As a business owner, you must account for and manage several types of expenses in order to keep your operations running. Categorizing these expenses can help you effectively plan your finances, maintain an organized record of all transactions, and file taxes with ease. Understanding the key business expense categories can also make it easier to identify what is and isn’t tax deductible.

In this article, we will discuss what these small business expenses are, how to categorize them, and how expense tracking can benefit your business. 

Key Takeaways

• Key expense categories for small businesses include utilities, insurance, and taxes. 
• When categorizing and tracking expenses, business owners should consider setting up a separate bank account and using tracking software or apps.
• Tracking business expenses can offer several benefits including better preparing you for tax season and providing strategic opportunities for budget planning and tax deductions. 

What Are Tax-Deductible Business Expenses?

Tax-deductible business expenses, or “tax write-offs,” are costs that business owners can deduct from their total revenue to determine their taxable income. In essence, tax-deductible business expenses can reduce the amount of taxes you have to pay for operating and profiting from your business. 

Here are some key examples of tax-deductible expenses:

• Business use of home and/or car
• Direct labor
• Taxes
• Office or storage facility rent 
• Insurance payments
• Utilities like phone bills, internet service, etc. 

Small Business Expense Categories

Categorizing business expenses can make it easier to identify deductible items and file tax returns. Here are the main deductible expenses for small businesses to keep in mind. 

Taxes

Business-related tax expenses like state and local sales tax, state and local income tax, personal property tax, and excise tax may be deductible. 

Utilities and Rent 

Expenses paid for utilities necessary for your business to remain operational can be deductible. These expenses can include your telephone, internet, and electricity bills, and rent paid for your office and additional storage space.

Note

If you work from home and use a home office setup, you can include the cost of a computer, mobile data plan, office chair, work desk, and similar expenses for tax deductions.

Insurance

The ordinary and necessary cost of insurance can be deducted as a business expense if it is specifically for your business or trade. Examples of tax-deductible insurance expenses include insurance premiums, general and professional liability insurance, commercial property insurance, and data breach insurance. 

Vehicle Expenses 

If you use a car or a similar vehicle for business purposes, cost of ownership and operations can be tax deductible. More specifically, the cost of gas, mileage from business use, parking fees and tolls, and depreciation (though there are certain criteria for the latter) can be considered deductible expenses.  

Compensation

The wages you pay your employees or contractors for direct labor can count as a deductible business expense. 

How To Categorize Small Business Expenses

Categorizing business expenses can be helpful, but it may feel challenging and overwhelming if you have never filed business taxes before. Whether you are a new business owner creating efficient systems for expense tracking, or a seasoned entrepreneur looking to change your financial records system, here are some ways to categorize small business expenses. 

Set Up a Separate Expense Account 

Setting up a separate bank account for handling specific business expenses can make tracking easier. For example, you can pay all your phone, internet, and electricity bills through a separate “Utilities” account. 

Use Online Apps and Software

User-friendly (and often free) tracking apps and software can streamline the expense tracking and tax calculating process for small business owners. Instead of having to manually add to and maintain a spreadsheet or sort through a pen-and-paper trail of transactions, business owners can have an automated system to create invoice and expense reports, track expenses and time, and easily look up financial records and data.

Note

Examples of expense tracking software include SAP Concur, Expensify, Quickbooks, and Mint. 

Why You Should Track Business Expenses

Tracking business expenses can help you in the following ways:

• Expense tracking helps you identify tax-deductible expenses and gets you better prepared for tax season.
• A well-maintained transaction record can come in handy during business audits and inspections. 
• Regularly tracking business expenses can help you determine how you are doing financially, your business’s potential for profitability, and what needs to change. 
• Expense tracking helps you categorize and organize all the financial data essential to keep the business running. 
• Tracking business expenses also helps you budget effectively and find external funding if required. 

Note

Remember to keep records of business expenses and other business paperwork even after you file your taxes.

Gone are the days of finicky spreadsheets, yellow pages, and scratch paper to-do lists. Modern technology makes most things much easier, and owning a home is no exception. There are plenty of mobile apps available that can help homeowners make the ins and outs of owning a home a little bit simpler. Whether you need help organizing maintenance schedules or picking the perfect color for your walls, you can bet there’s an app for that.

Owning a home presents a lot of unique challenges. While many of these apps can be used by anyone, they are particularly helpful for homeowners. You can use apps to track household inventory, manage smart home features, help your lawn and garden thrive, handle home repairs, or even plan a full-scale renovation.

Under My Roof

Under My Roof is a mobile app that aims to help users organize their homes. It is geared toward people who have trouble keeping track of all the little details that come with owning a home. The app is also designed for those who want to ensure they have everything needed to file an insurance claim in the event of a disaster, such as a flood or fire. “After losing a small cabin to a wildfire,” one reviewer explained on the App Store, “my insurance company wanted a detailed inventory list before paying out on the contents portion of the policy. Needless to say, that task was difficult since I had to rely on memory and some photos … They are now scanned documents in the app … this is the only meaningful full-featured app for home contents.”

Under My Roof is a bit of a multi-tool. The app allows you to track household supply inventory, maintenance schedules, repair and renovation history, and collections (like movies or board games) as well as general information for everything you own, including warranties, purchase dates, and manuals. The app is free to download, though there is a 10-item limit for the free version. To unlock the full version, you can subscribe for $34.99 per year or $4.99 per month. This app is for iPhone, iPad, and Mac only.

Planta

Planta is an app that helps homeowners care for their gardens and houseplants. It is designed for those who love the luscious garden look but can’t seem to keep their plants alive. The app has a robust AI feature that helps users diagnose problems with their plants and create tailored care routines. “I used to be discouraged from having plants because I knew I would forget to care for [them] and have [them] die,” one user said on the Google Play store. “This app makes it easier to remember when to water, mist, add fertilizer, etc. It can even diagnose issues with your plant with their Dr. Planta feature [and] provide solutions.”

Planta works with both indoor and outdoor plants and can create a detailed care plan tailored to your home and garden. This includes watering reminders that account for local weather and climate, as well as more than 30 other parameters. The app will also send you reminders for routine plant care, such as fertilizing and misting — all personalized for your specific plants and location. It can also help you to identify plants you don’t know, and includes a space for a plant journal. The app can even use your phone’s built-in camera as a light meter to help you decide which locations are suitable for which plants. It runs on a subscription-based fee system and costs $47.99 per year. Planta can be used with both iOS and Android.

Frontdoor

Frontdoor connects homeowners with pre-qualified home-repair technicians via live video chat to assist with maintenance and repair issues. It’s designed for homeowners who feel comfortable with DIY home-repair tasks but don’t know where to start when that leaky faucet is staring them in the face. “This app is absolutely worth having for anyone — rent or own,” one reviewer said on the Google Play store. “We saved a ton of money on fixing the furnace on a holiday weekend. The app was easy to navigate, he was patient and professional, and walked me [through] every step, including helping me grab the correct tools out of my toolbox.”

Beyond the video chats with home-repair experts, Frontdoor also includes a library of how-to tips as well as a list of vetted professionals in your area who can come out and help if you are unable to fix the problem yourself. The app has experts available to help with tasks like electrical issues, HVAC, everyday appliance repairs, and plumbing. The free tier comes with one free chat, along with access to the library of how-to articles and several discounts on home essentials. The premium version of the app is $149 per year and comes with unlimited video chat sessions and more extensive discounts. Frontdoor works on both iOS and Android.

Sweepy

Keeping a clean home is easier said than done. Household chores are just one of those things that never seem to end — finish washing the final dish, and a new stack inevitably appears the moment you turn your back. There are plenty of cleaning hacks to keep your home tidy, but sometimes you just need that extra push. Sweepy is an app that helps homeowners keep their homes clean and organized and provides motivation by turning cleaning into a game among family members.

Sweepy automatically generates a cleaning schedule for your home based on the parameters you set, including how much you can clean each day. It also lets you split chores among household members so everyone can compete for the top spot on the household leaderboard. The premium version is priced at $3.99 per month or $19.99 per year. There is a free tier that allows you to manually create a cleaning routine with pre-added tasks or custom tasks, but it doesn’t include the automatically generated schedule or gamified elements. Sweepy is available for both iOS and Android.

iScape

Hoping to tackle some landscaping projects to boost home value? Landscaping your own home can be a bit intimidating, especially when you have a vision but don’t know where to start. The iScape app helps homeowners design and preview landscaping plans before breaking ground on a new project. It is unique because it uses augmented reality to let you experiment with different options before ever picking up a shovel.

To use the augmented reality feature, users can take a photo of their yard and then browse the app’s database to add plants and hardscaping elements directly to the photo. This creates a 2D model of their landscaping plans. From there, you can make a complete inventory of materials needed to bring your vision to life. The app has a limited free tier that allows users to make and save up to two designs and includes some access to the app’s database and other features. For $29.99 per month or $299.99 per year, you get full access to iScape’s database and features, a proposal tool, and the ability to upload your own images. The apps work on both iOS and Android.

Houzz

Houzz is a home design app that allows you to browse for renovation and design inspo. The app is geared toward homeowners who like Pinterest but want something more focused on design and that connects them directly with local professionals. “This app has given me wonderful ideas for organizing, decorating, remodeling, and even gardening,” one reviewer said on the Google Play store. “It is so enjoyable to read about home decor and how others have remodeled on a tight budget.”

The Houzz app allows users to explore and save design inspiration ideas, find local professionals, and view products using the “View in My Room 3D” feature, an augmented reality tool that works with a phone camera to see what products will look like in a particular home. The app is free for homeowners and works for both iOS and Android.

Itemtopia

If you have a home, you probably have a lot of stuff in it. Itemtopia allows homeowners to track and organize information for all of their belongings. Users can inventory everything they own and add information such as receipts, warranties, insurance policies, and other important documents. “After using this app for over a year, I can honestly say I’ve never had this kind of excellent support from a developer,” a reviewer said on the Google Play store. “The app itself is a fantastic collection of superb capabilities to track everything about my home assets for both insurance purposes, but more importantly to me, being able to find things that I have tucked away somewhere and prevent me from buying duplicates of things I already own.”

This app is a great way to manage your belongings. Users can track the location of an item (like when you let someone borrow something), how much it’s worth, add photos and videos, and more. There is also an AI feature that allows users to ask questions about their belongings, including how to fix or maintain them and what their current value is. The app has a robust free version. Purchasing a premium subscription adds the ability to print QR codes and export data. Itemtopia works with both iOS and Android.

Color Portfolio

Color Portfolio by Benjamin Moore allows homeowners to see what paint colors will look like in real photos of their home. It can also match your favorite colors to Benjamin Moore paints, so you never have to wonder what shade to use for your room again.

Color Portfolio has a virtual library of Benjamin Moore colors. With the app, you can virtually “try on” colors using a photo of a room in your home. The app is free to use, though there is a physical tool (called a ColorReader or ColorReader Pro) that is available for purchase to use with the app. The ColorReader tool allows users to get a more precise match than is possible with photos alone. Color Portfolio is available on both iOS and Android.

Nextdoor

Nextdoor is an app that connects neighborhoods, allowing neighbors to get safety alerts, get together for events, share favorite local spots, buy and sell items, and more. “Nextdoor is a great neighborhood network that truly brings communities together,” one reviewer said on the Google Play store. “It makes it easy to stay connected with neighbors, share important updates, ask for recommendations, and support one another. The platform creates a sense of trust and belonging by focusing on real local connections.”

The app is essentially a neighborhood-specific social media platform. It provides neighbors with a feed of news stories from local publishers, local safety alerts, and a place to share and learn about local favorites — things like where to hike, favorite coffee shops and hangouts, and even trusted local professionals like babysitters or electricians. There is also a marketplace where neighbors can list items they would like to sell or give away for free, and a calendar for neighborhood social events like BBQs and other gatherings. Nextdoor is free to download and join. It is available for both iOS and Android users.

Photo Measures

There are many reasons to keep measurements on hand if you own a home. Digging through the notes app in your phone in the aisle of a store when you need to know if a piece of furniture will fit in that one empty spot can be time-consuming and stressful. Photos Measures allows homeowners to take photos of rooms, furniture items, or anything that needs to be measured. From there, you can add measurements directly to the photo itself for easy reference.

“[Photo Measures] allows you to directly lay measurements on top of existing photos, which not only looks more professional; it also helps with intricate details that would otherwise have been missed or misinterpreted,” one user said in their review on the Google Play store. “I highly recommend this app! It’s easy to use and to understand, while also having several tools available to you in a streamlined and intuitive package.” The measurement photos can be saved in the app or exported as a PDF or JPEG file and then printed or shared. Photo Measures is a $4.99 one-time purchase on Google Play or $6.99 in the App Store.

ToolBox

Can’t find your tool kit? Why not turn your phone into a pocket-sized toolbox? Though they may not replace the real thing, many phone apps work just fine in a pinch when you need to finish that perfect gallery wall and your level is nowhere to be found. ToolBox is a five-in-one carpenter kit for your iPhone or iPad. This is useful for homeowners doing projects in their homes, like renovations or even just hanging pictures.

The app gives you a bubble level, a bullseye level, a protractor, a plumb bob, and an AR ruler. It is useful for simple projects around the home, like hanging pictures, leveling shelves, measuring angles, and checking the verticality of furniture. The premium version is 99 cents per month or $7.99 for a one-time purchase. The free version allows access to the bubble level only. ToolBox is available for Apple users.

Home Assistant

There are a million ways to make your home a smart home, but how do you keep track of them all once you’ve started accumulating devices? Home Assistant is an open-source smart home hub designed for this purpose. This companion app allows users to access and control smart home devices from multiple brands remotely. 

With Home Assistant, you have access to all your smart home features without having to jump from branded app to branded app. This allows you to automate heating, manage security, detect leaks or a door left open, check battery levels, control lights, and more from a single central hub. The app connects with a Home Assistant account and is open source and free. It’s available in both the App Store and the Google Play store.

My Lawn

Maintaining the perfect lawn can feel like a Herculean task — especially when there are so many recommended tools for healthy green grass. For many homeowners, it can be hard to know where to start. My Lawn is a lawn care app from Scotts that lets you create customized lawn care plans, diagnose and fix problems, track water use, and learn tips for growing the best lawn possible.

My Lawn can help you decide which products you need to keep your lawn healthy and weed-free, and tell you when to apply them. The app can also help you calculate the size of your lawn, so that you know how much of each product you need to apply. It also lets you track water usage and has a library of lawn care tips. The app is free to use and works with both iOS and Android. Scotts lawn care products can be purchased directly through the app.

Basements offer a coveted, spacious area to relax and spend time with your family. Whether you choose to make this space into a game room or a home theater, it can be challenging to make the lower level of your home feel truly cozy. Basement rooms tend to be notably colder than the rest of a house, and you might wonder if it’s normal how frigid this space can feel. We spoke to a home heating and cooling expert to get the inside scoop on why a basement might be cold and how to keep your home warm and cozy.

“Basements tend to be a naturally cold place within the home because they’re typically constructed with concrete, which absorbs and retains cold — especially during the winter months — and they often lack sufficient insulation to prevent heat loss,” Steve Clemente, president and COO of One Hour Heating & Air Conditioning, shared with House Digest in an exclusive interview.

There are a lot of factors that can play into why a basement might be cold. To tackle this issue, it’s vital to understand these causes and rule out any potential underlying issues. “Cold air also naturally sinks, while warmer, lighter air rises, leaving lower levels of the home like basements and ground floors feeling noticeably cooler than upper levels,” Clemente emphasized. “Basement temperature issues can also be tied to broader home comfort challenges, including reduced HVAC performance caused by blocked vents or filters, as well as leaks or damage within the ductwork.”

When is a cold basement an issue?

There is no need for immediate concern if your basement is cold. Most basements will be a bit cooler than the rest of your home. There are, however, certain factors that may raise concern. Structural and HVAC issues are problems you should rule out to ensure your space is truly just a normal, cold basement.

“If a basement is simply naturally cold, and there are no structural concerns such as cracks in the foundation or insulation gaps, and the home’s HVAC system is operating efficiently, homeowners who don’t mind the lower temperature may not need to take action,” expert Steve Clemente shared exclusively with House Digest. “However, if the cold temperature is caused by structural concerns, blocked vents or filters, leaks within the ductwork, or other HVAC inefficiencies and damage, it’s important to address the issue.”

If you have an HVAC issue in your basement, this will impact your entire home. You may be dealing with a larger efficiency issue that you’ll need to consult a professional about as soon as possible. Clemente warned that failing to address HVAC problem can lead to “higher energy bills, humidity and air quality issues, frozen pipes, and even system breakdowns.”

How to address issues with a cold basement

HVAC professional Steve Clemente explained exclusively to House Digest, “To ensure the home’s HVAC system is operating safely and efficiently, and there are no larger home comfort concerns at play, homeowners should schedule a seasonal evaluation with a trained technician … An HVAC technician can inspect your system’s vents and filters to ensure they’re clean and unblocked, assess ductwork for leaks or damage, and address any other issues that may be preventing the system from heating the lower levels of the home effectively.”

Once a trained professional rules out any pressing issues such as air leaks or foundation cracks, you can explore other solutions if you want a warmer basement. For instance, you can have a professional add or extend registers for more efficient heating. You can also opt for a good old-fashioned space heater. However, Clemente warned that while they require no professional installation, they can be less energy efficient for larger spaces and can’t be left on for long stretches of time. 

Luckily, there are other easy ways to heat a basement without an electrical space heater. “Sealing cracks along the foundation of the home and adding or improving existing installation are other cost-effective steps that can help prevent heat loss and make a noticeable difference in basement temperature levels,” Clemente explained. He went on to mention pellet stoves as another type of energy-efficient, low-maintenance heating solution to explore

Market ups and downs are a normal part of investing. But once you hit retirement, those swings feel a lot riskier—especially when you’re pulling money out of your portfolio. That’s where a volatility buffer comes in.

Think of it as a backup plan that gives you income during market downturns. A properly designed volatility buffer strategy can help you maintain steady income during bear markets—without having to sell investments at a loss.

In this post, we’ll break down what a volatility buffer is, how it works, and why it could be the safety net your retirement plan needs.

🔑 Key Takeaways

• Sequence of returns risk can derail your retirement if losses hit early.
• A volatility buffer provides stable income during market downturns.
• Common buffer tools: cash, short-term bonds, annuities, IULs, and more.
• Set clear triggers for when to use and refill your buffer.
• Diversification or bonds alone aren’t enough—buffers add protection.

The Problem: Sequence of Returns Risk

When you’re saving for retirement, average market returns matter. But when you’re withdrawing money in retirement, the order of those returns matters even more.

This is called sequence of returns risk—and it can crush a retirement portfolio if poor market performance hits early on. Even if your long-term average return is the same, bad timing in the early years can cause your savings to run dry far too soon.

Research shows that:

• Retirees who face negative returns in the first 5 years of retirement are over 30% more likely to deplete their assets prematurely than those who face losses later.
• For a 60/40 portfolio withdrawing 4% annually, starting retirement during a bear market can reduce the success rate of the plan by 20–25%.

That’s why a strategy like a volatility buffer isn’t just a luxury—it’s essential protection against bad timing.

What Is a Volatility Buffer?

A volatility buffer, as the phrase suggests, is a buffer against market volatility—a financial cushion that helps retirees weather market downturns without derailing their income plan.

Instead of selling investments at a loss, you pull from this buffer to maintain income and give your portfolio time to recover.

A volatility buffer can:

• 💸 Keep your income steady during market dips
• 🚫 Prevent selling investments at a loss
• 📉 Reduce the risk of running out of money
• 🛡️ Protect your long-term retirement plan

It’s a simple strategy with powerful results—especially when combined with a well-thought-out withdrawal strategy.

Types of Volatility Buffers

There’s no one-size-fits-all approach to building a buffer for retirement income stability. It’s about choosing reliable, non-market-correlated assets that you can lean on during rocky times. Common types include:

1. 💵 Cash Reserves – High-yield savings accounts represent the most straightforward buffer option. They offer FDIC protection up to $250,000 per account, complete liquidity, and competitive interest rates that often adjust with Federal Reserve policy changes. The primary advantages include safety, accessibility, and simplicity.
2. 📄 Short-Term Bonds or Bond Ladders – Short-term bonds are a popular choice for a volatility buffer since they’re less sensitive to interest rate changes than long-term bonds. A bond ladder takes this further by spreading investments across staggered maturities—like one, two, and three years—providing regular access to cash for income or reinvestment.
3. 🛡️ Fixed Indexed Annuities – FIAs offer principal protection with the potential for market-linked growth. Your principal is guaranteed by the insurer, while returns are based on index performance. As part of the evolution of annuities, FIAs blend traditional income guarantees with modern market-linked growth—making them a smart fit for long-term volatility buffer strategies.
4. 👨‍👩‍👧‍👦 Cash Value Life Insurance – An IUL for retirement builds cash value that can be accessed tax-free through policy loans, offering a tax-efficient buffer during market downturns. This allows you to borrow against the policy without triggering taxes, while still maintaining a death benefit and insurance coverage.
5. 🏡 Reverse Mortgages – For retirees with substantial home equity, a reverse mortgage line of credit offers a unique buffer strategy. It provides tax-free access to cash without selling your home or adding monthly payments. While not for everyone, it’s a valuable option to consider as part of your retirement toolkit.

How to Use a Volatility Buffer in Retirement

A volatility buffer isn’t just about having extra cash—it’s about knowing exactly when and how to use it to cover expenses in retirement and protect your long-term income plan.

To make the most of your buffer, set up activation triggers—specific conditions that tell you when to pause portfolio withdrawals and use your buffer instead. Then, just as importantly, define recovery triggers to guide when to return to normal withdrawals.

🧭 Set Clear Activation Triggers

Having rules in place removes the guesswork and helps you act rationally during emotionally charged market events. Here are three types of triggers to consider:

1. 📉 Market-Based Triggers: Use your buffer when the market experiences a significant drop. Examples:
   • Major index (e.g., S&P 500) declines 10% or more
   • Market enters official bear market territory (down 20% or more)
   • 3-month rolling average return is negative

Why it works:
Protects you from selling stocks during deep downturns and gives your portfolio time to recover.

2. 📊 Portfolio-Based Triggers: Base it on the value or condition of your personal retirement accounts. Examples:
   • Your total portfolio falls 10%+ from its last high
   • Your equity allocation drops below a pre-set threshold
   • Your withdrawal rate (as a % of remaining assets) jumps above 5–6%

Why it works:
Customizes the trigger to your personal situation, not just market headlines.

3. 💵 Income Need Triggers: Use your buffer when your portfolio can’t safely meet your income needs without exceeding a sustainable withdrawal rate. Examples:
   • Your planned withdrawal for the year exceeds 4–5% of your portfolio
   • Market returns + income needs = projected shortfall

Why it works:
Ensures you maintain a sustainable drawdown rate over the long haul.

🟢 When to Resume Normal Withdrawals

Just as important as knowing when to activate your buffer is knowing when to switch back to your portfolio.

Recovery Triggers:

• Markets have regained pre-decline levels
• Your portfolio balance has recovered to a target value
• Positive returns resume over a 3–6 month period

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💡 Need Help Creating Your Volatility Buffer?

Creating the right volatility buffer strategy starts with knowing your income needs, risk exposure, and available tools.

A licensed financial professional can help you evaluate your options, and design a plan that protects your income through every market cycle.

Schedule a Free Consultation Today

How Much Should You Set Aside?

A common guideline is to hold 1 to 3 years’ worth of retirement income in your buffer. But the exact amount depends on:

• Your monthly income needs
• How much guaranteed income you already have (Social Security, pensions, annuities)
• Your risk tolerance and market exposure
• Whether you’re early or late in retirement

Common Misconceptions

• “I’m diversified. I don’t need a buffer.” – Diversification helps, but it doesn’t eliminate sequence of returns risk. You still need a plan for where to pull money from when markets are down.
• “Bonds are enough.” – Not necessarily. Bond values can drop too, especially in rising interest rate environments. A true volatility buffer includes safe, liquid, and stable assets.
• “Volatility buffers are only for conservative investors.” – Buffers benefit all investors by giving their riskier assets space to recover. Even aggressive investors can benefit from strategic reserves.
• “I’ll just cut spending if the market crashes.” – That sounds good in theory—but in practice, most retirees have fixed expenses. A buffer gives you flexibility without forcing uncomfortable lifestyle changes.

Final Thoughts: Build Your Buffer Before You Need It

The early years of retirement are the most vulnerable. And the best time to build your buffer is before you need it. Don’t wait for a downturn to find out your plan wasn’t as resilient as you thought.

A volatility buffer isn’t just a backup plan—it’s a proactive strategy to protect your income, preserve your portfolio, and give you the confidence to stick with your plan through any market cycle. It can mean the difference between running out of money and riding out the storm.

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Retirement has changed. Are you prepared? Learn how to build lasting and reliable income.

Frequently Asked Questions

When should I use my volatility buffer?

Use your buffer when the market is down significantly or your portfolio has lost value—especially if withdrawing from investments would lock in losses. Look for activation triggers like a 10%+ market decline or a spike in your withdrawal rate.

What’s the difference between a volatility buffer and an emergency fund?

An emergency fund is typically for unexpected expenses, while a volatility buffer is a planned reserve designed to replace income during market downturns. Both are important, but they serve different purposes.

Do I need a volatility buffer if I have a pension or annuity?

If your guaranteed income sources (like pensions, Social Security, or annuities) cover most or all of your expenses, you may need a smaller buffer—or none at all. But if you rely heavily on investments, a buffer is highly recommended.

Are volatility buffers only for the wealthy?

No. Volatility buffers benefit retirees at all wealth levels. In fact, they may be even more important for middle-income retirees, who have less margin for error. Whether you have $500,000 or $2 million saved, a buffer provides critical flexibility and protection when you need it most.

In 2010, Thomas Thwaites decided he wanted to build a toaster from scratch. He walked into a shop, purchased the cheapest toaster he could find, and promptly went home and broke it down piece by piece.

Thwaites had assumed the toaster would be a relatively simple machine. By the time he was finished deconstructing it, however, there were more than 400 components laid out on his floor. The toaster contained over 100 different materials with three of the primary ones being plastic, nickel, and steel.

He decided to create the steel components first. After discovering that iron ore was required to make steel, Thwaites called up an iron mine in his region and asked if they would let him use some for the project.

Surprisingly, they agreed.

The Toaster Project

The victory was short-lived.

When it came time to create the plastic case for his toaster, Thwaites realized he would need crude oil to make the plastic. This time, he called up BP and asked if they would fly him out to an oil rig and lend him some oil for the project. They immediately refused. It seems oil companies aren’t nearly as generous as iron mines.

Thwaites had to settle for collecting plastic scraps and melting them into the shape of his toaster case. This is not as easy as it sounds. The homemade toaster ended up looking more like a melted cake than a kitchen appliance.

This pattern continued for the entire span of The Toaster Project. It was nearly impossible to move forward without the help of some previous process. To create the nickel components, for example, he had to resort to melting old coins. He would later say, “I realized that if you started absolutely from scratch you could easily spend your life making a toaster.”

Don’t Start From Scratch

Starting from scratch is usually a bad idea.

Too often, we assume innovative ideas and meaningful changes require a blank slate. When business projects fail, we say things like, “Let’s go back to the drawing board.” When we consider the habits we would like to change, we think, “I just need a fresh start.” However, creative progress is rarely the result of throwing out all previous ideas and innovations and completely re-imagining of the world.

Consider an example from nature:

Some experts believe the feathers of birds evolved from reptilian scales. Through the forces of evolution, scales gradually became small feathers, which were used for warmth and insulation at first. Eventually, these small fluffs developed into larger feathers capable of flight.

There wasn’t a magical moment when the animal kingdom said, “Let’s start from scratch and create an animal that can fly.” The development of flying birds was a gradual process of iterating and expanding upon ideas that already worked.

The process of human flight followed a similar path. We typically credit Orville and Wilbur Wright as the inventors of modern flight. However, we seldom discuss the aviation pioneers who preceded them like Otto Lilienthal, Samuel Langley, and Octave Chanute. The Wright brothers learned from and built upon the work of these people during their quest to create the world’s first flying machine.

The most creative innovations are often new combinations of old ideas. Innovative thinkers don’t create, they connect. Furthermore, the most effective way to make progress is usually by making 1 percent improvements to what already works rather than breaking down the whole system and starting over.

Iterate, Don’t Originate

The Toaster Project is an example of how we often fail to notice the complexity of our modern world. When you buy a toaster, you don’t think about everything that has to happen before it appears in the store. You aren’t aware of the iron being carved out of the mountain or the oil being drawn up from the earth.

We are mostly blind to the remarkable interconnectedness of things. This is important to understand because in a complex world it is hard to see which forces are working for you as well as which forces are working against you. Similar to buying a toaster, we tend to focus on the final product and fail to recognize the many processes leading up to it.

When you are dealing with a complex problem, it is usually better to build upon what already works. Any idea that is currently working has passed a lot of tests. Old ideas are a secret weapon  because they have already managed to survive in a complex world.

Iterate, don’t originate.

Debt snowball can be an uplifting way to tackle debt. You prioritize loans from smallest to largest and gain motivation as you pay off debts quickly.

With the debt snowball method, you pay off your debt with the smallest balance first. Once that’s paid, you roll the amount that was going toward that bill into paying off your next-smallest debt.

With this method, you still make the minimum payment on all of your debts. The key is to add whatever extra money you can spare toward the account with the smallest balance.

The amount you’re able to pay toward debt grows as you close out loans. You know, like a snowball rolling down a hill that picks up more snow with every turn.

How to do debt snowball

1. List your debts (not including your mortgage) in order of smallest to largest balance. Ignore interest rates.
2. Pay the minimum monthly payment for every debt.
3. Calculate how much extra money you can devote to debt payoff. 
4. Put that extra cash toward your smallest debt until you pay it off — even if you are paying more interest on a different one.
5. Next, take the entire amount you were paying toward it (monthly minimum, plus the additional cash) and target the next-smallest debt.
6. As you knock off debts, you can put all the freed-up money toward the next one in line.

Debt snowball example

Let’s say you have the following debts and can add an extra payment of $200 per month:

• A $1,200 hospital bill with no interest.
• A $3,000 credit card balance at 15.9% interest.
• A $5,000 credit card balance at 22.9% interest. 

Pay the minimum on all balances, and add the extra $200 to the $1,200 hospital bill first, even though the credit cards are charging more in interest. The goal is to get quick wins and build momentum.

Who should use the debt snowball method?

Consider the debt snowball method if you’re motivated by small wins. This approach can provide the early satisfaction of seeing debts wiped out one by one.

It’s mindset over math. Sure, paying down higher-interest rate debt first makes numerical sense. But going small and actually closing out loans can give you the satisfaction to keep going.

Meanwhile, the debt avalanche strategy is more about the numbers. It has you prioritize paying off high-interest debt first to save the most money. While this method can indeed save you more over time, it can take longer to get the first debt paid off.

If your unsecured consumer debts — such as credit cards and personal loans — would take more than five years to pay, consider exploring debt relief options.

Debt snowball pros and cons

As you’re thinking about whether this is the strategy for you, consider the advantages and disadvantages.

Pros

Creates early wins.

Easy to understand and track.

Works well for people who have trouble staying motivated.

Cons

You might pay more interest than with the debt avalanche.

Not ideal if you have big balances with high interest rates.

Add ‘debt snowflakes’ to your snowball

“Debt snowflakes” are small daily savings. For example, cutting out one restaurant meal per week and putting what you’d spend there toward a debt payment is a snowflake. Pack that onto your growing snowball because every little bit counts.

Look for ways to free up more money

Speed up your snowball-rolling by putting more money toward debt. You could start a side hustle to earn more. You could also negotiate with service providers to spend less on bills like internet and cell phone.

A recent NerdWallet study found that the top two most cited debt payoff strategies for Americans who have ever had revolving credit card debt are spending less money (46%) and increasing income (35%), both of which could help you add cash to debt payments.

Additionally, you can try to get lower rates on larger, high-interest debts. Debt consolidation, which combines multiple debts into a single payment, usually at a lower interest rate, could be an option.

• You may be able to transfer a credit card balance to a lower-rate card, or one with a 0% introductory APR.
• You could also look into a debt consolidation loan.

Future-Proof Gifts: Savings Bonds for Grandchildren

Looking for a meaningful gift that stands the test of time?

Buying savings bonds for grandchildren is a fantastic way to show your love while investing in their future. Unlike toys that may break or clothes they’ll outgrow, a savings bond keeps growing—just like your grandchildren!

Savings bonds can also help teach kids about money, patience, and saving for the future. In this guide, we’ll walk you through what savings bonds are, why they’re such a thoughtful gift, how to buy them, and how to transfer them when the time is right.

What Are Savings Bonds?

Savings bonds are simple, safe investments issued by the U.S. government. Think of them as a way to loan money to Uncle Sam, and in return, the government pays you interest. Over time, the bond becomes worth more than what you originally paid.

• Series EE Bonds – These bonds double in value after 20 years.
• Series I Bonds – These bonds earn interest and help protect against inflation, so their value keeps up with rising prices.

Both types of bonds are super safe, making them a reliable choice for a child’s future.

Why Savings Bonds Make a Great Gift for Grandchildren

Savings bonds are more than just money. They’re a lesson, a promise, and a thoughtful way to say, “I’m thinking about your future.” Here’s why they’re such a great gift:

• Teach Financial Lessons – Kids learn about saving, waiting, and how money can grow.
• Build Future Value – Over time, the bond will be worth more than its original purchase price.
• Perfect for Milestones – They’re ideal for big expenses like college tuition, a first car, or other important milestones.
• Show Thoughtfulness – A savings bond lasts for years, reminding your grandchild of your love and care.
• Safe and Sound – Backed by the U.S. government, they’re one of the safest investments around.

Where to Buy Savings Bonds for Grandchildren

Gone are the days of walking into a bank to buy a paper savings bond. Today, it’s all done online through the TreasuryDirect website. This is the official U.S. government website for purchasing savings bonds and other treasury securities.

While savings bonds are no longer available in paper form at banks or credit unions, you can easily purchase them online through a simple process.

How to Buy Savings Bonds for Grandchildren: Step-by-Step

Follow these steps to buy a savings bond for your grandchildren:

1. Set Up a TreasuryDirect Account – To purchase savings bonds, you’ll need to go to the TreasuryDirect.gov website.
   • Click on Open an Account.
   • Follow the instructions to provide your name, email, and bank account information.
   • Choose a password and security questions for your account.

This will be your account for buying and managing savings bonds.

2. Set Up a Gift Savings Bond – Once your account is ready, you can buy a bond as a gift.
   • Log in to your TreasuryDirect account.
   • Click on the BuyDirect option.
   • Choose the type of bond you want to purchase – EE Bond or I Bond.
   • Enter the amount you want to spend (you can buy bonds for as little as $25).
   • Select This is a Gift and provide your grandchild’s details:
     • Their full name
     • Social Security number (ask the parents for this if you don’t have it)
   • Review the information and confirm the purchase.
3. Deliver the Gift – Since savings bonds are now digital, you won’t receive a paper bond. Instead, the bond will be held in your TreasuryDirect account until your grandchildren have their own account.
   
   To give the bond:
   • Let your grandchildren and their parents know you bought it.
   • When your grandchildren are ready, they can open their own TreasuryDirect account and you can transfer the bond to them.

If you want to give something physical, print a certificate with details about the gift. TreasuryDirect offers templates you can use to make the gift feel extra special.

Tips for Gifting Savings Bonds to Grandchildren

Here are some helpful tips to make the process even smoother:

• Start Small – You can buy savings bonds for as little as $25, so it’s affordable for any budget.
• Add a Personal Touch – Print out a gift certificate or write a heartfelt note explaining why you bought the bond.
• Think Long-Term – Savings bonds are meant to grow over time, so they’re a great choice for milestones like college or a first home.
• Check the Limits – You can buy up to $10,000 in bonds per year, per person.

Transferring Savings Bonds to Your Grandchildren

When your grandchildren are ready to manage their own money, it’s time to transfer the bond. Here’s how:

1. Ensure They Have a TreasuryDirect Account – Your grandchild (or their parent) will need to open their own TreasuryDirect account. This is a quick process, similar to how you created your account.
2. Initiate the Transfer
   • Log in to your TreasuryDirect account.
   • Select ManageDirect, then click Transfer Securities.
   • Choose the bond you want to transfer and enter your grandchild’s account information.
   • Confirm the transfer.

Once the transfer is complete, the bond will appear in your grandchild’s TreasuryDirect account. They can then decide when to redeem it.

The Bottom Line: A Gift That Grows

Giving a savings bond isn’t just about the money. It’s about planting a seed for your grandchildren’s future and showing them that you believe in their dreams. With every year that passes, the bond’s value grows—and so does the love and care behind it.

Whether you buy an EE Bond or an I Bond, your grandchildren will benefit for years to come. And who knows? One day, they might thank you for helping them pay for college or buy their first car.

So next time you’re looking for a gift, skip the toy aisle and give something that lasts. A savings bond is more than just a present; it’s a promise to help them reach their potential.

Debt snowball can be an uplifting way to tackle debt. You prioritize loans from smallest to largest and gain motivation as you pay off debts quickly.

Updated Feb 23, 2026
Fact Checked

With the debt snowball method, you pay off your debt with the smallest balance first. Once that’s paid, you roll the amount that was going toward that bill into paying off your next-smallest debt.

With this method, you still make the minimum payment on all of your debts. The key is to add whatever extra money you can spare toward the account with the smallest balance.

The amount you’re able to pay toward debt grows as you close out loans. You know, like a snowball rolling down a hill that picks up more snow with every turn.

How to do debt snowball

1. List your debts (not including your mortgage) in order of smallest to largest balance. Ignore interest rates.
2. Pay the minimum monthly payment for every debt.
3. Calculate how much extra money you can devote to debt payoff. 
4. Put that extra cash toward your smallest debt until you pay it off — even if you are paying more interest on a different one.
5. Next, take the entire amount you were paying toward it (monthly minimum, plus the additional cash) and target the next-smallest debt.
6. As you knock off debts, you can put all the freed-up money toward the next one in line.

Debt snowball example

Let’s say you have the following debts and can add an extra payment of $200 per month:

• A $1,200 hospital bill with no interest.
• A $3,000 credit card balance at 15.9% interest.
• A $5,000 credit card balance at 22.9% interest. 

Pay the minimum on all balances, and add the extra $200 to the $1,200 hospital bill first, even though the credit cards are charging more in interest. The goal is to get quick wins and build momentum.

Who should use the debt snowball method?

Consider the debt snowball method if you’re motivated by small wins. This approach can provide the early satisfaction of seeing debts wiped out one by one.

It’s mindset over math. Sure, paying down higher-interest rate debt first makes numerical sense. But going small and actually closing out loans can give you the satisfaction to keep going.

Meanwhile, the debt avalanche strategy is more about the numbers. It has you prioritize paying off high-interest debt first to save the most money. While this method can indeed save you more over time, it can take longer to get the first debt paid off.

If your unsecured consumer debts — such as credit cards and personal loans — would take more than five years to pay, consider exploring debt relief options.

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Debt snowball pros and cons

As you’re thinking about whether this is the strategy for you, consider the advantages and disadvantages.

Pros

Creates early wins.

Easy to understand and track.

Works well for people who have trouble staying motivated.

Cons

You might pay more interest than with the debt avalanche.

Not ideal if you have big balances with high interest rates.

Add ‘debt snowflakes’ to your snowball

“Debt snowflakes” are small daily savings. For example, cutting out one restaurant meal per week and putting what you’d spend there toward a debt payment is a snowflake. Pack that onto your growing snowball because every little bit counts.

Look for ways to free up more money

Speed up your snowball-rolling by putting more money toward debt. You could start a side hustle to earn more. You could also negotiate with service providers to spend less on bills like internet and cell phone.

A recent NerdWallet study found that the top two most cited debt payoff strategies for Americans who have ever had revolving credit card debt are spending less money (46%) and increasing income (35%), both of which could help you add cash to debt payments.

Additionally, you can try to get lower rates on larger, high-interest debts. Debt consolidation, which combines multiple debts into a single payment, usually at a lower interest rate, could be an option.

• You may be able to transfer a credit card balance to a lower-rate card, or one with a 0% introductory APR.
• You could also look into a debt consolidation loan.