investment

Reviewed by Michael J Boyle
Fact checked by Ryan Eichler

With so much cash thrown around in Silicon Valley, it’s not easy for an acquisition to cause a stir. Facebook’s (META) (now Meta) acquisition of WhatsApp in 2014 did just that—surpassing Google’s $3.2 billion purchase of Nest Labs and Apple’s $3 billion Beats Electronics procurement—to become one of the largest tech buys of all time.

WhatsApp, a text messaging app used widely across the globe, stole headlines with its initial $16 billion bid from Facebook. The deal was later finalized at $19 billion. In 2013, the app lost $138 million and brought in $10.2 million in revenue. So how did the company win over Facebook?

Key Takeaways

• Facebook purchased WhatsApp in 2014.
• Facebook’s $16 billion initial bid and the $19 billion closing price were astronomical, even for Silicon Valley.
• WhatsApp uses internet either mobile or WiFi rather than SMS technology.
• WhatsApp has over 2.95 billion users as of March 2025.
• WhatsApp helped Facebook grow in developing markets where it is widely used to communicate.

WhatsApp Acquisition

WhatsApp is an ad-free mobile application that allows users to send unlimited messages to contacts using WiFi or mobile data. The app is free to download and is an alternative to the cell provider’s traditional text messaging service. The app was founded by Jan Koum and Brian Acton, two former Yahoo! executives.

When Facebook announced its plans to acquire WhatsApp in February 2014, WhatsApp’s founders attached a purchase price of $16 billion: $4 billion in cash and $12 billion remaining in Facebook shares. This price tag is dwarfed by the actual price Facebook paid: $21.8 billion.

Facebook agreed to pay $19.6 billion—adding $3.6 billion to the original price as compensation to WhatsApp employees for staying on board at Facebook. However, Facebook share prices soared to $77.56 from $68 when the regulatory approval process concluded in October. By then, the agreed-upon 184 million Facebook shares inflated the final sale price by an additional $2.2 billion. 

WhatsApp’s six-month revenue for the first half of 2014 totaled $15.9 million, and the company incurred a staggering net loss of $232.5 million. However, the majority of that loss was for share-based compensation.

Why WhatsApp?

WhatsApp is Zuckerberg’s most significant acquisition and one of the most enormous Silicon Valley has ever seen. It is over 20 times larger than its Instagram acquisition, making quite the splash in 2012. That begs the $22 billion question: why did the social media giant break the bank to buy WhatsApp?

The answer is user growth. In 2014, over 450 million people used WhatsApp monthly, and the service added more than 1 million users per day. With 70% of WhatsApp users being active daily, the app was expected to quickly reach one billion users.

The app launched in 2009 and, as of 2020, had more than 2 billion users. As of 2020, Facebook had 2.8 billion monthly active users. With a shared mission of enhancing global connectivity via internet services, the merging of forces will likely accelerate growth for both companies.

For Zuckerberg’s company, user growth comes first and monetization later.

WhatsApp and Mobile Users

WhatsApp helped fuel Facebook’s growth in developing markets where internet connectivity is sparse, and WhatsApp is widely used. Facebook then gained access to these mobile user bases. Connecting to WhatsApp users in these areas will also aid the Facebook Connectivity initiative; Meta CEO Mark Zuckerberg’s plan to implement internet access to parts of the world not yet online.

However, the company does believe it will profit from WhatsApp down the line as phone calls become obsolete and mobile messages reign. This is why Zuckerberg spent one-tenth of his company’s (then) market value to buy the text messaging app, nearly doubling Google’s (GOOG) bid. In doing so, he successfully kept the company out of the hands of other tech rivals.

The Bottom Line

WhatsApp plays a significant role in global areas crucial to Meta’s future growth. By putting monetization efforts on hold, Meta is focusing on the future of international, cross-platform communications. Through the acquisition of WhatsApp, the company is poised to reach billions of people, and Meta is sure to find a way to eventually cash in.

Reviewed by Margaret James
Fact checked by Melody Kazel

An all-in-one mortgage allows you to combine your mortgage and savings. The combined accounts function like a home equity line of credit (HELOC).

This kind of arrangement can help lower the interest you pay on your mortgage because the balance of the savings you add to the account is applied to your principal, thus reducing the amount of interest you owe.

Key Takeaways

• All-in-one mortgages allow for the combining of a mortgage and savings. They require the combination of a checking account, home equity loan, and mortgage into one.
• The benefits of an all-in-one mortgage include seamlessly using extra cash flow to pay down a mortgage, as well as having increased liquidity beyond typical home equity loans.
• All-in-one mortgages typically charge a $50 to $60 annual fee and are 30-year adjustable rate mortgages.

What Is an All-in-One Mortgage?

An all-in-one mortgage combines elements of a mortgage, a bank account, and a home equity line of credit (HELOC). This structure provides the homeowner with immediate access to home equity without a separate loan. The homeowner makes payments like they would with a traditional mortgage, and those payments are applied to the principal and interest on the loan.

However, unlike a traditional mortgage, payments are deposited into a savings account, making them available for withdrawal. Because of this setup, borrowers can deposit the amount of their typical monthly mortgage payment plus the amount of their typical monthly expenses, including savings. Because all of that money goes toward paying down the principal, interest payments can be lowered.

Important

An all-in-one mortgage is different from an offset mortgage, which is not available in the U.S. due to tax laws. 

Example of an All-in-One Mortgage

A conventional 30-year fixed mortgage for $400,000 at 6.00% would result in a monthly payment of about $2,398 and total interest payments of about $463,352 over the life of the mortgage. If you also are putting $1,000 toward your savings every month, an all-in-one mortgage would allow you to apply both amounts—a total of about $3,398— to your mortgage balance each month while still giving you access to your savings. Doing this without withdrawing any of those funds would allow you to pay off your mortgage in less than 15 years and save about $258,283 in interest payments.

A key to this example is not withdrawing any of the funds. In order to reduce your interest payments and speed up the time it takes to pay off your mortgage, you need to be disciplined enough to avoid constantly tapping into the available equity.

All-in-One Mortgage Fees and Rates

Offset and all-in-one mortgage lenders charge a $50 to $60 annual fee on top of other standard loan expenses, and higher rates usually apply for accelerated mortgages. Most accelerated loans are 30-year adjustable-rate vehicles that are tied to the LIBOR index.

A key issue to consider here is the lifespan of the loan. A slightly higher interest rate could be worthwhile if the loan is paid off several years sooner than a lower-rate loan. Remember that the time for repayment for an accelerated loan is not fixed. Therefore, the borrower’s projected surplus cash flow must be taken into account when making this comparison.

All-in-One Mortgage Suitability

One of the main caveats of this type of loan is that most lenders who offer accelerated mortgages require borrowers to have relatively higher FICO scores in order to qualify. This is because this type of mortgage will only benefit a borrower who has a consistent positive cash flow, with surplus funds available to reduce the principal of the loan on a regular basis.

One way to decrease mortgage-related debt is to secure a mortgage with a low-interest rate. It’s important to shop around as different lenders may offer different interest rates on the same type of mortgage and in the long-run securing a mortgage with a lower interest rate could save you thousands of dollars.

What Is an Offset Mortgage?

An offset mortgage combines aspects of a traditional mortgage with one or more deposit accounts at the same financial institution, The interest charged on the mortgage is based on the principal amount less the amount on deposit in the savings component (which offsets the loan principal). Offset mortgages are not available in the U.S. due to greater tax regulation. Instead, the all-in-one mortgage is a viable alternative for some U.S. homeowners.

Who Should Avoid All-in-One Mortgages?

Although the benefits of this type of loan can be substantial, suitability is still a key concern, just as with any other loan product. Financially undisciplined borrowers may want to steer clear of taking one of these loans. Possessing too much available credit through the equity line aspect of the account could trigger spending sprees for some people, which will add to their overall debt.

What Are Some Alternatives to an All-in-One Mortgage?

If you want to access home equity, you can refinance your existing mortgage with a cash-out refi. You can also take out a home equity loan or HELOC. If you are instead looking to pay off your mortgage sooner, you can recast your mortgage or else pay additional principal early.

The Bottom Line

A combined mortgage, savings account, and HELOC is a special product that allows homeowners to pay down their mortgage principal faster, thus lowering the total amount of interest they will pay over the life of the loan. For this to work, average monthly expenses cannot exceed average monthly deposits, meaning borrowers need to refrain from tapping into their home equity.

Fact checked by Vikki Velasquez

Buying a vacation home with friends may sound like a dream come true. The shared costs alone can make an otherwise expensive investment more accessible, and frequent getaways with close friends or family may be enticing.

However, it can come with its own set of challenges. Before jumping into sharing a vacation home purchase, here’s what you should consider to avoid conflicts down the line.

Key Takeaways

• Co-owning a vacation home with friends requires careful planning to manage shared responsibilities effectively.
• Evaluate the property’s cost and ongoing expenses, such as mortgage, taxes, insurance, and maintenance, to better understand the financial aspects of co-ownership.
• Having a formal written agreement outlining each co-owner’s responsibilities, rights, and financial contributions is ideal.

What to Consider Before You Buy

Co-owning a vacation home with friends involves shared responsibilities, so before you buy, it’s important to assess everyone’s level of commitment and understand their expectations.

Type of Ownership

Standard ownership options available to those who co-own a property include joint tenancy and tenancy in common (TIC). In joint tenancy, all co-owners share equal rights and obligations to the property, meaning they are jointly responsible for its expenses and equally entitled to any profits from renting or selling.

Tenancy in common allows each owner to hold a different percentage of ownership, which can be sold or mortgaged independently by each tenant. While joint tenancy provides equal ownership, TIC offers more flexibility for individuals with varying financial contributions. Both options come with unique advantages and responsibilities that should be carefully considered.

Cost

Evaluating the financial commitment of co-owning a home is necessary. This includes not only the property’s cost but also expenses like the mortgage, taxes, insurance, utilities, and maintenance.

The average mortgage ranges from $1,600 to over $3,000 per month. Property taxes total 0.5% to 1% of the home’s value. Insurance and utilities can add up to about $600 to $900 per month, and it’s recommended to budget between 1% and 4% of the home’s value annually to cover maintenance and repairs, depending on the age of the home, the home value, and the location.

Thankfully, these costs will be split between co-owners, but if things are still too expensive, there are ways to help offset costs. For example, if everyone agrees, one co-owner can use the home as their primary residence, potentially securing access to better mortgage terms or programs that make the cost of the home more manageable. However, that is not the only way to make the purchase affordable for everyone.

“Another [way] would be using it as an Airbnb and renting it out for longer terms. This allows for you and your family to still use it as well,” said Ashley Collitt, a realtor at Stofel & Associates Realty.

Usage Frequency

Consider how often each person will use the property. This is especially important during peak seasons when demand for the property is higher. You want to avoid conflicts but ensure everyone gets an equal opportunity to enjoy the home.

Property Management

A vacation home will require regular maintenance, such as cleaning, lawn care, and seasonal upkeep, like servicing the HVAC system. Depending on the location, you may also need to address weather-related repairs, such as roof inspections after storms.

Hiring a property manager is especially useful in these cases, as they can handle day-to-day maintenance and repairs, which ensures the home remains in good condition without requiring frequent trips from the co-owners.

“If you are not local, hiring a property manager is the best way to keep the property under control. It also takes a lot of stress off your shoulders,” Collitt explained. 

Important

Vacation homes don’t qualify for capital gains exclusion like primary homes do.

How to Protect Yourself and Your Investment

Depending on how things unfold, the arrangement might not go well if conflicts arise over scheduling, property use, or financial responsibilities.

“The biggest issue is managing expectations. However, as long as there are boundaries set, both sides end up being successful,” Collitt said.

As mentioned, the type of ownership chosen when buying a vacation home with friends determines each owner’s responsibilities. However, having a formal co-ownership agreement in place is beneficial, as it clearly defines each co-owner’s rights, responsibilities, and share of the property. This legal document also helps prevent misunderstandings and disputes.

It’s wise to consult with a real estate attorney who can help you navigate the legal complexities of co-ownership.

Why Co-Owning a Vacation Home With Friends Might Be Worth It

When considering the responsibilities of co-ownership and the potential for things to go awry, you may question whether buying a vacation home with friends makes sense. However, the perks of co-owning a home can outweigh the risks.

• Shared financial responsibility: Co-owning a vacation home with friends makes an expensive investment more accessible and affordable by splitting the various costs between co-owners.
• Frequent getaways: You can enjoy regular vacations with close friends and family.
• Potential income: Renting out the property when not in use can generate extra income to cover expenses.
• Increase property value: Over time, the home could appreciate in value, providing a potential return on investment for each owner if and when the property is sold.

The Bottom Line

Despite the risks, co-owning a vacation home with friends offers several perks. There’s some risk involved, but it is ideal to address expectations as well as financial and legal aspects upfront.

With clear communication, proper agreement, and protections in place, the arrangement can be worth it, allowing everyone to enjoy the benefits of a shared vacation home while minimizing potential conflicts and misunderstandings.

“Buying a vacation home seems like a big commitment, but it will benefit those involved if done right. Preparation is key,” Collit said. 

Reviewed by Chip Stapleton
Fact checked by David Rubin

Goodwill vs. Other Intangible Assets: an Overview

One of the concepts that can give non-accounting (and even some accounting) business folk a fit is a distinction between goodwill and other intangible assets in a company’s financial statements.

Perhaps the confusion is to be expected. After all, goodwill denotes the value of certain non-monetary, non-physical resources, and that sounds like exactly what an intangible asset is.

However, many factors separate goodwill from other intangible assets, and the two terms represent separate line items on a balance sheet.

Key Takeaways

• Customer loyalty, brand reputation, and other non-quantifiable assets count as goodwill.
• Intangible assets are those that are non-physical, but identifiable.
• These include a company’s proprietary technology (computer software, etc.), copyrights, patents, licensing agreements, and website domain names.
• While “goodwill” and “intangible assets” are sometimes used interchangeably, there are significant differences between them.
• On a balance sheet “goodwill” and “intangible assets” are each separate line items.

Goodwill

Goodwill is a miscellaneous category for intangible assets that are harder to parse individually or measure directly. Customer loyalty, brand reputation, and other non-quantifiable assets count as goodwill.

Goodwill cannot exist independently of the business, nor can it be sold, purchased, or transferred separately. A company’s record of innovation and research and development and the experience of its management team are often included, too. As a result, goodwill has an indefinite useful life, unlike most intangible assets.

Goodwill only shows up on a balance sheet when two companies complete a merger or acquisition. When a company buys another firm, anything it pays above and beyond the net value of the target’s identifiable assets becomes goodwill on the balance sheet. Say a soft drink company was sold for $120 million; it had assets worth $100 million and liabilities of $20 million. The sum of $40 million that was paid over and above $80 million (the value of the assets minus the liabilities) is the worth of goodwill and is recorded in the books as such. 

Look at this example of an assets section of a balance sheet. Goodwill is a separate line item from intangible assets.

Current Assets
Cash	$300,000
Investments	$200,000
Inventory	$150,000
Non-current Assets
Property, plant, and equipment	$600,000
Goodwill	$200,000
Intangible Assets	$150,000

Other Intangible Assets

Intangible assets are those that are non-physical but identifiable. Think of a company’s proprietary technology (computer software, etc.), copyrights, patents, licensing agreements, and website domain names. These aren’t things that one can touch, exactly, but it is possible to estimate their value to the enterprise. Intangible assets can be bought and sold independently of the business itself.

There’s also a key distinction in how the two asset classes are amended once they’re on the books. Because assets tend to lose some of their value over time, companies sometimes have to make periodic write-downs.

Intangible assets are amortized, which means a fixed amount is marked down every year, resulting in a simultaneous charge against earnings. The amortization amount is adjusted if the asset’s value is impaired at some point after its acquisition or development.

Key Differences

While “goodwill” and “intangible assets” are sometimes used interchangeably, there are significant differences between the two in the accounting world.

Goodwill is a premium paid over the fair value of assets during the purchase of a company. Hence, it is tagged to a company or business and cannot be sold or purchased independently. In contrast, other intangible assets like licenses, patents, etc., can be sold and purchased separately.

Goodwill is perceived to have an indefinite life (as long as the company operates), while other intangible assets have a definite useful life.

Important

If there is no impairment, goodwill can remain on a company’s balance sheet indefinitely.

Special Considerations

The Financial Accounting Standards Board (FASB) in 2021 came up with an alternative rule for the accounting of goodwill. Before 2001, it could be amortized over a period of 40 years. A 2001 ruling decreed that goodwill could not be amortized but must be evaluated annually to determine impairment loss; this annual valuation process was expensive as well as time-consuming.

As per the alternative FASB rule in 2021 for private companies, goodwill can be amortized on a straight-line basis over a period not to exceed 10 years. The need to test for impairment has decreased; instead, an impairment charge is recorded when an event signals that the fair value may have gone below the carrying amount.

These rules apply to businesses conforming to generally accepted accounting principles (GAAP) using a full accrual accounting method. If conditions indicate that the carrying value may not be recoverable, impairment tests are performed.

Small businesses using cash-basis accounting or modified cash-basis accounting can use the statutory rates set by the Internal Revenue Service (IRS). The IRS allows for a 15-year write-off period for the intangibles that have been purchased. There is a lot of overlap and contrast between the IRS and GAAP reporting. 

What Is Goodwill?

In business terms, “goodwill” is a catch-all category for assets that cannot be monetized directly or priced individually. Assets like customer loyalty, brand reputation, and public trust, all qualify as “goodwill” and are non-qualifiable assets.

What Is GAAP Mean?

GAAP stands for generally accepted accounting principles.

Can You Write Off Intangible Assets?

Yes. You can write off intangible assets (for a 15-year write-off period) that have been purchased by using the statutory rates set by the Internal Revenue Service (IRS).

What Is an Intangible Asset?

Patents, trademarks, licensing, and copyrights are all examples of intangible assets.

Sometimes relatively good news over a long enough time makes for bad habits. In recent years, drawdowns that have been followed by comparatively quick recoveries have often rewarded those “buying the dip”—market drops from recent averages. But those favorable market conditions were never meant to last, a hard truth often crowded out by Reddit threads and headlines from less-scrupulous investing sites promising major gains ahead with not a little macho language about going in where angels fear to tread.

Historically, drawdowns don’t always just bounce back—witness the lost decade of the 2000s when the S&P 500 Index had negative returns after the dot-com bust and global financial crisis. Legendary investor Bill Gross, the “Bond King” behind $270 billion funds at PIMCO, thus has a blunt warning for those looking to scoop up supposed bargains during market tumult. “I think it’s a very dangerous period of time. It’s not necessarily a period for stockholders to reach in and try and grab a bargain, like catching a falling knife,” he told CNBC. We explain his rationale below.

Key Takeaways

• Bill Gross, the former “Bond King” from PIMCO, warns against rushing to buy the dip during market drops.
• Experts suggest alternative strategies for navigating market volatility instead of impulsive dip-buying.

Buy the Dip, Catch the Knife

As turbulence hit markets again in 2025 on the heels of the Trump administration’s announcement of sweeping tariffs, retail investors rushed in to “buy the dip,” only to see the market move from a correction (10% or more drop from a recent high) to perilously close to a bear market (20%) after pouring billions in. The highest level of retail buy-in in a decade, according to J.P. Morgan (JPM), the dip-buying in the days after the announcement was just more money chasing after bad. Meanwhile, institutional investors were betting against many of the stocks retail investors favored: small caps and big names like Amazon.com Inc. (AMZN).

The danger in trading this way, according to Gross, lies in mistaking a current downturn for a routine correction. “It’s an epic event,” Gross said about the April 2025 drawdown, though his advice is evergreen for other periods of tumult. “It’s not something where you can time quickly for a market bottom.” He compared the tariff situation to the historic 1971 end of the gold standard, meaning it could represent a fundamental shift, not a temporary setback, something some commentators with just a few years of experience don’t have the perspective to handle.

For example, following the dot-com bubble burst, even blue-chip tech stocks like Microsoft Corporation (MSFT) took 14 years to recover to their previous highs. During that era, many investors who thought they were “buying the dip” in the early stages of the decline ultimately watched their investments lose much of their value.

The psychology that makes buying the dip appealing is what makes it dangerous. Investors naturally want to feel they’re getting a bargain, but as Gross warns, you might only be buying more trouble.

What Gross Recommends Instead

Gross doesn’t suggest shunning the market altogether. “What I’ve been doing… is buying domestic companies, buying telephone companies like AT&T [Inc. (T)] and Verizon [Communications Inc. (VZ), buying tobacco stocks that yield 7% to 8%, like Altria [Group Inc. (MO)], buying domestic companies,” he said.

Gross’s focus on domestic investments with strong dividends offers a solid defensive approach during market turbulence—one that most experts suggest. Gross also reminded investors of an often-overlooked option: “My cash portfolio yields 4.3% and it doesn’t go down,” he said—a simple yet effective strategy during uncertain times.

What Gross means by his “cash portfolio” isn’t simply money stashed in a safe—that earns nothing—but a strategic allocation to high-yielding money market funds, short-term Treasury bills, and other cash equivalents that provide income while preserving capital during market volatility.

The Bottom Line

Gross‘s warnings about buying the dip come from decades of market experience that few can match. While the temptation to snatch up seemingly discounted stocks remains strong, you would have much in common with most investors in finding it difficult to differentiate the “epic economic and market event” Gross describes or a routine correction. Whatever you do, “don’t sell in a panic,” he said, suggesting the virtue of patience at a time when it’s hard to have any.

Fact checked by Vikki Velasquez
Reviewed by Margaret James

If you’re starting a business, it’s crucial to begin with careful financial planning and precise accounting. Unfortunately, many new businesses make the mistake of not properly estimating and budgeting for startup costs. This approach can lead to poor results or even the business’s failure. Instead, take the time to make a budget. Here’s what you need to plan for.

Key Takeaways

• Startup costs are expenses incurred while establishing a new business. They can be divided into two categories: pre-opening and post-opening. 
• Pre-opening startup costs include a business plan, advertising, employee training, professional services, and setting up books and records.
• After the business opens, costs shift toward promotional activities and employee salaries.
• Each type of business structure (e.g. sole proprietorship, corporation) has unique startup costs.

Understanding Common Business Startup Costs

Startup costs are the expenses a new business faces during its creation.

“It’s important to carefully consider start-up costs, conduct sound research, and build a contingency fund to cover these unpredictable expenses and ensure that your business can maintain smooth operations during its early stages,” says Jo Madison, director of the Small Business Development Center at the Urban League of Greater Cleveland. “Careful budgeting and flexibility will give you the financial foundation needed to navigate the challenges of starting a new business.”

A business will incur different types of startup costs depending on its nature of operations.

For example, online businesses, such as e-commerce websites, often have lower initial capital requirements than brick-and-mortar businesses, such as restaurants. This difference in startup costs is because online businesses typically need less physical space and fewer employees compared to brick-and-mortar operations.

Despite these differences, several expenses are common across most types of businesses. These typically include costs related to legal or attorney fees, licensing, initial inventory, market research, and marketing efforts to launch the brand.

Important

Keep detailed records of all your startup expenses from the beginning. This not only helps with budgeting and planning but also helps you take full advantage of tax deductions.

The Business Plan

Creating a business plan is crucial for starting a business, as it provides a detailed roadmap and prompts careful consideration of various startup costs. Underestimating these expenses can lead to an inflated expectation of net profit, which can be detrimental for a small business owner.

“Creating a comprehensive business plan can involve market research, financial projections, and professional assistance,” Madison says. “An individual expert fee structure can range from $300-$1500 depending on the complexity of the business plan.”

Research Expenses

Before launching a business, it’s crucial to thoroughly research the industry and target consumer demographics. Some business owners opt to hire market research firms for this purpose.

Hiring a market research firm is essential for companies wanting to excel in competitive markets. These firms offer key insights into customer preferences and industry trends, using both qualitative and quantitative data to inform strategies ranging from product development to marketing. Their analysis helps businesses make informed decisions and identifies potential risks and opportunities.

For business owners who choose to follow this route, the expense of hiring these experts must be included in the business plan.

Borrowing Costs

Starting up any kind of business requires an infusion of capital. There are two ways to acquire capital for a business: equity financing and debt financing. Equity financing usually entails the issuance of stock, meaning the company offers shares of its ownership to investors in exchange for funds. However, this doesn’t apply to most small businesses, which are proprietorships and don’t issue stock.

For small business owners, the most likely source of financing is debt in the form of a small business loan. Business owners can get loans from banks, savings institutions, and the U.S. Small Business Administration (SBA). Like any other loan, SBA business loans come with principal and interest payments that need to be carefully planned for when starting a business, as failing to make these payments can result in severe consequences.

Insurance, License, and Permit Fees

Many businesses are expected to submit to health inspections and authorizations to obtain certain business licenses and permits. Some businesses might require basic licenses while others need industry-specific permits.

“Business insurance (e.g., general liability, property, workers’ compensation) is essential to protect the company against unforeseen events and legal risks,” Madison says.

Carrying insurance to cover your employees, customers, business assets, and yourself can help protect your personal assets from any liabilities that may arise. 

Technological Expenses

Technological expenses include the cost of a website, information systems, and software, including accounting and point of sale (POS) software, for a business. Some small business owners choose to outsource these functions to other companies to save on payroll and benefits.

Equipment and Supplies

Every business needs equipment and basic supplies, which are crucial components of startup costs. When planning these expenses, you must decide whether to lease or buy the equipment. 

The state of your finances will play a major part in this decision. Even with sufficient funds to purchase equipment outright, it might be more practical to lease initially, with the option to buy later, especially if other unavoidable expenses arise. However, it’s important to remember that, regardless of the cash position, leasing isn’t always the most beneficial option depending on the type of equipment and the lease terms.

Advertising and Promotion

A new company is unlikely to succeed without promoting itself. However, promoting a business entails much more than buying ads online.

It also includes marketing—everything a company does to attract clients to the business. You might consider paying for a marketing consultant or firm.

Employee Expenses

Businesses planning to hire employees must plan for wages, salaries, and benefits, also known as the cost of labor. This includes not only direct payments but also any additional benefits that contribute to employee compensation packages, including health insurance, retirement plans, and bonuses.

Failure to adequately compensate employees can result in low morale and potentially bad publicity, which can tarnish a company’s reputation and be disastrous for the business.

Contingency Fund

The trickiest part of calculating start-up costs is estimating contingency costs. “These are costs that can arise unexpectedly but are critical to account for when preparing a budget,” Madison says.

“The main challenge in calculating start-up costs is ensuring you factor in all of these unpredictable, hidden, or variable expenses,” she adds. “A comprehensive budget needs to include a contingency fund—usually 10-20% of the estimated start-up costs—specifically for dealing with unexpected expenses.”

Additional Startup Cost Considerations

The most expensive element of your business will depend on the nature of your business, and your industry.

It’s wise to set aside some extra money for any overlooked or unexpected expenses. Many companies fail because they lack the cash (or cash flow) to deal with unexpected problems.

“The time it takes for customers to pay invoices could result in delays in receiving payments to cover operational expenses before revenue starts coming in,” Madison says. “Setting up a cushion or cash reserves (liquidity) may be overlooked as it is not viewed as a start-up cost, however, [it] should be viewed as a start-up necessity.”

It’s also important to note that the startup costs for a sole proprietorship differ from the startup costs for a partnership or corporation. Some additional costs a partnership might incur include the legal cost of drafting a partnership agreement and state registration fees.

Other costs that may apply more to a corporation include fees for filing articles of incorporation, bylaws, and terms of original stock certificates.

What Are Business Startup Costs?

Startup costs are the expenses required to create a new business. Once the business is operational, these costs can be broadly categorized into pre-opening and ongoing or operating expenses. Pre-opening costs may include expenses for developing a business plan, market research, securing a location, and initial marketing. Ongoing costs typically involve operational expenses like employee salaries, utilities, and inventory replenishment.

What Business Startup Costs are Tax Deductible?

Tax-deductible startup costs generally include essential expenses for establishing a new business, such as market research, opening advertisements, and employee training salaries. The IRS allows new businesses to write off expenses of $10,000 in startup costs and $5,000 in organizational costs in the year the business begins. However, total startup costs must be $60,000 or less and organizational costs must be $50,000 or less. If the costs exceed the maximums, the remaining has to be amortized.

How Do I Calculate Business Startup Costs?

To calculate your startup costs, first identify all necessary expenses, like office space, equipment, licenses, permits, salaries, and marketing. Estimate each expense by researching online and consulting with mentors or similar businesses. You can then organize these costs into one-time and monthly categories, then calculate a total to understand your capital needs. Calculating your expected startup costs can help you secure funding, attract investors, and launch your business successfully.

The Bottom Line

Understanding and planning for startup costs is crucial for any new business. These costs include pre-opening expenses, like market research and a business plan, and post-opening expenses, such as marketing and employee salaries. Every business has unique costs, but common expenses often involve legal fees, permits, equipment, and technology.

Accurately estimating your startup costs is key for any new founder. Realistic figures can help secure funding from investors or banks and ensure smooth operations. Keeping detailed records from the start can also help you in financial planning and maximizing tax benefits.

Reviewed by Anthony Battle
Fact checked by Suzanne Kvilhaug

Many people wouldn’t dream of giving up an inheritance. After all, a sudden windfall may help them reach some of their financial goals, including getting out of debt or saving for retirement. But, it may make more sense to decline it, especially if the inheritance pushes you into a higher tax bracket or if you simply want someone else to inherit it.

Key Takeaways

• You can decline or disclaim an inheritance for any reason, including avoiding the tax implications.
• Disclaimers must be written within nine months of the decedent’s death.
• Once you’ve refused an inheritance, you cannot benefit from any assets or reclaim them in the future.
• Disclaimers can be a handy estate planning tool, where you add conditions in your will if a beneficiary declines their inheritance.

Reasons for Declining an Inheritance

Declining an inheritance may seem like an unusual move. So, if you decide to proceed, you can use a qualified disclaimer to refuse an inheritance. But why would you? The following are some of the most common reasons why you may not want to accept one.

Disclaiming may make sense if you are heavily exposed to income and estate taxes as a result of the inheritance, according to Keith Atneosen, principal and family business advisor at Freedom Summit. You may be pushed into a higher tax bracket if the assets generate income, and you may be responsible for estate taxes if the inheritance is high enough. Anything over $13.99 million in 2025 ($13.61 million in 2024) is subject to the estate tax.

Some of the other reasons why you would disclaim an inheritance include:

• You want someone else to benefit. You can reject the inheritance if you want someone else, including a sibling, to take possession of the assets instead.
• You’re already financially stable. You may not need the assets or money from an inheritance because of your financial situation.
• You don’t want to deal with tricky or complicated assets, such as vacation homes, that may take time to dispose of or sell.
• Avoiding family conflict. A death, will, and inheritance may cause tension among family members, so you may decide to disclaim it to keep the peace.

You simply may not want the inheritance. This may be for personal reasons, which is very valid.

Legal and Tax Implications

Before you disclaim an inheritance, you should consider some of the legal and tax implications.

Legal Implications

You may have your reasons for declining an inheritance. However, you should understand that if you refuse an inheritance today, you cannot reclaim it in the future. Put simply, a disclaimer is irrevocable, which means you can’t change your mind or claim the inheritance if your situation changes. You also give up the asset or any benefits from it.

Additionally, you’ll have no power to decide where the inheritance goes after you decline it. The assets are passed down to the next beneficiary if one is listed in the deceased’s will. If there is no beneficiary, they are passed on to the estate.

“If there are no estate documents [such as a will], it could be subject to probate court in the state of the decedent,” Atneosen said. This probate process involves reviewing and analyzing the deceased’s assets and documents in probate court. The length of time depends on the state, but the average is generally six months.

Tax Implications

You avoid any of the tax implications that might come with accepting an inheritance. For instance:

• You avoid paying taxes on income-generating assets you inherit.
• You pass any tax implications on to the new beneficiary.
• You reduce the potential for estate taxes passed on to your beneficiary(s) after you die.

Procedure for Disclaiming an Inheritance

Writing a disclaimer involves a process. You have nine months from the date of the deceased’s death to do so.

If you intend to decline an inheritance, you must do so in writing. This written notice must include what you are disclaiming, whether you choose to decline the entire estate or just certain parts. The document must be signed to ensure that the refusal is legal. Once complete, it must be sent to the executor or the estate’s representative.

Although you can do the disclaimer yourself, Atneosen says to be careful, as there may be legal risks if you don’t work with an attorney. “It’s best to engage with an attorney licensed [in] your state of domicile,” he said.

Warning

You generally cannot disclaim an inheritance once the assets have been transferred. And remember, once you disclaim it, you cannot reclaim the inheritance.

Impact on Estate Planning

You can use a disclaimer as a flexible estate planning tool, especially when you’re unsure of what will happen in the future.

For instance, your beneficiary (maybe your spouse) can’t decide where any inherited assets will go if they complete a qualified disclaimer. Since you don’t know if this will happen, you can outline in your will what happens to your assets if your beneficiary decides to refuse the inheritance. This can include naming additional beneficiaries or passing the assets on to a trust.

Speak to an estate planner, lawyer, or financial expert to get the best advice on how to deal with any scenario.

Examples and Case Studies

Here’s a hypothetical example to show how disclaimers work. Imagine Mr. X has a traditional IRA worth $250,000, two properties (a primary and income-generating vacation residence) valued at $300,000 each, a checking and savings account with a combined value of $30,000, and a car worth $15,000. The total value of his estate is $895,000.

Mr. X leaves his entire estate to his adult daughter. If the daughter doesn’t want the tax implications associated with her father’s IRA (she would have to take withdrawals over 10 years after his death) and the income from the vacation home after he dies, she can complete a disclaimer within nine months indicating her refusal of those assets. These assets will pass on to the next available heir. If she wants, she can keep the primary residence, checking and savings accounts, and the car without paying taxes.

The Bottom Line 

Although disclaimers aren’t uncommon, they aren’t unusual. People with large net worths who stand to inherit valuable assets may use them to avoid heavy tax implications. Disclaimers must be made in writing within nine months of the decedent’s death. Keep in mind that once you refuse an inheritance, you are legally bound by the disclaimer. This means you cannot benefit from or reclaim any disclaimed assets in the future. Be sure to speak to a financial or legal professional so you know where you stand.

Fact checked by Vikki Velasquez

If you inherit a house with a mortgage, there is a lot to think about. Should you keep the house and take over mortgage payments? Should you sell it? Let’s look at all your options.

Key Takeaways

• If you keep the house, the deed will be transferred into your name. You can pay the current mortgage or refinance.
• If you sell the house, you can use the proceeds to pay off the remainder of the mortgage.
• If you keep the house and rent it out, a tenant’s monthly rent checks could cover the home’s mortgage payments.
• If you let the home fall into foreclosure, you won’t make any mortgage payments, hurting your credit rating.

Hang on to the House

If you decide you want to keep the house, you’ll also have to make the mortgage payments that come with it. This is a good option if you like the home and the current mortgage payments will fit into your budget.

“Many choose this option if they decide they want to move into the home, if it has sentimental value, or if the value of the home is expected to appreciate over time,” says Adam Rosenblum, attorney at Rosenblum Law.

As soon as you decide to keep the house, you’ll want to reach out to the lender handling the mortgage and ask about taking over the home’s existing mortgage.

“Once you have been approved, continue making monthly mortgage payments and pay for taxes, insurance, and upkeep on the home,” Rosenblum says. “You will then need to work with the lender or servicer to assume the loan and transfer the home’s deed to your name. You may also be able to refinance the home if you want to lower payments or remove other heirs from the title.”

Sell the House

Deciding to sell an inherited house is another option. The money from the sale may cover the remainder of the home’s mortgage. Any money left over after that can be used however you wish. Don’t forget about taxes.

“Any excess money made from the house can be kept by the homeowner or distributed to other heirs,” Rosenblum says. “Many choose this option if they cannot afford to keep the house, but note that you may also need to pay taxes on money made from the sale.”

Before you sell an inherited home, you’ll want to assess the value of the home by getting an appraisal.

“If you choose to sell the house, you should get the property appraised to determine its market value, which can be done with the help of your lender or by contacting a licensed appraiser,” Rosenblum says. “If you decide the value of the home is worth selling it, you should then work with a licensed real estate agent to list the home.”

Rent Out the House

Keeping the house and opening the house up to a tenant is another means of covering a home’s mortgage payments and making some additional cash each month.

“If you choose to keep the home but wish to also make some extra income from it, you can rent it out to someone else, which can also cover the mortgage payments,” Rosenblum says.

Becoming a landlord may be a way to make additional money from an inherited house, but there is much to consider.

“If you choose to rent the home, you should ensure compliance with any rental restrictions in your state, prepare the home, screen tenants, draft a lease agreement, and manage the property yourself or hire a property management company,” Rosenblum says.

Stop Payments on the House

You can choose to let an inherited house go into foreclosure, but it will hurt your credit rating to do so. Think carefully about choosing this option.

“If the mortgage exceeds the home’s value, or if you no longer wish to keep the home in any capacity, foreclosure is an option,” Rosenblum says. “However, we generally do not recommend foreclosure as a good option, as it can severely damage your credit score and make obtaining future loans more difficult.”

The Bottom Line

When you inherit a house with a mortgage, you have four key options to consider:

• You can keep the house, take over its mortgage payments, and have the deed transferred into your name.
• You can sell the house, and pay off the home’s mortgage with the proceeds of the sale.
• You can keep the house and rent it out to a tenant. Ideally, the tenant’s monthly rent check would cover the home’s mortgage plus some additional cash.
• You can let the home fall into foreclosure. This option may be tempting to do if the home’s mortgage is worth more than its current value, but it will damage your credit.

Fact checked by Suzanne Kvilhaug

Not all natural disasters are covered by renters insurance policies, and you may need to buy separate additional coverages for earthquakes and floods to protect your belongings should these disasters strike in your area.

“If you rent a house or apartment and experience a fire or other disaster, your landlord’s insurance will only cover the costs of repairing the building. But it won’t cover your personal property. To protect yourself financially, you will need to buy renters or tenants insurance,” says Scott Holeman, Director of Media Relations for the Insurance Information Institute.

Key Takeaways

• Renters insurance does cover natural disasters, but most don’t cover earthquakes or floods.
• Shop for flood insurance from the National Flood Insurance Program and private insurers.
• Earthquake coverage can be added to a renters’ insurance policy or purchased separately.
• To lower insurance costs, shop around and compare prices, and take advantage of discounts offered by insurance companies.

Natural Disasters and Renters Insurance

Renters insurance covers your belongings, provides liability protection if someone is injured on your premises, and offers additional living expenses if your rented home is badly damaged and you need a place to live while it is repaired.

But where do natural disasters fit in? Some natural disasters are covered by renters insurance, and some are not.

Covered natural disasters include lightning, smoke, fire, and windstorms. But most renters insurance policies do not cover earthquakes and floods. For insurance protection for those natural disasters, you’ll need to buy additional coverage.

For flood insurance policies, check out the National Flood Insurance Program. You can determine your home’s flood risk and get quotes for flood insurance on this website. You can also buy flood insurance from private insurers. Shop around for the best deal.

“Costs vary based on location and risk but typically range from $100 to $600 per year for renters,” says Stacy Brown, Senior Director of Training at Real Property Management.

For earthquake insurance coverage, you can buy it as a separate policy or have it added to your renters insurance. Check with your insurance company to see if you can add earthquake insurance to your current renters insurance policy. Keep in mind that many earthquake insurance policies come with a deductible that you’ll be required to pay should you file a claim.

“Costs depend on seismic risk, but premiums usually start around $50 to $300 per year,” Brown says.

How Much Does Renters Insurance Cost?

The national average cost of renters insurance is $20 per month for $30,000 of personal property coverage and $100,000 in liability coverage.

Renters insurance is affordable, and you can qualify for discounts to make it even cheaper. You’ll receive discounts for bundling your renters insurance with your car insurance, paying the full amount of your premium upfront, paying your bills online, and not having any insurance claims.

“Always ask your insurance professional if you qualify for any discounts. Things like having an alarm system, deadbolt locks, smoke detectors, good credit, and even your age may help lower your costs for renters insurance,” Holeman says.

Getting discounts will slash renters insurance prices, and the money you save can be applied to a separate flood insurance or earthquake insurance policy.

Shopping around for the best coverage from insurers in your area is another way to drive down renters insurance prices. Use the same strategy when shopping for flood and earthquake insurance. Don’t accept the first quote; keep on shopping until you find lower insurance prices.

The Bottom Line

Most renters insurance policies do not cover earthquakes and floods. For insurance coverage of these natural disasters, you’ll need to purchase separate insurance.

For flood insurance, the National Flood Insurance Program is a good place to start, and you will also want to check out flood coverage from private insurers. For earthquake coverage, you can buy a separate policy, or you may be able to get it added to your renters insurance policy. Check to see what’s available from your insurance company.

To lower insurance costs, shop around and ask about discounts. There are several ways to get a discount on renters insurance, including paying your bill on time and having good credit. This same strategy applies to earthquake insurance and flood insurance. So be sure to shop around for the best price and ask about an insurer’s discounts.

Market drops can tempt investors with the supposed profits that await those buying coveted stocks at a discount. When markets took a nosedive after President Donald Trump announced sweeping tariffs in April 2025, many considered “buying the dip,” referring to a drop in the stock market from recent averages.

“If you’re thinking about buying the dip, then you’re looking at market losses in a healthy manner,” said Peter Lazaroff, chief investment officer of Plancorp and a member of Investopedia’s advisor council. “The key now is to be smart with what you choose to buy.”

According to JPMorgan (JPM), retail investors bought billions in popular stocks like NVIDIA Corp. (NVDA) on April 3, buying at the highest level in a decade. However, they threw good money after bad, “buying the dip” as stocks continued to plummet into bear market territory.

Key Takeaways

• Buying the dip can be a sound strategy for long-term investors, but timing the market perfectly is almost impossible.
• Before investing during a downturn, assess your financial stability, including emergency funds and debt levels.
• Don’t invest money that you can’t handle losing in the short term if the market drops further.

What Does It Mean to ‘Buy the Dip?’

Ideally, downturns should offer stocks with strong fundamentals at reduced prices. “Buy low, sell high,” goes the famous investing strategy. So what’s not to like?

Many retail investors know that in recent years, pullbacks during an otherwise strong bull market have been followed by quick recoveries. Indeed, investment forums and social media channels go into overdrive with buy-the-dip advice during such periods. These message boards can make it seem easy, but identifying market bottoms is notoriously difficult. Even professional investors with vast resources and experience fail to time market bottoms.

In addition, dips often turn downward into a deeper correction or bear market. Recent downturns had numerous so-called “sucker rallies“—an apt name for what you’ll feel if you buy into them.

Experts recommend having an emergency fund that can cover three to six months of expenses in easily accessible funds. Buying the dip means nothing if you have to cash-out your stocks to pay bills before the market heads back up.

What You Need To Know

Assess Your Financials

Before buying into a dip, ensure your overall financial house is in order:

• Only invest what you can handle losing. Adding more risk is only prudent if you can withstand additional losses in the near term.
• Get your debts in order. The guaranteed “returns” from paying off credit cards (some with interest rates as high as 30% annually) are often greater than potential market gains.
• Assess your income stability. Those with stable incomes can afford to take more risks than those facing potential unemployment or fewer work hours.

“Is this truly long-term money that you will not need for seven+ years? And if the market drops further, will you stay calm or feel the urge to panic-sell?” said Michelle Perry Higgins, a financial advisor at California Financial Advisors. “If you’re not confident in your ability to ride out more volatility, it may be best to hold off.”

Consider Dollar-Cost Averaging

Rather than putting all your money into a single dip, consider a more measured approach: dollar-cost averaging (DCA). This involves investing fixed amounts at regular intervals—say, $100 weekly or monthly—and removes the psychological and emotional pressure of timing. If you have a 401(k) with contributions from each paycheck, you’re already doing this.

“Understand that you’re unlikely to time the bottom perfectly,” Higgins said. “Statistically, the odds of buying at the exact low are very slim. Instead, think of it as gradually buying at lower average prices over time … nibbling your way in during downturns rather than trying to hit a perfect entry point. This approach helps build long-term wealth without unnecessary stress.”

Focus on Diversification and Fundamentals

Just because something is on sale doesn’t mean you should buy it. The same is true with stocks. Consider shares of companies with strong balance sheets, sustainable competitive advantages, and reasonable valuations (e.g., lower price-to-earnings ratios). But be wary of companies that appear to be facing business model challenges. For example, as the market lurched into bear territory in April 2025, stocks that took a hit included those most likely to face severe problems in a high-tariff environment.

So-called defensive stocks like those for utilities and consumer staples—things that will have demand no matter the economic environment—may offer better value than others. Defensive ETFs that focus on minimum volatility, like the Consumer Staples Select Sector SPDR ETF (XLP), can leave the choice of specific stocks up to the professionals in a fund’s management.

But keep your portfolio diversified. “Individual stocks are historically a losing route to wealth building,” Lazaroff said. “The best route is to emphasize broadly diversified, low-cost options that are well aligned with your time horizon,”

The Bottom Line

Dips can create buying opportunities that improve long-term returns. But trying to time market bottoms is incredibly difficult, and it’s often impossible to judge whether a severe sell-off is just a temporary overreaction or a harbinger of a prolonged bear market. Investors should remain informed, exercise patience, and avoid impulsive decisions based on short-term market moves.