financial

Typically no, but there are some exceptions

Fact checked by Suzanne Kvilhaug
Reviewed by Andrew Schmidt

Home improvements can add value, style, and safety to your home but do they also add to your tax deductions? Generally, no, but some home improvements are tax deductible. They include capital improvements, energy efficiency improvements, and improvements that are related to medical care.  

Key Takeaways

• Homeowners can benefit from tax deductions that are related to select, eligible home improvements.
• Not all home improvements are tax deductible and it’s essential to understand the criteria for eligibility.
• Capital improvements that make permanent structural or restoration changes to the home, necessary medical-related improvements, and select home office changes may qualify for tax breaks.
• Energy-efficient home improvements may also qualify for tax credits and provide additional financial incentives for homeowners.

Can You Write Off Home Improvements?

Homeowners can take a tax deduction for specific home improvements if they meet the minimum criteria of the Internal Revenue Service (IRS). Home improvements that homeowners can deduct are referred to as capital improvements. They include any addition of a permanent structural change or the restoration of some aspect of a property.  

The IRS details the three criteria for classifying a home improvement as a capital improvement or a tax-deductible home improvement. It must enhance the property’s overall value, prolong its useful life, and adapt it to new uses.

A home improvement is tax deductible when it meets all these conditions. , it is tax deductible. A tax-deductible expense means the homeowner can reduce their adjusted gross income (the amount they pay taxes on) by the home improvement expense. 

Homeowners do not reduce their taxable income by the entire amount of the capital improvements in one year. Instead, these capital improvement expenses are depreciated over time (usually 27.5 years), so the full cost of the home improvements divided by the time is the tax-deductible amount each year.  

Important

An example of a home improvement project meeting all of these criteria is replacing the siding of a house rather than making a few repairs to cracks. If replacing the siding is $27,500, then $27,500 divided by 27.5 means that $1,000 is tax deductible each year for 27.5 years.

Improvements vs. Repairs

According to the IRS, there is a big difference between home improvements and home repairs. Home repairs are modifications made that keep your home in “an ordinary, efficient operating condition,” and these are not tax deductible unless they are part of a larger home improvement project.

Home improvements are tax deductible if they meet the three qualifying criteria:

1. Betterment: Amounts paid to repair something that will increase the value of the home or to add a feature that increases the value of the home
2. Adaptation: Amounts paid to change a property into a new or different use
3. Restoration: Amounts paid to repair or restore a significant component or substantial part of the property to its original condition

Other Tax Breaks for Homeowners

Energy-Efficient Home Improvements

Energy-efficient home improvements like replacing leaky doors and windows, equipping your home with solar panels, or installing better insulation all deserve a high-five from Mother Nature, but does the IRS feel the same way?

These home improvements are not tax deductible, meaning the expenses do not reduce a homeowner’s adjusted gross income. However, they still provide tax breaks for enterprising homeowners looking to make their homes more energy efficient. Energy-efficient home improvements offer tax credits that reduce tax bills dollar for dollar.

Homeowners can receive credit for 30% of the expense up to the maximum allowable credit each year. The yearly limits are:

• Up to $1,200 for energy-efficient home improvements in total. Each door has a limit of $250 per door ($500 total per year). Windows have a limit of $600 per year. Home energy audit limits are $150 per year.
• Homeowners may receive a $2,000-per-year credit for heat pumps, biomass stoves, and biomass boilers.
• These limits are each year with no cap on the amount of credit received in a lifetime.

Medically Necessary Home Improvements

A green cabinet color may make you feel sick, but you will still need more evidence for the IRS to allow you to write off your home improvements for medical purposes. Specific, necessary medical home improvements are tax deductible, though. Home improvements or special equipment explicitly needed for the medical care of you, your spouse, or your dependent are all deductible from your adjusted gross income.

The way these medical home improvements are qualified for tax deduction purposes is a bit murkier, though. The nuance comes from whether the home improvements that you need for medical care increase the value of your home or not.

If the improvements increase the value of your home, they are considered capital improvements and are tax deductible. If the home improvements do not improve the value of your home, then they are not tax deductible.  

Homeowners needing more information about what qualifies as a medically necessary tax-deductible home improvement can visit the IRS website. 

Home Office Improvements 

Homeowners and renters alike are eligible for home office tax deductions for simply running all or a portion of their business from their home, as long as the business is the principal place of their business and the working area of their home is used exclusively for business.

Anyone spending hours a week in their home office might be considering upgrading their space. The IRS allows for home office improvements to be tax deductible if they meet a few criteria. The home improvements or repairs must be made exclusively to the office space to deduct the whole amount. One example of a tax-deductible home improvement is repairing a broken window.

Repairs or home improvements that benefit your entire home and home office can be deducted as a percentage of the overall cost based on what percentage of your home is used for a home office.

For example, repainting your entire home for $1,000 does not mean you may write off the whole $1,000. If you only use 10% of your home exclusively for your business, then you may only write off $100 of the repainting cost.

Tips for Proper Documentation and Record Keeping

Documentation is critical to ensuring you bring receipts for your tax deductions. The IRS provides a worksheet to help homeowners track expenses that they think might be tax deductible.

Whether homeowners decide to use the IRS’s worksheet or keep their records in another way, they should keep any receipts, canceled checks, money orders, contracts, or other documents related to the home improvements for three years from the date of filing or two years from the date of the taxes paid.  

Considering renovations to personalize your home or boost property value? Check out our guide—Owning It: Investing in Your Home—to learn more about how to plan and pay for your project.

What’s the Difference Between a Tax Deduction and a Tax Credit?

Tax credits and deductions both mean taxpayers will owe less. The difference is in how they reduce that amount. Tax credits reduce what you owe dollar for dollar, while tax deductions reduce your adjusted gross income, meaning you pay taxes on a smaller amount.

Are Rental Property Renovations Tax Deductible?

The same IRS stipulations apply whether the home you are making improvements to is your primary residence or a rental property. Home improvements that meet the criteria for capital improvement, necessary medical alterations, or energy-efficient upgrades are eligible for tax benefits.

What Documentation Do I Need to Support My Home Improvement Deductions?

Homeowners should keep any receipts, canceled checks, money orders, contracts, or other documents related to the home improvements for three years from the date of filing or two years from the date of the taxes paid.

The Bottom Line

Some home improvement projects that make necessary modifications for medical needs, upgrades for energy efficiency, or improvements for the home’s value are tax deductible or offer tax credits.

These tax credits or tax deductions are only available in certain situations and with the proper documentation. Homeowners hoping to recoup some cheddar from their home improvement projects should chat with a tax professional before knocking down any walls.

Learn how tying the knot impacts benefits, too

Fact checked by Suzanne Kvilhaug
Reviewed by Samantha Silberstein

Marriage is about so much more than a wedding. While you daydream about your future home, family, and trips, it’s also a great time to discuss what you want your retirement to look like and how you will achieve that vision.

According to the U.S. Census Bureau, the median age for a first marriage is 30.5 for men and 28.6 for women. This data means that many of today’s couples are entering wedded life with some working years under their belts and perhaps some prior retirement savings and/or debt.

Given these realities and your desires to realize your dreams, it’s important to consider how the financial changes accompanying marriage may affect your retirement planning. 

Key Takeaways

• Marriage can significantly impact existing retirement plans, eligibility for survivor benefits, and access to spousal retirement benefits.
• It’s crucial to manage retirement savings as a married couple, because joint financial planning and shared expenses can affect retirement savings goals.
• It’s best to regularly review and update your retirement plans after marriage and any other life changes it might bring.
• Divorce can affect the division of retirement assets, based on how much you contributed to your accounts while married.

Marriage’s Impact on Retirement Savings

Combining finances is one of the most complex parts of joining lives with a significant other, especially, as ICOM Advisors’ Erin Willcutt said, “…a lot of couples today bring debt to the marriage. That puts automatic strain on the relationship.”

Navigating this past and current strain while keeping an eye on the future is where things can get complicated. But there are ways to make the transition to combined finances easier, and it starts with talking openly and honestly with each other.

“Communication remains a key aspect of a solid partnership,” says Jenica Bertalan, a financial advisor at Edward Jones. “That doesn’t change after saying ‘I do.'”

Couples should discuss their current financial status, future financial goals, and general attitudes toward money before walking down the aisle.  Opening these lines of communication early lays a solid groundwork for future conversations and keeps them from feeling awkward, according to Bertalan.

Important

If you haven’t been having these conversations regularly, now is the time to start.

Some of the biggest hurdles couples face in retirement planning are accurately considering their budget, spending habits, individual risk tolerances, and overall goals. It is tough to make a plan you can stick with as a couple if one of you is a saver and the other is a spender, or if you disagree on how to spend your money. Budgets are a great starting point for opening those lines of financial communication with your spouse.

“Many couples have never made a household budget, so when they combine accounts and start paying bills, much of the nonessential spending comes to light,” Willcutt says. Reducing nonessential spending can help you redirect money to future retirement savings. Still, it’s a good idea for each spouse to retain some nonessential spending money, Willcutt says, as that’s likely to help make the budget stick.

It’s also critical to discuss how having children, if that’s your intention, will alter your financial planning. Will one of you be willing to step away from a career to stay at home if child care expenses are prohibitively expensive or there are other needs? Doing so would reduce your working income as a couple, and the unemployed spouse couldn’t contribute to an employer plan. You’ll also need to figure out how to balance saving for college vs. saving for retirement.

Again, openly discussing these subjects will help you, as a married team, to get on the same page. If you need help starting this conversation, a financial advisor can help you.

Questions to Ask Your Future or Current Spouse About Retirement

• At what age would you like to retire, and what does your retirement look like?
• Do you have any current retirement savings through an employer-sponsored plan, an individual retirement plan, or both?
• What are your attitudes toward spending vs. saving?
• What are your savings priorities?
• Are you open to including a financial advisor in our retirement planning?

Marriage’s Impact on Social Security and Survivor Benefits

One of the first things married couples should do after signing on the dotted line is update beneficiaries on their current retirement accounts, whether those are work accounts, individual accounts held at a broker-dealer, or both.

Marriage has little impact on your own Social Security benefits. You will not need to halve your benefits with your spouse or wait longer to receive benefits when you reach retirement age.

As long as you have enough credits to qualify for Social Security benefits, your wage and employment history alone determine your Social Security benefit.

Still, married people have more options when it comes to applying for benefits. For example, if one spouse earned more, and therefore will get a higher benefit, the other spouse can receive benefits up to 50% of that higher amount, if it’s more than their own. Also, spouses without enough credits to qualify for Social Security benefits can get up to half of their spouse’s benefit, starting at age 62.

Defined benefit plans or pensions are just one example of retirement plans that typically have a spousal benefit. 401(k)s, defined contribution plans, and other retirement plans have survivors benefits, too.

Note

Federal law requires that a spouse be the primary beneficiary on any employer-sponsored plans, which ensures that the funds existing in your retirement plan get paid to your spouse upon your death.

Divorce and Retirement Plans

Any retirement contributions you made before marriage are yours and yours alone in the event of a divorce. However, contributions you make during your marriage, even to an individual account, are considered marital assets.

Matching funds that your employer contributes to your 401(k) as part of your overall compensation are marital assets, too. During divorce proceedings, a judge will decide how much, if any, of your retirement assets acquired after marriage are split.

If you’re not yet married and have considerable assets, you might consider a prenuptial agreement. Any legal agreements made before the marriage about the division of assets and property, even those acquired during a marriage, can prevent a judge from later ruling to split those assets.

Fortunately, divorce has no impact on your Social Security benefit unless, as noted above, it is less than your ex-spouse’s benefit.

A marriage lasting 10 years or more entitles an ex-spouse who is age 62 or older, hasn’t remarried, and will receive a lower benefit than you to file for Social Security benefits under their former spouse’s record. However, even if the Social Security Administration (SSA) awards benefits to an ex-spouse, there is no impact on the amount of your benefits.

If you are considering divorce, meet with a financial advisor right away if possible. Planning to move forward financially after divorce is a process best started early.

Updating Retirement Plans 

Retirement plans are not a set-it-and-forget-it endeavor. Each new baby, new job, new house, and new dream can affect how much you’ll need in retirement, when you’ll need it, and how you plan to use it. Finance professionals are the right people to help you make a plan, stick to it, and update it when necessary.

Most financial advisors want to see clients at least once a year to check in with them, Willcutt says. Doing so will help you see your whole financial picture and get the most bang for your buck. A good financial advisor will want to make sure you can meet your goals while considering all of your available assets.

If there is a change in your marital status, your financial advisor is the expert to walk you through any financial adjustments to make. And your employer’s human resources department should be able to put you in contact with the person or organization that updates information on your work retirement plan.

Unless you plan to change your name, there is no requirement to tell the Social Security Administration about your marriage or divorce unless you are actively receiving benefits. When you are ready to file for Social Security benefits or need to apply for disability benefits, contact the SSA with the appropriate information, and they will take it from there.

If you’re a millennial with your eyes on retirement, there are many resources that can help you plan your financial future.

How Does Marriage Affect Retirement Benefits?

Marriage will not reduce Social Security benefits but could improve your retirement income overall. Even if spouses do not have enough credit to qualify on their own, they may be eligible to receive benefits if they’re receiving disability or retirement benefits. These benefits won’t impact your benefits but may increase retirement income and help you decide when retirement is right for you.

Does My Ex-Spouse Still Get Half of My Retirement if They Remarry?

It depends on your marriage and divorce conditions, your state’s laws, and the judge’s ruling regarding your retirement accounts and plans.

How Many Years Do You Have to Be Married to Get Your Spouse’s Pension?

It depends on the type of pension, how long you have been married (and/or divorced), state laws, your income, and much more. It’s best to speak to an attorney or financial advisor familiar with pension plan laws.

The Bottom Line

Marriage is an exciting milestone that brings two people together to form a family and intertwines financial futures. Couples should consider marriage’s impact on retirement benefits and any future assets. It is also important, though far less fun, to discuss what happens to retirement assets in the event of a divorce or death.

Couples should continue openly and honestly discussing their financial goals, spending habits, and retirement plans. Plans change, and financial advisors can help keep couples focused on the bigger picture and work together toward their shared dreams.

Payhip makes money by collecting subscription and transaction fees

Fact checked by Vikki Velasquez
Reviewed by Katie Miller

Payhip is an ecommerce platform specifically targeted at digital content creators. It enables users to sell digital downloads, online courses, coaching, memberships, and physical products. It makes money from subscription and transaction fees, which vary by plan.

Payhip has a free plan that charges 5% transaction fees on each sale; a mid-tier plan that charges $29 per month with a 2% transaction fee; and a premium plan that charges $99 per month with no transaction fees.

Key Takeaways

• Payhip is an ecommerce website that enables users to create online storefronts.
• Payhip’s platform is designed with digital content creators in mind, and its users sell products like digital downloads, coaching services, online courses, memberships, and physical merchandise.
• Payhip has three pricing plans: Its free plan has no monthly cost but charges 5% transaction fees on each sale; its mid-tier plan is $29 per month with a 2% transaction fee; and its premium plan is $99 per month with no transaction fees.

Payhip’s Industry

Payhip is an ecommerce marketplace specializing in digital services like downloads, online courses, memberships, physical products, and coaching. It allows users to sell or purchase physical products online, manage inventory, fulfill orders, run promotions, collect reviews, and more. Payhip features a customizable store website builder, and users can connect their own custom domains or embed a checkout on their existing websites.

Payhip targets small- and medium-sized businesses and claims to have a user base of over 130,000 creators.

Some of its competitors are:

• Gumroad
• Sellfy
• Samcart
• Teachable
• Kajabi
• Wix
• Squarespace

Payhip’s Fundraising and Financials

As of March 2025 (using 2023 data), the company had not conducted any fund-raising rounds and has fewer than 10 employees:

• Net Assets (2023): £631,276
• Total Assets (2023): £855,866
• Total Liabilities (2023): £224,592

History and Leadership

Payhip was launched in 2011 by two entrepreneurial developers, Kahin Farah and Abs Farah. They previously founded Get Fractal, a service that converted HTML and CSS webpages to email client-friendly HTML and CSS.

Is Payhip.com a Legitimate Site?

Payhip is an e-commerce platform registered in the United Kingdom as a limited liability corporation. The website was operational as of March 2025.

What Are the Disadvantages of Payhip?

A few of Payhip’s disadvantages are the limited payment options of Paypal and Stripe and no SEO tools that help attract traffic.

What Is Payhip Used For?

Payhip provides an e-commerce platform that connects digital content creators to customers.

The Bottom Line

Payhip is an ecommerce platform targeted at creators who want to sell digital content, with the option to sell physical merchandise. Its many features address various digital applications involved in selling content, such as digital downloads, courses, coaching, and memberships. 

The platform is designed to be easy enough to use that sellers do not require any technical knowledge to set up a shop, but customizable enough that it can integrate into existing brands, businesses, platforms, and marketing strategies.

There Are Plenty of Options to Boost Efficiency and Productivity

Fact checked by Vikki Velasquez
Reviewed by JeFreda R. Brown

Artificial intelligence (AI) tools promise many benefits for small businesses, including increased efficiency, cost savings, better customer service, and growth opportunities.

These applications can help a small business owner automate business processes for greater efficiency, and analyze information for better planning. Others can enhance communication with customers.

Better yet, some of these tools, like ChatGPT and Google Docs, are free.

According to the Small Business and Entrepreneurship Council’s 2023 Small Business AI Adoption Survey, 83% of small business owners plan to use AI in the next year.

Key Takeaways

• Small businesses can use AI tools to assist in accounting, customer service, marketing, security, and recruitment.
• To smoothly implement AI, identify areas that need improvement, select the right tools, and train employees on their proper use.
• Don’t overlook the need to capture the information that AI is providing and incorporate the benefits into your business.

AI Tools to Consider

Choosing the right artificial intelligence tool from the many that are available will come down to the requirements of the small business and its day-to-day activities. Here is an overview of some of the applications and business areas that AI tools can support.

Accounting

AI can make accounting processes more efficient, offering categorization recommendations for transactions based on historical data.

Some AI tools can assist with data analysis for cash flow forecasting, accounts payable, and accounts receivable processing. They can even catch errors or irregularities in transaction data that indicate possible fraud or security risks.

Chatbots

A chatbot is an app that simulates human conversation through text or voice interactions. Added to a company website, it can field common questions and requests from customers.

That frees up the team to address more complex issues and extends customer service coverage to 24 hours.

Many chatbots also learn as they capture data, and can be connected to customer relationship management (CRM) software to integrate information on customer interactions.

Siri Is AI

Apple’s virtual assistant Siri is an example of AI. Siri uses machine learning, natural language processing, and voice recognition to respond to users.

Customer Relationship Management (CRM)

AI-enabled CRM software can help drive sales or identify marketing opportunities based on its learnings from customer behavior and data. For example, it can offer incentives based on a customer’s order value and frequency.

It can also predict future customer behavior, providing suggestions and insights into trends.

Customer Service Automation

Chatbots are one way to automate customer service. Many phone systems use voice-enabled AI to answer questions and direct calls, while tools like voice search can be helpful to direct customer calls.

As with chatbots, tools like these can extend customer service center hours without the need to hire around-the-clock support.

Cybersecurity

Small business owners looking to protect their business and customer data can use AI-powered cybersecurity tools to scan for data irregularities or patterns of unusual activity and receive alert notifications.

Marketing and Advertising

Generative AI tools such as ChatGPT, Midjourney, and Adobe Firefly can help with content creation for marketing and advertising applications from blog posts to social media captions, graphics, and emails.

Tools like Grammarly can help review or edit the content. Other AI tools can be used to schedule, post, or send content, and track the performance of campaigns, tests, or posts according to set metrics.

Recruiting

Reviewing resumes is a time-consuming task, and AI-powered software can take some of the load off recruiting. AI-powered tools can screen resumes and applications, and narrow down the candidate pool.

Translation and Transcription

AI translation tools provide a quick and easy way to translate text into other languages.

AI recording and transcription tools can be used to capture meeting notes or record follow-up tasks.

Benefits of Using AI Tools for Small Businesses

Small businesses can gain many advantages by incorporating AI tools into their operations:

• Improved efficiency: AI can increase employee productivity by reducing time spent on rote or recurring tasks.
• Cost savings: AI software can alert you to potential threats or errors (such as duplicate payments) by identifying irregularities in data, saving money, and reducing risk.
• Enhanced customer experience: AI chatbots and automated customer interactions can reduce the volume of calls and queries, freeing your team to focus on more complex customer interactions. They also extend the hours that your business can offer customer service. AI can assist in personalizing content to offer customers a unique engagement with the brand.
• Increased growth opportunities: Many AI programs incorporate machine learning algorithms, which can offer a greater understanding of customer behavior via pattern recognition that improves over time. This can lead to better sales and revenue growth.
• Better decision-making: AI can provide and interpret analytics on large volumes of key business data to enhance problem-solving.

Best Practices for Implementing AI

To maximize the effectiveness of any AI tool, think of it like any other process or technology being introduced to the business. Here are some steps to consider:

1. Assess current processes. Identify areas or systems that could benefit from automation or increased efficiency through the use of an AI tool.
2. Do your research. It’s a crowded field. Comparative research on features and pricing can ensure you choose the right AI tool for the application and outcome. Check to make sure that the tool can be integrated with current systems and scaled according to the needs of the business as it grows.
3. Give your team a heads-up. Let any relevant team members know in advance that you’re introducing the tool, and answer any questions they may have.
4. Undergo and provide training. Ensure that anyone using the AI tool fully understands what it’s being used for and how to use it.
5. Monitor, maintain, and update. Keep the software maintained with any updates, and monitor its performance and usefulness.
6. Leverage insights or improvements. Understand how the tool plugs into the bigger picture of your business to ensure that you capture and incorporate the benefits it’s providing.
7. Continue to learn and adapt. Make time to reflect and solicit feedback on how the tool is working for the business and its employees, and take advantage of any machine learning capabilities that the tool can provide over time.

Challenges to Incorporating AI Tools

Small businesses need to take several factors into consideration when adopting AI tools. These include:

• Incorrect or inaccurate results: AI tools are limited by the amount or type of data they are trained on, and they can generate misleading or nonsensical results (referred to, aptly, as “hallucinations”). This is the case with many generative AI tools, whose outputs might need to be reviewed or fact-checked by a human to ensure their validity, relevance, and accuracy.
• Data privacy and security: The legal landscape around AI data privacy is still evolving. As AI models require data to train their algorithms, there are urgent concerns about the use and security of personal data. Any user of AI needs to stay alert to developments in this area.
• Bias and ethical considerations: Many AI models are designed to recognize patterns. They have been shown to reproduce existing patterns of discrimination. This was the case with an experimental AI recruiting software developed by Amazon. Trained on 10 years of resumes submitted to the company, it demonstrated significant bias against women, reflecting an existing gender gap in tech workers.
• Employee training: Because of the speed at which AI technology is evolving, it can be challenging to keep up with developments and changes and train employees accordingly.
• Potential job displacement: In 2023, Goldman Sachs predicted that AI could replace “the equivalent of 300 million full-time jobs,” replacing between a quarter and half of the workload of exposed occupations.

Future Trends in Small Business AI Tools

Advancements in AI tools hold many promising applications for small businesses.

The ability to increasingly personalize customer experiences by capitalizing on historical data, for instance, can offer small businesses a competitive edge.

As natural language processing models keep evolving, generative AI tools will become more powerful and more accurate. Tools are being developed to adapt this technology for more industries and specialized uses.

AI tools can also enable predictive analytics, providing valuable insights to decision-makers based on current and historical data. This can be particularly powerful in applications such as financial forecasting and inventory management.

What Are Some Free AI Tools for Small Businesses?

Many software suites are incorporating AI functionality. For example, Google Workspace Labs introduced AI-assisted capabilities to Google Docs, Sheets, and Slides.

Free tools like ChatGPT, Dall-E, Canva, and Grammarly can assist with content generation. Software like Fireflies and Otter can help with transcription and meeting notes.

How Can I Use an AI Chatbot in My Business?

Adding an AI chatbot to a business website can help address common customer inquiries, reducing the volume of calls or emails that staff members have to resolve.

Chatbots can also provide businesses with valuable insight about customer engagement and behavior.

Which AI Tools Are Best for Solo Entrepreneurs?

AI tools that offer automation or increased efficiency can be especially valuable for solo entrepreneurs with limited time and resources. Generative AI tools can assist with time-consuming or repetitive tasks such as writing captions or product descriptions. Recording technology can take meeting notes and provide call transcriptions. AI accounting tools can reduce the workload on those who can’t hire a dedicated bookkeeper.

The Bottom Line

AI tools can have a big impact on the success of a small business. However, it’s important to consider their uses thoughtfully and implement them well to capitalize on their benefits and guard against their drawbacks. In the wrong hands, AI can create issues in terms of privacy, security, accuracy, and bias.

Building an effective business launch plan

Fact checked by Vikki Velasquez
Reviewed by Samantha Silberstein

Starting a business in the United States involves a number of different steps spanning legal considerations, market research, creating a business plan, securing funding, and developing a marketing strategy. It also requires decisions about a business’ location, structure, name, taxation, and registration.

Here are the key steps involved in starting a business, as well as important aspects of the process for entrepreneurs to consider.

Key Takeaways

• Entrepreneurs should start by conducting market research to understand their industry space, competition, and target customers.
• The next step is to write a comprehensive business plan, outlining the company’s structure, vision, and strategy.
• Securing funding in the form of grants, loans, venture capital, and/or crowdfunded money is crucial if you’re not self-funding.
• When choosing a venue, be aware of local regulations and requirements.
• Design your business structure with an eye to legal aspects, such as taxation and registration.
• Make a strategic marketing plan that addresses the specifics of the business, industry, and target market.

Conducting Market Research

Before starting a business, entrepreneurs should conduct market research to determine their target audience, competition, and market trends. The U.S. Small Business Administration (SBA) breaks down common market considerations as follows:

• Demand: Is there a need for this product or service?
• Market size: How many people might be interested?
• Economic indicators: What are the income, employment rate, and spending habits of potential customers?
• Location: Are the target market and business well situated for each other?
• Competition: What is the market saturation? Who and how many are you going up against?
• Pricing: What might a customer be willing to pay?

Market research should also include an analysis of market opportunities, barriers to market entry, and industry trends, as well as the competition’s strengths, weaknesses, and market share.

There are various methods for conducting market research, and these will vary depending on the nature of the industry and potential business. Data can come from a variety of places, including statistical agencies, economic and financial institutions, and industry sources, as well as direct consumer research through focus groups, interviews, surveys, and questionnaires.

Crafting a Business Plan

A comprehensive business plan is like a blueprint. It lays the foundation for business development and affects decision making, day-to-day operations, and growth. Potential investors or partners may want to review and assess it in advance of agreeing to work together. Financial institutions often request business plans as part of an application for a loan or other forms of capital.

Business plans will differ according to the needs and nature of the company and should only include what makes sense for the business in question. As such, they can vary in length and structure. They can generally be divided into two formats: traditional and lean startup. The latter is less common and more useful for simple businesses or those that expect to rework their traditional business plan frequently. It provides a vivid snapshot of the company through a small number of elements.

Reviewing Funding Options

The process of funding a business depends on its needs and the vision and financial situation of its owner.  The first step is to calculate the startup costs. Identify a list of expenses and put a dollar amount to each of them through research and requesting quotes. The SBA has a startup costs calculator for small businesses that includes common types of business expenses.

The next step is to determine how to get the money. Common methods include:

• Self-funding, also known as bootstrapping
• Finding investors willing to contribute to your venture capital
• Raising money online by crowdfunding
• Securing a business loan from a bank, an online lender, or a credit union
• Winning a business grant from a donor, usually a government, foundation, charity, or corporation

Different methods suit different businesses, and it’s important to consider the obligations associated with any avenue of funding. For example, investors generally want a degree of control for their money, while self-funding puts business owners fully in charge. Of course, investors also mitigate risk; self-funding does not.

Availability is another consideration. Loans are easier to get than grants, which don’t have to be paid back. Additionally, the federal government doesn’t provide grants for the purposes of starting or growing a business, although private organizations may. However, the SBA does guarantee several categories of loans, accessing capital that may not be available through traditional lenders. No matter the funding method(s), it’s essential to detail how the money will be used and lay out a future financial plan for the business, including sales projections and loan repayments.

Understanding Legal Requirements

Businesses operating in the U.S. are legally subject to regulations at the local, county, state, and federal levels involving taxation, business IDs, registrations, and permits.

Choosing a Business Location

Where a business operates will dictate such things as taxes, zoning laws (for brick-and-mortar locations), licenses, and permits. Other considerations when choosing a location might include:

• Human factors: These include target audience and the preferences of business owners and partners regarding convenience, knowledge of the area, and commuting distance.
• Regulations: Government at every level will assert its authority.
• Regionally specific expenses: Examples are average salaries (including required minimum wages), property or rental prices, insurance rates, utilities, and government fees and licensing.
• The tax and financial environment: Tax types include income, sales, corporate, and property, as well as tax credits; available investment incentives and loan programs may also be geographically determined.

Picking a Business Structure

The structure of a business should reflect the desired number of owners, liability characteristics, and tax status. Because these have legal and tax compliance implications, it’s important to understand them fully. If necessary, consult a business counselor, a lawyer, and/or an accountant.

Common business structures include:

• Sole proprietorship: A sole proprietorship is an unincorporated business that has just one owner, who pays personal income tax on its profits.
• Partnership: Partnership options include a limited partnership (LP) and a limited liability partnership (LLP).
• Limited liability company (LLC): An LLC protects its owners from personal responsibility for the company’s debts and liabilities.
• Corporation: The different types of corporations include B corp, C corp, S corp, closed corporation, and nonprofit.

Getting a Tax ID Number

A tax ID number is the equivalent of a Social Security number for a business. Whether or not a state and/or federal tax ID number is required will depend on the nature of the business and the location in which it’s registered.

A federal tax ID, also known as an employer identification number (EIN), is required if a business:

• Operates as a corporation or partnership
• Pays federal taxes
• Has employees
• Files employment, excise, alcohol, tobacco, or firearms tax returns
• Has a Keogh plan
• Withholds taxes on nonwage income to nonresident aliens
• Is involved with certain types of organizations, including trusts, estates, real estate mortgage investment conduits, nonprofits, farmers’ cooperatives, and plan administrators

An EIN can also be useful if you want to open a business bank account, offer an employer-sponsored retirement plan, or apply for federal business licenses and permits. You can get one online from the Internal Revenue Service (IRS). State websites will do the same for a state tax ID.

Registering a Business

How you register a business will depend on its location, nature, size, and business structure.  For example, a small business may not require any steps beyond registering its business name with local and state governments, and business owners whose business name is their own legal name might not need to register at all.

That said, registration can provide personal liability protection, tax-exempt status, and trademark protection, so it can be beneficial even if it’s not strictly required. Overall registration requirements, costs, and documentation will vary depending on the governing jurisdictions and business structure.

Most LLCs, corporations, partnerships, and nonprofits are required to register at the state level and will need a registered agent to file on their behalf. Determining which state to register with can depend on factors such as:

• Whether the business has a physical presence in the state
• If the business often conducts in-person client meetings in the state
• If a large portion of business revenue comes from the state
• Whether the business has employees working in the state

If a business operates in more than one state, it may need to file for foreign qualification in other states in which it conducts business. In this case, the business would register in the state in which it was formed (this would be considered the domestic state) and file for foreign qualification in any additional states.

Obtaining Permits

Filing for the applicable government licenses and permits will depend on the industry and nature of the business and might include submitting an application to a federal agency, state, county, and/or city. The SBA lists federally regulated business activities alongside the corresponding license-issuing agency, while state, county, and city regulations can be found on the official government websites for each region.

Implementing Marketing Strategies

Every business should have a marketing plan that outlines an overall strategy and the day-to-day tactics used to execute it. A successful marketing plan will lay out tactics for how to connect with customers and convince them to buy what the company is selling.

Marketing plans will vary according to the specifics of the industry, target market, and business, but they should aim to include descriptions of and strategies for the following:

• A target customer: Including market size, demographics, traits, and relevant trends
• Value propositions or business differentiators: An overview of the company’s competitive advantage with regard to employees, certifications, and offerings
• A sales and marketing plan: Including methods, channels, and a customer’s journey through interacting with the business
• Goals: Should cover different aspects of the marketing and sales strategy, such as social media follower growth, public relations opportunities, and sales targets
• An execution plan: Should detail tactics and break down higher-level goals into specific actions
• A budget: Detailing how much different marketing projects and activities will cost

How Much Does It Cost to Start a Business?

Business startup costs will vary depending on the industry, business activity, and product or service offered. Home-based online businesses will usually cost less than those that require an office setting to meet with customers. The estimated cost can be calculated by first identifying a list of expenses and then researching and requesting quotes for each one. Use the SBA’s startup costs calculator for common types of expenses associated with starting a small business.

What Should I Do Before Starting a Business?

Entrepreneurs seeking to start their own business should fully research and understand all the legal and funding considerations involved, conduct market research, and create marketing and business plans. They will also need to secure any necessary permits, licenses, funding, and business bank accounts.

What Types of Funding Are Available to Start a Business?

Startup capital can come in the form of loans, grants, crowdfunding, venture capital, or self-funding. Note that the federal government does not provide grant funding for starting a business, although some private sources do.

Do You Need to Write a Business Plan?

Business plans are comprehensive documents that lay out the most important information about a business. They reference its growth, development, and decision-making processes, and financial institutions and potential investors and partners generally request to review them in advance of agreeing to provide funding or to collaborate.

Is 2025 a Good Time to Start a Business?

Yes, according to the SBA. “According to research, the majority of small business owners are optimistic about America’s economy,” the SBA states. “That optimism, paired with a well-informed small business strategy, could mean plenty of success.”

The SBA identifies five trends to consider in business planning for 2025:

• Ecommerce: Online sales are expected to continue growing as a percentage of all retail sales.
• Online marketing: Almost three out of four small businesses have a website, and many employ social media.
• Artificial intelligence: More than half of small businesses use chatbots and virtual assistants powered by AI, which can help streamline processes, limit human error, and improve employee productivity and focus.
• Cybersecurity: Data security and privacy remain a top concern for consumers, so business owners should consider best practices, network security, up-to-date software, and multifactor authentication in preventing cybercrime.
• Customer experience: An interpersonal touch should be prioritized, from research to point of sale, to create happy customers.

The Bottom Line

Starting a business is no easy feat, but research and preparation can help smooth the way. Having a firm understanding of your target market, competition, industry, goals, company structure, funding requirements, legal regulations, and marketing strategy, as well as conducting research and consulting experts where necessary, are all things that entrepreneurs can do to set themselves up for success.

Reviewed by Robert C. Kelly

SolarCity and First Solar were two major players in the solar power industry, each taking distinct approaches to market dominance. SolarCity, founded in 2006, revolutionized residential solar by offering leasing and financing options that made solar panels accessible to homeowners. First Solar, established in 1999, focused on manufacturing thin-film solar panels and supplying large-scale utility projects. Let’s take a look back at the history of competition between the two companies.

Key Takeaways

• SolarCity revolutionized residential solar by offering leasing and financing options, allowing homeowners to install solar panels with little upfront cost.
• First Solar, founded earlier, focused on manufacturing thin-film solar panels for large-scale utility projects, offering lower production costs and better performance in high temperatures.
• SolarCity’s reliance on a financing model led to financial risk, and despite rapid growth, it faced challenges that culminated in its 2016 acquisition by Tesla.
• Post-acquisition, Tesla integrated SolarCity into its energy division.
• First Solar continues to thrive as it’s own company and has expended to international operations.

Understanding the Companies

SolarCity was founded by Lyndon and Peter Rive, cousins of Elon Musk, with the goal of making solar energy accessible to homeowners. The company capitalized on federal and state incentives while pioneering a leasing model that allowed customers to install solar panels with little to no upfront cost. With its aggressive sales tactics, the company became the largest residential solar installer in the U.S. by the early 2010s.

First Solar, on the other hand, took a completely different approach. Established in 1999, the company focused on developing and manufacturing thin-film solar panels using cadmium telluride technology. This alternative to traditional silicon-based panels allowed for lower production costs and better performance in high-temperature environments. First Solar’s emphasis on cost efficiency and large-scale projects made it a preferred partner for utility-scale solar installations, helping secure contracts with major energy providers worldwide.

Understanding the Business Models

One of the most defining differences between SolarCity and First Solar was their business models. SolarCity relied heavily on a leasing and financing model that enabled homeowners to install solar panels without an upfront investment. Customers would pay monthly fees, often lower than their existing utility bills, while SolarCity retained ownership of the panels. This model allowed for rapid adoption, but it also meant that SolarCity took on significant financial risk by financing these installations and relying on long-term customer payments in order for the company to make money.

First Solar focused primarily on manufacturing and selling solar panels rather than financing or installing them for consumers. The company specialized in producing thin-film photovoltaic panels and selling them to large-scale energy developers. This approach allowed First Solar to generate revenue without being tied to long-term customer contracts.

Differences in Solar Panel Technology

A key differentiator between SolarCity and First Solar was their approach to solar panel technology. SolarCity did not manufacture its own solar panels but instead relied on third-party suppliers. The company focused on delivering and financing installations rather than innovating new panel designs. As we’ll talk about later, this strategy shifted once SolarCity was later acquired by Tesla.

First Solar was more of an innovator in solar panel manufacturing. Its thin-film technology was a major departure from the industry’s dominant crystalline silicon panels. The advantage of thin-film solar was its lower production cost and better performance in high temperatures and low-light conditions.

Note

There was controversy with the Solarcity/Tesla acquisition, as leadership between the two companies were related and of the same family.

The Tesla Acquisition of SolarCity

One of the most pivotal moments in SolarCity’s history was its acquisition by Tesla in 2016. At the time, SolarCity was facing mounting financial pressure, with increasing debt and slowing customer growth. Elon Musk, who had been a major supporter of SolarCity due to his family ties and belief in clean energy, orchestrated a merger between Tesla and SolarCity. The move was framed as a way to create a vertically integrated clean energy company, combining Tesla’s battery technology with SolarCity’s solar installations.

The acquisition was controversial, with critics arguing that Tesla was bailing out a struggling company at the expense of its shareholders. Many questioned whether SolarCity’s financial troubles could drag down Tesla, which was already facing its own challenges in scaling electric vehicle production. However, Musk defended the deal, arguing that integrating solar energy with Tesla’s Powerwall batteries and electric vehicles would create a seamless renewable energy ecosystem.

Post-acquisition, SolarCity was effectively absorbed into Tesla’s energy division, and the brand was gradually phased out. Tesla shifted focus away from SolarCity’s traditional leasing model and instead prioritized the development of the Tesla Solar Roof. This transition marked a significant change in strategy, moving from rapid expansion through financing to a more product-focused approach centered on innovation and in-house technology.

First Solar’s Strategic Positioning

As SolarCity struggled with financial viability, First Solar continued to adapt its strategy to maintain its leadership in utility-scale solar. One of its key moves was its ongoing investment in improving thin-film solar panel efficiency. Another strategic shift was First Solar’s expansion into international markets. As solar adoption grew worldwide, First Solar positioned itself as a reliable supplier for large-scale projects around the world, shipping to more than 45 countries as of 2025.

First Solar also focused on integrating energy storage solutions into its projects. With the rise of battery storage technology, pairing solar farms with large-scale batteries became a key trend in the renewable energy industry.

Who Ultimately Won the Competition?

In hindsight, First Solar probably emerged as the more financially sustainable and strategically resilient company. While SolarCity initially disrupted the residential solar market, its reliance on debt-financed leasing made it vulnerable to economic fluctuations and policy shifts. The company’s rapid rise was met with an equally rapid decline, ultimately leading to its absorption into Tesla and the end of its independent operations.

First Solar, on the other hand, continued to grow and evolve. Its emphasis on technological innovation ensured that it remained a leader in utility-scale solar, even as new competitors entered the market.

What Was SolarCity’s Approach to the Solar Power Market?

SolarCity’s approach to the solar power market focused on making solar energy accessible to homeowners through leasing and financing models.

What Was First Solar’s Approach to the Solar Power Market?

First Solar, founded in 1999, focused on manufacturing thin-film solar panels using cadmium telluride technology. The company targeted large-scale utility projects rather than residential installations, positioning itself as a supplier of solar panels to energy developers.

What Technological Differences Existed Between SolarCity and First Solar?

The key technological difference between SolarCity and First Solar was that SolarCity did not manufacture its own solar panels, relying instead on third-party suppliers. SolarCity focused on financing and delivering installations, whereas First Solar specialized in manufacturing thin-film solar panels.

What Was the Outcome of the Tesla-SolarCity Acquisition?

Following Tesla’s acquisition of SolarCity, the company’s operations were absorbed into Tesla’s energy division, and the SolarCity brand was gradually phased out. Tesla shifted its focus from SolarCity’s leasing and financing model to an emphasis on product innovation, particularly with the development of the Tesla Solar Roof.

The Bottom Line

SolarCity focused on making solar accessible to homeowners through financing, while First Solar specialized in large-scale projects and manufacturing efficiency. SolarCity’s rapid growth led to financial challenges and a Tesla acquisition, whereas First Solar’s stable approach ensured its long-term presence in the industry.

Reviewed by Michael J Boyle

If you’re looking at total returns on an annual basis, the capital preservation funds below are some of the best that managed to deliver in every environment over the past decade. No matter what kind of market lies ahead, bull or bear, it might be prudent to stick to a few capital preservation funds that have the majority of their exposure to investment-grade bonds—just in case.

Key Takeaways

• Capital preservation funds aim to minimize risk while providing modest returns, making them ideal for conservative investors.
• The Great-West Short Duration Bond (MXSDX) invests in U.S. Treasuries and high-quality bonds, delivering stable but low returns, with a 10-year return of 2.1%.
• The Prudential Short-Term Corporate Bond (PBSMX) focuses on corporate bonds for high income and capital preservation, with a long-term return of 4.43% since its inception in 1989.
• The BlackRock Allocation Target Shares Series S Portfolio (BRASX) has an almost zero expense ratio, no minimum investment, and a strong 5-year average return of 10.62%.

1. The Great-West Short Duration Bond (MXSDX): High Quality, Low Return

If you’re looking for exposure to investment-grade bonds, then consider the Great-West Short Duration Bond (MXSDX), which invests at least 80% of its net assets in U.S. Treasuries, commercial and residential mortgage-backed securities, asset-backed securities and corporate bonds. The expense ratio of 0.60%, and there is no minimum contribution.

The objective of the fund can be seen in the fund’s historical returns. Between March 2024 and March 2025, the one-year return of the fund was 5.93%. As of March 2025, the fund’s 3-year return was 3.11%, 5-year return was 2.04%, and the 10-year return was 2.1%. Note that the S&P 500 returns over the same 3-year period and 5-year period were both negative.

Note

In investing, risk and return are often positively correlated. If you want to minimize your risk and preserve capital, you can generally expect to have less opportunity for higher returns.

2. The Prudential Short-Term Corporate Bond (PBSMX): Bigger Investment, Not Better Results

The Prudential Short-Term Corporate Bond (PBSMX) focuses on high current income with capital preservation by investing in bonds of corporations with varying maturities. The effective duration of the fund is generally less than three years. Similar MXSDX, there’s a target amount of bonds to hold; the fund seeks high income and capital preservation by investing at least 80% of its assets in corporate bonds.

As of 1/31/2025, the fund’s total net assets were $8.231 billion. At the end of 2023, Barron’s ranked the fund as one of the best family funds. The dividends accrue daily and are paid monthly. Since the fund’s inception on September 1, 1989, the fund has returned 4.43%.

3. The BlackRock Allocation Target Shares Series S Portfolio (BRASX): No Expense Ratio

The BlackRock Allocation Target Shares Series S Portfolio (BRASX) does not come with an expense ratio (its adjusted expense ratio is 0.01%, effectively zero), which is impressive. However, the performance of the fund and its future potential are more important to note here.

There is no minimum investment, which makes this a low-risk starter capital preservation fund for wary investors. BRASX invests in commercial and residential mortgage-backed securities, obligations of non-U.S. governments and supra-national organizations, asset-backed securities, and U.S. Treasury and agency securities, among others. As of March 2025, the fund’s yield was 4.59%, and it’s 5-year average return was 10.62%.

What Is Capital Preservation in Investing?

Capital preservation is an investment strategy focused on protecting the principal amount of an investment while minimizing risk. It is commonly used by conservative investors who prioritize safety over high returns.

Why Is Capital Preservation Important for Investors?

Capital preservation is essential for risk-averse investors, retirees, and those with short-term financial goals. It ensures that funds remain secure, preventing significant losses and allowing for future liquidity.

How Do Capital Preservation Funds Minimize Risk?

These funds invest in low-volatility, high-quality securities such as government bonds, cash equivalents, and short-term debt instruments. They also avoid speculative assets to reduce market risk.

What Is the Difference Between Capital Preservation and Growth Investing?

Capital preservation focuses on maintaining the principal with minimal risk, while growth investing seeks to maximize returns through higher-risk assets like stocks and real estate. The difference between the two lies in their standard deviation around their expected average return; capital preservation funds aim to have a lower standard deviation.

The Bottom Line

If you’re looking for relative resiliency to challenging economic conditions while picking up a little yield, then you might want to consider further researching the funds above. You should not expect a big return. This is more about capital preservation, after all.

The median average credit card interest rate for March 2025 is 24.20%. Investopedia tracks over 300 credit card interest rates every month. March’s and February’s rate remained steady after falling 17 basis points in January.

Credit card interest rates tracked by Investopedia are based on median advertised rates across several hundred popular card offers. Investopedia’s average rates differ from those tracked by the Federal Reserve (the Fed), which was most recently reported to be 21.76% for the third quarter of 2024 because the Fed tracks average stated interest rates across all accounts at each reporting bank.

Key Takeaways

• The median average credit card interest rate for March 2025 is 24.20%.
• Your credit score and credit history will largely determine your credit card interest rate.
• You’ll likely get a lower credit card interest rate if you have an excellent credit score.
• The best credit cards on the market come with rewards, balance transfer offers, and more, and the right card for you will depend on your situation.

How Are Credit Card Interest Rates Determined?

Various consumer loans, including credit cards, are tied to movements of the Fed funds rate, which is the Fed’s mechanism to stimulate or slow the magnitude of lending, depending on economic conditions.

The Fed maintained the federal funds rate at its peak level for almost 14 months, beginning in July 2023. But on Sept. 18, the central bank announced the first rate cut in what was expected to be a series of decreases in 2024 and likely 2025. That first reduction was by 0.50 percentage points.

On Nov. 7 and Dec. 18, the Fed announced an additional successive rate cuts of 0.25 percentage points, bringing the federal funds rate to 4.25% to 4.50%. With those cuts, the fed funds rate reached its lowest level since March 2023. At the Jan. 31 meeting the fed held rates steady.

The Fed’s next rate announcement will be made on March 19.

Most credit card issuers employ variable interest rates indexed to the Federal Reserve’s prime rate, so the fed rate policy impacts card interest rates directly. However, available card rates’ lower and upper ends can change monthly depending on competitive pressures and individual banks’ risk policies.

Several factors influence how individual credit card rates are set, the most important of which is credit quality. Those with excellent credit receive the lowest rates, and those with no credit or bad credit receive the highest. Other factors include the type of credit card and the risk-based pricing policies of the specific credit card issuer.

Investopedia tracks average advertised rates for new applicants, typically quoted as a range for each card product, across more than 300 card offers. These rates are shown below and broken out by credit quality, card type, and issuer.

Credit Card Interest Rates vs. Personal Loan Interest Rates

Interest rates for credit cards tend to run in a similar range to those interest rates for personal loans. Credit cards are a type of revolving credit with variable interest rates, whereas personal loan rates are typically fixed for a specific amount and repayment term. Many consumers use balance transfer credit card offers to consolidate higher-interest credit card debt. Additionally, the best personal loans can also be used for debt consolidation involving credit card debt and other types of consumer debt.

Debt consolidation was the most popular reason for using a personal loan, according to a survey conducted by Investopedia in September 2023.

Interest Rates by Credit Quality Types

Different credit quality ranges can vary depending on the type of score used, but the most popular credit score used by credit card lenders is the FICO score.

Credit quality is defined according to the FICO score ranges for each credit quality level:

FICO Credit Score Ranges
Very Good to Excellent	740–850
Good	670–739
Fair	580–669
Poor or No Credit	350–579

Tip

For those needing to build or rebuild their credit, it’s critical to begin actively using credit responsibly—always paying bills on time and keeping credit utilization below 30% of credit lines. A secured credit card can be a good place to start if you don’t already have credit in your name. It can take time, but responsible credit use can produce positive results after as little as six months and builds over time.

Interest Rates by Credit Card Types

• Balance transfer: Credit cards that offer a promotional rate, often 0%, for a year or more.
• Business: Credit cards designed for small business owners, providing segregation of business expenses, working capital, and often rewards and discounts on business-related purchase categories.
• Low cost: Credit cards for those with bad credit or no credit history that often have no annual fee but charge higher interest rates to offset higher credit risk.
• Rewards: Credit cards that offer points, miles, or cash back on purchases.
• Secured: Credit cards that require a security deposit as an initial credit line.
• Student: Credit cards for those with limited credit history and credit education, often for college students.

Interest Rates by Issuer

Credit card issuers have different risk-based pricing policies that cause variation in the ranges of interest rates they advertise and eventually assign to customers based on approved applicants’ credit scores.

Prime Rate Trend

Credit card interest rates are predominantly indexed to the prime rate along with a margin, which varies at the card product level and individual account holder’s credit quality. The prime rate stands at 7.75%% in December 2024, having risen 525 basis points since the beginning of 2022 following several rate increases by the Federal Reserve, which ended with an increase of 0.50% in July of 2023. At the Nov. 7, and Dec. 18, 2024 meetings, the fed funds rate was cut by another 25 basis points in succession in reaction to a sustained reduction in inflation supporting the 2% fed target.

Delinquency Rate Trend

Credit card delinquency rates, defined as accounts that are 90 days or more overdue, have been below 3% in recent years. However, during the pandemic, the delinquency rate fell to a low of 1.48%, bottoming out in April of 2021. Since then, the delinquency rate has more than doubled due to increased revolving debt incurred by consumers in the past two years, reaching 3.23% as of Q3 2024, easing slightly from Q2 but still near its highest level since the start of 2012.

Credit Card Debt Trend

Total consumer revolving credit card debt passed the $1 trillion mark just before the pandemic and fell sharply to a low of $970 billion in January 2021. Since then, revolving debt has climbed back beyond pre-pandemic levels to over $1.358 trillion as of Q3 2024, as reported by the Federal Reserve.

How We Find the Average Credit Card Interest Rate

Investopedia tracks individual credit card rates on more than 300 network-branded cards offered to the public from 43 of the nation’s largest banks and issuers. Most credit card rates are advertised in the form of a range from low to high, depending on the applicant’s credit score. In determining average rates by credit quality, card type, or card issuer, Investopedia calculates the average midpoint of advertised interest rate ranges and also calculates the average of the lower and upper ends of rates that are expressed in ranges.

Cruise line shareholders receive more than potential stock appreciation and dividends—they can access exclusive onboard credits and more.

By owning as few as 100 shares of Carnival Corporation & plc (CCL), Norwegian Cruise Line Holdings (NCLH), or Royal Caribbean Cruise Lines (RCL), investors can unlock perks that effectively create a “vacation dividend” ranging from $50 to $250 depending on cruise length. For frequent cruisers, these benefits can represent returns equivalent to about a 9.5% annual dividend while also improving their onboard experiences.

Key Takeaways

• Some publicly traded cruise lines offer shareholders modest perks, typically as onboard credits.
• These credits range from $50 to $1,000, depending on the length of the voyage.
• Norwegian, Royal Caribbean, and Carnival Cruises offer similar levels of benefits.

The Hidden “Dividend” of Cruise Line Stocks

Major cruise operators, including Carnival, Royal Caribbean, and Norwegian Cruises, offer onboard credits to shareholders who own a minimum number of shares and book cruises with their brands.

These credits can be applied toward onboard purchases such as specialty dining, shore excursions, spa treatments, and more—effectively creating a “dividend” that comes as ways to improve your vacation. These modest but welcome discounts can add a little more fun to holiday voyages.

Carnival Cruises

Carnival provides benefits across its wide-ranging lines, which include Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, Cunard, Costa Cruises, AIDA, and P&O Cruises.

Shareholders who hold at least 100 shares of CCL become eligible for the following:

• $250 onboard credit when they book cruises that last at least 14 days.
• $100 onboard credit for cruises lasting between seven and 13.
• $50 onboard credit for durations of six days or fewer.

You must request rewards and verify stock ownership at least three weeks before your departure date through the Carnival “Stockperks” app.

Norwegian Cruise Lines

The Norwegian Cruise Line Holdings brands—Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises—provide similar benefits (excluding charter sailings). Any shareholder owning a minimum of 100 shares qualifies for the following:

• $250 onboard credit when they book cruises lasting 15 days or more.
• $100 onboard credit for sailings between seven and 14 days
• $50 onboard credit for six days or fewer.

Shareholders must send the shareholder benefit request form via mail or email at least 15 days before the sailing.

Royal Caribbean

Royal Caribbean’s benefits are especially useful for world cruisers. The onboard credit benefits are for Royal Caribbean International, Celebrity Cruises, and Silversea Cruises (excluding Galapagos and charter sailings). Holders of 100 or more shares qualify for the following:

• $1,000 onboard credit for World Cruises.
• $250 onboard credit for sailing 14 nights or longer.
• $100 onboard credit between six and 13 nights.
• $50 onboard credit for five nights or less.
• Requests should be received two to three weeks before the sail date through the Royal Caribbean website.

Calculating the Real Investment Return

Frequent cruisers may find that these benefits substantially improve their investment returns.

Suppose you buy 100 Carnival Cruises shares at $21 each (their approximate value in March 2025) for a total investment of $2,100) and take two seven-night cruises annually. You’ll gain $200 in onboard credits annually. Assuming the price of CCL shares remains unchanged, that’s like receiving a 9.5% dividend.

For luxury or extended voyages, the value proposition becomes even more compelling. A 14-plus night cruise with a $250 onboard credit represents an immediate 12% return on a 100-share investment.

While these benefits offer tangible value, benefits are typically nontransferable and apply only to the stateroom in which the shareholder is sailing. In addition, credits can’t usually be applied toward prepurchased activities.

The Bottom Line

While any investment should be evaluated primarily on its financial merits, shareholder benefits for cruise line stocks represent a unique advantage for travel enthusiasts. For investors who already enjoy cruising, these perks reduce vacation costs while providing exposure to the travel and hospitality industries.

Food Insecurity Negatively Affects the Economy, and Therefore the Stock Market

Fact checked by Vikki Velasquez
Reviewed by JeFreda R. Brown

Food insecurity is considered an economic and social issue but generally not one that affects the stock market. Its ramifications nonetheless involve the food, retail, and consumer goods sectors and it can be a symptom of broader economic problems including poverty, unemployment, and inflation.

The struggle of households to put food on the table can also indirectly influence stock valuations and investment returns. The tendrils of food insecurity effectively stretch into the core mechanisms of the stock market, affecting consumer behavior, corporate earnings, and even investor sentiment.

Key Takeaways

• Food insecurity is a lack of access to affordable food.
• It’s an ongoing problem in the developed and developing world including more than 10% of American households.
• Food insecurity can affect consumer spending which can in turn dampen corporate earnings and stock valuations.
• Socially responsible investing can offer a pathway for investors to help combat food insecurity while achieving financial returns.
• Food insecurity disproportionately impacts lower-income and minority households so investors can’t solve the problem alone.

What Is Food Insecurity?

Food insecurity is a lack of reliable access to affordable food. It’s a complex condition that involves economic, social, and geographic factors. A household is facing food insecurity if it’s uncertain about where its next meal will come from or has to choose between food and other basic needs like healthcare or housing.

It begins at the household level where the struggle to afford food frequently leads to reduced spending in other areas. Families often cut expenditures in other sectors such as retail, entertainment, and healthcare when they cut back on food spending.

This decline in consumer spending has a cascading effect on businesses. Companies that rely on consumer demand can see revenues drop, resulting in lower profit margins. These diminished earnings can negatively influence their stock prices.

Areas referred to as “food deserts” have limited access to affordable and nutritious food, making it harder for residents to maintain a healthy diet. Some counties in the U.S. don’t have a single grocery store, mainly in the Great Plains and Midwest regions.

Important

Food insecurity in the U.S. increased from 12.8% of households in 2022 to 13.5% in 2023 and 8.4% or 11.2 million households had low food security at that time, according to government statistics.

How Food Insecurity Affects the Stock Market

Food insecurity can set off a chain reaction that eventually reaches the stock market. The stocks of companies in certain sectors are more exposed to the consequences than others, however.

Companies in the food and beverage industry may experience decreased sales as consumers turn to cheaper options or no options at all. Retailers, particularly those selling nonessential items, can experience a slump in demand. Even the healthcare sector can be impacted as food-insecure individuals delay or forgo medical treatments because of financial constraints, affecting the revenue streams of healthcare companies.

Food insecurity can also influence investor sentiment. Rising levels of food insecurity can indicate economic instability, making investors more cautious. This might be seen in reduced investments in stocks that are considered to be riskier, contributing to market volatility.

The Effect of Other Factors

Consumer spending isn’t the only factor that affects corporate earnings and stock valuations. The relationship between food insecurity, corporate earnings, and stock valuations is neither straightforward nor deterministic.

Other factors such as supply shocks, technological innovations, competition, regulations, taxes, interest rates, exchange rates, or geopolitical events can significantly affect the profitability and attractiveness of varying businesses and industries.

What Food Insecurity Means for Investors

Investors traditionally look at indicators like price-to-earnings (P/E) ratios, dividend yields, and earnings reports to assess the health and potential profitability of stocks. These remain important but incorporating food insecurity data can add another layer to risk evaluation.

Understanding that certain sectors like food and retail are more sensitive to fluctuations in food insecurity levels allows investors to weigh their portfolios accordingly. Stocks in these sectors might become riskier when and if food insecurity rises. Food insecurity can vary significantly by region as well. Investing in companies with heavy exposure to areas with high levels of food insecurity might also be seen as a higher risk.

Food insecurity frequently correlates with broader economic conditions. High levels of food insecurity could be an early warning sign of a looming recession. Investors can be better equipped to navigate market downturns or capitalize on emerging opportunities when they keep an eye on this metric.

Donating a part of your gains to socially responsible investments such as nonprofit organizations working to combat food security can provide help as well as tax advantages. Charitable donations are tax-deductible in many jurisdictions and at the federal level and this can help offset some of the capital gains tax you might otherwise owe on your investments.

Fighting Food Insecurity

Governments worldwide use various strategies to combat food insecurity, each tailored to their respective nations’ distinctive challenges and resources. Their methods can be different but the goals are generally the same: to ensure that all citizens have reliable access to sufficient, healthy food.

This includes setting up and supporting direct food programs like food banks and food vouchers such as the Supplemental Nutrition Assistance Program (SNAP) in the United States. Providing free or subsidized meals in schools is another way to directly alleviate food insecurity among children and, by extension, their families.

Note

Investors can have a role in the fight against food insecurity. Not only do they frequently have the financial resources to make a difference but they can also influence corporate behavior and public policy.

Investors can try to influence change by consciously choosing to invest in companies that are committed to reducing food insecurity. Look for companies with clearly defined corporate social responsibility (CSR) programs to reduce food insecurity or related issues like poverty. This could range from food companies sourcing their products sustainably to technology companies that develop platforms that help redistribute excess food.

Companies that report their social impact metrics transparently can help you see what they’re doing. Investing in companies with strong social initiatives isn’t just about doing good. It can also benefit your portfolio. Research has shown that companies with strong CSR initiatives frequently have a lower cost of capital, lower volatility, and higher profitability.

How Does Food Insecurity Impact the Economy?

Food insecurity reduces consumer spending among those who are struggling and this can contribute to lower economic growth. The public costs of addressing health and educational disparities caused by food insecurity can also weigh on the economy to a certain degree.

Where Does Food Insecurity Have the Greatest Impact?

Food insecurity has the most significant impact in low-income communities and countries with high poverty rates. These areas are frequently ensnared in a cycle of poverty and food insecurity that hampers economic development.

Countries that were facing critical levels of food insecurity in 2022 include Afghanistan, the Central African Republic, the Democratic Republic of the Congo, Ethiopia, Haiti, Honduras, Somalia, South Sudan, Sudan, Syria, and Yemen.

How Can Food Insecurity Impact the Workforce?

Food insecurity can lead to health problems and decreased productivity among workers, affecting individual lives and overall economic output. Employees are more likely to miss work or perform at suboptimal levels, leading to decreased productivity, when they face health issues because of inadequate nutrition.

Why Is Food Insecurity a Problem in the U.S.?

The U.S. grapples with food insecurity despite being a wealthy nation because of income and wealth disparities, structural inequalities, and inadequate social safety nets. Official statistics reported that more than 27% of American households faced some degree of food insecurity during 2023. It affected 36 million households.

What Has the U.S. Done About Food Insecurity?

The U.S. government has taken steps to better address food insecurity, particularly during the COVID-19 pandemic. It provided stimulus packages, extensions of unemployment benefits, and expansions of food assistance programs. These were mostly short-term solutions, however. They weren’t meant to address the systemic issues that lead to food insecurity.

Programs like SNAP exist but they often provide insufficient support to completely alleviate food insecurity.

The Bottom Line

Food insecurity is a problem affecting millions of Americans and many millions more around the world. This lack of access or affordability to food isn’t an isolated problem. It has far-reaching implications that may include influencing the stock market. Understanding this connection can help investors make more informed decisions and potentially contribute to solutions that alleviate this pressing issue.