Investopedia

Reviewed by Robert C. Kelly
Fact checked by David Rubin

On May 8, 2021, The Coca-Cola Company celebrated its 135th anniversary. With a history that spans more than a century, it is no surprise that the brand has seen many changes since it first was founded. From selling nine drinks a day at Jacobs’ Pharmacy in Atlanta, Georgia to selling more than 2.2 billion servings in more than 200 countries around the world daily as of 2024, here is how the Coca-Cola Company has changed over the years and how the evolution has affected its business.

Key Takeaways

• The Coca-Cola Company was founded in 1886 in Atlanta, Georgia. The company sells more than 2.2 billion beverages in more than 200 countries around the world daily as of 2024.
• When the company first started in 1886, it used coupons for free drinks to raise interest in the product, advertising on painted wall signs, napkins, and clocks.
• By 1911, the company’s advertising budget had skyrocketed to more than $1 million.
• As of early 2025, Coca-Cola was ranked the sixth most valuable brand in the world by Forbes.
• For more than a century, Coca-Cola has managed to retain its popularity and keep up with the times while still remaining entrenched in nostalgia.

Advertising Strategies

Coca-Cola might be one of the best-known brands in the world today. However, that wasn’t always the case. When the company first started in 1886, it used coupons for free drinks to raise interest in the product. In 1892, marketer Asa Candler finalized the purchase of Coca-Cola from inventor Dr. John Pemberton. Candler’s original advertising budget was $11,000. He used items such as calendars, soda fountain urns, painted wall signs, napkins, pencils, and clocks to advertise Coca-Cola. By 1895, Coca-Cola reports that the beverage is sold and drunk in every U.S. state and territory, beginning its market saturation around the world.

1900-1950s

The first celebrity to ever endorse Coca-Cola was music hall performer Hilda Clark in 1900. Since then, numerous celebrities such as Joan Crawford, Ray Charles, The Supremes, Aretha Franklin, Arnold Palmer, and Joe Namath have attached themselves to the brand. By the beginning of the 1900s, the marketing budget for the soft drink has already multiplied ten-fold to $100,000.

Coca-Cola purchased space in national magazines for the first time in 1904. By 1911, the company’s advertising budget had skyrocketed to more than $1 million. In the 1920s, Coca-Cola added outdoor billboards and radio program sponsorships into its advertising mix. The famous Coca-Cola Christmas advertising campaigns began in 1931 with illustrations of St. Nicholas drinking Coca-Cola.

1950s-1990s

The first television commercial for Coca-Cola premiered on Thanksgiving Day in 1950. By this point in time, advertising already accounts for a significant portion of the company’s expenses. In 1956, McCann-Erickson, Inc. replaced the D’Arcy Advertising Company as the official ad agency. The latter had a history of more than 50 years advertising Coca-Cola, marking a shift in strategy. Sales outside the U.S. accounted for about 33% of revenue by 1957.

By the 1960s, the company had begun to diversify its product lines, acquiring The Minute Maid Corporation in 1960 and introducing Sprite in 1961. In 1971, the famous “I’d Like To Buy the World a Coke” television commercial was launched. To this day, it remains one of the most popular and successful ads for Coca-Cola.

1990s-Present

One of the most memorable Coca-Cola TV commercials was 1993’s “Northern Lights,” which marked the debut of the Coca-Cola polar bears. However, not all of Coca-Cola’s marketing ideas have been hits. In 1985, in an effort to compete with Pepsi, the company decided to change the formula for Coke for the first time in 99 years. The new drink was called “New Coke.” The reaction to the new flavor was overwhelmingly negative, and Coca-Cola went back to the original recipe in just 79 days.

Joe Tripodi, chief marketing and commercial officer for Coca-Cola, said the company spent more than $4 billion on marketing in 2013, according to Forbes. It spent over $3.2 billion on advertising in 2011. The major spending paid off as Coca-Cola was named Marketer of the Year in 2011 by AdAge.

Coca-Cola Packaging Evolution

Coca-Cola was only served as a fountain drink until 1899 when Candler sold the U.S. bottling rights to Benjamin F. Thomas and Joseph B. Whitehead for $1. The Coca-Cola contour bottle went into production in 1916. The unique shape of the bottle was designed to distinguish Coca-Cola from its imitators. The 6.5-ounce contour bottle was the only packaging Coca-Cola used until 1955 when the king-sized package was introduced. Consumers had the option to purchase Coke in 10-, 12-, 16- and 26-ounce bottles in addition to the standard 6.5-ounce bottle. In 1960, Coca-Cola introduced 12-ounce steel cans to make its drinks more portable.

Coca-Cola went green in 2009 with 100% recyclable bottles made partially from plant-based materials and moved to reduce its use of new plastic by 20% across North America in 2021. In 2011, Coca-Cola’s seasonal holiday packaging was met with disdain by consumers. For the first time, regular Coke was put in white cans that customers said looked similar to the silver Diet Coke cans. The white cans were supposed to stay on shelves until February 2012 but were discontinued in December 2011 in favor of the classic red cans. In October 2012, Coca-Cola announced that it would stop the production of 6.5-ounce glass bottles because they are no longer profitable.

History of the Coca-Cola Logo

The trademark Coca-Cola script logo was created in 1886 by Frank M. Robinson. A red and white graphic that represents two adjacent contour bottles, called the Dynamic Ribbon Device, was added to the logo in 1970. A shock of yellow and floating bubbles was added to the white twist in 2003 as part of the Coca-Cola Real campaign. Those enhancements were removed by 2007. For its 125^th birthday, the company created a special logo that featured bubbles coming out of the contour bottle.

The Bottom Line

Coca-Cola was ranked sixth on the Forbes list of the World’s Most Valuable Brands in 2020. Competitor Pepsi followed well behind at 36th. For more than a century, Coca-Cola has managed to retain its popularity and keep up with the times while still remaining entrenched in nostalgia. Despite the competition, Coca-Cola is still one of the most successful and well-known brands in the world.

Plan so you’re covered for emergencies, college, retirement, and more

Reviewed by Charlene Rhinehart
Fact checked by Suzanne Kvilhaug

Spending comes naturally for many of us but saving can take a little practice. How and where to save requires strategies for best success whether it be for financial emergencies, college, or retirement. Your strategies and options can vary depending on what you’re saving toward.

Start by taking a look at your outstanding debts. It makes little sense to pay 17% in interest on credit card debt while earning 1% on a savings account or even lower in some cases. Consider tackling the two in tandem, putting some money toward savings and some toward your credit balances. The sooner you can pay off that high-interest debt, the sooner you’ll have more to put into your savings.

Key Takeaways

• Employer-sponsored retirement plans like 401(k)s make saving for retirement easy and automatic and some employers even match your contributions.
• State-run 529 college savings plans let you withdraw money tax-free as long as you use it for qualified education expenses.
• You can find ways to reduce your spending and boost your savings by tracking your expenses manually or with an app.
• Strategies and options can vary depending on what you’re saving toward.

Building Emergency Savings

The goal for most individuals and families should be an emergency fund that’s large enough to handle serious, unexpected expenses such as a costly car repair or medical bill. A rainy-day emergency fund can also tide you over for a while if you lose your job and need time to hunt for a new one.

How much should you save?

Your take-home pay is often a fair approximation of your monthly living expenses and it’s easily found on your pay stubs or bank statements. Financial planners commonly recommend setting aside at least three months of living expenses but others say you should put away between six months to a year’s worth of expenses.

These figures work for retirees as well but it’s always a good idea to make a few extra calculations. Consider all your monthly expenses and contrast that with your monthly income including Social Security, pensions, liquid assets, and investment income. You’ll also want to factor in the risk associated with any stocks or other volatile investments you have in a bear market.

Where to park your cash?

The best place to keep money you’ll want to access quickly in an emergency is in a liquid account. This might be a checking, savings, or money market account at a bank or credit union or a money market fund at a mutual fund company or brokerage firm. All the better if the account earns a little interest.

These accounts will allow you to write a check, pay a bill online, or use an app on your phone in most cases. You can also move money by electronic wire transfer from your account to someone else’s account if you need to do so. You’ll be able to withdraw cash from an automated teller machine (ATM) if you get a debit card when you open your account.

Funding your account

Consider saving all or part of any money you earn outside of your usual paycheck. This may be a tax refund, a bonus, or income from a side gig. Try to contribute at least a portion of that to your account as well if you receive a raise.

Another time-honored tip is to pay yourself first. Treat your savings like any other bill and earmark a certain percentage of every paycheck to go into it. Consider direct deposit to avoid the temptation of spending the money instead. You can have it deposited to your checking account and then transferred automatically to your emergency fund.

Saving for a rainy day or emergency is easier said than done for many of us. Someone who nets $50,000 a year would have to set aside from $12,500 to $25,000. It would take two and a half to five years if they devoted 10% to emergency savings not counting any additional contributions or interest the account might earn.

Important

Make sure to replenish it as soon as possible if you ever have to take money out of your emergency fund.

Saving for Retirement

Retirement is the single largest savings goal for many of us and the challenge can be daunting. Fortunately, there are several smart ways to set money aside for this goal and many of them come with tax advantages as an added incentive.

There are individual retirement accounts (IRAs) for just about anybody. Tax-advantaged accounts include 401(k) plans for private-sector employees and 403(b) plans for employees of schools and nonprofits.

Employer-sponsored plans

The easiest, most automatic way to save for retirement is through an employer plan such as a 401(k). The money automatically comes out of your paychecks and goes into whatever mutual funds or other investments you’ve chosen.

You don’t have to pay income tax on that money or your 401(k) gains or on any dividends your plan earns until you eventually take the money out. You can put up to $23,500 a year into a 401(k) plan in 2025, up from $23,000 in 2024. You can contribute an additional $7,500 if you’re age 50 or older in both 2024 and 2025.

Many employers will match your contributions up to a certain level. A $10,000 investment on your part would be worth $15,000 if your employer kicks in an additional 50%.

This table shows how compounding works with your retirement savings assuming that you invested the full $23,000 in 2024 and were guaranteed a 5% return each year.

Year	Total Amount Contributed	Year-End Value
1	$23,000	$24,150
2	$46,000	$49,507.50
3	$69,000	$76,132.87
4	$92,000	$104,089.52
5	$115,000	$133,443.99

No 401(k)? No problem!

Consider an IRA If you’re fortunate enough to have even more than the 401(k) maximum to set aside or you don’t have an employer-sponsored plan available. You can invest in either the traditional variety where you get a tax break at the time you contribute or a Roth IRA where the money you withdraw in retirement can be tax-free.

Saving for College

College may be the second biggest savings goal for many and the easiest way to save for it automatically, just like retirement.

529 plans

Each state has its own 529 plan and some states have several. You don’t have to use your own state’s plan but you’ll generally get a tax break if you do.

Some states allow you to deduct your 529 plan contributions up to certain limits on your state income tax return. They won’t tax the money you take out of your plan as long as you use it for qualified education expenses such as college tuition and student housing.

The federal government doesn’t offer any tax breaks for the money you put into one of these plans but it won’t tax the money you take out provided that it goes to qualified expenses.

Contribution limits

How much you can contribute to a 529 plan depends on your state. There are no annual contribution limits but some states may put lifetime caps on how much you can put into their 529 plans. A 529 plan balance in New York can’t exceed $520,000 per beneficiary as of 2025.

You can also use a 529 plan to pay up to $10,000 a year in tuition at an elementary or secondary public, private, or religious school as of 2025. A lifetime limit of $10,000 from a 529 plan can be used to pay off student loans under the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.

Saving for Life Goals

Most of us are likely to have more than one savings goal at any given time and a limited amount of money to divide among them. One option to consider is a Roth IRA if you find yourself saving for your retirement and a child’s college education at the same time.

Unlike traditional IRAs, Roth IRAs let you withdraw your contributions although not any earnings on them at any time. You may have to pay a penalty for early withdrawals, however, so be sure to do your research if you’re younger than age 59½ and you haven’t yet held the account for five years.

This means that you can use a Roth IRA to save for retirement and tap into the account to pay them if you come up short when the college bills arrive. The downside is that you’ll have that much less money saved for retirement when you may need it.

The maximum allowable IRA contribution for traditional and Roth IRAs combined is $7,000 in 2024 and 2025. Those who are age 50 and older can contribute an additional $1,000 catch-up contribution which hikes the limit to $8,000.

Tips for Saving Money

Financial planners often suggest a few ideas to consumers who need to save more money than they can easily pry out of their paychecks,

1. Manage your spending

People often find that they’re frittering away funds on things they don’t need and that they could easily live without. Record every penny you spend for a certain period whether it’s a week or a month. You can use a notebook or an expense-tracking app such as Clarity Money or Wally.

Some apps even save for you. The Acorns app links to your payment card, rounding up your purchases to the next dollar and moving the difference into an investment account.

2. Consider cash back

It may make sense to sign up for apps such as Ibotta or Rakuten provided that you’re buying things you truly need. Apps like these offer cash back from retailers on groceries, clothing, beauty supplies, and other items.

You can also use a cash rewards credit card which offers 1% to 6% in cash on each transaction. The Chase Freedom card offers 5% cash rewards on categories that change periodically. This tactic only works if you transfer your savings to a savings account, however, and if you always pay your credit card bill in full every month.

3. Focus on major expenses

Clipping coupons is fine but you’ll save much more money by paring back on the biggest bills in your life. That’s usually things like housing, insurance, and commuting costs. Ask yourself a few questions.

• Could you save by refinancing your mortgage at a lower rate?
• Could you shop around for lower premiums or bundle all your policies with one carrier for a discount?
• Is there a cheaper alternative such as carpooling or working from home once a week if you drive to work?

4. Don’t go overboard

You might want to dine out less often, try to get a few more wearings out of your wardrobe, or drive that old car for another year. Don’t deny yourself every last pleasure in life, however, unless you enjoy living like a miser and some people do. The point of saving money is to build toward a financially secure future, not to make yourself miserable in the here and now.

How Can I Save $1,000 Fast?

Sign up for direct deposit through your employer if you haven’t already and schedule automatic transfers to a savings or other emergency account. You can pad this account by signing up for cash-back apps or credit cards. Take advantage of a 401(k) or automatic withdrawals from your account into an IRA if you want to sock away money for retirement.

What Is the 30-Day Rule?

The 30-day rule is a savings rule that aims to help you move your mindset onto saving rather than spending. Stop if you’re online or walking through the mall and see something you like and are about to check out. Log off or turn around. Delay the purchase for a month and put the money you would have spent into your savings account instead. You can revisit the purchase when you’re beyond the 30 days.

What’s the Best Way to Save Money?

You need discipline and a plan to save money. Know what your goals are and how much you need to set aside. Take advantage of the options available to you whether that’s an employer-sponsored retirement account or an IRA. Make sure you have assets that can be easily liquidated when you need money during emergencies and be sure to consult a financial professional to help point you in the right direction.

The Bottom Line

Saving money is crucial for a secure financial future that involves little debt and allows you to live comfortably and build wealth. Many important situations require spending as life progresses such as paying for school, a house, your child’s schooling, and retirement. Using a variety of saving strategies for each occasion will allow you to approach these expenses from a prudent financial standpoint.

Reviewed by Eric Estevez
Fact checked by Vikki Velasquez

Publicly traded companies who have their shares listed on stock exchanges are required to file regular financial statements and disclosures with regulators, such as the Securities and Exchange Commission (SEC) in the United States.

Among the most widely read of these are a company’s annual report, which tells investors and analysts how the company has performed over the previous fiscal year (FY), how its businesses look going forward and summarizing corporate financials for use in fundamental or ratio analysis through scrutinizing the balance sheet, income statement, and statement of cash flows.

In the old days, shareholders would receive the annual report by mail or through their broker. Thanks to the Internet, finding financial reports is easier and quicker than ever. Nowadays, nearly every reputable company has an easy-to-follow investor relations section on its website that is a wealth of information, including an archive of its annual reports, often going back several years.

Key Takeaways

• Public companies are legally required to file financial reports with the U.S. Securities and Exchange Commission (SEC).
• These reports include annual and quarterly reports that investors use to analyze companies.
• With the Internet, it is simple to access all company financial reports, which are available on their websites, usually under the “Investor Relations” section.
• If you want to dive further into company details and reports, the SEC has a database, known as EDGAR, with all company filings.

Working Example: Walt Disney

Walt Disney Co. is an excellent example of a business that uses its website to get information out to its shareholders, analysts, and prospective investors. It is very easy to find a direct link to its investor relations section.

This part of the Disney website contains a downloadable version of its annual report, as well as stock quotes, an investor newsletter, archived conference calls, and even the opportunity for current shareholders to sign up for electronic reports.

The best part about these online investor relations sections is their extra nuggets of hard-to-find information. For example, most companies will use these spaces to offer detailed info on past acquisitions and stock splits not always available on other financial portals.

If you want to dig deeper and go beyond the slick marketing version of the annual report found on corporate websites, you’ll have to search through required filings made to the Securities and Exchange Commission. All publicly traded companies in the U.S. must file regular financial reports with the SEC. These filings include the annual report (known as the 10-K), quarterly report (10-Q), and a myriad of other forms containing all types of financial data.

Note

In addition to the 10-K and 10-Q, other company filings include the 8-K, the DEF 14A, Form 4, Form 5, and the 13-D.

Filing Reports

Reports are filed through a system known as EDGAR (Electronic Data Gathering, Analysis, and Retrieval system). EDGAR performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others required by law to file forms with the SEC.

Information on EDGAR can be found on the SEC’s website, where you can search through forms as well as familiarize yourself with the system using its EDGAR tutorial.

Be warned; the tools on the SEC’s site are still cumbersome at best. For a more user-friendly site, try EDGAR Online. It is a subscription-based site offering dozens of products on any type of information filed with the SEC. You won’t find anything free, but if you need sophisticated services, EDGAR Online is the site for you.

What Is the Difference Between a 10-K and a 10-Q?

A 10-K and a 10-Q are both financial reports that are legally required to be filed by public companies with the Securities and Exchange Commission (SEC). The 10-K can be considered the most important one as it is audited by an external party and includes the most detail. It is filled annually at the end of a company’s fiscal year and details a company’s performance for the entire year and future outlook. A 10-Q is filed at the end of every quarter, contains less information, and is not required to be audited.

What Is Included in a Company’s Annual Report?

A company’s annual report is an in-depth look at its performance for the year and its future outlook. It contains a letter from the CEO summarizing the business and how it performed throughout the year. It contains all of the financial statements, including the balance sheet, income statement, and cash flow statement. It also discusses any big performance achievements for the year, changes to the business, future goals, social responsibility progress, business risks, and more. Overall it seeks to provide as much detail about the company for the year.

What Happens If a Company Doesn’t File an Annual Report?

If a company fails to file its annual report, there are a host of possible negative consequences. These include fines, penalties, lawsuits, delisting from stock exchanges, loss of investor confidence, suspension of trading, and more. It’s imperative for companies to file annual reports to remain in good standing and abide by the law.

The Bottom Line

Finding company annual reports and SEC filings is a simple process thanks to the Internet. Almost every public company has an “Investor Relations” section on their website with all of the filings for anyone to access.

Additionally, the U.S. Securities and Exchange Commission (SEC) has its EDGAR database where you can search for all financial filings companies have made with the SEC. These reports provide all the important information that investors and analysts need to know about companies, such as balance sheets, income statements, cash flow statements, business models, ownership, stock splits, and more.

Reviewed by Anthony Battle
Fact checked by Vikki Velasquez

Net worth is what you have of monetary value (assets) after you account for what you owe (liabilities). As a simple example, if you have $1,000 in savings and owe $500 to your credit card company, you have a net worth of $500 ($1,000 – $500).

A positive net worth figure means that you have more assets with monetary value than debt.

When your net worth is positive and it keeps growing year by year, it’s telling you that you are doing well at increasing your financial assets, such as income, savings, investments, and maybe adding a house. You also may be reducing debt.

That’s a great message to receive. From a financial standpoint, you’re in good health.

A net worth calculation is like GPS for your various savings goals, especially retirement. It tells you where you are now and where you need to go to reach your destination.

So, calculating your current net worth on an ongoing basis can help you keep your retirement plans on track.

Key Takeaways

• Your net worth is the total of your assets minus the total of your debts.
• There’s no hard rule for what makes an ideal net worth amount.
• Monitor your net worth to be sure that it’s growing toward providing you with a comfortable future.
• If it’s not, it’s time to increase your income, cut your spending, and reduce your debt.

How to Calculate Your Net Worth

Net worth is simply the total value of all assets minus the total value of all liabilities. It’s a financial benchmark applied to companies and individuals. The formula is a simple one:

$begin{aligned} &text{Net Worth} = text{Assets} – text{Liabilities} \ end{aligned}$​Net Worth=Assets−Liabilities​

Here’s what makes up the assets and liabilities categories.

Assets

There are liquid assets and illiquid assets. Liquid assets are investments or possessions that can be turned into cash relatively quickly with little or no loss of value.

Bank accounts, certificates of deposit, stocks, bonds, mutual funds, and exchange-traded funds (ETFs) fall into this category.

Illiquid assets are investments or possessions that are difficult to convert into cash quickly. Your home (if you own it) is an illiquid asset, as are any other real estate holdings.

The balance in a retirement savings plan (before you turn age 59½) and a business partnership are considered illiquid assets.

Most personal property, such as vehicles, furniture, and clothing, should be left out of your net worth calculation. Even if they cost a lot to acquire, their resale value may be unknown.

However, investment-quality art, jewelry, and collectibles could be assets you’d use in calculating net worth.

Liabilities

Liabilities are debts. Credit card balances, car loans, home mortgages, student debt, and business loans all fall into this category. Personal loans count, too.

Where Do You Stand?

The chart below features the median and mean net worth figures for American households by age group.

The data was compiled by the Federal Reserve Board’s Division of Research and Statistics in its 2022 survey of assets, debts, and financial behavior of U.S. households. The next survey, begun in February 2025, will be published in late 2026.

The median is the figure below which half of families have less net worth, and above which half have more net worth. The mean figure is the average net worth calculated from the net worth for all families in the age group.

Age of Family Reference	Median	Mean
Less than 35	$39.0	$183.5
35-44	$135.6	$549.6
45-54	$247.2	$975.8
55-64	$364.5	$1,566.9
65-74	$409.9	$1,794.6
75 or older	$335.6	$1,624.1

Don’t place too much importance on how your net worth compares to these numbers. They are just meant to give you a sense of the range of national data.

Note the big differences in mean and median net worth in each age category. Remember that the mean is an average. A relatively few affluent families can skew the average. That may be why the mean net worth of American families younger than age 35 tops $183,000.

The Ideal Number

What should your net worth be? Every person has their own lifestyle and individual expectations, so there is no one-size-fits-all, universally agreed-upon number.

That said, Thomas J. Stanley and William D. Danko, authors of “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy” offered this formula as rule of thumb:

$begin{aligned} &text{Net Worth} = frac{ text{Age} times text{Pretax Income} }{ 10 } \ end{aligned}$​Net Worth=10Age×Pretax Income​​

Your annual household pretax income multiplied by your age, then divided by 10, equals “what your net worth should be,” according to Stanley and Danko.

Using this formula with a basic salary of $25,000, we get the following results:

Age	Income	Net Worth
20	$25,000	$50,000
30	$25,000	$75,000
40	$25,000	$100,000
50	$25,000	$125,000
60	$25,000	$150,000

The numbers in the middle-age ranges might look feasible, but the formula is less likely to work for people just starting out in life. Few 20-year-olds have racked up $50,000.

Then again, most professionals, if all goes well, see a steady increase in salary over the years. Below, see the results for the same formula using increasing income:

Age	Income	Net Worth
20	$25,000	$50,000
30	$35,000	$105,000
40	$45,000	$180,000
50	$55,000	$275,000
60	$65,000	$390,000

The net worth estimates are still unrealistic for very young workers, and they’re not great for people approaching their retirement years.

Still, the numbers may provide a benchmark for consideration. At the least, they may help you determine if you are moving in the right direction.

The Marotta Formula

Interestingly, under the scenario where income rises with age, the net worth estimate above delivers results similar to those generated by a formula devised by David John Marotta, a financial advisor.

Marotta recommended following a savings plan that would result in a net worth that, by age 72, was 20 times your annual spending.

Under this plan, the older you get, the more you save. Since most people earn more as they grow older, this is not unrealistic.

Age	Income	Savings Factor	Annual Spending	Net Worth*
30	$25,000	1x	$15,000	$15,000
35	$35,000	2x	$20,000	$40,000
42	$50,000	4x	$35,000	$140,000
51	$55,000	8x	$40,000	$320,000
66	$75,000	16x	$50,000	$800,000

How Do I Calculate Net Worth?

The formula to calculate your net worth is: assets minus liabilities.

Is a Net Worth of 500K Good?

That depends on your age, your income, and your circumstances. It also depends on whether you compare yourself to other people, or to what experts recommend is an ideal net worth. Generally speaking, a $500,000 net worth is good, especially if you’re mid-career. But you’ll want to increase it as much and as long as you can.

Where Should I Be Financially at 35?

Fidelity recommends that you have about two times your salary saved by age 35.

Here’s the breakdown:

By age 30 | Save at least 1x your salary

By age 40 | Save at least 3x your salary

By age 50 | Save at least 6x your salary

By age 60 | Save at least 8x your salary

By age 67 | Save at least 10x your salary

The Bottom Line

A positive net worth is better than a negative one, a higher net worth is better than a lower one, and an increasing net worth is better than a static one. Words to live by.

If your net worth is negative, strive to get it to a positive number. Live within your means and build it by saving and investing, a little at a time. Create a budget, cut your spending, and pay off debts.

Even if you feel your net worth is high, keep increasing it to ensure that you have enough money to live well during your retirement years.

If you have multiple types of student loans, such as different kinds of federal loans along with private debt, trying to figure out how best to tackle all of it can feel overwhelming. In many cases, paying off private student loans before federal loans makes the most sense, due to the former often having less favorable terms. However, there’s no universal solution, as it depends on what your goals are, such as trying to minimize interest, reduce uncertainty, or build momentum toward becoming debt-free.

Key Takeaways

• Because federal student loans often have better terms, it typically makes sense to prioritize paying off private student loans first.
• Loan type is only one factor, as there’s also interest rates and repayment terms to take into consideration.
• The best strategy for paying off student loans ultimately depends on your situation and goals.

4 Things to Consider When Evaluating Repayment Priorities

What Types of Student Loans You Have

Student loans fall into one of two main categories: federal and private loans. Federal student loans have fixed interest rates set at the time the loan is taken out, whereas private student loans can be either fixed or variable.

Federal student loans often have better terms, particularly regarding repayment requirements, such as by offering pathways to loan forgiveness and forbearance options. There are a few private lenders that also offer some repayment flexibility, but in most cases they won’t be as generous as their federal counterparts. As such, it often makes sense to pay off private student loans first, as you want to reserve that flexibility with federal loans in case your circumstances change in the future.

Among federal student loans, there are also different types to consider, and their varying terms can affect your choices. Currently, the United States Department of Education offers the following four loan types:

• Direct unsubsidized: Interest accrues on these loans while you’re in school and during a six-month grace period before you have to start making payments. Because accrued interest increases your loan balance, tackling this debt is more of a priority for some borrowers, though factors like loan size still matter.
• Direct subsidized: The federal government covers the interest on these loans while you’re in school and for the six-month grace period afterward, which means you’d have a lower repayment amount compared to unsubsidized loans of the same size. As such, you might prefer to tackle these loans after unsubsidized loans, if that means the larger balance gets paid down first. That said, some might prefer to start with the lower balance to build momentum.
• Direct PLUS loans: PLUS loans are for parents of undergraduates, or graduate and professional students, who can take these loans out themselves. In both cases, interest accrues as soon as the loan is disbursed, although graduate and professional students don’t have to make payments while in school or for six months after, albeit with interest still accruing. It often makes sense to pay these off before other direct loans, especially because interest rates are generally higher.
• Direct consolidation loans: While you can’t exactly refinance your federal student loans, you can take out a consolidation loan that combines several of them into one. The interest rate for this type of loan is based on a weighted average of your prior loans’ rates. By consolidating your federal student loans, you can sidestep having to decide which one to prioritize. However, if it’s between this option and private loans, you might still prefer to tackle the latter first.

The Interest Rates and Rate Type

Your interest rate is also a big factor in deciding which student loan ought to be repaid as soon as possible. However, there are different ways to approach this aspect. One strategy is to prioritize the loan with the highest interest rate first, as that can mean paying less in interest in the long run. However, if your federal student loans happen to have higher rates than your private ones, you’ll have to weigh whether the interest savings are worth giving up the former’s benefits flexibility sooner.

Another factor to consider is whether the interest rate is fixed or variable. As previously mentioned, federal student loans are fixed, while private loans can be either. If you have both types, you might prefer tackling the variable loan first to limit the window in which rates can increase.

The Loan Terms

Although federal student loans often have more favorable terms, not all borrowers will be able to take advantage of them. For example, if you’re a high-income earner, you might be ineligible for certain benefits like income-driven repayment (IDR) plans. Think carefully about what options you’ll likely have before deciding what loans to prioritize.

The repayment term also matters. Some borrowers prefer to pay more in the long run if it means having a lower monthly payment, thereby providing more room in their monthly budget. If that applies to you, tackling the shortest-duration loan might be best.

Pay attention to your other types of debt and how these accounts might impact your ability to meet other financial goals. In some cases, it might make more sense to put money toward paying down other types of high-interest debt while making the minimum monthly payment on your student loans. Once your other debt is paid off, you can decide whether to start with federal or private student loans.

What Other Debt You Have

A final factor to bear in mind is if you have any other kinds of outstanding debt. Let’s say you have a lot of high-interest credit card debt. One option could be to take out a personal loan to pay off both your student loans and credit card debt, and then just focus on paying off the personal loan. However, this strategy shouldn’t be taken lightly. You need to calculate all costs involved and determine if this is realistically going to save you the most money.

3 Strategies for Prioritizing Your Student Loan Payments

There are different ways to approach paying off your student loans. One isn’t inherently better than the others, as the decision ultimately comes down to your financial situation and preferences.

Prioritize Private Student Loans

A general rule of thumb is to prioritize repaying your private student loans, even if the interest rates and loan terms are more or less the same as your federal loans. The repayment flexibility of federal student loans means you could have a monthly payment as low as $0 under certain IDR plans. Additionally, if you work for the government or a nonprofit, you could be eligible for Public Loan Service Forgiveness (PLSF) after making 120 monthly payments.

Important

The future of the current IDR plans is up in the air following a federal court injunction stopping the Department of Education from implementing the Saving on a Valuable Education (SAVE) plan and parts of other plans. As a result, the Department of Education has closed applications for all IDR plans.

Prioritize Higher-Interest Loans

One common strategy is to simply pay off the highest-interest loans before moving on to the next highest-interest one, and so on and so forth, until all are eventually paid off. This approach is called the debt avalanche strategy, and if you can stick with it, you’ll pay the least amount of interest possible.

Prioritize Smaller Loans

In contrast to the debt avalanche method, some borrowers may prefer to pay off the smallest loans first to build momentum in what’s known as the debt snowball method. This might mean paying more interest in the long run, but the peace of mind that can come with watching the number of loans you have dwindle may be worth that cost.

The Bottom Line

While not everyone will agree on which kinds of student loans ought to be repaid first, the right decision for you will depend on your financial situation and what you feel most comfortable with. For many people, paying off private student loans before their federal counterparts will be the right call. However, before you decide to go down this route, it’s worth considering the amount of interest you’ll pay in the long term, how payments will affect your monthly budget, and whether you can qualify for federal loan forgiveness

A money order is a safe and easy alternative to cash or checks

Reviewed by Khadija Khartit
Fact checked by Vikki Velasquez

A money order is essentially a paper check that can’t bounce because it’s prepaid. It can be a secure and convenient solution when you have to make or accept payment but cash, check, and electronic transfers don’t fit the bill.

You can purchase a money order at any U.S. post office or at Western Union or MoneyGram outlets such as those found inside supermarkets and pharmacies. Most banks, credit unions, and check-cashing stores offer money orders as well.

Key Takeaways

• Money orders offer an easy way to exchange funds safely when paying in cash isn’t practical, using a personal check isn’t acceptable or desirable, or a non-digital payment is required.
• Money orders are written directly to a specific party and require endorsement to be cashed.
• You can get money orders at the post office, most banks, and Western Union outlets.
• Money orders are generally inexpensive but they almost always involve a purchase fee and sometimes a redemption fee for the recipient.
• Money orders are an attractive tool for fraudsters so it’s important to check the visual security features on any you receive.

How Money Orders Work

Money orders have played a key role in U.S. history. Thieves would rob post offices and delivery runs to grab cash being sent all over the country during the Civil War. President Abraham Lincoln’s postmaster general came up with money orders as a solution.

A money order might be the best answer in situations where paying with cash, check, or a digital app isn’t ideal or even viable. They’re written directly to individuals or companies by name just like checks, requiring endorsement and identification to cash them. They’re much more secure than cash, protecting the funds in case of loss or theft.

Personal checks offer similar security benefits but money orders have the advantage of being prepaid. Accepting it as a form of payment is free of risk because the sender has already provided the funds for it. A personal check is accepted in good faith that the sender’s bank account has sufficient funds or overdraft protection to cover the check.

The advantages of money orders over cash and checks make them preferred or even required in many situations:

Note

Every money order comes with a detachable stub or receipt that allows you to track it after it’s delivered or sent.

• The recipient isn’t comfortable trusting a personal check due to a lack of familiarity with the sender or bad past experiences with previous payments.
• The sender doesn’t want to reveal their address or checking account number.
• It’s crucial to make the payment without any risk of being rejected for insufficient funds.
• The payer doesn’t have a checking account and cash isn’t practical.

Certified and cashier’s checks are potential alternatives but banks generally charge higher fees for the added security of these options. You must also go to a bank during banking hours to obtain them, offering fewer time and location options. It can be a more flexible and economical choice if a money order can handle the job.

Where Can You Buy Money Orders?

Online providers are emerging but money order purchases are still mostly a paper and in-person industry. It probably won’t be difficult to find a money order location near you, however.

Money orders can be bought or redeemed at many locations in the United States, including post offices, CVS, Walmart, and the Western Union and MoneyGram outlets tucked inside tens of thousands of 7-Eleven, Publix, Kroger, Meijer, and other retail locations. Most bank and credit union branches also offer money orders.

How Much Do Money Orders Cost?

Pay attention to pricing because not all money order sellers charge similar fees. Walmart is one of the cheapest options, charging a maximum of $1 per money order as of 2025. The U.S. Postal Service (USPS) charges either $2.35 or $3.40 per money order depending on whether the amount is above or below $500. You may be able to get a money order for free by going to a bank or credit union where you’re a customer or you may find that the cost is $5 or $10.

Another consideration is how many money orders you’ll need because the value of each one is typically capped. USPS caps the maximum value of a money order at $1,000. You’d need three money orders if you want to pay $2,500.

Buying a money order with a credit card is treated as a cash advance. We recommend paying with a debit card, cash, or a bank account withdrawal to avoid finance charges on your next credit card statement.

Money Order Scams

Money orders are susceptible to fraud and have become a common deception vehicle for thieves. Their design has evolved in response to include multiple security and anti-counterfeiting features from watermarks and security strips to rainbow ink patterns and UV-light features. Look for the multiple indicators that can tell you whether a money order is legitimate or not before you accept one.

Note the issuer if you’re ever in doubt and research the specific security features it should include.

Important

Beware if someone pays you with a money order for more than the requested amount and asks you to pay them back the difference! This is a common scam of money order fraudsters.

How to Fill Out a Money Order

The requirements for filling out a money order vary from one institution to another but the information you’ll fill in is generally the same. Print the name clearly and use ink. Fill in this section immediately as soon as you purchase the money order. It may make it more difficult for someone else to fraudulently use the money order if it’s lost but has this field written in.

Fill in your information next. Write your name and address or other identifying information on the “from” or “purchaser” line in case there are any issues or questions about the money order. This information may also be used if the money order has to be returned to you.

Now add any necessary account or reference numbers. Write any necessary account or reference numbers in the memo or account number field if you’re paying a bill or making a specific purchase.

Write the exact amount of the money order in both numbers and words in the “amount” or “dollars” field to avoid error or confusion. Then sign your name in the purchaser’s signature field. This is required to validate the money order and make it official. Detach the receipt and keep it for your records. This can also help you track the money order to make sure it was received.

$1,000

The maximum amount in which a single money order can typically be issued.

How to Cash a Money Order

You have two options for converting it into funds if someone pays you with a money order.

1. Take it to a location that redeems money orders such as a bank, post office, Walmart, or grocery store to receive its value in cash.
2. Sign the back and deposit it in your bank account like a check.

Converting it to cash offers the quickest access and you may personally escape the problem if the money order is later determined to be counterfeit or fraudulent. Redeeming money orders isn’t as convenient as buying them, however. Some convenience stores sell them but they don’t cash them. Post office locations will cash money orders but they might not have enough cash on hand to redeem a larger one.

Cashing it in could involve a fee as well. Your best bet is to redeem a money order with the same provider that issued it. Take a postal service money order to a post office or a Walmart money order to a Walmart (WMT) location. You’ll likely avoid any redemption fees. Call ahead to first verify that a location can honor your redemption and ask if any fees will apply.

The alternative is to deposit the money order into your bank account as you would a check. This offers the advantage of safely adding the payment to your bank balance rather than walking away with a large sum of cash you may not physically want or need.

Depositing a money order may not be as easy as depositing a check, however, depending on your bank. You may be accustomed to making mobile bank deposits with your smartphone but some banks don’t allow electronic deposits of money orders. They instead require you to come into a branch. Online-only institutions may not accept money order deposits at all.

Be sure to bring a photo ID with you whether you decide to turn your money order into cash or take it to your bank. Don’t endorse the money order until you’re at the counter with a clerk or teller who will accept it.

How to Replace Lost or Stolen Money Orders

Money orders take physical form so they can become lost, stolen, or damaged. You can take certain steps to replace money orders if they don’t quite make it to their intended recipient. It may take up to a month, however, to make sure it’s been lost. You can’t stop payment on a postal money order but you can replace it.

Contact the issuer of the money order. Provide the post office, bank, or retail location where you purchased it. Provide them with the details of the stolen money order such as the serial number and the amount. Ask them to put a stop payment on it if possible.

It’s also a good idea to file a police report if you think the money order was stolen. This will help you recover your money and it may assist law enforcement in catching the thief and preventing similar cases from occurring to other individuals.

You must keep a close eye on your bank and credit card accounts after taking these steps to make sure that no unauthorized transactions have been made. Report it to your bank or credit card company immediately if you notice any suspicious activity. Remain in contact with the issuer because you may have to take action to ensure your money is returned to your account.

Pros of Money Orders

Money orders provide greater security and accessibility compared to other forms of payment. They’re a secure way to send or receive money because they’re prepaid and can be replaced if lost or stolen. Recipients of money orders can be assured that the funds are available and won’t bounce.

Money orders have the advantage of being fairly easy to obtain and they can be used by anyone regardless of whether they have a bank account. They’re a more accessible form of payment because they’re usually inexpensive compared to other forms of payment such as wire transfers or cashier’s checks.

Money orders don’t require the disclosure of any personal financial information so they’re a good option for people who value their privacy or don’t want to disclose select information. Money orders are also borderless and can be sent internationally. This makes them a great option for those who are looking to send or receive money across borders.

Cons of Money Orders

Money orders aren’t suitable in all situations. There are some downsides. They usually have a maximum amount limit so you may have to purchase multiple money orders to achieve your desired total if you want to send a large amount of money. This can be inconvenient or incur additional fees.

Fees can vary depending on the amount and the location where you purchase them. Money orders can also take substantial time to process and cash compared to other forms of payment that rely on electronic financial transfers.

Money orders aren’t without potential fraud or scams. You could lose the money you sent if an unintended bad actor obtains the money order. Some businesses or institutions may not accept money orders or may make them difficult to cash for this reason.

Pros

• Safer than cash from theft or loss

• Can’t bounce like a check for insufficient funds because the amount has been prepaid

• Cheaper than a bank’s certified or cashier’s check

• Do not require the use of a bank account

• Can be sent or received from around the world

Cons

• Requires an in-person visit to a money order dealer

• Requires you to pay a purchase fee, unlike personal checks

• Not allowed for mobile deposit by all banks

• May be inconvenient to cash due to fraud protection measures

What’s the Maximum Value Available for a Money Order?

Most issuers set a limit of $1,000 for a single money order. You’ll have to get a cashier’s check or buy multiple money orders for larger amounts.

Who Cashes Money Orders?

Most banks accept money orders as well as some grocery stores, pharmacies, and money transfer services like MoneyGram and Western Union. Be aware that just because a facility issues a money order doesn’t mean they’ll cash one. Check your location’s policies before you go there.

What Can I Do If a Money Order Is Lost or Stolen?

Money orders are generally treated the same as cash but they do have a receipt attached. There may be some recourse depending on where you purchase it. Check with the issuing body to find out.

Do Money Orders Expire?

Money orders don’t have expiration dates per se but the issuing body may charge fees to cash them if they’re older than a year. They may fall into the unclaimed property category if they aren’t cashed for many years.

The Bottom Line

Money orders have become a staple from their origins as a safe way to transfer money during the Civil War to their current status as a convenient tool for those without a bank account or a need for certified funds. They’re fast and convenient buyers may have to shop around to get the best prices. Keep in mind that these are financial instruments that are considered the same as cash. Keep them safe or cash them out as quickly as possible if you receive them.

You can roll your IRA investments over into a 401(k)—but should you?

Fact checked by Vikki Velasquez
Reviewed by David Kindness

If you have investments in one or more Individual Retirement Accounts (IRAs) and are starting a new job with an employer that offers a 401(k) plan, you may be wondering: Should you move your assets from your IRA into your new 401(k)?

Though the question is a logical one, it rarely arises because IRA rollovers generally move in the opposite direction, with investors transferring their 401(k) assets to an IRA when they leave a job. Nevertheless, there can be some good reasons to move your IRA(s) into your company’s 401(k).

Let’s look at the pros and cons of this maneuver.

Key Takeaways

• Moving investments from an IRA to a 401(k) is called a reverse rollover.
• Though uncommon, there are advantages to this move, including protection against creditors and delayed required minimum distributions (RMDs).
• The disadvantage of doing this is that most 401(k) plans have more limited investment options than IRAs do.

Understanding Reverse IRA Rollovers

Moving assets from an IRA to a 401(k) is sometimes referred to as a reverse rollover. That’s because the rollover in the opposite direction—from a 401(k) to an IRA—is far more common. This often happens when an employee leaves a job or decides they would like more investment options than a corporate 401(k) offers. 

However, it’s important to check whether your employer’s 401(k) accepts this kind of incoming transfer. Some plans do, but others do not. The Internal Revenue Service (IRS) provides guidance as to what kinds of transfers are allowed and how to report them.

As this guidance states, you are only allowed one rollover in a 12-month period, and you must report any transaction when you submit your annual tax return for both direct and indirect rollovers. If you move assets out of your IRA and into your 401(k) or use them for another purpose, your IRA brokerage will send you a Form 1099-R that will show how much money you took out. On your 1040 tax return, report the amount on the line labeled IRA Distributions. The taxable amount you record should be $0. Select “rollover.“

Though this maneuver is uncommon, it can have advantages in some circumstances. 

Advantages of Rolling Over an IRA to a 401(k)

There are a number of reasons why you would want to move assets from your IRA into your 401(k):

• Earlier Access to Your Money. IRAs and 401(k)s have different rules for when you can take distributions. You can typically start withdrawing from a 401(k) at 55 but will need to wait until you are 59½ to access the money in your IRA. If you plan on retiring early, this nearly five-year difference could be important.
• Lower Costs. Most 401(k) plans have administrative and other costs that make their expense ratios higher than those of IRAs. However, some 401(k) plans—particularly those at large companies with many participants—might actually have lower fees than your IRA does. This is especially true if you use target-date funds.
• Protection Against Creditors. The assets in 401(k) plans are more protected against creditors than those in IRAs. IRA assets are protected in bankruptcy up to a certain amount, but 401(k) plans have no such limits.
• 401(k) Loans. Borrowing from your 401(k) should be a last resort, but if you are really stuck for cash, it’s important to recognize that some 401(k) plans allow loans. Loans are not permitted for IRAs, so moving your assets into your 401(k) might make them more accessible in an emergency.
• Required Minimum Distributions Delay. If you continue working past age 73, you may not have to take RMDs from your current employer’s 401(k), whereas IRAs require RMDs regardless of employment status.

Moving investments from an IRA to a 401(k) account might give you more flexibility when it comes to accessing this money. However, it may well limit your investment options, because many company 401(k) plans are relatively limited in the options they offer.

Disadvantages of Rolling Over an IRA to a 401(k)

As with every investment decision, there are also some potential drawbacks to moving your IRA assets into a 401(k):

• Limited Investment Options. One of the advantages of an IRA is that you can invest in nearly anything. However, 401(k) accounts, in contrast, are often much more limited. Some company 401(k) accounts only allow you to invest in a few mutual funds, for instance, or encourage you to invest in company stock.
• Low-Cost Investment Advice. Many IRAs provide assistance with investment selection—as long as you don’t mind working with a robo-advisor. A financial advisor can also help you manage investments in a 401(k), of course, but this could be of limited use considering the small, curated investment selection that’s typical of a 401(k).
• Stricter Withdrawal Rules. 401(k) plans have more rigid withdrawal restrictions. Unlike an IRA, where you can withdraw funds anytime (with potential penalties), 401(k)s generally require you to reach age 59½ or meet specific hardship criteria.
• Required Employer Approval. Some employer plans may not accept rollovers or may impose additional restrictions, such as vesting schedules, that could limit access to your funds.
• Less Flexibility for Beneficiaries. IRAs often provide more flexible inheritance and distribution rules for heirs, while 401(k) plans may require faster distributions, which can create tax burdens for beneficiaries.

Can I Put My IRAs Into My Company’s 401(k)?

Yes. This is sometimes referred to as a reverse rollover because it’s more common to move funds the other way, from a 401(k) to an IRA. The IRS provides guidance about how to report these transfers.

How Do I Report an IRA Rollover?

Your IRA brokerage will send you a Form 1099-R that will show how much money you took out of your IRA. On your 1040 tax return, report the amount on the line labeled IRA Distributions. The taxable amount you record should be $0. Choose “rollover.”

Why Should I Put My IRAs Into My Company’s 401(k)?

Rolling over your IRAs into your company’s 401(k) might give you more flexibility when it comes to accessing this money, because 401(k) accounts allow you to take distributions earlier than IRAs. 401(k)s also provide more protection against creditors, and some offer loans.

The Bottom Line

If you are starting a new job with an employer that offers a 401(k) plan, you might be wondering if you can roll over investments from your IRA(s) to your new plan. Though unusual, this move can offer some advantages, such as accessing your retirement funds earlier or, in rare instances, applying for a 401(k) loan. The disadvantage is that 401(k) accounts generally have much more limited investment options than IRAs do.

Reviewed by Lea D. Uradu

What Is IRS Form 941: Employer’s Quarterly Federal Tax Return?

IRS Form 941, also known as the Employer’s Quarterly Federal Tax Return, is used when businesses report the income taxes, payroll taxes, Social Security, and Medicare taxes withheld from their employees’ wages.

Many businesses are required to file IRS Form 941 on a quarterly basis, and the form ultimately determines the company’s total payroll tax liability for the quarter.

Key Takeaways

• Employers transfer withheld taxes to the IRS monthly or semiweekly, reporting quarterly on Form 941 the details on staff, compensation, and taxes owed or overpaid.
• Form 941 has five parts, covering employer information, staff details, tax deposit schedules, business status, and signatures. Payments for owed taxes can accompany the form using Form 941-V.
• Part One of Form 941 reports federal taxes withheld, Social Security, Medicare, and additional Medicare taxes. Small employers with $1,000 or less owed for the year may file Form 944 with IRS permission.
• Amended Form 941-X is used to correct errors made on a filed Form 941.
• Employers owe employment taxes and should refer to IRS Publications 15 and 15-B for guidance on taxable payments and tax calculations.

How To File Form 941

Form 941 consists of three pages and five parts. At the top of page 1, the employer provides a name (including a trade name if one is used), address, and employer identification number (EIN). Also, the employer indicates the filing period:

• First quarter (January, February, March)
• Second quarter (April, May, June)
• Third quarter (July, August, September)
• Fourth quarter (October, November, December)

The deadlines for filing Form 941 are strict, and fall on the last day of the month following the end of a quarter (April 30, July 31, October 31, and January 31).

You can file the form by mail or online using the Modernized e-File (MeF) system available on the IRS website.

Warning

Not filing IRS Form 941 by the due date or reporting less tax liability than what you actually owe can lead to stiff IRS penalties. The IRS charges a penalty of 5% of the total tax amount due, and you can be charged an additional 5% fee every month your return has not been submitted, for up to five months.

Part One

In Part One, the employer reports the number of staff employed, their compensation, and the taxes owed. This part also indicates whether the employer owes taxes (balance due) or has overpaid employment taxes. Any overpayment can be applied toward the next quarter or received as a refund. The choice is indicated by checking the appropriate box on Line 15.

Part Two

Part Two, which begins midway on the second page, explains the tax deposit schedule for employment taxes. The deposit schedule for most employers is either monthly or semiweekly. If depositing monthly, a breakdown of tax liability by month is entered here.

Employers depositing taxes semiweekly explain their tax liability for their deposits on Schedule B. There is a next-day deposit requirement for taxes exceeding $100,000. Taxes of less than $2,500 can be paid with the form and need not be deposited.

Part Three

In Part Three, the employer must answer two questions: Did the business close or stop paying wages (and the date this happened), and is the business a seasonal employer (and thus a return every quarter is not required)?

Part Four

In Part Four, the employer is asked whether they will authorize an employee, paid tax preparer, or another third party, such as a Certified Public Accountant (CPA) to speak with the IRS regarding the return. If the answer is yes, the employer must provide the designee’s name, phone number, and a self-selected five-digit personal identification number so the IRS can confirm the person’s identity.

Part Five

In Part Five, the employer signs, dates and provides a daytime phone number.

In addition, if the employer used a paid preparer to complete the form, the preparer must enter their information in Part Five. This includes name, Preparer Tax Identification Number (PTIN), firm name, EIN of the preparer or the firm, address, and phone number.

Should the employer owe employment taxes for the quarter, payment can accompany the filing of Form 941. Use Form 941-V: Payment Voucher to ensure that the IRS processes the payment correctly.

Form 941 is available on the IRS website.

Taxes Reported on Form 941

In Part One, the employer reports the amount of taxes paid on wages, tips, and other compensation. There are four types of taxes:

1. Federal taxes withheld from employee wages (Line 3).
2. Social Security taxes (Lines 5a and 5b). The tax rate of 12.4% is for amounts owed by the employee and employer.
3. Medicare taxes (Line 5c). The rate is 2.9 percent, and covers both employer and employee taxes owed.
4. Additional Medicare taxes on compensation over $200,000 (Line 5d). The tax rate is 0.9%; the tax is paid solely by the employee.

Important

Not all types of businesses need to file Form 941, including some seasonal businesses, companies that employ farmworkers, and individuals employing household staff, such as maids (but they may need to file Form 1040 instead).

Special Considerations When Filing Form 941

For Small Employers

An employer that owes employment taxes of $1,000 or less for the year can file Form 944, Employer’s Annual Federal Tax Return, if given IRS permission to do so. Call 800-829-4933 or send a written request, as you must receive permission before filing this form instead of Form 941.

Amended Forms

If you need to correct Form 941, use Form 941-X, Adjusted Employer Quarterly Tax Return or Claim for Refund. For example, if wages were understated or Social Security tax on tips was overstated, and you discover the error, use this form to correct it.

Who Is Required To Fill Out Form 941?

As an employer, if wages that you pay are subject to federal income tax withholding, Social Security, and Medicare taxes, you’re required to file Form 941 every quarter.

What Happens If I Don’t File Form 941?

If your business is obligated to fill out Form 941 and fails to do so, you could face stiff penalties, including a penalty of 5% of the total tax amount due, an additional 5% for each month the return remains unsubmitted to the IRS (for up to five months), and an initial penalty of 0.5% of the unpaid tax amount.

How Do I Fill Out a Form 941 if No Wages Were Paid?

If, for instance, you’re a seasonal employer and don’t pay wages all year long, check the box on line 18 of Form 941 to let the IRS know that you won’t send the form every quarter. Be sure to continue to check it every time you do file or the IRS will expect the form every quarter.

The Bottom Line

IRS Form 941 is an important document for businesses. It is used to report income taxes, payroll taxes, Social Security, and Medicare taxes withheld from employee wages. The form requires you to disclose specific information about your company, including the number of employees, total wages paid, and taxes withheld.

Filing deadlines for Form 941 are strict, falling on the last day of the month following a quarter’s end. Failure to file or underreporting can result in significant penalties. Given the complexity of this form and the risks involved, it’s smart to consult with a tax advisor or business attorney for more detailed guidance.

Reviewed by Margaret James
Fact checked by Vikki Velasquez

A company can account for changes in the market value of its various fixed assets by conducting a revaluation of the fixed assets. Revaluation of a fixed asset is the accounting process of increasing or decreasing the carrying value of a company’s fixed asset or group of fixed assets to account for any major changes in their fair market value.

Initially, a fixed asset or group of fixed assets is recorded on a company’s balance sheet at the cost paid for the asset. Afterward, there are two methods used to account for changes in the value of the fixed asset or assets.

Key Takeaways

• Sometimes, a company’s fixed assets, such as property, plant, and equipment, will experience substantial changes in their market prices.
• When this occurs, the company must account for changes in value using either the cost method or revaluation techniques.
• Accounting rules allow for either methodology, so management discretion must be used to choose the most appropriate model.

Cost Model

The most straightforward accounting approach is the cost model. With the cost model, a company’s fixed assets are carried at their historical cost, minus the accumulated depreciation and accumulated impairment losses associated with those assets. The cost model does not allow for upward adjustments in the value of an asset based on the fair market value.

The primary reason companies might choose the cost approach to valuation is that the resulting number is much more of a straightforward calculation with far less subjectivity.

However, this approach does not offer a way to arrive at an accurate value for non-current assets since the prices of assets are likely to change with time—and the price doesn’t always go down. Quite often, they go up. This is particularly true for assets such as property or real estate.

Note

Depreciation and amortization both involve spreading the cost of an asset over time. Depreciation primarily applies to tangible assets, like machines, while amortization applies to intangible assets, such as patents.

Revaluation Model

The second accounting approach is the revaluation model. With the revaluation model, a fixed asset is originally recorded at cost, but the carrying value of the fixed asset can then be increased or decreased depending on the fair market value of the fixed asset, normally once a year.

If an asset reduces in value, it is said to be written down. Under International Financial Reporting Standards (IFRS), assets that are written down to their fair market value can be reversed, while under generally accepted accounting principles (GAAP), assets that are written down remain impaired and cannot be reversed.

The main advantage of this approach is that non-current assets are shown at their true market value in financial statements. Consequently, the revaluation model presents a more accurate financial picture of a company than the cost model. However, revaluation must be re-done at regular intervals, and management may sometimes be biased and assign a higher revalue than is reasonable for the market.

Revaluation vs. Cost: How Do You Choose?

The decision of choosing between the cost method or the revaluation method should be made at the discretion of management. Accounting standards accept both methods, so the deciding factor should be which method is the best fit for the unique needs of the business in question.

If the business has a greater proportion of valuable non-current assets, revaluation might make the most sense. If not, then management may need to go deeper to reveal the factors needed to make the best decision.

Just remember that for a revaluation model to function properly, it must be possible to arrive at a reliable market value estimate. If reliable comparisons to similar assets (such as past real estate sales in a neighborhood) are possible, then the subjectivity of the revaluation is decreased, and the reliability of the revaluation increases.

What Is the Difference Between IFRS and GAAP?

Both International Financial Reporting Standards (IFRS) and generally accepted accounting principles (GAAP) are accounting standards used by companies. GAAP is primarily used in the U.S., while IFRS is used widely across the globe. The primary difference is that GAAP is a rules-based accounting framework whereby companies must adhere to strict rules. IFRS, on the other hand, is a principles-based accounting framework that allows for more flexibility via different interpretations of the accounting principles.

What Is the Cost Method of Asset Valuation?

The cost method of asset valuation is a simple way to measure the value of an asset. It solely assesses the original purchase price of the asset minus any depreciation. It’s a straightforward approach because it doesn’t take into account any market fluctuations or the value of future cash flows. While it is basic in approach, it is not the most accurate way to value an asset.

What Is Market Value?

Market value is the price an item would sell for at a given moment based on supply and demand. It is the price a seller is willing to sell a good or service for and a buyer is willing to buy when both have all the required information and are freely allowed to make a decision.

The Bottom Line

Choosing between the cost model and the revaluation model depends on what best suits a company’s financial strategy. The cost model is a simple approach but may not represent the true value of assets over time.

The revaluation model provides a more accurate picture of asset value but is more intensive as it requires ongoing adjustments and involves some subjectivity. Ultimately, management needs to decide which method best suits the company’s needs and balance the pros and cons.

Finding the Best Financing Options for Your Investment

Real estate is perhaps the world’s oldest asset class. Investment properties provide diversification beyond traditional assets like stocks and bonds, have historically kept pace with inflation, and offer the potential for steady, predictable cash flow.

They can be financed with leverage (borrowing), enabling you to benefit while spending less money upfront. However, investors can quickly feel overwhelmed by the countless loan options available. In addition, you’ll need to assess down payments, your creditworthiness, interest rates, and how much debt you already have.

Below is our guide to help investors navigate the many choices available and choose the one that best aligns with their investment goals.

Key Takeaways

• Conventional loans require higher down payments and have stricter criteria.
• Hard money loans are suitable for short-term investments but have higher costs.
• Private money loans offer flexibility but can strain personal relationships.
• Home equity loans and HELOCs leverage existing home equity but risk foreclosure.

Why Buy an Investment Property?

There are several key reasons why you might find investment properties appealing:

• Steady cash flow and passive income potential: Properties in an attractive market
  can provide a consistent revenue stream, helping to offset mortgage payments and expenses. In addition, investment properties can offer passive income with minimal day-to-day involvement.
• Property appreciation: Real estate historically appreciates over time. For example, since 1963 inflation in the U.S. has risen by an annualized rate of 3.9% while home prices have increased by over 5.5% annualized over the same period. Rent has also increased in line with inflation, acting as a hedge against rising prices.
• Tax benefits: Investors can deduct mortgage interest, depreciation, maintenance costs, and property taxes, reducing taxable income. Certain investment strategies, such as 1031 exchanges, could allow you to defer capital gains taxes when selling a property and reinvesting in another.
• Portfolio diversification: Researchers have generally found that real estate values tend to follow bonds but not stock performance, which could mean your property investments gain value even during stock market downturns.
• Leverage: Investors can finance properties with loans, allowing them to control a high-value asset with a relatively small down payment. In addition, as tenants pay down the mortgage, investors build home equity over time and can realize a healthy return on their investment, even if their property value stays the same.

Understanding Investment Property Financing

Financing an investment property differs significantly from financing your primary home. Lenders consider investment properties at a higher risk, resulting in more stringent lending criteria and qualification requirements.

As an investor, you should expect the following:

• Higher qualifying credit scores than those required for primary residences
• Larger down payment requirements
• Increased interest rates to offset the perceived extra risk

One advantage of investment property loans is that lenders typically let you count 75% of anticipated rental income toward your qualifying income. However, this requires documentation of a current lease agreement or a rental schedule based on an appraiser‘s assessment of the property’s likely rental income potential.

Financing Options

Conventional Mortgages

Conventional mortgages are the most common option for investment properties. Issued by private lenders and following guidelines set by Fannie Mae and Freddie Mac, these loans typically require higher credit scores, down payments, and underwriting criteria than mortgages for
primary residences.

These are the key features:

• Higher down payment requirements: Investment property loans generally require larger down payments. While primary residences might qualify for down payments as low as 3% to 5%, investment properties often require at least 15% to 25% down.​
• Stricter credit score criteria: Lenders typically expect higher credit scores for investment property loans, often a minimum of 620 with 25% down and 680 with a 15% down payment.
• Higher interest rates: Because of the increased risk associated with investment properties, interest rates are usually 0.5% to 0.75% higher than those for primary residences.​
• Reserve requirements: Your lender might expect you to keep at least six months of cash set aside to cover your loan without income from the property.

Here are the three types of more conventional bank loans:

•  Fixed-rate mortgages: ​Most (92%) have preset interest rates that last the entire mortgage, with the remaining 8% having adjustable rates.
• Adjustable-rate mortgages (ARMs): ARMs offer a lower initial interest rate that remains fixed for a set period (e.g., five, seven, or 10 years), after which the rate adjusts periodically based on
  market conditions. However, payment amounts could increase drastically if interest rates shift significantly after this initial period.
• Jumbo Loans: Jumbo loans are used for properties that exceed the limits set by Fannie Mae and Freddie Mac. These loans typically require higher credit scores, larger down payments, and lower debt-to-income ratios. They are suitable for investors purchasing luxury rental properties or high-value vacation rentals, especially in high-cost areas where conventional loans may be insufficient.

Alternative Financing Options

• Hard money loans: These are short-term, asset-based loans provided by private lenders or companies, primarily secured by real estate. These loans focus more on the property’s
  value than the borrower’s creditworthiness. As such, they’re helpful as a bridge loan rather than a more permanent source of financing and are particularly attractive for house flippers.
• Private money loans: As the name implies, private money loans are funds lent by individual investors or private entities, often based on personal relationships. As such, the repayment schedules, interest rates, durations, qualifications, and structures are all highly flexible.
• Home equity loans and HELOCs: Home equity loans and home equity lines of credit (HELOCs) allow homeowners to leverage the equity in their primary residences to finance additional investments, including purchasing investment properties. Home equity loans provide a lump sum amount with fixed interest rates and set repayment terms, while HELOCs act as revolving credit lines with variable interest rates, allowing borrowers to draw funds as needed up to a predetermined limit during the draw period.

Commercial Loans for Investment Properties

Commercial loans are used to finance multiunit residential and commercial properties. They have more stringent credit requirements and potential prepayment penalties, featuring higher down
payments and have shorter repayment terms of five to 20 years. Commercial loans come in three common varieties:

1. Traditional commercial mortgage loans

Traditional commercial mortgages are not government-backed and are issued directly by banks or lenders, typically requiring higher credit scores (700+) and down payments (15% to 35%).

2. SBA 7(a) loan for commercial real estate

SBA 7(a) loans are government-backed loans for businesses that don’t qualify for traditional financing, covering up to 85% to 90% of the property purchase price with a maximum loan of $5 million.

3. CDC/SBA 504 loan for commercial real estate

The community development corporation (CDC)/SBA 504 loan combines funding from a private lender (50%) with a CDC (40%) alongside a 10% borrower down payment. These loans feature no maximum loan amount and have interest rates ranging from 3.5% to 5%. A key criterion is
that the businesses must meet local job creation goals.

Creative Financing Strategies

Seller Financing

In seller financing, the property seller acts as the lender, allowing the buyer to make installment payments directly to them. This can expedite transactions and provide flexibility for buyers who may not qualify for traditional loans. However, risks include potential default by the buyer and the absence of standard consumer protections associated with conventional mortgages. These loans may also require stringent legal counsel and thus may be quite costly.

Crowdfunding and Syndicates

These methods involve pooling resources from multiple investors to fund real estate projects, enabling participation in larger investments with reduced individual capital outlay. While this strategy offers diversification and access to substantial properties, it presents challenges like complex management structures and potential regulatory hurdles.​ In particular, syndicates must become registered legal entities regulated by the U.S. Securities and Exchange Commission. They also require a sponsor to identify properties and bring together passive investors, as well as a syndication company to draft agreements, determine how the syndicate should be managed, and conduct due diligence. As such, syndicates should only be considered by experienced investors with a deep pool of resources.

Government-backed loans, like those from the Federal Housing Administration (FHA), the U.S. Department of Agriculture, and Veteran’s Affairs, are principally for primary residences—not investment properties. An exception includes an FHA loan you can use for a property with up to four units if you live in one of them.

The Bottom Line

Investing in real estate offers diversification, steady cash flow, tax benefits, and leverage opportunities, but financing an investment property can be complex. Unlike primary residence loans, investment property financing requires higher down payments, stricter credit requirements, and risk-adjusted interest rates. Strategic planning is crucial in selecting the right financing option to fit your investment goals and to maximize returns while minimizing your risks.