Last Updated on August 7, 2017 by Michael Brockbank
Most freelance professionals need to keep an extra close eye on finances. It can be easy to forget that you need to pay taxes once per year, especially since most clients only offer 1099s and don’t file employee taxes on you. Using Stash Invest might have some potential for managing those expenses.
How Stash Invest Can Help You
Before I get started, I just want to put a disclaimer here. Investing in the stock market is a risky venture, especially if you’re not 100% sure about what you’re doing. It’s real easy to lose your investment rather quickly.
With that being said, let me tell you a bit about how Stash Invest can be helpful for freelancers when it comes to financial obligations.
What Is Stash Invest?
Stash Invest is an app that helps you trade stocks without requiring a great deal of money. Unlike other trading platforms, there are no fees for buying or selling. All that is required is $1 per month for maintenance fees until your account hits $5,000. At which point, the fees are 0.25% of your trading value.
Stash uses a primary base of ETF stock holdings. These are exchange-traded funds that are relatively safe to buy. Essentially, an ETF is a collection of business stocks related to a specific industry or niche. When you buy an ETF, you’re actually getting a portion of a share across all of the available included companies.
The reason why ETFs are so attractive is because they are less volatile. For example, if one company tanks and another one does exceptionally well, the value of the ETF remains relatively firm. That’s because it benefits from all of the businesses under its collection rather than just a single company.
With Stash Invest, you can buy portions of these ETFs without requiring the full value. For instance, I bought into an ETF on Stash for $10.00. The ETF was valued at $45.45 on TD Ameritrade at the time I bought it. Instead of needing the whole $45, my $10 investment has earned me $0.14 so far.
The only downside to Stash Invest that I have seen so far is it doesn’t have a lot of ETFs to choose from. However, those that are available have a pretty good history of growth over the long-term.
How Does Stash Invest Help Freelancers Save?
One thing I see happen a lot every year is freelancers scrambling to pay taxes. I am one of them. Using a savings account, you can set aside 10% of your income every week and easily pay income tax amounts. That’s if you don’t qualify for credits and earned income.
If you put that money in Stash Invest, you’ll earn more cash as the investment matures. I know, it’s risky. But historically, stocks perform better over the long-term than most savings accounts. In fact, investing in companies that pay dividends makes it even more lucrative.
Of course, you would want to invest your money in companies that have proven longevity, such as Microsoft or even Google. But what if you don’t have the money to buy into a super-high valued company? At the moment of this post, Google is trading at $945.75 per share! Yeah, I don’t have a spare grand to toss at the search engine giant.
That’s when apps like Stash Invest come into play. Instead of needing the entire amount for a single stock, you can invest in portions of a greater whole. This means that even a $100 investment can get your savings started.
If you invest 10% of everything you make as soon as the money is available in an ETF, there is a greater chance you’ll be able to pay off next years taxes without breaking a sweat. In fact, you may generate enough in dividends that you may not need to pull out the entire thing to pay off the IRS. This helps get a retirement fund started.
Would a savings account be safer?
Sure. Savings accounts do not have the same volatility as the stock market. However, most savings accounts only generate between 0.05 to 1.0% compounded interest. That’s really not a lot of money when you think about it.
In the mean time, my Stash Invest account has grown 1.39% in the past week. I can already pull out that $0.14 it has generated, which is something you wouldn’t see from a $10 amount in a savings account over 7 days.
Strength in Numbers
The main point to using ETFs to act as a placeholder for your money is because the returns are faster than a savings account. And, because these traded funds are composed of many companies, there is a far less chance of losing your money if companies start to capsize.
It’s all about the strength in numbers. While you might not reap the same rewards if you buy a stock that soars in the first couple of days, you don’t have to worry too much if that one company sinks. The slack is picked up by the remaining companies within the ETF.
More Difficult to Spend
Another problem traditional savings accounts have is the ease of access. I had several savings accounts that we wound up tapping because we wanted something frivolous or we had to pay other bills. In reality, it’s just too easy to access a basic savings account and use it for random things.
When you use Stash Invest, getting the money back is a bit more convoluted. You can’t just pull it out and spend it in the same few minutes. You need to sell your stock, transfer the funds back to your bank account and then pull the money out. This whole process could take up to five business days.
The reason why this is effective is because it keeps the money out of your hands. It is far more difficult to spend on things other than taxes at the end of the year.
Control Your Future Finances
Whether you use Stash Invest or not, you need to put money away for taxes or healthcare when you’re a freelance professional. Otherwise, you could find yourself in some severe monetary distress. After all, wouldn’t it be nice to have an early retirement? It’s possible if you know where to put your money where it will work for you instead of you working for it.
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