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Thinking about changing jobs? You’re in good company. According to data released by the Bureau of Labor Statistics, Americans are staying in the same job for shorter periods of time than in the past.
The length of time you’ve worked for your current employer is called your job tenure. In 2014, the median job tenure – across all age groups, occupations and industries – was 4.6 years. In 2024, it dropped to 3.9 years. In fact, job tenure is now the shortest it has been in over 20 years.
Economists care about tenure as a measure of employment security and health of the labor market. And personal job tenure is important to workers because job changes often raise questions about personal finances and planning for the future.
Tenure Trends
The median job tenure generally got longer from the 1980s through the 2010s. From 2014, it started to recede. Women tend to have shorter tenures than men – a gap that was starting to close in the 2010s, but has since opened back up. And tenure increases with age, as people have generally spent more time in the workforce.
On average, people in “management occupations” have stuck around the longest: 5.7 years. This makes sense, as one common path to management is when a company promotes a long-tenured employee into a supervisory role.
If your job tenure is dramatically above average for your occupation, that could be a sign that your job is a really good fit. But no matter how long you’ve been at your job, if you’re feeling unsatisfied, or think your future at the company is uncertain, you may be considering a change.
Consider the benefits of having more tenure
Changing employers could help you get paid what you’re worth. Wage growth is generally higher among job switchers, according to data from the Federal Reserve Bank of Kansas City.
But many workplaces provide incentives to stay. Senior employees often get more PTO, access to development programs or more job security. Your time at a company can also translate into institutional knowledge and a level of respect among colleagues who haven’t been around as long.
Another benefit of seniority is the possibility of advancement. If you’re not fully satisfied in your current role, your employer might consider what they can do to keep you. Being prepared to walk away from a job is a very strong negotiating position, and may help you find a better role at the same company.
It’s unlikely that any single one of these things will make or break your decision to leave. But it’s a good idea to closely examine whether or not the potentially higher salary with a new employer is offset by fewer benefits or other tradeoffs.
Financial checklist when job switching
If you ultimately decide it’s time to move on, take steps to get your financial house in order before turning in your notice:
Do: Make a plan to support yourself financially
You might already have a new source of income lined up, or a job offer for a new position. If not, or if that new job doesn’t pay as much as the one you’re leaving, you’re probably going to want to budget for this transition.
This means taking a look at your spending, your savings and how much you expect to make in the coming months. Cutting back on your spending, even in modest ways, can buy you more time. When you’re job hunting, there’s a big difference between running out of money in six months versus running out in one.
If your employer contributes to your retirement account, you should nail down how much of your balance is yours for the taking. Your employer’s contributions might be yours to take with you (known as “vested”) only after a certain number of years with the company.
If you’re unsure of how much of your retirement account is your contributions versus your employers’ portion, or you’re unclear on your vesting schedule, talk with your human resources or finance department.
Do: Have a plan for health insurance
Figure out when your employer-paid insurance is going to end, and who will insure you after it does. Temporarily extending your coverage through COBRA is one of several options. Switching to a new insurer will reset your deductible, so if you’ve met or are close to your current deductible, now may be a good time to get any health care you’ve been putting off.
Do: Cash out your use-it-or-lose-it benefits
Some employers pay out unused PTO when you leave, but how much varies from job to job. If you have unused days that won’t pay out when you quit, now is the time to use them. If you have a flexible spending account (FSA), it won’t follow you to the next job. Find out when it’s going to expire, and then spend it before it does.
Don’t: Forget your HSA
Unlike an FSA, you can keep your employer-provided health savings account (HSA) after you quit. If you have a significant amount in the account – which you might, especially if you’ve opted to invest it – don’t lose track of that money. You can choose to leave your HSA where it is, or you can transfer the funds to a new HSA to consolidate.
Do: Get a good reference
When you give your notice, communicate clearly, cordially and professionally. Do your best to part ways on a positive note. Your last few weeks at a job are a good time to thank your coworkers and superiors for working with you, and to ask if they’d be willing to provide you with a reference in the future.
Would you choose to give yourself less money in the future? Historically, bank CDs have done just that. In meetings with older clients, I’ve often heard how large their 2024 tax bills were.
That’s not much of a surprise considering that interest rates have climbed to where they are today.
Substantial sums in money markets, savings, and CDs have earned around 4.5% annual interest. A record 7 trillion dollars are currently being held in money market accounts. It seems that uncertainty has rarely been higher than it is today. And to top it off, the U.S. stock market has recently been at or near all-time highs.
Let’s take a closer look at those CDs and money market accounts. Here’s a fun exercise. Take the interest you earn on a CD and multiply it by your income tax rate. Then subtract that percent of interest owed to taxes. You’ve just determined your tax adjusted return on the CD.
Now, subtract the CPI rate of inflation from your remaining CD return. Is that amount positive or negative? Using average CD rates and middle tax brackets, the real rate of return on a CD has been negative in 17 of the last 20 years.
FDIC insurance is important, and having a stable return can provide peace of mind. But long-term investors know that without some risk there’s typically little reward. I bring this up to show that there are other opportunities available to investors to grow their wealth over the long term. You don’t have to settle for just keeping up with inflation. Or maybe falling short.
How much money is too much money in the bank? That’s a question I’m frequently asked. The answer, of course, varies from person to person. Anyone who tells you there’s a specific number for everyone is missing an important point. Ease of mind is critical to being a prudent investor. If unexpected expenses were to arise, having cash on hand allows long-term investors to remain invested.
But there is a point where too much cash on hand – cash that’s not earning interest – is detrimental to your long-term financial outlook. Work with an advisor to figure out what amount is right for you.
Brandon Morris. (Submitted)
The investment world has expanded greatly over the past 25 years. In 2000, there were 80 exchange traded funds in the United States. Fast forward to today and that number is just over 3,600. ETFs can provide tax efficiency for after-tax investors. The money in your checking, savings or any non-IRA account is an after-tax investment. And the interest, dividends and capital gains paid out each year are taxable.
As the CD example above shows, taxes take a bite out of your investment returns. By structuring these portfolios with taxes in mind, you can keep more in your pocket and less in Uncle Sam’s. Being a long-term investor means having an iron stomach, as downturns are inevitable. Working with an advisor can help to make sure the level of risk in your portfolio is appropriate, given your tolerance for risk.
A 60/40 stock/bond portfolio has returned close to double digits every year since 1987. Inflation over that same time was 2.73% per year. Long-term investors have a great asset on their side. Time. Don’t be afraid to use it.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Society for Lifetime Planning is not affiliated with Kestra IS or Kestra AS. https://kestrafinancial.com/disclosures
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning past performance are not intended to be forward-looking and should not be viewed as an indication of future results.
Forget about workbooks and flash cards. Financial-themed videos, grocery store games and even escape rooms can be a better way to teach kids about money, according to the latest thinking from financial literacy experts.
“A lot of traditional curriculums were about the numbers,” says Noel Wilkinson, a program coordinator for the Take Charge America Institute within the Norton School of Human Ecology at the University of Arizona.
That can be a turn-off for some students.
“That led me to involve more play and gamification into workshops,” he adds, which led to greater engagement and, as a result, more learning.
Here are a few ways to make learning about money fun — and more effective:
1. Let kids practice and make mistakes
“I’m a big believer in experiential learning,” says Jessie Jimenez, an accredited financial counselor in Oregon and founder of the website Cashtoons.com, where she makes engaging videos about financial topics.
In other words, learning by doing — such as practicing buying items on a budget at the grocery store or keeping money safe while you shop. While it might be nerve-wracking to watch your kids handle real money, those kinds of experiences can actually help them learn.
Jimenez says she grew up feeling like she was not a “money” person or a “numbers” person, and it was only after she became a mother that she started focusing more on financial literacy.
“I thought, ‘How did I get this far without being taught personal finance management? Where is the resource for those of us who don’t want to listen to podcasts about investments?’”
The answer, she discovered, was that she had to create those types of experiences that allow kids to experiment with financial management on their own.
2. Invent money games
With preschoolers, many everyday experiences, such as saving money on groceries, can be turned into a game, Wilkinson says.
“It’s all about encouraging parents to learn through play with kids,” he says.
You could play “price detective” where you each try to find the best deal to save money on a specific item, for example, or you could play “restaurant” at home where your child takes your order and sets prices.
“Play creates a safe environment where you can make decisions and choices that don’t affect us in real life,” Wilkinson says.
You can experiment with choices and outcomes without fear, he adds.
Teenagers can graduate to more advanced games. Wilkinson and his team developed an escape room for teenagers in Arizona where they finish a budget for a character in order to solve a puzzle and get a key, for example. Even something simple like tracking savings visually on a chart posted in the kitchen can make the process seem more fun.
“The concept of gamifying learning in general has become widespread,” Wilkinson adds.
Video games like Animal Crossing, Railroad Tycoon and Atlas:Earth can also help teach teens and young adults about personal finance.
Buying digital real estate parcels in Atlas:Earth, a virtual real estate game, gives you hands-on insight into value and scarcity, says CEO and co-founder Sami Khan. Players can also earn cash back for various actions.
“The time between 20 and 30 is an important decade for compounding, so it’s important for people to learn about money early,” Khan says.
3. Make it fun
Whether you’re trying to teach price comparison at the mall or explain how kids can use their allowance, Jimenez says one key is to avoid calling the process “learning.” Instead, it should just feel fun, whether it’s a casual conversation in the car or a shopping trip.
“Don’t announce, ‘It’s time to learn!’” Jimenez cautions. “That turns it into a chore.”
She also suggests giving yourself some extra time for the shopping trip if you’re going to let your kid help you hunt for bargains.
“It takes a little longer and you have to be open to that,” she says.
Part of financial literacy is simply learning to explore your own feelings and habits when it comes to money, and learning to be intentional instead of impulsive about decisions, Jimenez says. Kids can learn those skills from talking to you and watching you in your own life.
Try talking out loud when making purchase decisions or opening bills and discussing what they mean. Explaining big purchase decisions like cars and vacations can also help with comprehension.
4. Recognize different learning styles
Wilkinson says some kids may be more drawn to learning through books and storytelling while others prefer video games, practical exercises at the store or a budget-themed escape room. One key to learning, he says, is to embrace the method that works best for you and to acknowledge that everyone is coming from a different place.
“Some folks just don’t have experience with financial literacy. Maybe they didn’t grow up in a household where parents talked about investing or building wealth,” he says.
In those cases, adults can learn alongside their children through books, games and other experiences.
“Even as adults we benefit from involving play in learning,” he adds.
With these fun approaches to learning about money, kids might become “numbers” people without even realizing it.
The cost of child care now exceeds the price of college tuition in 38 states and the District of Columbia, according to a new analysis conducted by the Economic Policy Institute.
The left-leaning think tank, based in Washington, D.C., used 2023 federal and nonprofit data to compare the monthly cost of infant child care to that of tuition at public colleges.
The tally increased five states since the pandemic began. EPI’s last analysis relied on 2020 data, which showed child care costs outstripped college costs in 33 states and Washington, D.C., said EPI spokesperson Nick Kauzlarich.
The organization released a state-by-state guide on Wednesday showing the escalating cost of child care. Average costs range from $521 per month in Mississippi to as much as $1,893 per month in Washington, D.C., for households with one 4-year-old child, EPI found.
The analysis also found child care costs have exceeded rent prices in 17 states and the District of Columbia.
EPI leaders said child care is unaffordable for working families across the country, but especially for low-wage workers, including those who provide child care.
“This isn’t inevitable — it is a policy choice,” Katherine deCourcy, EPI research assistant, said in a news release. “Federal and state policymakers can and should act to make child care more affordable, and ensure that child care workers can afford the same quality of care for their own children.”
The organization highlighted New Mexico as a case study on the growing challenge facing families.
There, the average annual cost of infant care exceeds $14,000 — or nearly $1,200 a month, the group said. Care for a four-year-old costs nearly $10,000 per year — or over $800 a month.
While experts often consider housing as a family’s single largest expense, EPI found New Mexico’s annual infant care costs outpace rent by over 10%. Child care is out of reach for about 90% of New Mexico residents, according to the federal government’s definition of affordability, which is no more than 7% of a family’s income.
Advocates often call for universal preschool programs as a way to provide quality, free child care. EPI noted a 2022 constitutional amendment approved by New Mexico voters guaranteeing a right to early childhood education. That created an annual fund of about $150 million to help subsidize early childhood programs.
“New Mexico’s investments mark an important step toward affordable child care, but investments like this are needed across the country,” EPI argued in a Wednesday blog post.
Child care worker Marci Then helps her daughter, Mila, 4, put away toys to get ready for circle time at the Little Learners Academy in Smithfield, R.I. A new study highlights the high cost of child care. (TNS)
When you start a small business, there’s one thing you need more than anything else: money. However, getting money to fund a business has been challenging for women, particularly women of color.
While women continue to make strides in raising more venture capital, they still only garnered just 2% of the total capital invested in venture-backed startups in the U.S.
To source money for their new businesses, women need to look at multiple funding avenues. As NEXT points out, one opportunity is small business grants for women, which can get overlooked by traditional loans and lines of credit.
insta_photos // Shutterstock
What are business grants for women?
Business grants provide money to set up or grow your business, and you don’t have to pay it back. Free money — sounds good, right?
Grant opportunities are different from business loans because you don’t need to repay them — no lenders or dealing with payback schedules.
The downside is that it can be harder to qualify for a business grant than for a small business loan. You have to be prepared to put some work into the grant application.
However, if you’re a woman starting a new business, it can be much easier to qualify for dedicated grants for women.
Federal government grants for women
The federal government offers several grant programs for small business owners. Most of them are for all small business owners, not just for women, but they are still worth checking out.
Grants.gov
Grants.gov is a huge database of government grants spanning over 20 federal agencies. While it’s not exclusive to small businesses or women-owned businesses, you can search for federal grants that are suitable for your business using keywords and filters.
To apply for any grants, you need to have a Unique Entity Identity Identifier (UEI) — a unique 12-character business identification number (previously, you had to provide a DUNs number). You also need to register your business with the federal government and create an account at the Grants.gov site.
Small Business Innovation Research and Small Business Technology Transfer programs
Typically, the Small Business Administration (SBA) does not provide grants for starting or expanding a business. However, they offer a few grants to businesses involved in medical or scientific research via the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (SBTT) programs.
The Empower to Grow program
This is more of a training program than a straight grant award. However, this program is unique because it’s designed to help small business owners get on the fast track to lucrative government contracting opportunities. Even better: The federal government’s goal is to award at least 5% of all its contracting dollars to women-owned businesses annually.
State government and local grants
Small business grants can be tough to come by on a federal level. There are often more funding opportunities on a state or local government level—specifically designed for women entrepreneurs.
Small business development centers (SBDC) offer free business consulting, training and help in getting funding for your business. Sponsored by the SBA, these centers help entrepreneurs find assistance and counseling in their area.
Women’s Business Centers (WBC)
Run by the SBA, there are 168 women’s business centers nationally to help you learn how to manage your business and find more funds. Resources are often free or low-cost. Some WBCs lend money to women entrepreneurs, while others help owners find qualifying grants and loans.
Private business grants for women
These are business grants for women that private organizations and companies fund. Some of the best private grants for women starting a business are:
The Amber Grant for Women
Named in honor of Amber Wigdahl, who passed away at a young age before realizing her business dreams, the Amber Grant provides three amazing grants every month.
$10,000 grant to a woman entrepreneur. (Amber Grant)
$10,000 grant to businesses in the “idea” phase. (Startup Grant)
$10,000 grant to a set monthly business-specific category. (Business-Specific Grant)
NEXT
Business categories for Business-Specific Grants
For the Business-Specific Grant, there are 12 business categories you could be eligible for. If your business falls under these specific business categories, you automatically become eligible (once per year). Each year, one of these 12 winning business categories is given an additional grant of $25,000.
All businesses selected for one of the three monthly $10,000 grants are automatically eligible for three year-end Amber Grants ($25,000).
IFundWomen is a funding platform for women entrepreneurs that provides access to capital via crowdfunding and business grants. They offer a variety of grants, including business partnerships and crowdfunded grants. You can check for active grants and eligibility requirements.
Their universal grant application database is unique and delivers grant opportunities directly to you. When you submit your application, you get added to their database. Then, when IFundWomen brokers a grant, they match the grant criteria to their database.
If you match the program criteria, they notify you and invite you to apply. No more spending time on your application to find out you didn’t read the fine print and are ineligible.
Tory Burch Foundation
American fashion label Tory Burch has a philanthropic arm called The Tory Burch Foundation that gives out grants to women entrepreneurs. There are two grant pathways: their fellowship program and a woman of color grant program.
Fellowship program: Fellows participate in a year-long program complete with virtual education programming, options to attend in-person events and a trip to New York for a five-day workshop. Recipients also receive a $5,000 grant for business education.
The Tory Burch Foundation also partners with the Bank of America capital program to help provide more access to capital through affordable loans.
Cartier Women’s Initiative
The Cartier Women’s Initiative offers a women’s fellowship program with grants ranging from $100,000 or $30,000 to 30 regional laureates and finalists each year. It also provides executive coaching, peer-learning sessions, collective workshops, networking opportunities and other educational resources to help develop and support business needs.
Additionally, the Cartier Women’s Initiative awards several thematic grants:
Science and technology pioneer award. The award amounts are the same as the regional awards—$100,000-$30,000.
Diversity, equity, and inclusion award. This award is not disclosed and is also open to men.
Women Founders Network (WFN)
The Women Founders Network (WFN) is a nonprofit organization that provides education on entrepreneurship and investing to women and girls. Their Fast Pitch competition offers mentoring, coaching and sponsorships as part of the overall program. Aside from the $55,000+ in cash grants available for distribution, there is a cash investment potential from investors who attend the event, so it pays to sharpen your pitch skills.
digitalundivided BREAKTHROUGH program
digitalundivided is a nonprofit focused on economic growth for Black and Latinx communities through women entrepreneurs. In partnering with JPMorgan Chase’s Advancing Black Pathways, they launched the BREAKTHROUGH program. Upon completing the program, each company accepted to the program will receive a $5,000 grant to invest in their business.
This program is regionally based, accepting cohorts in different cities. Check their website and social pages for information about what city they’re coming to next.
The BGV Pitch program
Got a business idea? Black Girl Ventures holds a hybrid pitch program where they coach entrepreneurs, host a pitch competition and connect founders to their network of professionals for additional support. They have several different pitch programs where applicants can win grants and stipends.
The Mama Ladder
The Mama Ladder’s High Five grant program has helped mom business owners grow since 2018. They’ve granted over $70,000 to women business owners and aim to give $1 million in grants by 2033.
EmpowerHer fund
This grant is for women-led organizations that benefit women and girls in New York City. Every quarter, they grant a business $1,000.
Microgrants for woman-owned businesses
Galaxy Grants
Hidden Star, a nonprofit organization dedicated to helping minority and women entrepreneurs nationwide offers the Galaxy Grant. Entrants have the chance to win a grant of $2,450.
Kitty Fund Mompreneur business grant
Created in honor of Mother’s Day and Founder’s First CEO Kim Folsom’s mother, the Kitty Fund makes microinvestments in mothers running employer-based small businesses. Totaling $25,000, this program grants ‘mompreneurs’ in the form of $1,000 microgrants.
HerRise MicroGrants
HerRise microgrants are worth $1,000 each and are open to women of color entrepreneurs. Winners are selected monthly.
The Enthuse Foundation
The Enthuse Foundation provides a variety of financial awards to help entrepreneurs with crucial business needs. They offer 10 microgrants worth $2,500 each.
Giving Joy Grants
Giving Joy grants are one-time microgrants (up to $500) for entrepreneurs. Women 18 or older from any country in the world are eligible to apply.
Additional grants and resources
While these grants are not exclusive to women, they may be useful to small business owners.
The Halstead Grant
The Halstead Grant is only for those in the jewelry industry—both women and men.
Designed to help jewelry entrepreneurs kick-start their careers, the winner gets $7,500 in grant money plus $1,000 for Halstead jewelry supplies. It’s available for early-stage businesses that have been open for three to five years.
National Association for the Self-Employed Growth Grants
The National Association for the Self-Employed (NASE) awards Growth Grants to members of their organization. It’s open to both women and men small business owners. Awardees will receive $4,000, which can be used for marketing, advertising, hiring employees, expanding facilities and other specific business needs.
FedEx Small Business Grant Contest
Global shipping company FedEx has a small business grant program. It awards ten U.S.-based businesses with grants of up to $50,000 and up to $4,000 in FedEx Office print and business services. One business receives the grand prize of $50,000, and several second prize recipients get $20,000 for a prize pool totaling over $300,000.
How can I get business grants for women?
You can take steps to boost your chances of success when you apply for business grants for women.
Read the application requirements carefully. Make sure you choose a grant that really fits your business, so you don’t waste time applying for a grant you are unlikely to receive.
Don’t skip any documents that the application asks you for, and don’t be late for the application deadline.
Prepare a clear business plan. Describe what your business does and exactly how the grant will help. Be as detailed as you can.
Bring in outside experts, like an accountant or a business advisor. It looks good to have an expert on your team.
Check that your business has all the necessary licenses. Make sure you have valid business insurance. It shows that you are responsible and reliable.
This story was produced by NEXT and reviewed and distributed by Stacker.
Getting money to fund a business has been challenging for women, particularly women of color. (Getty Images)
It’s the dream of many to become a millionaire, and even those with just a little dough to start can achieve this goal with careful planning. While selecting the right investments is important, one other factor is still more important if you’re starting out with a relatively small nest egg: time.
Bankrate spoke with a wealth adviser to get her take on how to turn $1,000 into $1 million.
How to turn $1,000 into a million dollars
You can sum up the process of turning a thousand dollars into one million in three simple steps.
1. Let time work its magic
Even more than picking the right investment, time is the most important element in turning small money into big money. A few extra years of compounding your money can really have a huge impact on the total snowball you can roll up.
“Start investing as early as you can,” says Andrea Zoeller, wealth manager and partner at Merit Financial Advisors. “There are several studies that show an investor that starts early and saves often can end with a portfolio value larger than one who starts later in life.”
How powerful is starting now? Let’s use a simplified example, where you invest $1,000 each year to show the value of starting early.
—You start investing at age 22 and invest $1,000 annually with 10% annual returns. If you retire at age 62, you’ll have saved $40,000 over those 40 years, but that money would have compounded to more than $440,000, assuming no taxes.
—You start investing at age 32 and invest $1,000 annually with 10% annual returns. If you retire at age 62, you’ll have saved $30,000 over those 30 years, but that money would have compounded to more than $160,000, assuming no taxes.
“The money has been invested longer when someone starts earlier in life and will have more time to generate compounding interest in the lifetime compared to someone who didn’t start until later in life,” says Zoeller.
The tax laws favor investments, too. You won’t pay any taxes on your capital gains until you sell the investment, meaning you can compound your wealth for decades without the drag of taxes.
Does 10% sound like too high of a return? In fact, every investor can purchase an investment that’s returned about 10% on average over time.
2. Pick a strong investment
You might think that you need to trade in and out of the market with the very best investments to build a million dollars. Sure, it’s better to have the best investment, but you’ll do just fine over time with a consistent performer that delivers solid returns in most years.
The best solution? Invest in a low-cost index fund, says Zoeller.
A stock index fund provides the weighted average return of all its stock holdings. A fund based on the S&P 500 index, which includes hundreds of America’s top companies, has returned about 10% per year on average over long periods. These kinds of funds are accessible to anyone with a brokerage account, and you don’t need specialized expertise to purchase them.
Low-cost funds keep more money in your pocket and working for you, and you have many choices among them. The best S&P 500 index funds charge low fees — typically less than $10 annually for every $10,000 you have invested, and some even just $3 — so you invest in a solid index fund and enjoy strong returns over time at a low cost.
3. Hold on over time
It can be easy to overlook, but you are your own worst enemy when it comes to investing. That’s because you’ll sabotage your progress by doing things that you think are safe or smart. For example, it’s easy to sell when the market is rocky and the economy looks rough.
“Time in the market is more important than timing the market,” says Zoeller. “Missing out on the best positive days in the market because you are trying to time the market has shown to erode investor returns over time even when staying invested during down markets.”
So if you’re looking to achieve the returns of the index funds you’re invested in, you’ll want to stay invested. Plus, staying invested allows you to avoid paying capital gains taxes on your profits. If you sell a winner, you’re guaranteeing that your bankroll will decline in value.
“Be patient,” says Zoeller. “Building wealth is a marathon, not a race. It takes a lot of time and consistency.”
While our example uses $1,000 as a starting point, if you can add money to your portfolio over time — especially when the market falls — you can continue to earn attractive profits.
Other tips for building wealth
So that’s how you can turn $1,000 into a million — give yourself plenty of time, buy a strong index fund and then hold on. Here are some other tips for building wealth.
—Avoid selling after the market has gone down. “This is the No. 1 mistake that will erode your returns over time because there is no telling when you will get back into the market,” says Zoeller. “Oftentimes, by the time you get back in the market, it is after the recovery has happened, so you are consequently selling low and buying back at the top before possibly seeing another fall in the market.”
—Take advantage of tax-free accounts. If you’re investing for retirement, it makes sense to use a 401(k) plan or an IRA. Both accounts allow you to defer or avoid taxes on gains, allowing you to compound your money even faster. Your employer’s 401(k) plan may also pay you matching funds if you make a contribution, and it’s the easiest return you can ever make.
—Watch out for emotional decision-making. When the market becomes volatile, it can feel safe to sell first and ask questions later. “Be careful about making irrational decisions based on emotion or what other people are doing before understanding the meaning of what is happening in the markets,” says Zoeller. If you sell a winner, you’ll lock in taxes and you’ll slow your ability to compound your money.
—Work with a professional. Working with a financial adviser can yield a ton of benefits. “A professional can guide you through market volatility and educate you on how to make smart investing decisions and avoid the mistakes in investing,” says Zoeller.
Time is your biggest ally when it comes to building wealth, but you can really help yourself out by finding a strong index fund and then holding on to it. You’ll also grow your wealth faster if you’re able to keep adding to your account each week or month and get more money working for you.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
With natural disasters and homeowners insurance costs making headlines, many homeowners may find themselves dwelling on “what-ifs.” In at least one area, turning that anxiety into action could help ease some concerns.
Too often, those facing an unimaginable loss aren’t aware of how insurance payouts work with mortgaged homes — or that they’ll need to work with their mortgage company as well as their insurer.
“When you have a family that’s just lost everything, they don’t have the mental capacity to take that on,” says Brittnie Panetta, a personal injury lawyer with Matthews & Associates who has worked with California wildfire victims. “You’re just trying to get back on your feet.”
Understanding this process before you ever need to can prevent adding stress to an already difficult situation. Here’s what happens to your mortgage if your home is destroyed, how you might have to work with your mortgage company, and the steps you can take now to ensure you’ll have the resources you need in the event of a disaster.
First steps
Even if your home is a total loss, “the mortgage still lives on, unfortunately,” Panetta says — and you’re still expected to pay it. That’s why, in the wake of a devastating event, one of the first calls you should make is to your mortgage servicer. The servicer is the company you make payments to, whether it’s your original lender or a different firm.
If you need the money you would have spent paying your mortgage to cover other immediate costs, you’ll want to ask about forbearance. A mortgage forbearance temporarily puts your loan on hold, allowing you to skip payments without facing late fees or damage to your credit score. Forbearance is temporary, and it’s not forgiveness — you’ll have to make up the missed payments. But the short-term relief it provides could be invaluable.
Even if you can continue making payments, you need to inform your servicer about what happened. In fact, most home loan documents require you to inform the lender or servicer. That’s because the company that holds your mortgage has a claim on your home. That relationship can influence what comes next.
Rebuild or pay off
Homeowners faced with a total loss have to make a difficult choice: Whether to use their insurance money to rebuild or pay off the mortgage.
“It’s really tough,” says Jennifer Beeston, a branch manager and senior vice president at Rate who worked with Tubbs and Camp wildfire victims in California. “This is a horrible, emotional time. But unfortunately, it’s also one of those times where really understanding the math, looking at your options, weighing pros and cons… is critical.”
Mortgage documents are often filled with complicated language about insurance and rebuilding, but it generally boils down to a few key points. As noted above, the lender must be notified of the loss. Later, the homeowner and lender have to agree on whether the insurance payout will go toward paying off the mortgage or rebuilding. If the homeowner chooses to rebuild, the rebuilt home needs to be comparable in value to the one that was destroyed — and the lender manages paying out the insurance money.
For many homeowners, signing over the insurance check to their mortgage servicer is an unpleasant surprise.
“That was one of the things that people were really angry about,” Beeston recalls of the Tubbs fire. “Because they don’t want someone controlling their money, which I understand, but that is standard across the industry.”
During the rebuilding process, the homeowner continues making mortgage payments. That can mean paying a mortgage for a home that’s unlivable while paying for other accommodations. Loss of use coverage, which is a standard part of most homeowners insurance policies, can help defray those costs; FEMA housing assistance may also help with this expense.
A homeowner who can’t afford to — or doesn’t want to — rebuild would need to use their claim funds to pay off the destroyed property’s mortgage in full. It’s important to know that insurance policies may pay out smaller settlements for mortgage payoff than for rebuilding.
“It’s becoming a less desirable option to just pay off the mortgage with these prices,” Panetta, the personal injury lawyer, says. “Your policy may say you’re insured for $500,000 if you want a payout, but up to a million if you want to rebuild. It’s a huge discrepancy in value.”
Planning ahead
While you can’t control when disaster strikes, you can put yourself in a better position to face it. There are a couple of key preparation steps you can take now.
Make sure you can easily access key information about your mortgage, like your loan details and the servicer’s contact information. In the past, that might have meant keeping these documents in a fireproof safe, but today, storing them in the cloud or a secure app is probably more handy.
Additionally, keep documentation of your budget or regular expenses. These figures may be needed if you have to file a loss of use claim, since that’s calculated relative to your normal expenses.
The second — and admittedly much more difficult — step is to reevaluate your homeowners insurance. If you have a mortgage, you’re generally required to have homeowners insurance. But you want to be sure your coverage would be enough to rebuild at market rates and that you have the disaster coverage you need.
Putting these pieces in place now can provide some reassurance that if the worst happens, you’ll have the resources to recover.
ALTADENA, CALIFORNIA – FEBRUARY 02: Mariana Lopez embraces her children Lesly, David, and Rose as they visit the remains of their home which burned in the Eaton Fire on February 2, 2025 in Altadena, California. Mariana and her husband Vicente brought their children to see the remains of the house for the first time today while the family of six currently resides in a hotel with a voucher which expires on February 12. Mariana said ‘Everything I had from when they were little kids is gone…Never underestimate nature.’ Over 12,000 structures, many of them homes and businesses, burned in the Palisades and Eaton Fires which are now 100 percent contained. (Photo by Mario Tama/Getty Images)
If you sell goods or services or rent property, and get paid through Venmo, PayPal, Cash App or another payment app, you may have been surprised by a Form 1099-K this year.
Here’s why you might be among the millions of taxpayers who got this form for the first time: If you received a total of $5,000 or more through a payment app in 2024, that company is now required to report that amount to you — and to the IRS.
The standard before 2024 was that a 1099-K had to be issued only if you received $20,000 or more and had more than 200 transactions. Now the threshold dollar amount is much lower, and there’s no minimum transaction requirement.
And that threshold amount is slated to drop even more, with even more people likely to receive 1099-Ks next year: The $5,000 reporting threshold for tax year 2024 drops to $2,500 for 2025 and then plummets to $600 for 2026 and beyond.
While the new reporting rules might be a shock to some freelancers or people with side hustles, technically the tax rules didn’t change: You were always supposed to report that income to the IRS.
What is the 1099-K?
The 1099-K form reports payments for goods and services received from credit cards, mobile payment apps, online marketplaces, auction sites, ride-hailing apps, crowdfunding sites and more. Form 1099-K must be sent to taxpayers by Jan. 31 of the following year. That is, you should have received your 1099-K for 2024 by the end of January 2025. (See the 2025 tax deadlines.)
If you sell goods or services, or rent out property, the money you earn is generally taxable income (which, don’t forget, you can reduce by your costs, including qualified business deductions). Even selling your own clothes or furniture could count as taxable income, the IRS says, if you earned a profit.
If, however, you’re using Venmo or another payment app to pay your friend back for dinner, or to send a birthday present to your sister, this money shouldn’t be reported on a 1099-K. If you do receive a 1099-K, you’ll want to check to make sure that only taxable income is included on the form. (See below for how to deal with incorrect 1099-Ks.)
The income threshold for Form 1099-K was lowered to $600 as part of the American Rescue Plan Act (ARPA) of 2021. Prior to ARPA’s passage, only total payments of $20,000 or more, and more than 200 transactions, required a Form 1099-K.
During the debate over ARPA, tax pros and others expressed opposition to the lowered payment thresholds, with the American Institute of Certified Public Accountants among those warning Congress that the lower threshold would lead to confusion and errors. Ultimately, the IRS postponed the new reporting requirements in 2022 and 2023, allowing more time for the payment apps, officially known as third-party settlement organizations, to conform.
New 1099-K reporting requirements
To give third-party settlement organizations more time to comply with 1099-K reporting requirements, in 2024 the IRS announced a phased-in approach to the reporting thresholds:
2023 and earlier: $20,000+ and 200+ transactions
2024: $5,000+
2025: $5,000+
2025: $2,500+
2026: $600+
Not all payment apps are alike
While taxpayers can expect Form 1099-Ks from PayPal, Venmo, or Cash App, Zelle won’t be included in that list.
“The Zelle platform directly transfers funds from one bank account to another, similar to a wire transfer. Thus, it never has custody of the funds, it simply moves money,” says Monica Houston, a certified public accountant in Brentwood, Calif.
Therefore, Zelle transactions are not subject to reporting requirements.
Who is likely to receive a 1099-K?
The Form 1099-K is issued to taxpayers who receive direct payments for selling goods or providing services. While the reporting income threshold is $5,000 for 2024, in some cases you may receive a Form 1099-K even if the dollar amount is below the reporting threshold.
Whether you receive a Form 1099-K or not, if you received taxable income from the sales of goods or services, you’ll need to report it on your tax return.
What if you get an incorrect 1099-K?
If you used a payment app to exchange money with friends and family, that exchange isn’t taxable, and you shouldn’t receive a Form 1099-K for those transactions.
If you do receive a 1099-K with these types of transactions reported, then you shouldn’t report these as taxable income. Instead, contact the issuer of the Form 1099-K, request that they remove these items from the form and reissue a corrected Form 1099-K. The IRS has instructions on how to handle this situation.
If you use payment apps for personal and business use, then it makes sense to have a solid accounting system to clearly distinguish between business and personal payments.
“I recommend using an Excel spreadsheet or consider using QuickBooks online to adopt a computerized accounting system,” Houston says. Taking these steps can ensure you report your income correctly on your income tax return.
How to report income reported on Form 1099-K
Form 1099-K reports various types of payments, which affect how you report your income on your Form 1040 and related forms and schedules. If you sold personal items, you will need to report them on your tax return. If the item was sold for a loss, you cannot deduct the loss from your taxes, but you can zero out the reported income. However, if you sold an item for a profit, you must report the profit, which is the amount received less your cost, as taxable income.
Whether you receive payments for goods sold, services provided or rental property, these must be reported on your tax return. Freelancers, gig workers and self-employed people generally report income on Schedule C of their income tax returns. Rent payments are reported on Schedule E.
Houston stresses the importance of staying abreast of the new tax law changes and encourages taxpayers to take an active part in the tax process. “I highly recommend that they enlist assistance from a qualified tax professional in the final preparation of their return especially if they are receiving a Form 1099-K. The return on investment is usually worth it in many ways,” Houston says.
If you sell goods or services or rent property, and get paid through Venmo, PayPal, Cash App or another payment app, you may have been surprised by a Form 1099- K this year. (Dreamstime/Dreamstime/TNS)
A financially-stressed Reddit user recently asked for advice: As the primary earner in their family, which includes two children, how could they keep up with a mortgage and other expenses once severance ran out?
Reddit users offered many helpful ideas. Filing for unemployment, looking for other forms of state assistance and finding a new job — even if it’s not perfect — were among the most popular suggestions.
When we asked financial experts how someone can best survive a period of unemployment, they echoed many of those same tips. They also emphasized the importance of budgeting, even before a job loss occurs.
Here are their strategies:
Cut back on all but the essential expenses
“Focus on your essentials, and cut that budget to as bare bones as possible,” says Danielle Byrd Thompson, a financial advisor with TPS Financial in Washington, D.C.
Thompson says using an online budgeting tool or budget app, which can help you stay on top of necessary expenses and uncover where you can freeze spending for the time being.
“What can be pared back without completely blowing up your lifestyle?” asks Lori Gross, a financial advisor at Outlook Financial Center in Troy, Ohio.
If you have multiple premium streaming subscriptions, for example, she suggests cutting them all except one basic subscription.
Lean on community resources
Local communities typically offer resources to people in need, Gross says, including food banks, crisis relief services and low-income assistance programs.
She encourages people struggling to pay for essentials to look up these kinds of local resources. The website 211.org can be a valuable resource to find nearby support.
Take advantage of hardship programs
In some cases, Thompson says, mortgage, phone and utility companies offer hardship programs that allow customers to temporarily pause payments when they are experiencing a short-term financial challenge, such as unemployment.
“Typically every provider has a plan,” Thompson says. She suggests calling, explaining your situation and asking about options.
While loan providers may also offer hardship programs, Thompson suggests first waiting a month to see if you really need to use it. After all, the debt continues to grow even if payments are temporarily paused.
“If you can afford to stick to the plan, then you should continue to pay, but if you can’t, pull back immediately,” she suggests.
Essentials like food and housing have to take priority if you are forced to make that difficult choice.
Earn income where you can
“No one is too good to bus tables, be a hostess or do food delivery,” Thompson says.
She suggests taking on these kinds of part-time roles to make money and fill the gaps before your next full-time position.
“It puts cash in your pocket so you’re not totally depleting your savings,” she adds.
If you do earn extra income, Gross says, be sure to keep careful records of both your earnings and expenses. When you file your taxes, it will be easier to make sure you’re paying the correct amount.
At the same time, indicate on LinkedIn and other job-search websites that you are available for work, Gross suggests. That way, recruiters can find you and reach out if they have an opening.
“Be open to your options, even if they’re outside your normal parameters,” she suggests.
For example, perhaps you’ll find a job opening in an industry you worked in many years ago, even if it doesn’t match up with your most recent job experience.
When possible, prioritize emergency savings
Once you find a new job, Thompson says it’s time to begin rebuilding emergency savings. In fact, the period of unemployment might inspire you to shore up savings for next time.
Ideally, she says, everyone should aim to set aside three to six months’ worth of living expenses in a high-yield savings account. If that figure is too daunting, then saving a smaller amount can also help.
“Savings are the first line of defense when it comes to unexpected unemployment,” Thompson says. “Even if you start saving only $20 a month, make it a habit, then build from there.”
Reddit is an online forum where users share their thoughts in “threads” on various topics. The popular site includes plenty of discussion on financial subjects like budgeting and financial hardship, so we sifted through Reddit forums to get a pulse check on how users feel about surviving periods of unemployment. People post anonymously, so we cannot confirm their individual experiences or circumstances.
Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.
The article Discussed on Reddit: How to Survive a Period of Unemployment originally appeared on NerdWallet.
Job seekers attends the JobNewsUSA.com South Florida Job Fair held at the Amerant Bank Arena on June 26, 2024 in Sunrise, Florida. (Photo by Joe Raedle/Getty Images)
The conventional wisdom about private mortgage insurance (PMI) has long been that borrowers should try to avoid it. PMI is a requirement for conventional mortgage borrowers who put down less than 20% on a home — and it’s just one more cost squeezing first-time homebuyers.
Yet, in recent years, private mortgage insurers have lowered their rates.
“I am a big fan of mortgage insurance — and it’s kind of a dirty word. When you talk to customers, they don’t tend to like it,” says Emanuel Santa-Donato, senior vice president at Tomo Mortgage. “But if you look at the actual cost of the mortgage insurance relative to being able to put down 3% or 5%, it is quite advantageous. That money could be used elsewhere.”
What is private mortgage insurance (PMI)?
PMI is a requirement for conventional mortgage borrowers who make a down payment of less than 20% on a home. Although the borrower pays for coverage, PMI protects not the borrower, but the lender. Should the borrower default, or stop paying, the loan, the lender receives a payout from the PMI carrier.
PMI is a temporary expense. By law, lenders are required to cancel it when your mortgage balance drops to 78% of your home’s original purchase value, or when you are halfway through your loan term, whichever comes first.
Even before this scheduled date, though, you can request that your lender remove PMI once you pay down your balance to 80% of your home’s original value. In that case, you’d need to pay for an appraisal or broker price opinion to establish value.
For years, homebuyers have been so opposed to paying PMI that they’ve jumped through hoops, such as getting piggyback loans. With this type of loan, a buyer makes a 10% down payment, then takes a second mortgage for the other 10% — avoiding PMI, but incurring additional closing costs, not to mention a mortgage rate a bit higher than the rate on the primary loan.
Does PMI cost less now?
Today, the average cost of private mortgage insurance is about 0.4% of the amount of the loan. If you were paying PMI on a $400,000 loan, for example, your premium would be $1,600 a year, or about $133 a month.
As recently as 2019, borrowers could expect to spend more than that: around 0.5%. In the same scenario, that’d be $2,000 a year, or $167 monthly.
The averages are just averages, of course. Your PMI rate is based on a variety of factors, including your credit score, debt-to-income ratio, even the dynamics of your local housing market. You’ll pay a higher premium if you put just 3% down, as opposed to putting down 10% or 15%, too. PMI is designed to protect your lender against the risk that you’ll default, and the more risk the mortgage insurer perceives, the higher your premium.
A recent study by the Urban Institute illustrates how widely the cost of PMI varies. For conventional borrowers who put down 3% and have credit scores below 680, PMI costs more than 1% of the amount of the loan on an annual basis. A borrower with a 3% down payment and a credit score of 760 or higher, however, pays less than 0.5%.
Why are PMI rates falling?
The private mortgage insurance industry is made up of half a dozen carriers, a roster that includes Mortgage Guaranty Insurance Co., Radian Group, National Mortgage Insurance and Arch Mortgage Insurance. Over the past decade, those companies have adjusted their pricing models to more accurately reflect the risk posed by each individual borrower.
“Ten years ago, there were these very formulaic rate cards that each of the PMI lenders gave to the lenders,” says Chris Grimes, senior director at Fitch Ratings. “Now there’s a very dynamic process with hundreds, if not thousands, of factors.”
The new approach allows PMI carriers to more closely match each borrower’s risk profile to the premium.
“Pricing is more granular than it’s been before, and that’s how you get more precise premiums,” says Carl Tyree, chief sales officer at Arch Mortgage Insurance.
Should you pay PMI?
With home prices at record highs, coming up with a 20% down payment simply isn’t an option for many homebuyers, especially first-time buyers.
If you have enough financial flexibility to choose between a 20% down payment and something lower, though, ask yourself: “What else can you do with the money? Do you want to take that extra equity and invest it?” Santa-Donato says.
Here are two hypotheticals facing the buyer of a $500,000 home:
—Make a 20% down payment of $100,000. Assuming a 30-year mortgage at 7%, your monthly loan payment would be $2,661.
—Make a 10% down payment of $50,000. Your loan amount would go up to $450,000, so your monthly payment would rise to $2,994. Assuming a PMI premium of 0.35%, you’d pay an extra $131 in monthly PMI costs, bringing the total payment to $3,125.
There’s no right or wrong answer. Keeping the extra $50,000 in the bank or in investments would cost you $464 a month — the difference in mortgage payment between the first and second scenario. From there, it’s a personal decision about how much you value liquidity.
Bottom line
PMI remains an extra expense, but rates have come down enough in recent years that borrowers no longer need to reflexively avoid it.
Private mortgage insurance (PMI) remains an extra expense, but rates have come down enough in recent years that borrowers no longer need to reflexively avoid it. (Dreamstime/TNS)
Many people think $2 bills are rare, but in reality, there are millions still in circulation, and they continue to be printed. However, while most $2 bills are only worth their face value, certain ones can fetch thousands of dollars on the collector’s market.
This article will explore which $2 bills are worth the most, why they hold their value and how you can determine if your $2 bill is worth more than your next paycheck.
Which $2 bills are worth the most?
Not all $2 bills are valuable, but certain editions stand out due to their rarity, historical significance or printing errors. But similar to the most valuable coins, it’s extremely unlikely that you would ever come across these bills in your daily life. As you’ll see, bills printed in the 1800s tend to be the most valuable.
1862 and 1869 legal tender notes
The earliest $2 bills, issued in 1862 and 1869, feature a portrait of Alexander Hamilton (who was later replaced by Thomas Jefferson). These notes are highly sought after by collectors thanks to their historical importance and limited availability.
Depending on condition, these bills can be worth anywhere from a few hundred dollars to a few thousand.
1890 $2 Treasury Note
An 1890 $2 Treasury Note featuring General James McPherson is worth upwards of $4,500, according to U.S. Currency Auctions. However, it can fetch tens of thousands of dollars at auction, especially if it’s in perfect condition.
1928 red seal notes
The 1928 $2 bill was the first to feature Thomas Jefferson’s home, Monticello. Unlike later editions, it displayed a red seal rather than a green one. Collectors favor these notes because they were part of the earliest modern $2 bill series.
Circulated bills can fetch $5 to $175, but uncirculated bills in pristine condition can be worth several hundred dollars to over $1,000.
1953 and 1963 red seal notes
While not as valuable as older versions, these bills are still collectible. Depending on their condition, they can range from $5 to about $20.
1976 bicentennial $2 bills (with special serial numbers or stamps)
The 1976 $2 bill was released to celebrate the U.S. bicentennial, and while most of them are only worth face value, some with special serial numbers, misprints, stamps or star notes can be worth $20 to $900.
The rarest $2 bill from this year is known as a ladder note, which means its serial number is 12345678. These notes can be worth thousands of dollars at auctions.
Uncirculated vs. circulated $2 bills
The condition of a $2 bill significantly impacts its value. Collectors classify bills into two broad categories:
Uncirculated: These bills have never been used in transactions, so they remain crisp, clean and free of folds or tears. Uncirculated bills are far more valuable (and rare, especially the older they are) than circulated ones. For example, an uncirculated 1928 red seal $2 bill could be worth over $1,000, while a circulated version may only be worth $5 to $175.
Circulated: These bills have been used in everyday transactions and often show signs of wear and tear. While circulated $2 bills can still be valuable, they’re always worth less than their uncirculated counterparts.
In short, a bill in pristine condition will always fetch a higher price.
What’s the market for rare $2 bills?
The market for collectible $2 bills is quite active. Many $2 bills are traded via online marketplaces, including eBay, Heritage Auctions and currency dealer websites. However, if you’re looking to make money investing in collectibles, you can find more potentially profitable options elsewhere.
The demand for rare $2 bills means that sellers can often find buyers quickly, especially for well-preserved or unique bills. In general, older bills and bills with errors tend to sell the fastest and at the highest prices.
Looking for a more reliable way to make money? Check out Bankrate’s list of the 10 best investments.
How to sell valuable $2 bills
If you think you have a valuable $2 bill, here are the steps you need to take to determine its worth and find potential buyers.
Identify the series and condition: Look at the series year and seal color. Take note of the bill’s condition (circulated vs. uncirculated).
Research the value: Compare similar bills sold on eBay or currency auction sites, and consult a currency pricing guide. Heritage Auctions offers a helpful guide on how to evaluate the value of paper currency.
Find a buyer: You can sell your $2 bill through online marketplaces like eBay or you can visit a coin and currency dealer. Another option is listing your bill with auction houses specializing in paper money. A financial advisor might be able to help you evaluate potential offers.
Store your bill in a safe place: Keep uncirculated bills in protective sleeves, and avoid folding or handling the bill. Store in a cool, dry place to prevent the bill from getting damaged.
How many $2 bills are still in circulation?
Despite their perceived rarity, $2 bills are still shockingly common. According to the U.S. Treasury, there were over $3.2 billion worth of $2 bills in circulation as of December 2023. And that figure has been growing steadily each year for about two decades.
While they’re less common than other denominations, $2 bills are still being printed. The Bureau of Engraving and Printing printed around 128 million new $2 bills in fiscal year 2023 alone.
While receiving a $2 bill in change at the gas station or grocery store might feel rare, they’re still considered legal tender, and banks can still distribute them upon request. However, due to their lower demand in everyday life, many people mistakenly believe they’ve been discontinued.
Bottom line
The $2 bill may not be a common sight in everyday transactions, but certain editions are worth far more than their face value. Whether you have an 1890 bill worth thousands or a 1976 bicentennial bill with a special serial number, it’s worth checking to see if you own a hidden gem.
However, while there’s always a chance, don’t count on your $2 bill turning out to be a valuable alternative investment. If you’re looking for more reliable ways to grow your wealth, consider consulting with a financial advisor.
For borrowers in today’s expensive housing market, getting approved for a mortgage can be a challenge. Mortgage rates have soared from pandemic-era lows, home values are near record highs and home price appreciation is outpacing wage growth.
All of that means there’s no guarantee a lender will approve your mortgage application. Here’s a look at how lenders decide to extend credit, and some common reasons why mortgage applications get rejected.
How does mortgage underwriting work?
Mortgage underwriting is the process of verifying and analyzing the financial information you provide your lender — all with the goal of giving you an answer of yes, no or maybe. As part of the application, you hand over bank statements, W-2s and other tax documents, recent pay stubs and any additional documentation the lender requires.
Dispense with any stereotypes about the old days of lending or the movie “It’s A Wonderful Life”, when a banker determined your creditworthiness by the firmness of your handshake and the crispness of your shirt. In most cases, a loan officer or mortgage broker will collect your information and submit it to an underwriting software system. Loans that will be sold to Fannie Mae, for example, use Desktop Underwriter (DU), while loans sold to Freddie Mac leverage Loan Product Advisor (LPA).
Fannie Mae and Freddie Mac are government-sponsored enterprises that interface with lenders to keep the mortgage market stable. Between them, they buy or back about two-thirds of all U.S. home loans.
Systems like DU and LPA don’t allow for much in the way of human judgment. The software determines whether you’re either approved, rejected or asked for additional information.
Such automated underwriting, as it’s officially called, is the norm nowadays — part of the reforms to the mortgage financing world developed after the 2007–09 mortgage meltdown and subsequent financial crisis. “Prior to the crisis, there was more leeway,” says Bill Banfield, chief business officer at Rocket Mortgage. “Now, most of that subjectivity is gone.”
There are many reasons — from your income to the type of property you’re buying — that you could see your mortgage declined by underwriter software. And if it does, there may be little the human loan officers can do about it.
Keep in mind: Beyond your approval or denial, the main thing the lender decides during underwriting is your mortgage’s interest rate. They also use underwriting to determine how much to charge you in fees.
Reasons for mortgage denial
“There are a thousand potential questions Fannie (or Freddie) could return,” says David Aach, chief operating officer at Blue Sage Solutions, a mortgage technology firm. “That’s the nightmare of the underwriting process.” Here are some of the more common reasons underwriters reject mortgages.
1. You have credit issues
Your credit score is the single most important factor in determining your mortgage rate – and whether you get approved at all. Generally, the best deals go to borrowers with credit scores of 740 or above, and ones in the “good” range — 670 to 739 — are the most desirable.
You can qualify for some types of mortgages with much lower scores than others. For instance, VA loans are generally available to borrowers with scores of 620 or above, while loans backed by the FHA can go to those with scores as low as 500.
Before applying for a mortgage, check your credit score and credit report and dispute any errors. If your credit score is low, work on boosting it before you apply (for example, you could ask a card company to increase your credit line, which automatically lowers your credit utilization ratio). If you have a qualifying credit score, make sure you don’t do anything during the mortgage process to cause it to drop, like miss a payment, max out a credit card or apply for some other new loan.
If you don’t have a credit score at all, some lenders do have alternative credit scoring methods, such as analyzing your bank deposits. In fact, in January 2025, Fannie Mae released a new update to DU in support of “increasing access to credit for populations such as those with limited or no credit histories.”
2. You have an income shortfall
Your debt-to-income (DTI) ratio — the portion of your gross (pre-tax) monthly income spent on repaying regular obligations — signals to lenders whether you’re in a position to take on an additional major debt. If your DTI is too high, you may be rejected for a mortgage. Most lenders require a DTI of less than 43%. Some will go up to 50% if you have factors to offset that higher DTI, like a big savings account.
Aim for your payment obligations to make up about one-third of your income: A DTI around 36% is the ideal, qualifying you for better loan terms. If you owe a lot in student loans, car loans or credit card balances, work on bringing those balances down before applying for a mortgage.
Also, think about the length of the loan: The longer its term, the more affordable its monthly payments. So, opting for a 30-year mortgage might lower your chances of getting your mortgage declined by underwriter software. Keep in mind, though, that you’ll pay more in interest over the loan’s lifespan, compared to shorter-term loans.
On the income side, issues often emerge when the mortgage applicant is self-employed. The software is geared to W-2s — the wage-and-tax-statement from an employer — and might flag your file when you use alternative ways to prove your income. It might also cause an issue if your income stream is irregular, even if your earnings are high.
Also, business owners often maximize write-offs and expenses when doing their taxes — but that common practice flummoxes the underwriting models. “Self-employed people know what they make, but they don’t know what an underwriter is looking for,” says Tom Hutchens, president at Angel Oak, a lender specializing in non-qualified mortgage (QM) loans (mortgages outside the conventional criteria). “They might be fully approved, but then an underwriter looks at the tax returns” and sees that “$10,000 a month might become $5,000 a month in income.” The lower amount upsets the software, which then dings the applicant.
3. The loan-to-value (LTV) ratio is too high
Lenders also look at how much of a mortgage you want vis-à-vis the value of the home you’re buying — something called the loan-to-value (LTV) ratio.
The bigger your down payment, the less you borrow, and the lower your LTV. For instance, if you’re buying a $400,000 house with a down payment of $80,000, your LTV is a comfortable 80%. But if you’re putting down $20,000 and financing the remaining $380,000, the LTV is up to 95%. (While there’s no single perfect LTV percentage, lenders usually like to see it around or below 80% — for conventional loans, anyway.)
Low down payments are one of the big reasons for mortgage denial. The higher your LTV, the higher the likelihood that your loan will be flagged for follow-up questions, or rejected altogether. If you feel you need help lowering your LTV, look into down payment assistance — every state has these programs, especially for first-time buyers — to increase the amount of cash you can bring to the deal.
4. You’re trying to finance an out-of-favor property
Not all homes are created equal, as far as lenders are concerned. The traditional, detached single-family residence still rules, and alternatives can confound.
Condos are one particularly tough type of home to finance. In response to the June 2021 collapse of an oceanfront tower near Miami, Fannie and Freddie rolled out new rules covering condo loans. The giant mortgage market-makers have decided not to finance some buildings that have low reserves, need repairs or are facing lawsuits. Critics say the stricter reviews are causing condo sales to fall apart, even in buildings with no structural issues.
Manufactured homes also can be challenging to finance. And if appraisers or inspectors find a structural flaw or other issue with the home itself, that also can slow the approval, or even kill it.
5. Something recently changed in your financial life
The lending process prizes financial stability and predictability (remember what we said about income, above). Unfortunately, a recent job change or period of unemployment can throw a wrench in your approval. A short employment history or interruption in earnings sends warning signals to the software, too.
Unusual activity in your bank account can be another issue, even if it grows your cash reserves. Large, unusual deposits might indicate you borrowed money for your down payment — which you may need to repay along with your mortgage. If you got money from relatives to help you buy a house, make sure to submit a gift letter as part of your application.
6. You don’t meet the loan program’s requirements
Different types of loans come with different specifications.
If you want to get an FHA-insured loan, for example, your house can’t exceed the loan limit applicable to the location. In 2025, that is $524,225 in most areas. The house also needs to pass a special type of appraisal that looks at the property’s condition. The specifics put in the place by the FHA add more potential reasons for mortgage denial.
Similarly, loans backed by the VA and the USDA have their own unique requirements.
On top of all of this, lenders generally have their own proprietary guidelines. Failing to meet any of them can lead to your mortgage application being denied.
7. You’re missing information on your application
Make sure to fill out the mortgage application in its entirety. If it’s incomplete, the underwriting software might discard your application, resulting in an automated rejection.
How to get a mortgage after your application is denied
If you have a unique income situation, such as owning a business with unsteady cash flow, you might apply for a non-QM mortgage. These loans come with more flexible credit criteria and income requirements than conventional loans, making them ideal for those who don’t fit within the standard borrower box.
If your credit score or LTV was the problem, you can also consider loans backed by the FHA or VA. Their terms are more generous, geared toward borrowers with lower credit scores or little cash for down payments.
Manual underwriting
The vast majority of conforming loans — those eligible to be bought by Fannie and Freddie — are decided via automatic underwriting. It’s fast, cheap and takes bias out of the process. But some loans are still reviewed by a human. Lenders often do manual underwriting when an application would likely be denied through an automated system, or if the borrower has some unusual circumstances but is otherwise qualified.
Certain types of mortgages, like jumbo loans and non-QM loans, are more likely to be manually underwritten. But you can request it for any mortgage, if you believe your particular situation will not be fully understood by the software. Be prepared to supply additional paperwork — financial statements reaching farther back, for example — and for a longer process. Bear in mind that, even with a manual underwriter, your loan still has to conform to specific requirements.
Bottom line
The mortgage application process can be full of surprises — with a key one being that an automated underwriting system often decides your approval or denial. The key reasons underwriters reject mortgages often involve credit score issues, income shortfalls, high LTV ratios, property type or recent changes in your financial situation. But the software doesn’t necessarily have to have the last word.
Find out why your application was denied, and then seek remedies. You can explore alternatives to conventional conforming loans, or request manual underwriting (a review by a human underwriter), for example. Any of these may provide a pathway to homeownership.
FAQs
How long do underwriters take to approve a mortgage?
It depends on the lender, the tools they use and how good you were at providing the required information. On average, it takes about 44 days to close a new-purchase mortgage.
How worried should I be about underwriting?
Not very. Take steps before you approach lenders — like paying down other debts and improving your credit score — and you should feel confident when applying. If you’re still nervous, you can explore prequalification before you seek preapproval. This is a less stringent process that can give you an idea of where you stand.
What are some things I should not do during underwriting?
To avoid a mortgage declined by underwriter teams, do two things. First, don’t make any financial changes. Keep paying your bills on time and don’t open any new loans or lines of credits. Second, stay responsive. The lender might ask for additional information. If you don’t provide it in a timely manner, it can lead to denial.
Mortgage underwriting is often an automated process — software decides whether you are approved, rejected or asked for additional information. (Dreamstime/TNS)
Scraping together a down payment for a home is a challenge, especially in today’s housing market. But one persistent financial myth could be making it harder than it needs to be.
According to NerdWallet’s 2025 Home Buyer Report, 62% of Americans say that a 20% down payment is required to buy a home.
But that’s not the case. And since 33% of non-homeowners say that not having enough money for a down payment is holding them back from buying a home at this time, according to the survey, this misconception could be stopping them unnecessarily.
There are many reasons you might want to put down 20% or more of the purchase price when buying a home. But you don’t have to, and many options exist for lower-downpayment home loans. If you’re one of the 15% of Americans who the survey says plan on buying a home in the coming year, it could pay to know about them.
A surprisingly persistent myth
This myth prevails across the majority of age groups and educational levels. Even 60% of homeowners think a 20% down payment is required, according to the survey. This is surprising because the median down payment among all home buyers is under 20%, according to a survey conducted by the National Association of Realtors.
This myth has been with us for a long time — NerdWallet first asked about it in 2017 — and over the past couple decades homes have gotten much more expensive. In the 1990s, a 20% down payment on the average home sale was about 80% of the median annual household income. For the past few years, however, that same 20% down payment would require 100% or more of the median income. It’s not surprising, then, that the median down payment nowadays is 18% for all buyers and 9% for first-time buyers, according to the National Association of Realtors.
Loans with smaller down payments usually need special insurance
While a 20% down payment is not required to buy a home, smaller down payments often require a few extra steps. Lenders issuing conventional home loans typically require private mortgage insurance (PMI) if the down payment is under 20%.
PMI protects the lender by offsetting the additional risk a lender takes when it accepts a smaller down payment. If you stop making payments on the loan, this insurance can pay out a portion of what’s still owed to the lender. That said, if you default on your home loan, this insurance doesn’t protect you at all; defaulting will hurt your credit and put you at risk of foreclosure.
PMI is usually paid as part of your monthly mortgage payment; with a conventional mortgage, you can request the lender cancel it when you reach 20% equity on your home.
FHA loans, backed by the Federal Housing Administration, can have down payments as low as 3.5%. USDA loans for people who live in rural areas, VA loans for veterans and some others require no money down (also known as a 0% down payment). However, in addition to mortgage insurance, these low-downpayment mortgages can have other upfront fees.
Down payment assistance programs — often grants or loans from government agencies — can also help cover some upfront costs of home ownership.
Larger down payments are still good, if you can afford them
That said, there are many benefits to larger down payments. The more money you put down, the less you’re borrowing — which means it’ll be easier to pay off, in smaller payments or over less time. A down payment calculator can help illustrate this.
A larger down payment might also be able to get you a lower interest rate. And putting more money down also means owning a larger share of the home’s equity right away. While a mortgage is debt, the equity you actually hold in the home is an asset.
While larger down payments are better for many reasons, they are not required to buy a home. And a lower down payment can leave you with more savings on hand. Having money set aside for unexpected expenses is especially important once you’re a homeowner.
The article 20% Down? The Myth That Could Be Holding Home Buyers Back originally appeared on NerdWallet.
A for sale sign is displayed outside of a home for sale on August 16, 2024 in Los Angeles, California. (Photo by PATRICK T. FALLON/AFP via Getty Images)
President Donald Trump has vowed to dismantle the U.S. Education Department, which oversees federal student financial aid. There are reports that members of Elon Musk’s Department of Governmental Efficiency (DOGE) team have accessed financial aid data containing the personal information of millions of students enrolled in the federal student aid program.
These developments may sound the alarm for student loan borrowers. But for now, there’s no need to make dramatic changes to your student loans.
“We have to engage in the process that currently exists…we don’t have any guidance that suggests we should be doing things in different ways,” says Wil Del Pilar, senior vice president at EdTrust, an advocacy and research organization that works to dismantle racial and economic barriers in the American education system.
Education Department spokesperson Madison Biedermann declined to comment on whether Musk and DOGE had accessed a financial aid dataset, as reported by the Washington Post. She directed NerdWallet to a Jan. 20 Executive Order that allows DOGE teams to install in federal agencies within 30 days.
Take a few minutes to screenshot or download every bit of information from your studentaid.gov account. Having a paper trail of your payments and loan status can protect you if issues arise with the Education Department’s website or if your servicer makes an error.
“We have seen some data disappear from different [government] sites, and entire web pages kind of no longer exist,” Del Pilar says. More than 8,000 government pages have been taken down in the past week, according to The New York Times.
For borrowers, this is “always a good practice anyway,” says Daniel Zibel, chief counsel and cofounder of Student Defense, a policy research, litigation and advocacy group that aims to protect students and promote higher education access. “Just to play it safe and make sure that they have the documentation they may need down the road….there’s really no downside to going in and just making sure that you have sort of archived all of your information from the department.”
Borrowers should also download their complete repayment history. To do so, click “My Aid” on the bottom-right of your studentaid.gov dashboard. Next, click the blue “Download My Aid Data” button in the top-right corner.
Here’s what else you should download:
If you are enrolled in an IDR plan. A new payment count tracker will appear on the right-side of your dashboard in a module called “IDR End of Payment Term.” From here, click “View IDR Progress” for more details.
If you are not currently enrolled in an IDR plan. Click the “view details” button in the middle of your dashboard. This will take you to a page with your loan details. On the right-hand side, you’ll see a module labeled “Interested in IDR Plans?” Click “Learn More” and scroll down. You’ll see tracker modules explaining how many qualifying payments you’ve made so far and how many payments you’d have left under various IDR plans.
If you are on track for PSLF. Screenshot any information about your payment history progress toward forgiveness through the government’s PSLF help tool.
“Just as a consumer of any sort of financial product, you should be as informed as possible. Keeping your own records and cross-referencing that with what you can find on the online portal through your servicer is probably your best bet,” says Beth Akers, senior fellow focused on the economics of higher education at the American Enterprise Institute, a center-right think tank.
“That’s not necessarily because I believe that there’s any reason to think that this intervention that’s happening now is going to corrupt any data, but rather, just because I think that that’s good practice at any time,” she says.
Change your passwords and monitor your credit
The nature of DOGE’s reported access to financial aid datasets remains unclear, but you can still be cautious.
“We don’t know what data has been accessed, and we don’t know with what intent,” says Del Pilar. “I would suggest taking the steps you would take if there was a data breach that occurred for any account that you have.” (Education Department spokesperson Biedermann says there was no “data breach” nor any concern of a data breach.)
On Feb. 7, the Student Defense joined the University of California Student Association and Public Citizen Litigation Group to sue the Education Department for sharing confidential student data with DOGE. The lawsuit alleges the department violated the Privacy Act of 1974, which makes the improper disclosure and misuse of sensitive personal and financial information unlawful.
Akers says previous presidential administrations have appointed temporary government workers like Musk and DOGE, and she says she is not concerned about any additional security concerns to student aid data from DOGE.
“The idea of government employees having access to this data seems appropriate to me,” Akers says.
But to be safe, Del Pilar suggests changing your passwords on studentaid.gov and your student loan servicer account, and monitoring your credit report and other financial accounts for any suspicious activities or credit inquiries. If anything looks amiss, “I would strongly recommend placing a security or security freeze or fraud alert on your credit reports,” he says.
Make payments as usual
If your loans are in good standing, continue making your monthly payments when they’re due and follow existing regulations.
Don’t try to undertake a new student loan repayment process, because we don’t have a new process defined, Del Pilar says.
Student loan forgiveness programs like PSLF and IDR forgiveness are written into law, and changing or eliminating them would require an act of Congress. Although Trump has spoken out against loan forgiveness, these programs have historically had bipartisan support. Former President George W. Bush, a Republican, signed PSLF into law in 2007.
However, new relief programs implemented by former President Joe Biden are likely off the table, Akers says. These include the SAVE repayment plan, the temporary PSLF waiver and the one-time IDR waiver.
“I would sort of rewind to when you took out the loan and what you anticipated repaying at that time. And that’s probably where we’re going back to,” she says.
Stay informed and get help if you need it
Your servicer must inform you of any concrete changes to your student loan situation. Make sure your contact information is up to date in your student loan servicer account.
If you need student loan help, start by calling your servicer. If that doesn’t resolve your issue, Del Pilar suggests contacting the student loan ombudsman’s office or attorney general in your state.
(Historically, if you had a serious student loan complaint or issue, The Consumer Financial Protection Bureau and the Education Department’s student loan ombudsman office were two other key resources. But both of those government agencies are now under threat.)
What’s ahead for the Education Department?
President Trump could sign an Executive Order aimed against the Education Department in the coming days. However, he does not have the legal authority to completely dissolve the department.
“It’s certainly something that cannot be done without Congress, and any executive order to shut down the department would be unconstitutional, in our view,” says Zibel. Closing the department could negatively impact Pell Grants and other grants for low-income students, federal work-study programs, the student loan repayment process and the ability of students to take out loans in the first place, he says.
Even if the White House can’t shut down the department, it can still try to starve it of funding and cripple its ability to function properly, Del Pilar says.
If the Education Department does shut down completely, the government will likely prioritize moving its Federal Student Aid office to the Treasury Department or the Internal Revenue Service (IRS), Akers says.
Until then, it’s still largely business as usual for your student loans. Make personal financial decisions with the information in front of you today, rather than speculate about what might happen with the government.
“We really don’t know what the administration is going to actually do,” Zibel says.
The article With Education Department Under Threat, What Student Loan Borrowers Can Do originally appeared on NerdWallet.
For now, there’s no need to make dramatic changes to your student loans. (Getty Images)
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