loan for every year of their child’s education. So they could consolidate two loans into one direct loan and then consolidate the other two into another direct loan. Then when they consolidate the two direct loans, the new direct loan is eligible for the more favorable repayment plans.

Will Biden’s Loan Forgiveness Help Older Borrowers?

President Biden has announced his administration will forgive $10,000 in student loan debt for borrowers who meet income requirements. This includes Parent PLUS borrowers. In addition, borrowers who received Pell Grants can get a total of $20,000 in forgiveness under the Biden plan.

Kroll noted that older borrowers are less likely to meet the income requirements for repayment. The limit is $125,000 in annual income for individuals and $250,000 for married couples. People who make more than that are not eligible for forgiveness. ”I suspect,” Kroll said, “that a higher proportion of this group than the overall population will be on the wrong end of the income limits for this.”

The administration is also revamping repayment plans to make them less expensive and more broadly available. But it’s not clear yet whether the repayment changes will apply to Parent PLUS loans.

What Should Older Student Loan Borrowers Do?

Michael, the Milwaukee borrower we spoke with, urged other parents to contact a certified financial planner “before you begin the process of signing the bottom line on any loans.” Because he and his wife are working with Kroll, he said, their younger son’s loans “will be structured much more sensibly because we’re now aware of how the machine works and which levers open up options that apply to our family.”

Kroll’s advice for older borrowers: “You'll have to structure your loans properly. They need to be direct loans and not Parent PLUS loans. If the loans are from your own schooling, there's less to do here. If you took out loans for your kids, then you need to do at least one round of consolidation and in a perfect world, two rounds of consolidation.”

The biggest mistake Kroll said he sees is assuming you have to pay off the entire balance. “Look into the different forgiveness programs first,” he said. “Also, once you consolidate everything, you limit your repayment options.”

Kaufman added: “Those who are disabled or otherwise no longer able to work may be entitled to disability discharge. You just use this form and have your doctor attest that you can't engage in ‘substantial gainful activity’ (which more or less means major activity that could be used to pay off your loans).”

Jarvis said eligible borrowers should be mindful of the Public Service Loan Forgiveness waiver, which ends Oct. 31. The waiver allows payments that were previously excluded to be counted toward public service loan forgiveness. PSLF is a program that eases repayment for people who hold eligible public service employment. According to the Department of Education, Direct PLUS Loans are eligible for PSLF based on the qualifying employment of the parent who took out the loan.

Jarvis added that people should be ready to apply for the Biden $10,000 or $20,000 loan cancellation so they don’t miss the opportunity. The administration says an online form will be available by early October, with a deadline of Dec. 31 to submit applications.

Finally, Kaufman said, “Seniors should be on the lookout for scams. Scammers frequently try to target seniors. Do not ever pay a company to file student loan paperwork (including the application for income-driven repayment) on your behalf. That can all be done for free by your servicer.”

It’s tough enough trying to get ahead of a debt that’s gone to collection; it’s worse when a debt collector piles on fees, charging you extra to give them money. Yep, that’s right. According to federal officials, some debt collectors charge consumers extra to pay off debt online or over the phone, even if getting the money that way is also more convenient for the debt collectors themselves.

And — here’s the kicker — most of the time, those fees are against the law, according to the Consumer Financial Protection Bureau. The CFPB calls them “junk fees” and “pay to play.” It’s put debt collectors on notice that they may be breaking the law if they charge these fees, which debt collectors may dub“convenience fees.”

Junk Fees May Be Common

The CFPB doesn’t have data on how often these fees are charged, but included its warning as part of an overall review of credit industry penalty policies, which it says costs consumers $12 billion a year.

“My sense is it’s fairly common,” said Ariel Nelson, staff attorney with the National Consumer Law Center, which advocates for consumer justice and economic security for low-income and other disadvantaged people, including older adults.

The CFPB wrote in a court brief that most debt collectors do not charge convenience fees for paying by phone or online, likely because these payments are cheaper and less time consuming for the debt collectors to process than ones made with traditional paper checks sent through the mail or given in person.

“Still, some collectors impose fees on consumers repaying their debts over the phone or online, often relying on independent third-party payment processors to process those payments,” the court brief states. “Frequently, these debt collectors will charge consumers a fee for phone and online payments that is substantially higher than the price debt collectors pay to third parties to process such payments. According to the Bureau’s market understanding, while debt collectors typically charge consumers pay-to-pay fees of between $4 and $12, debt collectors typically pay third-party processors only $0.50 or less per transaction.”

What to Do if a Debt Collector Charges Junk Fees

As a general rule, the CFPB says, unless the fees are authorized by the agreement that originally created the debt in question, they cannot be charged. And Nelson says it’s the obligation of the debt collector to prove that the fees were authorized by the original debt agreement.

Another exception could be if a specific law authorized a particular fee. Nelson didn’t have any examples of such a law, but said it’s possible that states might allow for a particular fee to be collected in such circumstances. Nelson said the debt collector should provide the consumer with the legal authority upon which it relies in charging a fee.

If you encounter such a fee from a debt collector, Nelson said you should feel empowered by the CFPB opinion to confront the debt collector and ask for a legal justification. If the debt collector can’t prove the fee is allowed, but insists on collecting it, you should file an online complaint with the CFPB or by calling (855) 411-CFPB (2372).

You could also consult an attorney about legal action, Nelson said, but the amount of the fee may not make such a move worthwhile. Nelson suggested, however, that you may be able to get the debt collector to back down just by having a lawyer write a letter.

And the law may provide remedies that make litigation worth exploring. According to the National Consumer Law Center, debt collectors covered by the law in question (the Fair Debt Collection Practices Act) include third-party collection agencies, debt buyers whose principal purpose is debt collection, mortgage servicers that acquire the account after default and collection attorneys.

The center says another law, the Truth in Lending Act, may have more potent remedies than the Fair Debt Collection Practices Act. The Truth in Lending Act “limits pay-to-pay fees applied to payments on credit card obligations, including payments made to the card issuer, a payment processor, or potentially, a debt collector.” Under this law, card issuers and any third party “that collects, receives or processes payments is liable for actual damages, attorney fees, and statutory damages. Statutory damages are twice the finance charge with a minimum of $500 and a maximum of $5,000, or such higher amount as may be appropriate in the case of an established pattern or practice of such failures.”

Turning your downtime into something meaningful can be both fulfilling and financially rewarding. Whether you’re exploring a new skill, sharing your expertise, or simply making the most of your free time, there are plenty of flexible opportunities that offer purpose — with the added bonus of extra income.

Our diverse list is packed with plenty of tactics to earn extra cash — 32 ideas for you to consider, along with resources and pointers to get you started. Some are good for a quick buck, while others could turn into consistent streams of income — even a career. You could even get started on a few of these side hustles at the same time. 

Find out which cash-generating ideas could work best for you.

You can cash in on our right to vote on Election Day. Many localities need election officers, especially those who are bilingual. And while the hours may be long, the pay isn’t bad for a day’s work — although note that the day can be far longer than eight hours, frequently running from before polls open until after they close. During the day, you'll be responsible for setting up voting equipment, checking voter IDs, assisting in using the machines and organizing the results at the close of polls. 

For example, in Fairfax County, Va., which needs thousands of poll workers, election officers are paid $250 for a full day (step up your game and get paid $300 as an assistant chief election officer and $350 as a chief election officer). In Monterey County, Calif., election officers are paid $135 (for clerks) and $185 (for inspectors).

Generally, to qualify, you must be at least 18 years of age and a registered voter in the state, be a U.S. citizen, read and write English and have transportation to the polling place. You’ll likely also have to devote time to attend a training class. Here’s a video about becoming an election officer.

Pro tip: Bring plenty to eat and drink. It’s a very long day, and you cannot leave the polling place to grab a bite.

As youth team sports return to the playing field, consider coaching. This gig could require some creative workarounds with a full-time job, but that’s the deal with most moonlighting work. 

In the case of coaching youth teams, it often means late afternoon, evening and weekend availability, plus knowledge of the intricacies of a sport — soccer, hockey, softball, you name it. You'll also need the patience and talent to teach it to others (as well as manage the expectations of parents).

Many recreational youth sports clubs, especially travel teams, pay their coaching staff. The pay scale for youth soccer coaches on elite club teams, for example, tops out at around $2,000 per month at the highest level ($200-$400 per month at the lowest level, $500 to $2,000 per month for premier coaches), according to Job Monkey, a job-search website. 

But note: You must be certified at various levels to earn that kind of money and have safety certifications, which may or may not be paid by the organization.

Some high schools around the country also rely on outside individuals to coach teams if teachers aren’t interested in taking those positions. (I coached high-school soccer and a club youth soccer team for a few years while also working my full-time job as a journalist.) Pay varies. I received $2,500 per season for coaching high-school soccer. Of course, from pre-season to post-season and all the daily practices and games in between, that’s not a lot of money — but it helped, and it was a lot of fun.

If you’re a professional, colleges and universities are always on the lookout for adjunct professors or lecturers. Some may require a master’s degree; others just a college degree and professional experience to share with students. I taught visual and print journalism at two esteemed J-schools — one required a master’s degree, which I have — for 10 years while holding down a full-time job. 

The side hustles added several thousand dollars to my annual household income, and it was fulfilling to work with students eager to learn. 

How do you get an adjunct teaching job? Reach out to community colleges, colleges or universities where you live. Depending on your specialty — say, accounting — contact the department head in that particular school and inquire about becoming an adjunct.

How about substitute teaching? Grade schools and high schools nationwide are looking for people to substitute teach. Some districts hire directly, while others have outsourced the hiring process. 

ESS, a Knoxville, Tennessee-based K-12 educational staffing firm, works with more than 750 school systems in 28 states to fill substitute teacher and other staffing positions with its base of more than 100,000 substitute and permanent employees.

The company says it fills many nonteaching roles that don’t require certification. These are filled by people who are maybe getting their feet wet, seeing if they want to pursue a teaching career. It varies by state and school district, but some don’t require substitutes to have teaching certification. Pennsylvania, for example, allows people with a bachelor’s degree to apply for a one-year emergency certification to substitute. Check the websites of school districts in your area to see if they are hiring substitutes.

Pay varies by district. The Fairfax County Public School system, for example, pays substitute teachers $19.43 per hour for short-term assignments or $26.12 for long term. Here’s a state-by-state guide to requirements, and in some cases, pay and benefits, for substitute teachers, courtesy of the National Education Association.

Becoming a tour guide for your local museum or national park can help you earn extra cash while doing something fun — especially during peak tourist season.

For example, if you live near a historic site overseen by the National Park Service, you could become a licensed guide with the Association of Licensed Battlefield Guides. The Licensed Battlefield Guides of Gettysburg, the Pennsylvania site of one of the most epic battles of the American Civil War, are the only individuals allowed by the National Park Service to conduct visitors around the national park for a fee. 

Rates for a two-hour basic battlefield tour range from $70 to $152 depending on group size, with prorated fees of $35 to $76 per hour for additional time. Tips are not required but are often given.

For more information about becoming a tour guide, check out the National Federation of Tourist Guide Associations and click on "Our Members."

Dormant smartphones, tablets, computers or game consoles often find their way to a desk drawer or the back of a closet. You can easily cash in on your unwanted electronics — even damaged items — by selling them online.

Sell at one of ecoATM’s thousands of kiosks and get instant cash. Use the site to find one near you. They’re located in Walmart stores, Kroger supermarkets, malls and other locations (I found two in the small Virginia city where I live). 

Or try uSell, where you can sell smartphones, tablets, game consoles, etc., and get paid by check or through PayPal. Shipping with all of these sites is free. 

You can also bring your video games, game consoles, smartphones, tablets and accessories to GameStop to earn cash or store credit without the shipping hassles. Before you donate, however, make sure those old-school games you've been holding on to aren't worth a fortune; you'd be surprised by how much certain games will go for on eBay. 

There are billions of dollars worth of unclaimed property in federal and state coffers. Some of it could be yours, but it’s up to you to track down the cash.

The feds hang on to tax refunds that are returned to the IRS because of mailing address errors, or ones that taxpayers never claimed because they didn’t file returns. The government also holds on to forgotten savings bonds, government-guaranteed mortgage insurance refunds and government pensions that were never claimed. 

There’s no central database, so you’ll have to check with individual federal agencies about missing funds. Here's a list of government agencies that have databases where you can search for unclaimed money.

State governments hold onto uncashed dividend checks, returned utility deposits, unclaimed state-tax refunds, uncollected insurance benefits and stock dividends, among other things. (If a bank or other payer doesn’t have your last known address on file, it will turn over your money to the state where the institution is incorporated.) 

You can search for unclaimed property held by states at Unclaimed.org. The New York State Comptroller’s office, for example, reports it returns $1.5 billion yearly in unclaimed funds to people who file a claim.

If you have a special skill — whether it’s the ability to play an instrument well, paint like Picasso or explain calculus in a way anyone (even I) can understand — you may be able to make money sharing it with others. For example, you could earn $10 to $75 an hour tutoring individual kids or college students if you speak a second language or have great math, science or writing skills.

Advertise your services on school, campus and community bulletin boards, or tutoring websites such as Wyzant (where you choose your hourly rate) and The Princeton Review’s Tutor.com. And take advantage of social media sites, such as Facebook, to let people know about the lessons you’re able to teach.

Modeling is another great way to earn money. If you’re comfortable posing nude in front of artists and are capable of holding poses for as long as 30 minutes, consider life modeling. Artists want to draw bodies of all shapes and sizes in order to hone their skills. According to ZipRecruiter, the average hourly pay for an art model in the United States is $20 an hour.

During sessions, models start with short one-minute gesture poses, then transition to longer poses lasting from five to 30 minutes. If you’re interested in becoming a life model, contact art schools at local colleges, art organizations and community centers. Local arts publications may also have ads seeking models (all of which you should vet).

If you’re uncomfortable with the full monty, there are other options. How about modeling just part of your body? Fashion magazines, TV shows, commercials and movies are always in need of attractive hands, feet, legs, even beards, unique ears and that perfectly shaped bald pate. Contact local and national modeling agencies, including Los Angeles-based BodyPartsModels.com.

Market research firms are hired by big businesses to get inside the heads of consumers. Participation in an in-person focus group led by a moderator, such as those run by market research firm Focus Group by Schlesinger, can earn you rewards points or Visa debit cards. Focus Pointe also has opportunities for telephone, app, web chats, video diaries or online surveys, as well as clinical trials. The company also has 16 U.S. locations for in-person surveys.

Lawyers are getting in on the act, too. “Online jurors” can earn cash for giving their opinions on legal cases. EJury.com pays $5 to $10 per case. You’ll need a PayPal account. At OnlineVerdict.com, where fees for “jurors” range from $30 to $60 (the case reviews take from 30 minutes to 60 minutes to complete), payment is made by check.

If you have gold jewelry that isn’t valuable as an antique or a designer piece, consider selling it for scrap. Keep in mind that most gold jewelry isn’t pure, say 14-karat or 18-karat, so you’ll need to calculate the melt value to get a better sense of its worth as scrap. The melt value reflects the actual amount of gold in the jewelry; a dealer will offer you a percentage of that value. Quotes will vary widely, so get several.

The same goes for silver. Maybe you inherited a few sterling trays you never use. Assuming the trays hold no particular value to collectors, sell them for scrap rather than trying to sell them at a consignment store or online. Check with several metals dealers, both online and at storefront locations, to get quotes. Expect to receive about 85% to 90% of your silver’s melt value.

If you or your family members have brand-name clothing, accessories or shoes that are in good condition but no longer being used, turn them into quick cash by selling them on consignment. 

Research the consignment shops in your area to find the right match for the types and styles of clothing you have to sell. Most consignment stores will price items at one-third of their retail value, and you’ll likely get 50% of the price at which your items eventually sell.

You might be able to get more for your used clothes by selling them online. For example, you can earn up to 80% of the resale value of women’s and kids’ clothing, shoes and handbags at fashion resale site ThredUp.com, an online thrift and consignment shop. Shipping to ThredUp.com is free, and you can get cash or store credit, but note ThredUp can pull a commission of 20% to 90% of the value of your item. 

If you have high-end men’s and women’s clothing, jewelry, watches and accessories, try your luck with luxury consignment site The RealReal. You earn up to 85% of the resale value in cash (but it will more likely be 40%-50%; higher-ticket items get the higher returns).

Another player in this space, Poshmark, takes it all — clothing for women, men and children, plus handbags, shoes, jewelry and makeup. All items you sell that are under $15, Poshmark takes a $2.95 flat commission. On sales over $15, you keep 80% of the sale, and Poshmark keeps 20%.

Or skip the commission bite and sell your used clothing on eBay, which will require more effort on your part but could result in a bigger return.

Child care can be an enjoyable way to put money in your pocket if you like kids. If you advertise your availability via online services, note that hourly rates vary by city (and demands of services, including some requiring caregivers to be fully vaccinated or certified in CPR). 

You can advertise your services on community bulletin boards, localized web pages, the public library or houses of worship. You can also place a listing or search for jobs on sites including UrbanSitter, Care.com and Sittercity.

According to Care.com, the starting average hourly base rate for babysitters is $18.48 an hour.

If you have an attic, garage or storage unit filled with furniture you’re not using, unload those items for cash by selling them on Craigslist or Facebook Marketplace. (You might even end up saving the monthly cost of your storage unit.)

You can list items for free on local Craigslist classifieds or Facebook, and buyers will come to you — if you’re comfortable with that (some people I know who sell online meet the buyers at a neutral, very public location, including police stations, just to play it safe). Just be sure to insist on cash. Take good photos, share key details and provide a concise description of what you’re selling.

If you don’t want the hassle of selling items yourself, take furniture and home accessories you no longer want to an upscale consignment store that gets a lot of traffic so that you can get top dollar for your items. Expect to split the profit 50/50 with the store.

For online furniture consignment, try sites such as Chairish, which lets you sell your used or vintage furniture and home decor and earn up to 80% of the resale value (on listings of 10 or fewer items), or AptDeco, which helps you sell used home furnishings. However, AptDeco can keep up to 48% of earnings. Listings for both sites are free.

Perhaps you collected stamps (or baseball cards, coins or records) when you were young, and now they’re just collecting dust. They could be worth hundreds or thousands of dollars — check out these 10 old things in your home that could be worth a fortune. 

One place to get top dollar for your collectibles and small items of value is eBay. Click on the “register” link in the top left corner of the homepage to create an account. Then visit the site’s “Seller Center” to learn how to sell. 

You can list 50 items every month for free, and you’ll pay a 10% fee (lower in some cases) on each item when it sells. Research prices for merchandise similar to what you plan to sell so that you can price your wares competitively.

You could be sitting on an untapped source of cash if you haven’t bothered to redeem your credit card rewards points lately. In fact, in 2023 CreditCards.com found that 23% of cardholders hadn't redeemed their credit card rewards in the past year, leaving money on the table.

The next best thing to getting cash for points is a general-purpose gift card, something I stumbled on recently as I was looking at my NASA Federal Credit Union credit card statement online. I’d racked up enough rewards points to land a $50 Costco gift card. At American Express, for example, 10,000 Membership Rewards on a Platinum Card can be redeemed for a $70 retailer-specific — Amazon and Best Buy, for example — gift card from AmEx.

Why not get a little exercise while you earn anywhere from $10 to $30 for about an hour’s work? Working folks will pay plenty for you to take their puppies on a daily stroll when they’re in the office. Or consider pet-sitting for people while they’re on vacation, for a daily fee of $50 or more. Advertise your services in veterinarians’ offices or on sites such as Craiglist and Care.com.

You can also team up with an existing dog-walking operation that handles client recruitment and scheduling. To find one, ask other dog walkers you encounter whether they’re part of a group or check Craigslist.

Marking similar territory is Rover.com, a website for those of you looking to be pet caregivers (and, as well, a site for pet owners to find you). Rover offers dog boarding services, pet- and/or house-sitting services, doggy day care and even drop-in services where caregivers stop by your crib for quick potty services (for the dog) and a mini-playdate. 

Rover has some stringent guidelines for the folks it hires (only taking on less than 20 percent of potential sitters, the company says). The Seattle, Wash.-based firm has services in more than 24,000 communities in North America. Rover says sitters it backs via its website can earn up to $1,000 a month (sitters set their own rates; Rover takes a 20% bite per booking).

Plenty of media, corporate and nonprofit websites are looking for freelancers to write, edit or design content. Freelancewriting.com and Freelance Writing Jobs provide a long list of freelance writing opportunities culled from several top sites, along with advice and tips for freelance writers. Freelancer.com offers a wide variety of freelancing jobs in categories such as design, media and architecture or writing and content. For $14.99 a month, you can join Mediabistro’s MB Unlimited to post your qualifications and get support for your endeavors.

If you fancy yourself a skilled photographer, you can earn extra cash by selling photos to stock art sites such as Getty Images/iStock and Shutterstock. At both sites, you must apply to be a contributor by submitting samples of your photos, illustrations, videos or audio. If approved, you’ll earn royalties when your files are downloaded by paying clients. 

Rates are 20% for royalty-free still images and 25% for royalty-free video clips. iStock royalty rates start at 25% for photos and 30% for videos and illustrations. Shutterstock’s royalty payouts are between 15% and 40%.

Want to know? Check out our guide on what you need to know if you go freelance. 

If you have a knack for creating anything from baked goods to intricate art designs, you can profit from your talent.

It happened to Stacy Brown, founder of the Auburn, Ala.-based Chicken Salad Chick restaurant chain. Brown’s quest to create the perfect chicken salad morphed into a small side business where she was selling her creation from her house — until the health department informed her she couldn’t sell food from her home kitchen. Voila. A restaurant was born from whence a chain sprung (sprung chicken?). For more about Brown’s story, see Small-Business Success Story: Chicken Salad Chick Shares a Taste of the South.

Say you’re an excellent baker (according to all your friends). You can find clients for your baked goods by volunteering to provide treats for your children’s school functions or for church or other religious gatherings, or by selling them at a farmer’s market, flea market or local festivals. A brand, logo and stickers are probably the first investment you’ll want to make after ingredients.

If art and design are more your speed, consider selling your creations online (or at local craft shows). Online sites include Etsy and DeviantArt. Etsy features products such as jewelry, quote posters, vintage clothing and even pet supplies. DeviantArt mainly sells art prints.

The amount of sold-but-unredeemed — or “closed loop,” to use retail industry parlance — gift cards in the U.S. each year totals $244 per person on average, according to Bankrate. So grab the unwanted cards you have lying around your house, open the loop and turn them into cash by selling them online at sites such as CardCash, which pays up to 92% of the card value. Other sites include Raise and GiftCash.

Get cash in hand on the first of every month recruiting a roommate to share living costs and/or rent.

Not interested in a long-term houseguest? Websites including Airbnb make it easy to rent out a spare room, a wing of your house or a backyard cottage.

Beth Everett and her husband, Glenn, built a cottage in their backyard in 2014 for their son Jordan to live in when he’s home from college. But while the studio sat empty, visitors to Portland, Ore., began renting the cozy space through Airbnb for $99 a night.

Fox Lair, as it’s known, offers heated floors, a small sitting area decked out with guitars and bongos, and plenty of eclectic artwork. Everett estimated that in 2015 they earned about $9,000 from a steady stream of visitors, money she used to help pay for editing and cover designs for her self-published books, the Lee Harding mystery series. “It was the easiest money I ever made,” she says. “And it was fun.”

You can list your space free on Airbnb, then pay 3% to the site when you receive a successful booking.

Another option: Do you live in a resort town or a busy metropolitan area? You can rent out your home on Vrbo (formerly Vacation Rental By Owner). You set your rates and also charge the renters a $50 cleaning fee. Vrbo charges renter members 8% of the booking fee.

My wife and I rented a single-family home via Vrbo in Asheville, N.C., to attend a family wedding. We pitched in with other relatives to cover the cost of the week-long stay. An upside (next to the stunning views and low cost): The owners were nearby when we had a slight plumbing problem and promptly responded.

If you like to write or think it would be fun to share your knowledge about a particular subject, start a blog. WordPress.org and Blogger.com offer free blogging platforms. Want to go bigger? Try GoDaddy.com for domain name registration, as well as website building, hosting and security. Turn to Google for Publishers for a free way to display ads on your site to earn money.

If you have a camera and something unique to share, you can cash in on YouTube. A reasonable goal for amateur filmmakers is to score viral fame with a YouTube channel. That means making a series of videos highlighting a specific skill or theme — say, cooking, standup comedy, fixing plumbing or repairing older cars. Your videos will drive traffic to one another while you perfect your skills and earn “subscribers.” To generate views, reach out to media outlets and bloggers with a link to your videos.

If you’ve ever found yourself in need of a quick ride, you may have turned to Uber, the anytime, anywhere ride-hailing service that has gained enormous popularity. But have you ever considered becoming an Uber driver? 

Requirements for being an Uber driver in most cities are: You must be legally able to drive and have at least one year of driving experience (three if you’re under 23), own a car, and pass background and driving checks. If you meet the requirements, you could earn cash by driving people around in your free time.

Which could earn you some decent cash, but don’t forget to factor in the costs associated with using your own car, such as gas, maintenance, insurance and cleaning. Also, your earnings depend upon how much you work and how many rides you give, among other factors.

Uber’s biggest ride-share competitor is Lyft. Like Uber, Lyft has age, vehicle and background-check requirements for drivers.

We just told you about making extra dough by driving for the ride-hailing services Uber and Lyft. What about simply renting out your car and leaving the driving to Gus? Or any other stranger? It’s possible on Getaround. 

From the renter’s end, they get a reliable car to rent — fees start at $5 an hour, and they can be rented hourly or daily — with no monthly dues or tons of paperwork. Insurance and 24/7 roadside assistance are included in the rental, which the renter finds, rents and unlocks via an app.

From your end, when you sign on with Getaround — you will be screened — you decide when your vehicle is available for rental, and you unlock your car and rent it out using Getaround’s smart-car technology. Getaround pays for a $1 million insurance policy on your rental, and drivers are screened.

If you buy into this ride-share plan to make money while your car is idle, Getaround says car owners can make up to $1,000 a month renting out their mostly idle vehicle.

Another big player in this car-sharing biz is Turo.com, which you’re free to join to rent out your ride. Or rides. Turo encourages entrepreneurs to build a fleet of their own cars for rental purposes. Liability insurance, marketing, and prescreening of renters is included.

Also sharing (pun intended) this space in 2024 is AvailSharing.com. If you own a 2013 or newer vehicle, consider making some dough off of it by allowing Avail to share it with others. 

When you come aboard AvailSharing.com, you can drop your car off at Avail locations at airports and other Avail-staffed rental locations. Staffers there handle the rest, from cleaning the interior and exterior of your car to handling the rental operation. Avail, via Allstate, handles rental insurance and roadside assistance, if needed. Avail says you can make from $20 to $25 a day if your car is rented out, and if it isn’t, you still get the free car wash.

Surf over to Fiverr, an online community of freelancers of all stripes. There, you can advertise your proficiency in skills including writing and translation, video and animation, voice-over world and advertising. As Fiverr’s name indicates, your services sell starting at $5 a pop, and you have the option of adding ancillary services to make more money. Fiverr keeps 20% of customer payments, meaning you earn $4 from every $5 in services you sell.

For more intensive jobs, try joining TaskRabbit, which is owned by Ikea. If you live in or near one of the over 60 U.S. regions served by the site in 2024, you can perform tasks such as waiting in line for someone (yes, you can pay someone to do that), running errands, building shelves, doing yard work, assembling Ikea furniture or lifting heavy items. Set your own fees with TaskRabbit, and you keep 100% of what you charge plus tips.

So you teach, maybe full-time, maybe part-time. You’ve created some dynamic lesson plans and units, task cards, activities, Common Core resources, games, classroom décor and so much more that goes into teaching. How about selling it (or, if you’re looking for a classroom boost, buying classroom material others have created)? 

Welcome to Teachers Pay Teachers, a website dedicated to the craft. Since its inception in 2006 by a New York City school teacher, TpT has paid teachers more than $1.5 billion in take-home profits. Note there are a host of guidelines, the topmost of which is you cannot sell on TpT material that is copyrighted to someone else. Original material sold on the site includes learning games teaching reading and math skills, writing tools, flashcards, books and more.

There are two types of memberships: Basic Seller Membership, which requires a $29 one-time, non-refundable fee; you’ll retain 55% of your sales. With a Premium Seller Membership, which costs $59.95 a year, you’ll retain 80% of your sales.

Why the blank look on your car? It could be advertising stuff, other than the make and model and dealer of your ride. We’re talking about legit ads you have applied to your vehicle that get you paid. Hit up Carvertise, a Wilmington, Del.-based company that finds the advertisers and puts you in the driver’s seat, your car wrapped in ads unique to the market where you roam the streets.

Carvertise says drivers who have their cars wrapped (and unwrapped) by Carvertose experts can earn $450 to $1,500 per advertising campaign.

Another player in this space is Stickr, which pays you to wrap advertising made of high-end perforated vinyl material on your vehicle much as city buses do. Stickr will charge you an upfront fee of $10, but you get that back when you prove you have the sticker on your ride. Stickr claims drivers can earn cash plus $50-$175 in local restaurant gift cards monthly.

A couple of notes before you wrap your ride in advertisements: If you live in a community governed by a homeowners association, make sure there aren’t rules about parking vehicles with advertising on them in your ’hood. Yes, such restrictions exist.

Who’s a good boy? You are, when you turn your extra space into a dog park. Sniffspot, “the Airbnb for dog off-leash areas,” gives pet owners a place to let their charges run free. Essentially, you’re creating a dog park on your property — and earning yourself some walking-around money in the process (Sniffspot says some of its hosts make $3,000 or more per month).

Sniffspot’s stringent procedures and safeguards include verification of pet vaccinations and flea prevention, screenings for aggressive dogs (they’ll be banned) and insurance against damage to your property.

All types of properties are welcome to be listed. Property owners set their own per-hour per-dog rate. Sniffspot collects the funds and keeps 24.9%, plus $0.30 per charge.

Oh, and in case you’re wondering, pet owners are responsible for cleaning up dog waste.

If you’re retired and have some early morning and late afternoon time on your hands, you could make some cash driving a school bus.

You may even have the opportunity to make a little more money if you sign on to drive school sports teams to and from events in the evenings or on weekends.

For most school districts, you must have a commercial driver’s license, a clean driving record and a clean criminal record. It will go better if you like to drive, you’re friendly and can handle the occasional Otto Mann joke.

It’s not big money. Most drivers in the U.S. are paid between $15 and $23 per hour, according to 2024 Salary.com estimates.

Plan on working 20 hours or so a week, often starting in the early morning before getting back behind the wheel in mid-afternoon for a couple of hours. You’ll have an established route. And depending on where you live, you could be working for a school district or a private bus company hired by the school district, or potentially directly for a private school.

There are plenty of paid shoppers filling local supermarket aisles, either from outside services or store personnel. So how about going grocery shopping and making money instead of spending money? You can do it as an Instacart shopper. 

You know the drill, because you likely have run into armies of Instacart shoppers while shopping for your own groceries: Instacart employees are shopping for, and delivering to, folks shopping from home or work.

You have two options when you wear the Instacart green: Just do the shopping as an in-store shopper and have someone else deliver. Or do the shopping and the delivering as a full-service shopper. 

As a full-service shopper, you’re an independent contractor who must have access to a car. You choose your own hours and will shop and deliver orders. Instacart does not post salary levels, but Indeed.com says shoppers and drivers in Georgia, for example, can make anywhere from $10.95 to $24.37 per hour.

Maybe you needed (or thought you needed) to buy an RV in retirement. If you don't travel as much as you thought you would, you could rent out your RV to others for a little side cash.

If you’re uncomfortable putting that expensive ride in the hands of Craigslist, you could put the task of renting out your rolling home in the hands of professionals. One site is RVezy, which dubs itself "the Airbnb for RVs," meaning it rents out your RVs from people like you around the country. It features towables, motorhomes, pet-friendly RVs, deliverable RVs and stationary RVs.

According to RVezy, motorhomes typically rent for $1,000-$1,500 a week, and travel trailers rent for $600-$800 a week. RVezy covers the insurance and roadside assistance for the renter who has her rig. 

Similar to Airbnb, you get the booking requests and planned itineraries of your potential renters; you have the option of declining. And it will be you showing the renter how your RV works. You set the nightly price; RVezy takes 20%.

Do you have unused space in your garage, attic, shed, driveway or other property? For a fee, of course, you can store the belongings of others, from cars and RVs to... really whatever anyone needs a spot for. Need someone to help you rent out that space, insure it and cover the transaction? Turn to Neighbor, a website that brokers your unused space with people looking for storage.

“We allow anyone with extra storage space to list the availability of their garage, parking spot, warehouse, shed, or empty closet as available for storage,” says Colton Gardner of Neighbor. “This way, people can generate a passive income by just storing their neighbors’ stuff.”

Through Neighbor, you handle the requests for your space, decide whether to accept the offer, and arrange a time for the renter to show up. Like a good neighbor, Neighbor gets paid — on the renting end (listings are free). Neighbor absorbs 4.9% of the reservation.

The kids are grown and gone and you’re not the swimming type. Why not rent out that expensive hole in the ground?

One company that will help you turn your pool into cash by renting it out is Swimply. As with other online services brokerage sites, you do the listing (location, availability, price) and rental approval, and Swimply collects and distributes payments. 

Swimply’s commission is 15%, meaning you keep 85% of the booking fee (swimming pools in California listed on Swimply recently were charging $45 an hour; Swimply plays host to thousands of pools).

Swimply also offers host liability protection as well as property damage protection.

Related Content

• Best Jobs for Retirees
• 7 Online Side Hustles Worth Your Time
• 10 Things to Know About Working in Retirement

Losing your spouse is a painful, confusing time, but add to that repeated calls from an aggressive debt collector, and a bad situation suddenly can get even worse. Before you cave into the pressure, take a moment to catch your breath and learn the facts about your rights and responsibilities. You may be off the hook as some debts — including even certain types of credit card charges — are forgiven at death. However, others linger much longer.

First off, you should know that you are generally not personally responsible for paying off your husband's debts, as any loans would normally be paid off by his estate. This includes credit card debt, student loans, car loans, mortgages and business loans.

According to Marc Zimmerman, trust and estate planning attorney with the Law Offices of Michael A. Zimmerman, "When your husband dies owing a debt, the debt does not go away. Generally, the estate is liable for paying any outstanding debts, and, the named personal representative, executor or administrator will pay debts owed from the money in the estate, not from their own money or that of the surviving spouse. However, if the surviving spouse inherits certain assets from the deceased spouse through beneficiary designations or joint account ownership, and the estate assets are insufficient to satisfy the creditor claims, the creditors could attempt to make claims against those assets that pass directly to the surviving spouse outside of the probate estate.”

That being said, you may be responsible for certain types of debts. For example, if the debt is jointly owned or you have co-signed a loan, you are obligated to continue to pay this debt. This occurs most often with credit cards, car loans or mortgages. Some states also require you to pay off any medical bills that your spouse incurred before their death.

The State You Live in Can Make a Big Difference

It is essential to understand the laws of your state so that you know where you stand concerning all debts, as some community property states hold you responsible for the debt even if it is not in your name. Community property laws make both spouses equally liable for debts incurred after the marriage has taken place.

There are currently nine community-property states:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

A Word about Credit Cards

It is important to note that there is a distinction between joint account holders and authorized users with credit card debts. As a joint account holder, you would need to continue to pay off the credit card (no matter what state you live in) because you and your spouse are both considered owners of the account. That means you share equally in the ownership of any charges that are on the card.

On the other hand, authorized user status means that you have charging privileges on your spouse’s card, but you are not considered an account owner. So, if your spouse were to pass away, you wouldn’t be responsible for paying the debt they incurred as an authorized user. The exception would be if you lived in a community-property state, which requires the surviving spouse to pay off all debts, including those in just her husband's name.

Does Not Paying His Debt Impact My Credit Score?

Generally, your credit score would not be hurt by any of your spouse’s outstanding loans that you are not required to repay. According to Davon Barrett, who is a CERTIFIED FINANCIAL PLANNER™ professional specializing in working with widows at Francis Financial, "If the debt is solely in the name of your husband, the debt collector should not report any late or non-payment to the credit bureaus in your name." The exceptions to this will be if you are a joint account owner, co-signer or reside in one of the nine community-property states listed above.

Barrett cautions widows, "Some debt collectors are inappropriately aggressive. For example, if the debt collector insists that you are responsible for the account balance, but you believe you are not, you may request that the collector provide evidence."

Talking to an estate-planning attorney can help you understand under which circumstances you have an obligation to pay and when you do not. Zimmerman shares that “the best way to find an experienced estate planning attorney is to get a referral from another attorney, financial adviser or accountant whom you know. This professional should be able to introduce you to an excellent trust and estate planning attorney who specializes in this area of the law.”

Plan appropriately and include this in your financial plan. Consider talking to a financial adviser about how debt might affect your overall financial plan and goals. If you don’t have a financial adviser yet, finding one is not difficult. Reach out to your friends and family for a referral to a fee-only, fiduciary, independent financial adviser.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The debt just crept up on Kathy Lee, 59, and her husband over time. The couple made some home improvements thinking it would boost Lee's in-home day care business. Then there were the costs of an international adoption that never happened. In all, the Lees racked up about $72,000 in credit card debt and a car loan on top of their $582,000-plus mortgage. "We had so much debt," says Lee, a social worker for seniors in Northern California. "It's so hard to get out of it."

Then one day Lee heard personal finance guru Dave Ramsey on the radio extolling the value of getting and staying out of debt. She became a regular program listener and began reading personal finance blogs. After attending a local Ramsey seminar, the Lees sold possessions they no longer needed and worked part-time jobs for extra cash. They also stopped using credit cards. In more than a year, they paid off roughly $44,000 in consumer debt.

The 2008 financial crisis ended their progress abruptly. Lee's husband, who worked in commercial construction, struggled to find employment. Meanwhile, parents who had lost their jobs withdrew their kids from Lee's day care. She was forced to close the business and find other work. Eventually, the couple filed for bankruptcy.

Today, about a decade after declaring bankruptcy, the couple lives debt-free, and they remain committed to the fundamentals they learned while paying down debt. "Now we have more peace of mind," Lee says. "We don't have to worry about debt collectors."

Adults today are nearing and entering retirement with more debt than previous generations. Americans ages 50 to 59 had $3.39 trillion in debt in 2021's first quarter, twice as much as 20 years ago after adjusting for inflation, according to data from the New York Fed Consumer Credit Panel and Equifax. For people 60 and older, it was $3.58 trillion, more than three times as high after inflation compared to first quarter 2001.

Much of that is mortgage debt. The number of adults carrying a mortgage in retirement has doubled in the last 20 years, says Caezilia Loibl, a professor of consumer sciences at Ohio State University in Columbus. Mortgage debt in retirement is tied to increased food insecurity and trouble paying for medications. "Being able to borrow against the equity in your home can be important later in life," she says, because it "eases other financial burdens for an older couple."

"Debt is kind of evil when you go into retirement," says Mike Riffel, private wealth manager at Lucco Financial Partners in Highland, Ill. "You are stuck with a guaranteed payment you have to make when the focus in retirement should be to minimize your expenses. That is something that will haunt you until it's repaid."

And the strategies for taming that debt don't get any easier late in life.

You'll need to decide if your debt is manageable -- preferably before you retire. One gauge is your debt-to-income ratio, which measures how much of your monthly gross income goes to debt payments, says Jonathan Howard, a financial planner at SeaCure Advisors in Lexington, Ky. To calculate, divide your monthly debt payments by your monthly pretax income -- retirees should include pensions and Social Security benefits. The lower this number the better, though a ratio under 15% is healthy, Howard says. Banks frequently use this ratio to determine creditworthiness and often won't consider borrowers with a ratio over 43%.

The debt-to-income ratio is also used in another gauge, the 28/36 rule. With this ratio, no more than 28% of your monthly gross income should be spent on housing, including rent or a mortgage, insurance and taxes, says Jay Guyer, a senior financial planner at Janney Montgomery Scott in Philadelphia. Your total debt-to-income ratio shouldn't exceed 36%.

You should also estimate your total expenses in retirement and practice living on that amount while you are still working, recommends Mike Sullivan, director of education at Take Charge America, a nonprofit credit counseling agency in Phoenix. If you struggle to do this while carrying debt, you'll need to develop a repayment plan. Having one in place before you turn 55 gives you time to make adjustments, including paying off more debt or even delaying retirement. "You will earn more at the job you have now than the job you will be forced to take if you realize later you don't have enough to live on," he says.

You'll pay off debt faster by lowering the interest. If you own your home, refinancing the mortgage can reduce the interest rate and the monthly payment. The savings can be used to pay off higher-rate debt like credit cards. Don't refinance your home unless you can lower the interest rate by at least three-quarters of a percent, Riffel says. Also, avoid lengthening the term of your loan, says Paul Humphrey, founder of Humphrey Financial in Forest Lake, Minn. Lenders used to charge more for originating mortgages with an unusual term, like 22 years instead of 30, but now they are more open to it, he says. If you have a nonstandard number of years left on a mortgage, ask your bank to refinance it for that period. "I hate to see a 50-year-old take out a 30-year mortgage," he says.

If that's not possible, pay more than the required monthly amount to eliminate the mortgage sooner. (Just make sure the lender won't penalize you for prepaying the mortgage.) Although this strategy can leave you with less cash to repay other debt, the total cost of your mortgage is reduced in the long run.

Homeowners who are at least 62 years old may be eligible for a reverse mortgage, which eliminates the monthly mortgage payments while freeing up a large portion of the home's equity as cash to pay off other debt. In exchange, you or your estate repays the principal plus accrued interest when you move out or die.

A reverse mortgage isn't recommended for everyone. Although you remain the owner and retain the title to your home, repayment is triggered if you stop living there for 12 months, no matter the reason. "If you could guarantee that you will stay in that home for 20 years and then die in your sleep, that would be ideal, but that is also unlikely," says Todd Christensen, education manager at Money Fit, a nonprofit credit counseling agency in Bohemia, N.Y.

Double-digit annual percentage rates on high credit card debt can demolish retirement savings. Transferring the balance to a new card with a low or zero introductory interest rate reduces the cost of the debt. "If you are not able to pay it off rapidly, at least you can find a more competitive rate," says Bruce McClary, senior vice president of communications at the National Foundation for Credit Counseling in Washington, D.C.

This tactic comes with a few caveats. Some card issuers charge a balance transfer fee, usually about 3% to 5% of the amount transferred. Also, that 0% APR typically expires after a set number of months, and there could be an annual card fee. Before transferring a balance, check these fees and look for a card without them. Transferring an existing balance to a new card won't help you if you continue to use the old one, so either cancel or stop using it.

These options aren't always possible. Lenders can still reject your application for new credit because of a poor credit score or high debt-to-income ratio.

Taming debt doesn't always involve refinancing, and despite their names, these next two strategies won't leave you out in the cold. Under the "snowball" method, you attack your smallest debt first, regardless of interest rate, while paying the minimums on all other balances. Once the smallest debt is paid off, put the extra cash toward repaying the next smallest debt. Lee, who used the snowball method to pay off her debt, says it "gives you a sense of winning, that you are making progress."

The "avalanche" method resembles the snowball strategy except that you target the debt with the highest interest rate first, regardless of the amount owed. In the long run, though, using the snowball strategy to pay off all your debt will cost you more and take longer, Christensen says. He recommends that if you need the quick win from the snowball method, start with that strategy and then switch to the avalanche method after eliminating one or two balances.

If you have medical debt, experts say you should never pay those bills using a credit card. Instead, contact the provider and discuss repayment options. Most medical providers are open to working out a repayment plan, often with little or no interest. "A lot of people may hesitate to do this because they are afraid their request will be rejected or will accelerate sending them to a debt collector, but this actually improves your chances of avoiding that," McClary says.

If you can't make any headway repaying the debt, get professional help from a nonprofit credit counseling agency. Counselors charge a startup fee, usually about $20 to $40, and then a monthly fee, ranging from $20 to $30, for a debt management plan; by law, the charges are capped in all 50 states. Budgeting plans are free.

Once you sign on to a debt management plan, the agency works with your lenders to waive fees and lower interest rates on unsecured debt, such as credit cards and medical bills, with the goal of repayment in two to five years. Creditors are often willing to negotiate with a credit counselor because these plans usually require that you repay the principal.

Look for a nonprofit credit counseling agency affiliated with the National Foundation for Credit Counseling. It requires counselors to meet 18 quality standards, such as accreditation by a third party and debt management plans that are only provided to clients who can repay the money in 60 months. Be wary of for-profit credit counseling agencies, which don't come with NFCC's seal of approval. For-profit counselors often have an incentive to sell the agency's products and services instead of working in the client's best interest.

Credit counseling agencies are not debt settlement companies, which negotiate with your creditors to accept less than what you owe on unsecured debt. Typically, borrowers are told to stop repaying their loans to strengthen the debt settlement firm's bargaining power, but this destroys the consumer's credit score with no guarantee that your debt will be resolved. Linda Jacob, director of education at the nonprofit credit counseling agency Consumer Credit of Des Moines, had a client who paid a debt settlement company more than $2,000 to settle a debt for $367.

Bankruptcy should be a last resort because creditors may be able to seize assets, such as real estate or tax refunds, to settle what you owe. Besides badly damaging your credit, a bankruptcy stays on your credit report for up to a decade.

No debt repayment plan is complete without considering what caused the debt. Financing strategies are "just a debt shuffle," Christensen says. "I'm rarely a fan of debt shuffles because they don't address the problem, just the symptoms."

Once you create a budget, find like-minded people with similar goals to help you stay on track, says Lee, who now helps others become financially independent with her Baby Boomer Super Saver blog. Her advice: Look for positive and uplifting examples of people who have paid off their debt. Those examples, she says, can inspire you to reform your own financial habits and may even spark ideas for ways to become debt-free.

When the pandemic shut down travel in March 2020, Lew Moore gave up the lease on his Nashville, Tenn., apartment, which he had been renting out as an Airbnb since getting married a few years earlier. Moore, 51, sent a message through the apartment building's secure portal and figured he would lose his deposit and that would be the end of it. But a few months later, a debt collector called, claiming he owed $3,000 even though his $1,400 apartment was on a month-to-month lease. "There were all these fees, and none of that was in the lease," he recalls.

Moore contacted a consumer law firm, Sue the Collector, which successfully sued the collection agency for violating his rights. The debt was vacated, and he received a $1,000 check for damages. "They were trying to collect a debt in an improper manner. They were trying to collect a debt that wasn't owed," Moore says. "There were several strikes against them."

In the aftermath of the pandemic, a wave of bad debts and associated illegal collection practices is building. "Debt collection lawsuits are exploding right now," says Jarred Dean Johnson, founder of Sue the Collector, based in Franklin, Tenn. "In the next two years, we're going to be swamped." Marc Dann, a Cleveland-based consumer attorney and former Ohio attorney general, is preparing for the onslaught by training consumer lawyers all over the country. "The chaos that's going to follow the COVID experience is going to require an army of consumer protection lawyers," Dann says.

Debt buyers purchase old debt from the companies that consumers originally did business with, often for pennies on the dollar, and aggressively seek repayment. In 2020, the Federal Trade Commission recorded 82,700 consumer complaints about debt collection, up 10% from the previous year.

Federal law stipulates what collectors can and can't do in pursuit of a debt, lines that some collection agencies cross. For example, under the Fair Debt Collection Practices Act, they can't harass, threaten you or lie, and they can't spread false credit information about you or engage in other unfair practices. If a violation of the law is proven in court, individuals can collect up to $1,000, along with compensation for their attorney's fees and actual damages.

Know Your Rights

Even if you do owe money, debt collectors must notify you and provide information about the debt and your rights to dispute it. If you don't recognize the debt or believe the amount is wrong, you have 30 days to dispute the claim after a collection agency notifies you. Always do so in writing by certified mail, says April Kuehnhoff, a staff attorney at the National Consumer Law Center. The Consumer Financial Protection Bureau lists sample letters to debt collectors that you can use. "The worst practices we hear about are people collecting what we call phantom debts, accounts that don't exist. They say, 'If you don't pay me, then the police will show up at your door or immigration will show up at your door,'" Kuehnhoff says. "That is a real red flag that you may be dealing with someone who is a fraudulent actor and perhaps not even a real account."

Collectors can't call before 8 a.m. or after 9 p.m., misrepresent themselves or use abusive language. They can't send a recorded message to your cellphone without your permission or autodial your land line if you're on the do not call list. If you ask them in writing to stop contacting you about a debt, they must comply. Unless debt collectors don't know how to reach you, they can't contact a third party, such as an employer or family member. Collection agencies can't tell a third party that you owe a debt, send you a postcard or mail letters in an envelope marked to indicate debt collection. Any single violation of these restrictions could entitle you to statutory damages up to that $1,000 limit.

A growing problem is collectors pursuing debts that are barred from collection because of state statutes of limitation, which can vary from three to 10 years. If you make a partial payment on a debt that's too old to collect, you risk restarting the clock. Collectors may trick you into doing that by offering to "settle" an old debt. "The word 'settle' is closely related to lawsuits. It carries with it the idea that you can be sued," says Kuehnhoff, who adds, "This can all be very misleading for consumers."

Be skeptical of calls and emails from collectors, says Dann. "Ask for verification of that debt before you even consider making payment on something that was overdue," he says.

A consumer attorney in your state can advise you about the statute of limitations or possible violations of federal law and will take cases on a contingency basis. You can find someone through the National Association of Consumer Advocates and learn more from the National Consumer Law Center.

Most important: Don't ignore anything from a court about a debt because if you fail to respond or show up as required, you risk a default judgment against you. Michigan prosecutors in April charged three lawyers with fraud for allegedly falsifying documents to show that process servers had contacted debtors, when in fact they hadn't been notified of upcoming court dates. Before these bad actors were charged, they won judgments worth more than $1 million against 1,000 people, prosecutors say. "Debt collection companies have found that it's much easier to collect from a debtor who doesn't show up in court; they can garnish your wages, have a sheriff seize your car," Johnson says.

Death and Debt

Heirs and executors should also be wary of anyone seeking to recover losses from an indebted, deceased family member. "The debt collectors will routinely call the spouse and say you have to pay all this," Johnson says. Chances are it isn't true. "Debt collectors lie. They love to collect debts no matter who owes them."

Collectors may prey on your sense of obligation for a deceased family member, says Dave Philipps, an attorney based in Palos Hills, Ill. "The elderly are particularly susceptible because they believe it's some moral failing on their part that they can't pay their debts," Philipps says. People should not feel that way, he says. "There's not a moral component to debt. It's dollars and cents."

If your spouse dies, a joint checking account becomes your property, and joint debts become your obligation. But loans, credit cards and other debt obligations held only in the deceased's name are a different story. "The only time the widow has any obligation to pay the debt is if she is co-responsible for the debt," he says. "You can tell them to file a claim on the estate."

If you're the executor for a family member's estate, it falls on you to administer all claims against the estate, including old debts. Your family member may have racked up extensive medical bills or other end-of-life expenses, and those creditors rightly have a claim against the estate's assets. Once those assets are exhausted, however, it's unlikely that you'll be personally responsible for those obligations unless you co-signed on the original loan.

An exception is the doctrine of necessaries, a legal principle that holds someone responsible for essential living expenses a spouse incurred. "There can be different rules in community property states as well," Kuehnhoff says. Executors should be skeptical and ask lots of questions if they're approached by someone about this, she says, although the claims "can be tricky to figure out."

Assets that are not part of the estate, such as irrevocable trusts and qualified retirement accounts with a named beneficiary, for example, are generally off limits to creditors. "Life insurance is not available to creditors for payment of debts of people who passed away," Dann says. "If your house has a right of transfer on death, that automatically vests in the heir's name. That's not available to pay debts unless there's a judgment lien on the house already."

Never make payment arrangements over the phone, no matter how official or threatening someone sounds or the pressure tactics they use. Keep good records of phone conversations, consult experts and above all, make decisions about repayment when you're in the right frame of mind. "There are a surprising number of really powerful consumer protection laws that are available to everyone in the country," Dann says. "You're not just at the mercy of someone trying to collect money from you."