Get the most passive income possible with these top dividend stocks

In an uncertain market, dividend-paying stocks can offer a cushion against volatility and provide steady income.

The top dividend-paying stocks for January 2025 include transportation companies TORM plc (TRMD), BW LPG Limited (BWLP), and Hafnia Limited (HAFN).

Key Takeaways

• Companies with dividend stocks regularly share a part of their profits with shareholders, typically every quarter, though some pay semiannually or even yearly.
• The dividend yield is a measure that compares the yearly dividend amount to the stock’s current price, expressed as a percentage.
• As a company’s stock price shifts, the dividend yield adjusts accordingly, reflecting the changes in this ratio.

Below, we look at the top 10 dividend stocks listed on either the New York Stock Exchange (NYSE) or Nasdaq as measured by forward dividend yield, excluding companies with payout ratios that are either negative or over 100%. The data below are as of Dec. 27, 2024.

Why Are These the Best Dividend Stocks?

We selected the 10 best dividend stocks above based on the highest forward dividend yield, among those listed on the Nasdaq or New York Stock Exchange. We excluded stocks under $5, those with a market cap of less than $300 million, and those with a daily trading volume below 100,000. We also excluded companies with payout ratios that are either negative or over 100%.

Investors prioritizing dividends are looking for a steady income stream alongside the potential for stock price appreciation. However, future dividends are not a given even for companies with a good track record. Some considerations to keep in mind:

Dividends are adjusted: During moments of economic uncertainty, a company may reduce or cut its dividend payments altogether to preserve capital to weather storms previewed ahead. Alternatively, companies may increase their dividend payments in a bullish economic environment to attract investors.

Changes in the percentage yield: These stocks may offer a lower dividend yield when facing different overall market conditions, changes in financial stability, and adjustments to their market value.

Some dividend yields can mislead: Some dividend-paying companies may increase their dividend yield to attract investors in the short term, though higher dividends can be unsustainable. That is why it’s important to pay close attention to a company’s payout ratio.

How to Pick Dividend Stocks

Investors should pursue companies with robust fundamentals, long-term profitability, and a sustainable dividend yield that has consistently increased for some years.

How to Find Dividend Stocks

When reviewing dividend-paying companies, it is notable that certain sectors, such as finance, energy, and real estate investment trusts, typically pay higher dividends than other industries. When picking the right company, investors should also pay attention to a company’s peers to determine if a dividend yield is out of the ordinary for the sector.

What Should Investors Look For in Dividend Stocks?

Dividend yield: The dividend yield reflects the annual value of dividends received relative to a security’s per-share market value. You can calculate this by dividing the annual dividend per share by the current stock price, though most brokerage platforms and financial news sites publish such information.

For example, if Company ABC issues a dividend of $10 annually with a current share price of $100, it has a dividend yield of 10% ($10 / $100 = 10%). Investors pursuing high-yielding stocks can start by screening for issues with a divided yield above a certain percentage. Keep in mind that dividend yield is only one of many metrics to consider before investing.

Dividend payout ratio (DPR): The DPR gauges how much of a company’s earnings are paid to shareholders. Investors calculate the ratio by dividing total dividends by net income. This, too, can be found on financial sites and other platforms.

For instance, if Company ABC reports a net income of $50,000 and pays $15,000 in annual dividends, it would have a DPR of 30% ($15,000 / $50,000 = 30%). That is, the company pays 30% of its earnings to shareholders. Typically, a company that issues less than 50% of its net earnings in dividends is considered stable and has the potential for sustainable long-term earnings growth.

Dividend coverage ratio: This measures the number of times a company can pay dividends to its shareholders. Investors calculate the dividend coverage ratio by dividing a company’s annual earnings per share by its annual dividend per share.

For example, if Company ABC reported $10 million in net income with an annual dividend of $2 million to shareholders, it has a dividend coverage ratio of five ($10 million / $2 million). Usually, investors see a higher dividend coverage ratio as more favorable.

The Bottom Line

Investors pursuing dividend-paying companies should pay close attention to the overall financial condition of the stock they are planning to invest in. A company may offer a high dividend yield even when financially unstable, and it’s important not to invest without a proper understanding of the underlying stock.

It is essential to maintain a consistent strategy when going the dividend-payment route. There are advantages, including passive income, for choosing companies that issue dividends and provide a steady stream of income. Another great aspect of dividend investing is reinvesting dividends paid out by a company, using them to buy more shares, and taking advantage of compounding returns.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above stocks.

These are the top AI stocks based on best value, fastest growth, and most momentum

Reviewed by Charlene Rhinehart

December brought two major advancements in artificial intelligence (AI). On Dec. 5, OpenAI unveiled its o1 model, marking a shift toward reasoning-oriented capabilities rather than simple prediction. This model aims to emulate deliberate, human-like thought processes, enhancing its problem-solving and decision-making abilities. Not to be left behind in the AI arms race, Google announced the launch of Gemini 2.0 on Dec. 11, highlighting its “agentic” abilities, which enable the AI to autonomously understand, anticipate, and act on behalf of users. In 2025, the AI landscape continues to evolve, edging closer to the existence of true “thinking” artificial intelligence.

Below, we explore the best AI stocks for January 2025, considering those with the best value, fastest growth, and most momentum. Data are current as of Dec. 18, 2024.

Best Value AI Stocks

Value investing is a strategy based on the principle that some stocks trade at prices that are below their intrinsic value. Investors able to identify these stocks, usually through analysis of fundamental metrics, may be primed for a return on their investment when the market corrects the mispricing and the stocks rise. One such metric is the price-to-earnings (P/E) ratio. Lower P/E ratios are generally considered to be signs of a more attractively valued company since it is valued at less than its fundamental value.

• Consensus Cloud Solutions, Inc.: Consensus Cloud Solutions is a global leader in digital cloud fax technology, offering AI-driven solutions that automate workflows and enhance operational efficiency. On Nov. 7, the company reported a lukewarm third quarter that saw revenues decline by 3.1% year-over-year to $87.8 million, driven by a decrease in the “small office home office” business, partially offset by growth in the corporate segment.
• Perion Network Ltd.: Perion Network is a digital advertising company that helps brands and publishers improve their online presence through targeted advertising and data-driven technology. The company leverages AI technologies to optimize digital advertising across all phases of campaigns, including planning, activation, and reporting.
• Trimble, Inc.: Trimble provides technology solutions that increase productivity and sustainability across industries like construction, agriculture, and transportation. Trimble focuses on using AI to enhance automation, precision, and data analysis across industries like construction and agriculture. At the Trimble Dimensions Conference on Nov. 11, Trimble showcased a generative AI-powered tool for architects to create and refine designs based on text prompts and visual styles, streamlining design processes.

Fastest-Growing AI Stocks

Investors often evaluate growth stocks based on revenue and earnings per share (EPS), as these are key measures of a company’s performance. Looking at only one of these two factors, however, can leave your search susceptible to temporary phenomena, including tax law changes or one-off gains.

We aim for a more balanced screen of AI growth stocks by looking at the most recent year-over-year percentage growth for both revenue and EPS, giving each equal weighting. We also exclude companies with growth rates in either category of 1,000% or more on the grounds that these are likely outliers.

• Grid Dynamics Holdings, Inc.: Grid Dynamics is a technology services company that helps Fortune 1000 businesses accelerate growth and gain a competitive edge through digital transformation. It specializes in consulting and implementing solutions in areas like artificial intelligence, big data, analytics, cloud, and DevOps.
• ODDITY Tech, Ltd.: Leveraging an AI-driven platform and advanced data science, ODDITY identifies consumer needs and creates innovative beauty and wellness products for its 50 million users. ODDITY reported strong third-quarter 2024 results, with net revenue of $119 million (up 26% year-over-year), and adjusted EBITDA of $25 million, driven by strong consumer demand for its direct-to-consumer model and high-performance products.
• Applovin Corporation.: AppLovin develops software and AI-powered solutions to help businesses reach their target audiences, enhance marketing strategies, and expand their user base. The company operates two primary segments: Software, which earns revenue from advertising fees on its mobile applications, and Apps, which generates income through in-app purchases and advertisers’ acquisition of digital inventory.

AI Stocks With the Most Momentum

Momentum investing is based on the principle that stocks that have increased at a faster rate compared with the market or their peers are likely to continue on that trajectory, at least in the short term, as long as there aren’t fundamental changes to those companies’ operations or the broader industry.

Below, we look at the AI stocks that have provided the highest total return in the last 12 months.

• Quantum Computing Inc.: Quantum Computing’s strategy focuses on delivering accessible and affordable quantum machines to commercial and government markets, based on its proprietary Entropy Quantum Computing (EQC) technology for superior performance and low power consumption. The company hopes to use its products to capture market share in high-performance computing, AI, cyber security, and remote sensing applications.
• SoundHound AI, Inc.: SoundHound’s proprietary technology offers fast, accurate voice recognition across various industries, including automotive, TV, Internet of Things (IoT), and customer service. In a sign of the times, SoundHound recently announced a partnership with Church’s Texas Chicken to implement its Dynamic Drive-Thru voice AI ordering system, which allows customers to place orders conversationally, with up to 90% of orders processed without human intervention.
• Palantir Technologies, Inc.: Palantir provides advanced software platforms for data integration, analytics, and decision-making, for both government and commercial sectors. Its government clients include the U.S. Department of Health and Human Services; its current revenue mix is 55% government and 45% commercial customers as of 2024.

Advantages

• Broad applications

• Fast-moving innovation

• Popular trend

Disadvantages

• Industry uncertainty

• Untested companies

• Dangers of AI

Advantages of AI Stocks

Broad applications: AI has transformed—or has the potential to transform—a host of different industries and sectors. Companies positioned as leaders within the AI space could be well-positioned to benefit from widespread adoption and a broad, diverse customer base.

Fast-moving innovation: AI is at the forefront of innovation today, with both major tech firms and smaller up-and-coming companies working diligently to advance this technology. This means that the potential for breakthrough success may be huge as the industry continues to evolve.

Popularity: As of mid-2024, AI is still one of the most talked-about trends in technology. Interest in this space is very high, meaning that investors could be poised to benefit from tremendous momentum with the right investments.

Disadvantages of AI Stocks

Industry uncertainty: Although AI has been in existence for decades, it is only in the last several years that technological developments have brought this field into the mainstream. With changes and advancements happening incredibly quickly, it can be difficult for even the most knowledgeable investors to keep pace with what is happening in the industry. For instance, this means it could be easy for investors to get caught up in the hype surrounding a particular company after the ideal time to purchase that company’s stock.

Untested companies: While many of the major tech firms are involved in AI, other AI companies have little history and foundation for investors to consider when selecting investments. These companies may pose a greater risk than more stable, time-tested firms.

Dangers of AI: Leaders in computer science and related fields have warned of the potential dangers associated with AI. As the field continues to expand and change, public opinion, regulations, and other factors may change and have the potential to impact AI stocks in unexpected ways.

The Bottom Line

AI stocks present investors with the opportunity to tap into one of the most popular—and potentially most revolutionary—technology trends today. With companies across virtually all industries and sectors exploring ways to integrate AI into their operations, firms that are focused on the hardware and software required to run AI programs stand to benefit. But there are significant risks to investing in AI stocks, including the uncertain future of the industry and the potential dangers of AI technology itself.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above securities.

Education narrows the gap, but student debt can widen it

Reviewed by Andy Smith
Fact checked by Vikki Velasquez

Higher education can contribute to upward mobility, with median earnings for college graduates being approximately 84% higher than their peers with a high school diploma in 2022. Unfortunately, expenses add up for many students. In Q4 2024, outstanding student loan debt in the United States totaled $1.64 trillion. Student debt tends to weigh heavily on members of racial and ethnic minority groups, a disparity known as the racial wealth gap.

Key Takeaways

• Economists commonly cite a substantial disparity in net worth between White households and those of racial and ethnic minority groups in the U.S.
• Higher education that leads to higher-wage jobs can help narrow the gap.
• In Q4 2024, outstanding student loan debt in the United States totaled $1.64 trillion.

What Is the Racial Wealth Gap?

Economists commonly cite a substantial disparity in net worth between White households and those of racial and ethnic minority groups in the U.S. This is known as the racial wealth gap.

In 2023, at $112,800, Asian households had the highest median income. Non-Hispanic Whites earned $89,050, followed by Hispanics with $62,800. At $65,540, Black households had the lowest median income. Real estate ownership in Q4 2024 for White Americans was valued at approximately $37 trillion, while all other racial and ethnic group holdings totaled less than $11.5 trillion.

The College Borrowing Gap

Given the differences in wealth and income, Black students are significantly more likely to borrow for higher education than their White peers. A 2022 Federal Reserve report found that around 44% and 53% of Black men and women, respectively, ages 20–35 take out student loan debt, compared to 41% and 46% percent of White men and women within the same age range.

According to another 2023 report from the Fed, Black and Hispanic students who take out loans are more likely than White students to have difficulty repaying them. The report found that among borrowers, 27% of Hispanic borrowers had fallen behind in their loan payments, compared with 23% of Black borrowers and 10% of White borrowers.

$1.64 Trillion

In Q4 2024, approximately 42.7 million student loan recipients held $1.64 trillion in outstanding loans.

Factors That Widen the Gap

Graduation Rates

Black and Hispanic students who start college are significantly less likely than their White counterparts to finish, according to a 2019 report from the National Center for Education Statistics. It found that 64% of White students at bachelor’s degree-granting institutions graduated within six years, compared with 54% of Hispanic students and 40% of Black students. Asian American students had the highest graduation rates, at 74%, after six years.

Students who can check the box for “some college” on their job applications but don’t hold a degree fare better in the labor market than their peers who stopped with a high school diploma. According to 2023 data from the Bureau of Labor Statistics (BLS), workers ages 25 and older with some college had median weekly earnings of $992, compared with $899 for workers with only a high school diploma. Bachelor’s degree graduates had median weekly earnings of $1,493.

Note

In 2023, the unemployment rate for workers with bachelor’s degrees was 2.2% versus 4% for people whose highest level of education was a high school diploma.

Type of School

Students who attend for-profit colleges are considerably more likely to fall behind on their loan payments. For adults ages 18–39 who borrowed to pay for their education, the Federal Reserve found that 27% of borrowers who attended private for-profit colleges were behind, compared with 13% who attended public colleges and 11% who attended private not-for-profit colleges in 2023-2024.

Studies have shown that many employers believe for-profit degrees are of less value than degrees from public or private not-for-profit schools. As of fall 2021, Black students accounted for 27% of all undergraduates at for-profit four-year institutions, while Hispanic students represented 19%.

For-profit schools were found to mislead students with false promises while encouraging them to take out federal loans. In March 2021, the U.S. Department of Education made it easier for students in such cases to use federal “borrower defense to repayment” or “borrower defense” laws to seek to have their federal loan debt canceled.

Salary vs. Degree

Careers in STEM, or Science, Technology, Engineering, and Mathematics, are expected to grow nearly 11% from 2022–2032, according to the U.S. Bureau of Labor Statistics. In 2021, 24% of the U.S. workforce were employed in STEM occupations. Hispanic workers represented 15% of the STEM workforce, while Black workers accounted for just 9%.

The Impact of Student Debt

Student debt can affect anyone of any race for many years. A 2023 Nationwide Retirement Institute survey found that 29% of respondents said they plan to adjust their retirement savings contributions to accommodate their student loan payments. 59% considered side gigs to earn the income to pay their student loans without impacting their retirement contributions.

When Did Student Loan Repayments Resume?

Student loan repayments were paused, and student loan interest rates were set to 0% on March 13, 2020, to help alleviate financial hardships during the COVID-19 pandemic. The pause ended on Sept. 30, 2023, and payments resumed on Oct. 1, 2023.

What Is a Pell Grant?

The Federal Pell Grant program offers need-based grants to low-income undergraduate and graduate students to improve access to postsecondary education. Unlike loans, Pell Grants do not have to be repaid. For the 2024-2025 year, the maximum grant is $7,395, and students can receive up to 12 terms of Pell Grant awards.

What Is the FAFSA?

The FAFSA is the Free Application for Federal Student Aid, an official form prospective and current students use to apply for federal grants, loans, and work-study programs to pay for college. Additionally, many colleges use the FAFSA to distribute financial aid and scholarships.

The Bottom Line

For those who go on to well-paying careers, student debt may prove to be a good investment; however, the debt only exacerbates the wealth gap for students who fail to graduate or who graduate with low-value degrees. As of 2024, approximately 43 million student loan recipients held $1.63 trillion in outstanding loans.

Fact checked by Ryan Eichler
Reviewed by David Kindness

The average American stays at a job for 3.9 years, according to the U.S. Bureau of Labor Statistics. Though job changes can lead to more money—one in five employees received a 10% to 20% bump in compensation when switching jobs—it can also mean workers have multiple 401(k) retirement accounts from past employers. Having multiple accounts isn’t inherently wrong, but it can cost you time and money in the long run. Let’s break down the reasons you might want to consolidate those accounts.

Key Takeaways

• When you leave a job, you need to decide whether to leave your retirement contributions in your old 401(k) or roll them over into your next job’s plan. Another option is to roll over the funds to an individual retirement account (IRA).
• Rolling over funds can save you time managing your account as well as administration fees from multiple accounts.
• Consolidating accounts makes it easier for your beneficiaries to direct your estate after you die.
• Your account balance is one factor to consider. Balances under $5,000 can be automatically rolled over to an IRA of your former employer’s choosing.

Pros of Consolidating Accounts

There are three main reasons to consolidate your accounts: there are lower fees, there’s less legwork, and it’s easier for your beneficiaries.

1. Fewer fees. Retirement accounts often come with management fees, such as annual fees or fees for paper statements. If your account balance is small because you weren’t at a company for long or weren’t investing heavily at the time, those account fees can quickly eat into your balances. By consolidating your smaller balances into one individual retirement account (IRA) or rolling past accounts into your current 401(k), you’ll only be subject to one set of fees.
2. Less maintenance. If you’ve changed jobs three or four times, you may have three or more accounts to monitor. Keeping an eye on all those separate accounts is time you could spend doing something else. Plus, at age 73 (for individuals born between 1951 and 1959) and age 75 (born in 1960 or later), you must start making required minimum distributions (RMDs) from traditional IRAs and 401(k)s. Keeping all your money together means you’ll only have to take one RMD rather than several.
3. Streamlined for beneficiaries. If you die, your retirement accounts will pass on to your beneficiaries. If you have several smaller accounts, your heirs might find it laborious to track down and manage each account. One account allows them to easily see what is in your estate and when and how it should be distributed.

However, if you are satisfied with a former employer’s plan, you’re under no obligation to move your money if the amount is more than $5,000. Just beware the inactivity can result in escheatment, or turning over old accounts to the state as unclaimed funds. If you don’t contribute or withdraw anything from your accounts for a time defined by your state (typically five years), your account may be considered abandoned and held in your state’s unclaimed funds department. You can still claim those funds, but the IRS may consider that a taxable distribution if you withdraw them, which can incur penalties and fees.

Finding Old Accounts

It’s relatively easy to start consolidating accounts if you wish to do so. First, you’ll have to identify where your accounts are. If you have statements from your old accounts, contact the plan administrator to begin the rollover process.

If you’re not sure where your accounts are, you can do one of three things:

1. Contact your former employer. Your benefits manager or human resources director should be able to connect you with the plan administrator.
2. Consult the Internet. Several sites can help you search, such as MissingMoney.com. These sites will help direct you to your state’s unclaimed property divisions, where you can search your name, address, and Social Security number. This will only work for accounts that have been turned over to the state divisions.
3. Contact the U.S. Department of Labor (DOL). Every company that provides a 401(k) plan has to register with the DOL using a Form 5500. You can search for your company by year to find out who administered their plan.

How to Consolidate Your Accounts

When you’ve found your accounts, you need to determine how you can consolidate them. The IRS offers information about which types of accounts are compatible for rollovers. Because of tax implications, not all accounts are compatible.

When you’ve decided what type of account to roll your current investments into, pick a financial organization, whether it’s a bank, brokerage, or online investing platform. Open a new IRA with them. You can then decide whether to do a direct or indirect rollover.

Important

A direct rollover transfers funds from one investment account to another. The transfer will take place electronically, or your former plan administrator will write a check for the amount in your account balance and send it to the new IRA.

An indirect rollover is when you withdraw the funds from your account in cash and then redeposit them to the new account within 60 days. Indirect rollovers are riskier because if you miscalculate your 60-day period, you may be hit by an early withdrawal penalty and taxes.

Should I Leave My Retirement Account With a Former Employer?

Not all investment accounts are created equal. If your former employer’s 401(k) was performing exceptionally well, there’s no reason to pull your money out just because you don’t work there anymore. However, be aware that your options will be more limited. You can’t continue funding the account, and loans are unlikely to remain available after you’ve left the company.

Do I Have to Take RMDs at 73?

If you were born between 1951 and 1959 and you have a traditional 401(k) account or a Roth 401(k), you must take required minimum distributions (RMDs). If you were born after 1960, you must start taking them at age 75. On the other hand, Roth IRAs don’t require these distributions.

Is There a Limit to How Many Retirement Accounts I Can Have?

No. And though you can have multiple IRAs, 401(k)s, and other retirement accounts, the limits on how much you can contribute during a single year stay the same. It’s cumulative, not per account. With more accounts, this may become confusing, so keep careful track of where your investment dollars are going.

The Bottom Line

Changing jobs for a better salary or position is often a good career move. Though there’s nothing wrong with having multiple accounts from different employers, consolidating can save you time and money and increase your peace of mind. When you leave a job, be intentional with your decisions. And remember, your former employer may funnel your holdings into an IRA of their choosing if they don’t hear from you in a specified amount of time and your account balance is less than $5,000.

Fact checked by Betsy Petrick

If you’re a fan of CD laddering, you’ve probably been enjoying the high annual percentage yields (APYs) of 2023 and 2024. However, with the Federal Reserve signaling its intention to cut rates in 2025, you might be wondering if it’s still a viable savings strategy. You won’t get the high CD rates you might have gotten, but starting a CD ladder now and locking in rates before they drop can guarantee a higher rate of return on your maturing CDs than if you wait.

Key Takeaways

• A CD ladder includes multiple CDs that mature on different dates, although they’re funded equally.
• CDs are considered safe financial investments because you’re guaranteed a specific percentage yield based on your deposit and the CD term length.
• Establishing a CD ladder when interest rates are high can earn you more over time if interest rates fall.

How Does a CD Ladder Work Anyway?

A CD ladder includes several equally funded CDs with different maturity dates. This investment strategy can help you take advantage of high APYs, but it also offers the convenience of liquidity since you steadily have CDs maturing at different times. As a CD in your CD ladder matures, you can decide to reinvest the funds or take them out without a penalty.

For example, you can have a continuously maturing CD every year by establishing a ladder like this: Open 1-year, 2-year, and 3-year CDs simultaneously with equal amounts of money in each. When the 1-year CD matures, reinvest it into the next longest CD term. Do the same when the 2-year CD matures the following year, and so on. This process guarantees that one of your CDs matures every year.

Unlike standard savings accounts or money market accounts, the best CDs typically offer higher percentage yields. Plus, the rates are locked in for each CD term, so you’re guaranteed a specific return on your investment. Savings and money market accounts can’t say the same thing. The top CDs for each term also boast APYs as much as two or three times greater than FDIC averages:

Is Anything Changing With CDs in 2025?

Interest rates have been high since the Fed began fighting inflation, but as inflation eased, the Fed began cautiously cutting rates. It cut rates by a full percentage point between September and December 2024 but held rates steady at its January 2025 meeting and anticipates fewer cuts for the year.

The rate cuts that do happen in 2025 are expected to be small. Fed committee members indicated in December 2024 that they expect a slower pace for 2025 rate cuts, with the median prediction being a 0.75% reduction for the year. This means the interest earned by CDs likely will remain high, making it a good time to establish a CD ladder, especially if you do it before the Fed cuts rates.

Falling Interest Rates Could Impact Your CD Ladder

When interest rates fall dramatically, banks and lenders offer lower returns for investments like CDs. If you wait to establish a CD ladder and rates have dropped, you might not get as much out of the CDs or you may have to fund them for longer in order to get a better return.

If interest rates fall, you might find that the CDs you can reinvest in have lower percentage yields than the ones you initially took out. That is a disadvantage of taking out a CD, but remember that rates can be unpredictable. If interest rates rise, you might be able to reinvest one of your short-term CDs for one with a better percentage yield when it matures.

The Bottom Line

CD laddering as a financial strategy can be worth it for savvy savers since you’ll still earn modest yields and have more flexibility when it comes to accessing your funds. However, if interest rates drop, be prepared to reinvest your mature CDs at lower rates. You may even have to choose CDs with longer periods in order to earn the best yields.

Fact checked by Giselle Cancio

Simple errors could lead to costly mistakes on your federal tax return. For instance, while it seems like a no-brainer that you’d remember to sign your tax form or that your arithmetic would be correct, it’s worth it to slow down and double-check yourself.

Avoid these five common tax errors that can hurt your wallet and peace of mind.

Key Takeaways

• Incorrect filing status can result in higher taxes.
• Errors with income, Social Security numbers, or other details can delay your refund.
• Filing before you receive all your forms could cause you to pay more.

1. Incorrect Filing Status

Choosing the wrong filing status when you file your federal income taxes could be costly.

“Certain filing status–like Head of Household–offer better tax brackets and a higher standard deduction than single status. Choosing the wrong filing status could cost you more in taxes,” says Joanne Burke, a certified public accountant and founder of Birch Street Financial Advisors.

“You can also miss out on valuable tax credits like the Earned Income Tax Credit and the Child and Dependent Care Credit, which can be costly.”

Take time to review and choose the appropriate filing status to maximize your benefits.

2. Entering Information Inaccurately

Mistakes in entering your personal information, like income or Social Security numbers, can cause significant delays and confusion.

“One major impact is delayed processing and refunds. If critical information, such as income, filing status, or Social Security numbers, is entered incorrectly, the IRS may take additional time to review the return and resolve discrepancies, which could hold up any refund you’re expecting,” Burke says. “For e-filed returns, substantial errors might result in immediate rejection, while paper returns with inaccuracies may prompt the IRS to send a notice, further delaying the process.”

With inaccurate information you could pay too much or too little on your taxes.

“Inaccurate reporting can also lead to incorrect tax calculations, resulting in underpayment or overpayment of taxes. Underpayment due to errors, like underreporting income or claiming ineligible deductions, could mean owing additional taxes, along with penalties and interest. On the other hand, overpayment might reduce your cash flow unnecessarily until the error is corrected through an amended return,” Burke advises.

Carefully double-check all the information you input, especially income details, filing status, and Social Security numbers.

3. Filing Too Early

Don’t make the mistake of filing your taxes before you receive all your documents.

“It’s great to be on top of your return, but make sure that you have received all necessary documents before filing your return. You’ll benefit by waiting to file until you obtain all the details you need to claim child care expenses, student loan interest, the premium tax credit, and other tax benefits,” says Alison Flores, manager with The Tax Institute at H&R Block. 

Waiting until all forms are in hand will ensure you don’t miss deductions or leave money on the table.

4. Math Mistakes

Mathematical errors can lead you to paying the wrong amount in taxes. These mistakes are more common than you might think, and they could trigger IRS audits.

“Simple mathematical errors are one of the top reasons for IRS audits. Double-check all amounts you enter and use tax software like H&R Block that handles the calculations to minimize the risk of errors,” Flores says. 

Tax software can help reduce the risk of errors and give you confidence in the accuracy of your return.

5. Unsigned Tax Forms

It may seem like a small detail, but forgetting to sign your return can cause a delay. You can avoid this error by filing your taxes electronically and digitally signing it. 

“Make sure your return is signed and dated, especially for joint returns that require both spouses’ signatures,” Flores says.

What to Do If You’ve Made a Tax Mistake

If you’ve made a mistake on your return, you should file an amended return as soon as you realize it. Typically, the deadline is three years from the original date of file or two years from when you paid the tax (whichever is later.)

“File the amendment as soon as possible if you owe additional tax to minimize penalties. You’ll need to ensure the IRS has accepted your original return before amending, and if expecting a refund, wait until you receive it,” Flores advises.

The Bottom Line

Common tax mistakes can lead to delays, missed refunds or a higher tax bill. To avoid costly errors, pay special attention to personal details, your filing status, financial information, math calculations, and your signature. Consider using tax software for ease and accuracy, especially for handling calculations. By taking your time and being diligent, you can ensure your tax return is error-free and avoid unnecessary costs.

Fact checked by Stella Osoba

Warren Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B) has amassed the largest pile of cash ever held by a public company. At $325 billion, Berkshire Hathaway’s war chest is more than the combined cash reserves of Apple Inc. (AAPL), Microsoft Corp. (MSFT), Alphabet Inc. (GOOG), Amazon.com Inc. (AMZN), and NVIDIA Corp (NVDA)—despite them being collectively 14 times Berkshire’s market value. Also striking: the record-breaking stockpile has doubled in just over a year.

So what gives? As in everyday life, companies save for three main reasons: to prepare to weather an economic storm, to make a major purchase, or because they think what’s available isn’t worth it—in market parlance, it’s overvalued. 

A key chart value investors like Buffett use could help us narrow down the options: the S&P 500 index’s historic price-to-earnings ratio. That’s because it now sits 67% above its historical norm and almost 50% above its early 2022 value. This remarkable deviation could be a major reason that the famed Oracle of Omaha could be storing cash.

Key Takeaways

• Berkshire Hathaway’s record $325 billion is more than the combined cash held by the five largest public companies by market cap.
• The S&P 500 index price-to-earnings (P/E) ratio measures the average value of the index’s companies by dividing their combined market capitalization by their total earnings over the previous year, indicating how much investors are willing to pay for each dollar of earnings.
• The market’s P/E ratio of just over 30 is 67% above historical averages, suggesting stocks are significantly overvalued.

What This Chart Tells Us

The chart for the S&P 500’s price-to-earnings (P/E) ratio since 2022 tells a striking story about the stock market. It tells us investors are paying $30 for each dollar of earnings for the trailing 12 months, far above the historical median of 17.9.

In other words, investors are paying almost $30 for each dollar of corporate earnings when, historically, they’ve paid 40% less. We’ve focused the chart on the run-up in the P/E ratio since early 2022; since then, it’s ballooned 50%.

Thus, this chart could provide a stark warning that stock prices are being driven more by investor optimism than the underlying value of these stocks, exactly the kind of market condition that Buffett has said makes him keep his “elephant gun” of cash at the ready.

Why Buffett’s Cash Pile Keeps Growing

Buffett famously preaches a straightforward investing philosophy: Be fearful when others are greedy. Given Buffett’s “pledge” to Berkshire shareholders to practice “extreme fiscal conservatism” and since market valuations have been well above historical norms, it’s no surprise, perhaps, that Berkshire sold over $100 billion in stocks during the first nine months of 2024, including cutting its massive stake in Apple by two-thirds.

Cash as Insurance

Buffett has said that having a sizable war chest is a cornerstone of Berkshire’s risk management. Berkshire’s cash reserves served the company well during the 2008 financial crisis, when Berkshire provided crucial funding to companies like the Goldman Sachs Group Inc. (GS) and Bank of America (BAC) on extremely favorable terms, generating billions in profits.

“During the 2008 panic, Berkshire generated cash from operations” and didn’t need to borrow to keep going,” Buffett told Berkshire investors at the end of 2023. “We did not predict the time of an economic paralysis but we were always prepared for one.” Soon afterward, Berkshire would nearly double the size of its war chest.

The Bottom Line

Historical charts of the S&P 500 index P/E ratio suggest that when it’s high, it often precedes major market corrections—examples include 1987, 1992, 2002, and 2008. At the end of 2023, Buffett told shareholders that “Berkshire can handle financial disasters of a magnitude beyond any heretofore experienced,” which should have reassured his company’s investors. But that he thought the reminder necessary in this market is deeply unsettling for anyone else.

Fact checked by Giselle Cancio

Feeling the urge to pack up and leave the U.S.? The current political climate has some Americans thinking about starting fresh somewhere else. But, it’s not just politics pushing people to consider this change.

Some might want to live somewhere else because they seek a better quality of life, a more affordable place to live, or want to experience new cultures. However, the financial considerations can quickly add up.

Do your research and make a budget to ensure you can afford a move–including housing costs, insurance costs, and taxes–and are logistically prepared to access funds and work remotely. Here is a practical guide to the financial ins and outs of international relocation.

Key Takeaways

• If you’re working remotely for a U.S. company, you’ll need to choose a country with good internet infrastructure and a favorable time zone to sync with U.S. colleagues.
• Digital nomad visas, an increasingly popular option, typically require proof of stable income, remote work capabilities, and health insurance.
• As an American, you’ll still owe the IRS taxes, so be sure to familiarize yourself with the relevant tax code.

Choosing the Right Country

When choosing a country to relocate to, the practical aspects of daily life should influence your decision. Researching the cost of living, healthcare systems, and visa requirements for different countries is a great place to start. 

Next, think about your work situation; if you plan to work remotely for a U.S. company, you’ll need a country with reliable internet infrastructure and a time zone that allows you to maintain reasonable working hours with American colleagues.

Some countries have well-established expatriate communities that can help ease your transition. However, what works perfectly for one person might not suit another. The best country for you will depend entirely on your unique circumstances, preferences, and goals.

Important

When Americans move to an international destination in significant numbers, they sometimes displace local communities by driving up housing costs and limiting access to resources for locals.

Researching Visa Options

Digital nomad visas have become increasingly popular, with many countries offering this route to remote workers and passive income earners. Some countries—including Greece, Portugal, Hungary, Spain, and Malta—offer investment-based residency programs for Americans with significant capital. 

Countries eager to attract American retirees with stable pensions or investment income offer retirement visas. Panama’s Pensionado Visa is particularly popular, requiring an income or pension of just $1,000 per month. Mexico’s Temporary Resident visa for retirees asks for proof of regular income or substantial savings, while Thailand’s retirement visa requires financial proof and a minimum age requirement (50 years of age and older).

Several countries offer citizenship or residency based on heritage for those with ancestral connections. Italy’s “Jure Sanguinis” program allows Americans with Italian ancestors to claim citizenship, while Ireland extends similar rights to those with Irish grandparents.

Work visas remain an option, but they are often more challenging. Some countries have skills shortage lists, making obtaining work visas in specific professions easier. For instance, Australia’s Skilled Migration program and New Zealand’s Essential Skills Work Visa target specific occupations.

Most work visas require a job offer from a local employer willing to sponsor your application.

Logistics of Making Money and Taxes

Working remotely for a U.S. company offers one of the most stable paths for Americans moving abroad. Many people negotiate remote arrangements with their current employers. Aside from letting you keep your American salary while living abroad, this approach has significant advantages: You maintain a familiar work culture and avoid local employment complications. 

Digital entrepreneurship has become increasingly popular among those moving abroad. Many expats combine multiple digital income streams—for example, mixing content creation, online courses, and consulting work. 

Local business opportunities can be surprisingly accessible in some countries. Popular ventures among American expats include opening restaurants, cafes, or tourism-related businesses in expat-friendly destinations. 

Investment income provides another avenue, particularly for those moving to lower-cost countries. Rental income from U.S. properties, dividend-paying stocks, or other passive income sources can stretch much further in countries with a lower cost of living. 

Warning

It’s important to research tax implications. Americans must file U.S. taxes regardless of where they live.

Don’t Forget the Basic Necessities: Housing and Healthcare

Extended-stay hotels, Airbnb monthly rentals, or short-term furnished apartments give you time to explore different neighborhoods and understand local housing markets. 

For long-term rentals, local real estate agents can be invaluable—especially in countries where English isn’t widely spoken. However, commission structures vary widely by country; in some countries, you might pay up to three months’ rent as a commission. 

Remember, housing costs and availability can vary dramatically by season in many destinations. 

Private international health insurance is often the most comprehensive solution for Americans living abroad. These plans typically provide worldwide coverage (including U.S. coverage if needed), but premiums can range from $200 to $600 monthly for healthy adults. These plans often include evacuation coverage and allow you to see English-speaking doctors.

Local private health insurance is often a more affordable alternative to international plans. These local plans often provide better value than international insurance but may have more limited coverage areas, and some private insurers might exclude pre-existing conditions or charge higher premiums. You may also want to verify that your specific medications are available and legal in your target country.

Most importantly, don’t forget to factor healthcare costs into your overall relocation budget.

The Bottom Line

Considering all the small things before moving out of the U.S. for the next four years is important. It’s easy to take certain aspects of our daily life for granted in America—until you have to recreate them in a different country. Choosing a destination country is the fun part; researching tax implications, visa requirements, healthcare access, and other factors that influence the cost of living might require months of planning. For many people, this effort is worth it to experience a better quality of life, new cultural experiences, and a lower cost of living.

Standard Oil founder Rockefeller was one of the greatest Wall Street magnates

Fact checked by Suzanne Kvilhaug
Reviewed by Caitlin Clarke

Billionaire John D. Rockefeller (July 8, 1839 to May 23, 1937) continues to rank as one of the richest men in modern times. He rose from modest beginnings to become the founder of Standard Oil in 1870 and ruthlessly set about destroying his competitors to create a monopoly of the oil industry.

He branched out to ancillary businesses such as iron, steel, and copper—but also railroads, general stores, and newspapers. His quest for total control ran afoul of the U.S. government, which passed the Sherman Antitrust Act in 1890 to break up Standard Oil, sparking a running battle that the government finally won in 1911.

Rockefeller retired in 1896, leaving his only son to run his company, and pursued a second career as a philanthropist, donating hundreds of millions of dollars to worthy causes. His hard-edged public persona was softened by his practice of handing out dimes to children.

Dying just six-and-a-half weeks before his 98th birthday, Rockefeller remains one of the great figures of Wall Street—reviled as a villain, applauded as an innovator and a benefactor, and universally recognized as one of the most powerful men in history.

Key Takeaways

• John D. Rockefeller, one of the most powerful and wealthiest people in history, built Standard Oil into a massive monopoly by ruthlessly eliminating competitors.
• Government intervention led to the breakup of his oil empire in 1911 into smaller companies, many of which exist to this day.
• After retiring in 1896, Rockefeller focused his interests on philanthropic activities, donating hundreds of millions of dollars and setting up institutions like the University of Chicago and the Rockefeller Foundation.
• Rockefeller has a mixed legacy, criticized for his cutthroat tactics but praised for his philanthropy.

Early Life and Education

Rockefeller’s father, William Avery Rockefeller, led a nomadic life as a snake oil salesman who called himself a physician, while his mother raised their six children. After his family eventually took root in Strongsville, Ohio, a suburb of Cleveland, Rockefeller dropped out of high school and found work as a commission house clerk at the age of 16.

He left that position in order to form a business partnership with oil driller Maurice Clark and built his first oil refinery in Cleveland in 1863. Rockefeller and Clark would in 1870 become Rockefeller, Andrews, and Flagler, a company that focused on oil refineries rather than drilling.

In 1864, he married Laura Celestia “Cettie” Spelman (1839 to 1915), who would bear him four daughters (one of whom died at the age of 13 months) and one son, John D. Rockefeller Jr., who would eventually follow in his father’s footsteps and take over his business.

Notable Accomplishments

Strategic Focus

In 1870, Rockefeller, Andrews, and Flagler changed its name to Standard Oil, which in a mere two years controlled all the oil refineries in Cleveland. Rockefeller keenly understood ways of managing risk.

While he knew oil speculators could potentially reap huge profits if they hit a deposit, he also knew that they faced substantial financial loss if they failed in that effort. For this reason, he strategically narrowed his focus to the refining business, where profits were smaller but more stable.

An Innovative Trust

In 1881, Standard Oil was placed under the control of a nine-trustee board, with Rockefeller at its head. He and his partners innovated this first-of-its-kind trust, wherein they swapped their individual holdings for shares in the trust.

Rockefeller now wielded centralized control and veto power on all of the corporate boards within his conglomerate. The immediate benefits included even lower costs, lower kerosene prices, and standardization across the industry. Rockefeller’s company now had the assets and wherewithal to build or acquire pipelines and other infrastructure on a scale that was previously unthinkable.

Research and Development

Standard Oil employed chemists who developed ways of increasing the types and quality of combustible fuels and created methods of converting waste into usable substances. This meant that the petroleum coming out of the ground was refined into various products, such as diesel fuel, varnish, Vaseline, and toothpaste.

As these new products became cheaper to produce, the company increased its global economy of scale. Also, through robust research and development, Rockefeller discovered ways to exploit the traditionally discarded oil byproducts by using them to create lubricating oils, petroleum jellies, paraffin wax, and other useful items.

Eventual Diversification

Standard Oil had a hand in many ancillary industries, such as railroads, shipping, gas, iron, copper, steel, and banks and trust companies. It also grew its presence in more unexpected areas, such as general stores.

Rockefeller forced shops to carry his kerosene alone by supplying the stores that only sold Standard Oil kerosene with meat, sugar, and other products at artificially low prices, thereby driving shop owners who sold other kerosene brands out of business. Standard Oil likewise planted stories in newspapers to promote its version of events.

Creating a Monopoly

Rockefeller saw the cutthroat competition in the oil industry as a ruinous influence and began methodically stamping it out.

He used major profits to buy out competitors, starting in a six-week period in 1872 known as “the Cleveland Massacre,” when he acquired 22 of 26 rival refineries at very low prices. In addition to wielding his large cash reserves, Rockefeller struck a secret deal with the three major railroads serving Cleveland known as “the South Improvement Company.”

Standard Oil agreed to divide its oil shipments among the railroads into negotiated amounts in return for the railroads charging exorbitant rates to its competitors. The company would not only receive rebates on the cost of transporting its oil; it would also get a cut of the money generated by the high rates charged to its competitors.

News of the agreement leaked and panic ensued, with the rival companies fearing bankruptcy and selling to Rockefeller to avoid total ruin. Due to a hue and cry, the agreement was dissolved without ever actually being implemented.

In the ensuing years, Rockefeller’s offers to purchase competitors were usually readily accepted, though he also had ways of persuading holdouts, which included the following measures:

• Buying up all the oil barrels to cause a shortage that crippled smaller companies
• Buying up land to prevent other companies from building pipelines
• Orchestrating price wars between wholly owned subsidiaries, forcing holdouts to sell at losses
• Secretly bribing legislators
• Limiting the number of trains available for shipment by leveraging his close relationship with the railroad companies
• Purchasing all of the equipment and the equipment suppliers, then refusing to sell replacement parts to holdouts

By 1882, Standard Oil had a near-monopoly of the oil business in the United States.

Losing a Monopoly

The government took issue with Standard Oil’s near-total monopoly and passed the Sherman Antitrust Act in 1890 to break it up.

In response, Standard Oil’s legal team quickly converted the trust into a holding company, which functioned like a trust but was outside of a trust’s legal definition. The government adjusted its legislative attack accordingly and broke up the holding company in 1911, again through a Supreme Court ruling.

Standard Oil was carved up into smaller but still sizable chunks under the government’s supervision. Although their names have changed over the years, Chevron (CVX), Exxon Mobil (XOM), and ConocoPhillips (COP), among others, all share a Standard Oil pedigree.

These companies had the advantage of Standard Oil’s research and development and infrastructure, so they easily made the transition to gasoline producers when kerosene sales dropped as a result of Edison’s invention of the electric light bulb.

Wealth and Philanthropy

A devout Baptist, Rockefeller believed that God had blessed him with the ability to make money and saw no contradiction between his ruthless business methods and his faith. Indeed, he thought the division of the world into rich and poor was part of God’s plan. Or, in his own words, “It has seemed as if I was favored and got increase because the Lord knew that I was going to turn around and give it back.”

And that he certainly did. Rockefeller channeled his energies toward philanthropic causes after retiring in 1896, donating hundreds of millions of dollars during the latter years of his life. He was also known for the practice of carrying nickels and dimes on his person and distributing them to children.

With his son’s help, he created the Rockefeller Foundation in 1913 to carry on his work after he was gone. When he died in 1937, his assets equaled 1.5% of the total U.S. economic output for that year.

Legacy

Certainly one of Rockefeller’s main legacies is federal antitrust legislation, as well as laws strengthening unions. During his lifetime (and after), many people understandably faulted Rockefeller for the radical means through which he cultivated his fortune.

Still, his business practices and charities have benefited millions of people. The Rockefeller Foundation continues today to follow its stated mission to “promote the well-being of humanity throughout the world.”

In addition, he established the University of Chicago and the Rockefeller University (originally the Rockefeller Institute for Medical Research).

His legacy also lived on through his offspring. John D. Rockefeller Jr. built the famous art deco Rockefeller Center in Manhattan, which continues to house business offices to this day, as well as popular enterprises such as Radio City Music Hall and the Rockettes, the Rainbow Room, an open-air skating rink, a famous annual towering Christmas tree, and the television studios for “Saturday Night Live” and “The Tonight Show.”

Rockefeller’s grandson Nelson Aldrich Rockefeller served as a four-term Republican governor of New York State and as the 41st vice president of the United States under President Gerald Ford, in addition to running for the Republican presidential nomination three times.

What Was John D. Rockefeller’s Background?

John D. Rockefeller was born into modest circumstances in 1839, the son of an itinerant snake oil salesman who called himself a physician and his highly religious and disciplined wife, who raised him in the Baptist Church. The family eventually settled in the suburbs of Cleveland, Ohio, where John dropped out of high school and got his first job, working as a bookkeeper, at age 16. His first business trafficked in hay, grain, meats, and other goods; he then chose to go into the oil business due to the expansion of oil production in western Pennsylvania in the early 1860s.

How Long Did Standard Oil Exist As a Monopoly?

Rockefeller, along with his associates Samuel Andrews and Henry M. Flagler, founded Standard Oil in 1870. Within two years, the company had a monopoly on the refinement of oil in the Cleveland area. In 1881, the company was reorganized as a first-of-its-kind trust, allowing it to quickly expand by either building or buying up oil pipelines and other infrastructure. By 1882, it had a virtual monopoly on the oil business in the U.S.

The federal government disapproved of the situation, and Congress passed the Sherman Antitrust Act in 1890 to break up Standard Oil. A running battle ensued, which the government finally won in a Supreme Court ruling in 1911. Thus, Standard Oil essentially existed as a national monopoly for 19 years.

What Is John D. Rockefeller’s Legacy?

Rockefeller retired from business in 1896 and devoted his life to philanthropy. He donated hundreds of millions of dollars to charity during his lifetime and, along with his son, John Jr., set up the Rockefeller Foundation to continue that work after his death, which it still does. He founded the University of Chicago and the Rockefeller University. However, Rockefeller and Standard Oil Company were also responsible for antitrust legislation and laws strengthening unions, though not of their own volition.

The Bottom Line

Billionaire John D. Rockefeller was both admired and loathed, but there is no getting around the fact of his importance as both the principal founder of the Standard Oil monopoly and a world-class philanthropist.

His legacy continues today thanks to the work of the Rockefeller Foundation, as well as ongoing institutions he founded such as the University of Chicago and the Rockefeller University (originally known as the Rockefeller Institute for Medical Research).

A ruthless businessman who gave his competitors no quarter, he still ranks as one of the richest men of the modern world, a great figure of Wall Street, and one of the most powerful men in history.

Reviewed by Doretha Clemon

Rent is likely your highest monthly expense. It’s also a recurring cost that you can’t easily reduce once you’ve signed your lease.

If rent takes up too much of your paycheck, it can have short- and long-term effects on your overall financial picture. Here are a few ways to keep costs down.

Key Takeaways

• Once a lease is signed, it’s very unlikely that you’ll be able to lower the rent.
• However, there are ways to save on rent before signing a lease.
• Selecting less desirable neighborhoods, getting a roommate or two, accepting lower quality amenities, and properly budgeting your living expenses are good strategies to save on rent.

1. Choose an Affordable Location

If you decide to live in a highly desirable area, you may have to pay more for that privilege. On top of that, some densely populated neighborhoods will require an additional monthly fee for a parking space. Others will require a neighborhood association fee.

If you choose to live just a few miles away from those popular neighborhoods, though, you’ll pay substantially less each month.

Besides, when you live within easy walking distance of shops, restaurants, and bars, it’s much easier to make impulse purchases or overspend on entertainment. Living further away may force you to give a little more thought to your shopping trips and help control your spending.

Keep in mind that there is a balance to be struck. Higher-paying jobs are often in the same areas that are the most desirable to live in. If you work in one of these areas, don’t relocate too far away, or the savings in rent may get eaten up by increased transportation costs.

2. Be Flexible

Instead of looking for an apartment with granite countertops and stainless steel appliances, your definition of “nice” could be amended to simply mean a place that is free of major maintenance problems, insect infestations, safety issues, and bad neighbors.

You’re unlikely to find a shiny new dream apartment for a bargain-basement price. However, you might be able to find a solid place if you can overlook some things that will have minimal impact on your overall quality of life. Shabby carpets can be covered with area rugs, for example. And an ugly building exterior simply doesn’t matter.

3. Find a Roommate (or Three)

Getting a roommate could cut your rent in half. If you have two or three roommates, you could save even more.

If you’re able to sacrifice some privacy and peace and quiet, having roommates can allow you to spend less, get a nicer place, or live in a nicer location. Who knows—you might even make new friends.

4. Be a Smart Shopper

Although it can require a significant investment of time, patience, and flexibility, finding an apartment at below the market rate is not impossible. In addition to perseverance, you’ll need some familiarity with the real estate market. Do your research in advance, so you’ll know what constitutes a high, low, and average rent in your target neighborhood. You’ll also have to stay on top of the listings so you’ll be able to view places as soon as they go on the market. Apartments that are a good value get snapped up fast.

Know what you’re looking for in advance, which puts you in a position to take decisive action if you find the right place. Make a list of the key qualities your apartment must have, must not have and would be nice to have.

Cats and Dogs

If you have a pet, it’s customary to pay an additional pet deposit or even a small monthly “pet rent.”

5. Get the Details

If your rental application is approved, don’t impulsively sign the lease. First, ask your potential landlord lots of questions about the unit before you contractually obligate yourself to a year’s worth of rent. Ask if the unit and building have had any insect or rodent problems or other significant issues, plus any noise issues. Perhaps your neighbor-to-be has a baby, or there is an airport nearby that you aren’t aware of.

Also, be wary of large security deposits. Local laws will dictate legal limits for deposits. In most areas, it’s possible to move in with just the first month’s rent and a deposit equivalent to one month’s rent. Some landlords will ask for the first month’s rent, last month’s rent, and a deposit.

6. Know the Potential Costs of Any Outcome

Be aware of the rules for breaking your lease before you sign it. If you end up hating the apartment or the neighborhood, what are your options for leaving? What if you have to relocate for a promotion or job change? Make sure the penalties for leaving and the rules for subleasing are clearly stated in your lease. Don’t take the landlord’s word on anything.

The lease should also outline any fees for late rent payments or the repair of problems caused by you (such as unclogging a drain or letting you in if you lock yourself out). Also, ask about the typical rate and amount of rent increases. Some areas have rent control or reasonable landlords who stick with cost-of-living adjustments (COLA).

Which Cities Has the Most Affordable Rent?

The five most affordable cities for rent as of 2024 were: Wichita, Kansas (with a median rent of $680); Shreveport, Louisiana (with a median rent of $750); Akron, Ohio (with a median rent of $760); Lincoln, Nebraska (with a median rent of $800); and El Paso, Texas (with a median rent of $830), according to data collected by Earnest.

How Much Rent Can I Afford?

For most people, the amount of rent shouldn’t be more than 30% of your monthly income. However, in some areas of the country, it may be difficult to find an apartment for that amount of money.

Is Paying More for a Nice Apartment Worth It?

The old adage goes, “you get what you pay for,” but sometimes, that isn’t necessarily true. An upscale apartment with amenities may be desirable—but is it truly what you need? Maybe it’s better to try to find a clean, safe apartment in a neighborhood you like.

How Can I Save on Rent?

One way to save on your rent is by getting a roommate or two to help to split the bills. If you want to live alone, you should shop around for affordable properties, and be flexible on your definition of what constitutes a “good” or “nice” apartment.

How Much Money Do I Need to Rent an Apartment?

Some landlords ask for a security deposit and one month’s rent, but there are building owners who ask for as much as two month’s rent (first and last) plus a security deposit. Always ask in advance before signing a lease.

The Bottom Line

If you’re willing to make compromises and invest the time it takes to read lots of ads and look at numerous places, you’re more likely to find the perfect apartment for you at the perfect price. The extra time and effort will be worth it. Otherwise, you might end up regretting where you end up, next to rambunctious neighbors in a shoddy unit that’s always in need of repairs, with a hefty rent check that forces you to sacrifice other goals, like paying off debt, taking a vacation, or saving for a down payment on a house.