8 ways you could miss out on free money
There is an old saying in economics: “There is no free lunch.” But in real life, there really is “free money.” Banks, retailers, credit card companies, and even Uncle Sam can get you free money by making a few simple, smart financial moves.
Here are some of the biggest ways in your everyday life that you’re missing out on free money right now.
1. Putting money in an interest-free checking account
If you have cash in a non-interest-bearing checking account, you’re missing out on interest income and actually losing money to inflation. The longer your money sits there, the more purchasing power it loses.
Any extra cash you have should earn interest. In other words, it’s “free money” that you can get without having to work. Your bank (or another bank) must pay you for allowing it to use your deposits. Find a better place to store your cash than an interest-free checking account.
2. Not using high-yield savings accounts.
Currently, the national average savings deposit interest rate is only 0.46%. You can do much better than that! Currently, the best savings and money market accounts pay 5.00% APY or more.
Don’t settle for the average bank’s unimpressive APY on your savings. Choose a high-yield savings account. And if the Fed keeps interest rates high for the remainder of 2024 and into 2025, those high APYs will remain.
3. 401(k) does not have an employer match.
If you have a job with an employer-based retirement plan like a 401(k), you could be missing out on some free money. Does your employer provide a matching contribution? If so, take it!
Many employer 401(k) matches are equal to a certain percentage of your salary. It varies from company to company, but for example, some employers may match 50% of the first 6% of your salary that you contribute. So, if you make $50,000 a year and contribute 6% of that to your 401(k) ($3,000), your employer will contribute an additional $1,500.
It’s not just “free money,” it’s free money that’s actually earned. Don’t leave that money on the table. Not getting a 401(k) match is like not taking paid vacation. take it! Write it! Get the full compensation you deserve!
4. Not investing in an IRA account
In addition to a 401(k) or other workplace retirement plan, many people are eligible to save money in another tax-advantaged retirement account called an Individual Retirement Arrangement (IRA). There are two types of IRAs: Traditional and Roth.
Traditional IRAs, similar to 401(k)s, offer “free money” in the form of tax deductions for contributions. (There are some income limits for who can take advantage of this Traditional IRA tax break.) If you’re in the 22% tax bracket and you deposit $7,000 into a Traditional IRA in 2024, that means you’ll get about $1,540 in “free money.” It means that it becomes possible. “We reduced taxes.
A Roth IRA provides “free money” for your future in the form of tax-free withdrawals in retirement. You may not get the tax benefits today, but your money can grow tax-free for the rest of your life.
5. Not paying off high-interest debt
If you carry a credit card balance and pay interest every month, you’ll likely end up paying an annual interest rate of more than 20%. If you can pay off your credit card debt faster, that means “free money” in the form of interest you don’t have to pay back.
Unless you are the luckiest investor in the world, it is difficult to find a return on investment (ROI) higher than 20%. The first thing you should do with your extra cash is pay off your high-interest credit card debt.
6. Do not use a health savings account (HSA)
If you have a High-Deductible Health Plan (HDHP), you can use a Health Savings Account (HSA) to save on medical expenses. Just like a traditional IRA or 401(k), money invested in an HSA is tax deductible. That means it’s free!
For example, if you’re in the 22% tax bracket and you put $4,000 into your HSA in 2024, that means you’ll get about $880 in “free money” in your federal income tax bill.
7. Don’t use cashback apps
Have you ever wanted to get “free money” just for shopping? Now you can. The best cashback apps offer rewards for shopping at your favorite stores and brands, either online or in person. Some of these apps pay cash rewards of 1%, 2%, 5%, 10% or more. If you’re a smart shopper and love finding good deals, using a cashback app may be well worth the time and effort.
8. Don’t use rewards credit cards
If you have good credit and aren’t prone to overspending or forgetting when payments are due, you can take your “free money” hunt one step further by using a cash-back rewards credit card.
Some of the best cash back cards offer 1% to 6% cash back on everyday spending or large purchases. Some also offer welcome offers where you can get an extra cashback of (for example) $200 if you spend a certain amount within the first few months of account opening.
conclusion
You may be missing out on free money right now by not receiving any tax breaks, interest income or cashback rewards. Using a few simple strategies can help you get more from your banks, retailers, employers and the federal government.
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