Fixed Expense vs Variable Expense

Budgeting is the best way to get a better handle on where your money is going — which can help you get a better handle on where you’d like to see your money go.

But before you dive into the nitty-gritty of each individual line item on your ledger, you first need to understand the difference between fixed expenses and variable expenses.

As their name suggests, fixed expenses are those that are fixed, or unchanging, each month, while variable expenses are the ones with which you can expect a little more wiggle room. However, it’s possible to make cuts on items in both the fixed and variable expense category to save money toward bigger financial goals, whether that’s an epic vacation or your eventual retirement.

Let’s take a closer look.

What Is a Fixed Expense?

Fixed expenses are those costs that you pay in the same amount each month — items like your rent or mortgage payment, insurance premiums, and your gym membership. It’s all the stuff whose amounts you know ahead of time, and which don’t change.

Fixed expenses tend to make up a large percentage of a monthly budget since housing costs, typically the largest part of a household budget, are generally fixed expenses. This means that fixed expenses present a great opportunity for saving large amounts of money on a recurring basis if you can find ways to reduce their costs, though cutting costs on fixed expenses may require bigger life changes, like moving to a different apartment — or even a different city.

Keep in mind, too, that not all fixed expenses are necessities — or big budget line items. For example, an online TV streaming service subscription, which is withdrawn in the same amount every month, is a fixed expense, but it’s also a want as opposed to a need. Subscription services can seem affordable until they start accumulating and perhaps become unaffordable.

Recommended: Are Monthly Subscriptions Ruining Your Budget?

What Is a Variable Expense?

Variable expenses, on the other hand, are those whose amounts can vary each month, depending on factors like your personal choices and behaviors as well as external circumstances like the weather.
For example, in areas with cold winters, electricity or gas bills are likely to increase during the winter months because it takes more energy to keep a house comfortably warm. Grocery costs are also variable expenses since the amount you spend on groceries can vary considerably depending on what kind of items you purchase and how much you eat.

You’ll notice, though, that both of these examples of variable costs are still necessary expenses — basic utility costs and food. The amount of money you spend on other nonessential line items, like fashion or restaurant meals, is also a variable expense. In either case, variable simply means that it’s an expense that fluctuates on a month-to-month basis, as opposed to a fixed-cost bill you expect to see in the same amount each month.

To review:

•   Fixed expenses are those that cost the same amount each month, like rent or mortgage payments, insurance premiums, and subscription services.

•   Variable expenses are those that fluctuate on a month-to-month basis, like groceries, utilities, restaurant meals, and movie theater tickets.

•   Both fixed and variable utilities can be either wants or needs — you can have fixed-expense wants, like a gym membership, and variable-expense needs, like groceries.

When budgeting, it’s possible to make cuts on both fixed and variable expenses.

Recommended: Grocery Shopping on a Budget

Benefits of Saving Money on Fixed Expenses

If you’re trying to find ways to stash some cash, finding places in your budget to make cuts is a big key. And while you can make cuts on both fixed and variable expenses, lowering your fixed expenses can pack a hefty punch, since these tend to be big line items — and since the savings automatically replicate themselves each month when that bill comes due again. (Even businesses calculate the ratio of their fixed expenses to their variable expense, for this reason, yielding a measure known as operating leverage.)

Think about it this way: if you quit your morning latte habit (a variable expense), you might save a grand total of $150 over the course of a month — not too shabby, considering its just coffee. But if you recruit a roommate or move to a less trendy neighborhood, you might slash your rent (a fixed expense) in half. Those are big savings, and savings you don’t have to think about once you’ve made the adjustment: they just automatically rack up each month.

Other ways to save money on your fixed expenses include refinancing your car (or other debt) to see if you can qualify for a lower payment… or foregoing a car entirely in favor of a bicycle if your commute allows it. Can you pare down on those multiple streaming subscriptions or hit the road for a run instead of patronizing a gym? Even small savings can add up over time when they’re consistent and effort-free — it’s like automatic savings.

Of course, orchestrating it in the first place does take effort (and sometimes considerable effort, at that — pretty much no one names moving as their favorite activity). The benefits you might reap thereafter can make it all worthwhile, though.

Saving Money on Variable Expenses

Of course, as valuable as it is to make cuts to fixed expenses, saving money on variable expenses is still useful — and depending on your habits, it could be fairly easy to make significant slashes. For example, by adjusting your grocery shopping behaviors and aiming at fresh, bulk ingredients over-packaged convenience foods, you might decrease your monthly food bill. You could even get really serious and spend a few hours each weekend scoping out the weekly flyer for sales.

If you have a spendy habit like eating out regularly or shopping for clothes frequently, it can also be possible to find places to make cuts in your variable expenses. You can also find frugal alternatives for your favorite spendy activities, whether that means DIYing your biweekly manicure to learning to whip up that gourmet pizza at home. (Or maybe you’ll find a way to save enough on fixed expenses that you won’t have to worry as much about these habits!)

The Takeaway

Fixed expenses are those costs that are in the same amount each month, whereas variable expenses can vary. Both can be trimmed if you’re trying to save money in your budget, but cutting from fixed expenses can yield bigger savings for less ongoing effort.

Great budgeting starts with a great money management platform — and a SoFi Money® cash management account can give you a bird’s-eye view that puts everything into perspective. You’ll also have access to the Vaults feature, which helps you set aside money for specific savings purposes, no matter which goals are the most important to you, all in one account.

Check out SoFi Money and how it can help you manage your financial goals.

Photo credit: iStock/LaylaBird


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Source: sofi.com

Cost of Goods Sold Formula: A Step-by-Step Guide

Cost Of Goods Sold Definition
Cost of goods sold (COGS) is the cost of producing the goods sold by a company. It accounts for the cost of materials and labor directly related to that good and for a designated accounting period.

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As a company selling products, you need to know the costs of creating those products. That’s where the cost of goods sold (COGS) formula comes in. Beyond calculating the costs to produce a good, the COGS formula can also unveil profits for an accounting period, if price changes are necessary, or whether you need to cut down on production costs.

Whether you fancy yourself as a business owner or a consumer or both, understanding how to calculate cost of goods sold can help you feel more informed about the products you’re purchasing — or producing.

What Is Cost of Goods Sold?

Cost of goods sold is the cost of producing the goods sold by a company. It includes the cost of materials and labor directly related to that good. However, it excludes indirect expenses such as distribution and sales force costs.

What Is the Cost of Goods Sold Formula?

Four illustrations help explain the cost of goods sold formula, which accounts for beginning inventory, purchases, and ending inventory.

When selling a product, you need to understand the production costs associated with it in a given period, ​​which could be a month, quarter, or year. You can do that by using the cost of goods sold formula. It’s a straightforward calculation that accounts for the beginning and ending inventory, and purchases during the accounting period. Here is a simple breakdown of the cost of goods sold formula:

COGS = beginning inventory + purchases during the period – ending inventory

How Do You Calculate Cost of Goods Sold?

To calculate cost of goods sold, you have to determine your beginning inventory — meaning your merchandise, including raw materials and supplies, for instance — at the beginning of your accounting period. Then add in the new inventory purchased during that period and subtract the ending inventory — meaning the inventory leftover at the end for your accounting period. The extended COGS formula also accounts for returns, allowances, discounts, and freight charges, but we’re sticking to the basics in this explanation.

Taking it one step at a time can help you understand the COGS formula and find the true cost behind the goods being sold. Here is how you do it:

Step 1: Identify Direct and Indirect Costs

Whether you manufacture or resell products, the COGS formula allows you to deduct all of the costs associated with them. The first step is to differentiate the direct costs, which are included in the COGS calculation, from indirect costs, which are not.

Direct Costs

Direct costs are the costs tied to the production or purchase of a product. These costs can fluctuate depending on the production level. Here are some direct costs examples:

  • Direct labor
  • Direct materials
  • Manufacturing supplies
  • Fuel consumption
  • Power consumption
  • Production staff wages

Indirect Costs

Indirect costs go beyond costs tied to the production of a product. They include the costs involved in maintaining and running the company. There can be fixed indirect costs, such as rent, and fluctuating costs, such as electricity. Indirect costs are not included in the COGS calculation. Here are some examples:

  • Utilities
  • Marketing campaigns
  • Office supplies
  • Accounting and payroll services
  • Insurance costs
  • Employee benefits and perks

Step 2: Determine Beginning Inventory

Now it’s time to determine your beginning inventory. The beginning inventory will be the amount of inventory leftover from the previous time period, which could be a month, quarter, or year. Beginning inventory is your merchandise, including raw materials, supplies, and finished and unfinished products that were not sold in the previous period.

Keep in mind that your beginning inventory cost for that time period should be exactly the same as the ending inventory from the previous period.

Step 3: Tally Up Items Added to Your Inventory

After determining your beginning inventory, you also have to account for any inventory purchases throughout the period. It’s important to keep track of the cost of shipment and manufacturing for each product, which adds to the inventory costs during the period.

Step 4: Determine Ending Inventory

The ending inventory is the cost of merchandise leftover in the current period. It can be determined by taking a physical inventory of products or estimating that amount. The ending inventory costs can also be reduced if any inventory is damaged, obsolete, or worthless.

Step 5: Plug It Into the Cost of Goods Sold Equation

Now that you have all the information to calculate cost of goods sold, all there’s left to do is plug it into the COGS formula.

An Example of The Cost of Goods Sold Formula

Let’s say you want to calculate the cost of goods sold in a monthly period. After accounting for the direct costs, you find out that you have a beginning inventory amounting to $30,000. Throughout the month, you purchase an additional $5,000 worth of inventory. Finally, after taking inventory of the products you have at the end of the month, you find that there’s $2,000 worth of ending inventory.

Using the cost of goods sold equation, you can plug those numbers in as such and discover your cost of goods sold is $33,000:

COGS = beginning inventory + purchases during the period – ending inventory
COGS = $30,000 + $5,000 – $2,000
COGS = $33,000

Accounting for Cost of Goods Sold

There are different accounting methods used to record the level of inventory during an accounting period. The accounting method chosen can influence the value of the cost of goods sold. The three main methods of accounting for the cost of goods sold are FIFO, LIFO, and the average cost method.

Two illustrations help explain the difference between FIFO and LIFO, which is an inventory method of accounting for the cost of goods sold.

FIFO: First In, First Out

The first in, first out method, also known as FIFO, is when the earliest goods that were purchased are sold first. Since merchandise prices have a tendency of going up, by using the FIFO method, the company would be selling the least expensive item first. This translates into a lower COGS compared to the LIFO method. In this case, the net income will increase over time.

LIFO: Last In, First Out

The last in, first out method, also known as LIFO, is when the most recent goods added to the inventory are sold first. If there’s a rise in prices, a company using the LIFO method would be essentially selling the goods with the highest cost first. This leads to a higher COGS compared to the FIFO method. By using this method, the net income tends to decrease over time.

Average Cost Method

The average cost method is when a company uses the average price of all goods in stock to calculate the beginning and ending inventory costs. This means that there will be less of an impact in the COGS by higher costs when purchasing inventory.

Considerations for Cost of Goods Sold

When calculating cost of goods sold, there are a few other factors to consider.

COGS vs. Operating Expenses

Business owners are likely familiar with the term “operating expenses.” However, this shouldn’t be confused with the cost of goods sold. Although they are both company expenditures, operating expenses are not directly tied to the production of goods.

Operating expenses are indirect costs that keep a company up and running, and can include rent, equipment, insurance, salaries, marketing, and office supplies.

COGS and Inventory

The COGS calculation focuses on the inventory of your business. Inventory can be items purchased or made yourself, which is why manufacturing costs are only sometimes considered in the direct costs associated with your COGS.

Cost of Revenue vs. COGS

Another thing to consider when calculating COGS is that it’s not the same as cost of revenue. Cost of revenue takes into consideration some of the indirect costs associated with sales, such as marketing and distribution, while COGS does not take any indirect costs into consideration.

Exclusions From COGS Deduction

Since service companies do not have an inventory to sell and COGS accounts for the cost of inventory, they can’t use COGS because they don’t sell a product — they would instead calculate the cost of services. Examples of service companies are accounting firms, law offices, consultants, and real estate appraisers.

salary, business owners should have a well-rounded view of the costs associated with their goods sold. Following this step-by-step guide to learn how to use the cost of goods sold formula is a good starting point. As always, it’s important to consult an expert, such as an accountant, when doing these calculations to make sure everything is accounted for.

Sources: QuickBooks

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The Basics of Required Minimum Distributions: 12 Things You Must Know About RMDs

After decades of squirreling away money in tax-advantaged retirement accounts, investors entering their 70s have to flip the script. Starting at age 72, Uncle Sam requires taxpayers to draw down their retirement account savings through annual required minimum distributions. Not only do you need to calculate how much must be withdrawn each year, you must pay the tax on the distributions.

There’s no time like the present to get up to speed on the RMD rules. Once you know the basic rules, you can use smart strategies to minimize taxable distributions and make the most of the money that you must withdraw.

Here are 12 things you should consider regarding required minimum withdrawals.

When You Must Start Taking RMDs

The SECURE Act changed when you must start taking RMDs. Under the 2019 legislation, if you turned 70 ½ in 2019, then you should have taken your first RMD by April 1, 2020. If you turned 70 ½ in 2020 or later, you should take your first RMD by April 1 of the year after you turn 72. All subsequent ones must be taken by December 31 of each year.

This generally applies to the original owner of a traditional IRA, SIMPLE IRA, SEP IRA or a retirement plan, such as a 401(k) or 403(b). Roth IRAs do not have RMDs.

The RMD is taxed as ordinary income, with a top tax rate of 37% for 2021 and 2022.

An account owner who delays the first RMD will have to take two distributions in one year. For instance, a taxpayer who turns 72 in March 2021 has until April 1, 2022, to take his first RMD. But he’ll have to take his second RMD by December 31, 2022.

Taking two RMDs in one year can have important tax implications. This could push you into a higher tax bracket, meaning a larger portion of your Social Security income could be subject to taxes, or you could also end up paying more for Medicare Part B or Part D.

To determine the best time to take your first RMD, compare your tax bills under two scenarios: taking the first RMD in the year you hit 72, and delaying until the following year and doubling up RMDs.

How to Calculate RMDs

To calculate your RMD, divide your year-end account balance from the previous year by the IRS life-expectancy factor based on your birthday in the current year. 

If you own multiple IRAs, you need to calculate the RMD for each account, but you can take the total RMD from just one IRA or any combination of IRAs. For instance, if you have an IRA that’s smaller than your total RMD, you can empty out the small IRA and take the remainder of the RMD from a larger IRA.

A retiree who owns 401(k)s at age 72 is subject to RMDs on those accounts, too. But unlike IRAs, if you own multiple 401(k)s, you must calculate and take each 401(k)’s RMD separately.

You can take your annual RMD in a lump sum or piecemeal, perhaps in monthly or quarterly payments. Delaying the RMD until year-end, however, gives your money more time to grow tax-deferred. Either way, be sure to withdraw the total amount by the deadline.

Penalties for Missing RMD Deadlines

What happens if you miss the deadline? You could get hit with one of Uncle Sam’s harshest penalties—50% of the shortfall. If you were supposed to take out $15,000 but only took $11,000, for example, you’d owe a $2,000 penalty plus income tax on the shortfall.

But this harshest of penalties may be forgiven—if you ask for relief—and the IRS is known to be relatively lenient in these situations. You can request relief by filing Form 5329, with a letter of explanation including the action you took to fix the mistake.

One way to avoid forgetting: Ask your IRA custodian to automatically withdraw RMDs.

Work Waiver for RMDs

There are a number of instances where you can reduce RMDs—or avoid them altogether. If you are still working beyond age 72 and don’t own 5% or more of the company, you can avoid taking RMDs from your current employer’s 401(k) until you retire.

However, you would still need to take RMDs from old 401(k)s you own. But there is a workaround for that. If your current employer’s 401(k) allows for money to be rolled into the plan, you could do that. Doing that means you won’t need to take an RMD from a 401(k) until you actually retire. (You would still need to take RMDs from any traditional IRAs.)

Rollover to a Roth Account to Avoid RMDs

For those who own Roth 401(k)s, there’s a no-brainer RMD solution: Roll the money into a Roth IRA, which has no RMDs for the original owner. Assuming you are 59½ or older and have owned at least one Roth IRA for at least five years, the money rolled to the Roth IRA can be tapped tax-free.

Another solution to avoid RMDs would be to convert traditional IRA money to a Roth IRA. You will owe tax on the conversion at your ordinary income tax rate. But lowering your traditional IRA balance reduces its future RMDs, and the money in the Roth IRA can stay put as long as you like.

Converting IRA money to a Roth is a great strategy to start early, but you can do conversions even after you turn 72, though you must take your RMD first. Then you can convert all or part of the remaining balance to a Roth IRA. You can smooth out the conversion tax bill by converting smaller amounts over a number of years.

This can help you prevent paying more in taxes in the future. For instance, while traditional IRA distributions count when calculating taxation of Social Security benefits and Medicare premium surcharges for high-income taxpayers, Roth IRA distributions do not. And if you need extra income unexpectedly, tapping your Roth won’t increase your taxable income.

Consider a Qualified Longevity Annuity Contract

A qualified longevity annuity contract, or QLAC, is an option to lower RMDs and defer the related taxes. You can carve out up to $130,000 or 25% of your retirement account balance, whichever is less, and invest that money in this special type of deferred income annuity. Compared with an immediate annuity, a QLAC requires a smaller upfront investment for larger payouts that start years later. The money invested in the QLAC is no longer included in the IRA balance and is not subject to RMDs. Payments from the QLAC will be taxable, but because it is longevity insurance, those payments won’t kick in until about age 85.

Another carve-out strategy applies to 401(k)s. If your 401(k) holds company stock, you could take advantage of a tax-saving opportunity known as net unrealized appreciation. You roll all the money out of the 401(k) to a traditional IRA, but move the employer stock to a taxable account. You will immediately pay ordinary income tax on the cost basis of the employer stock. You will also still have RMDs from the traditional IRA, but they will be lower since you removed the company stock from the mix. And any profit from selling the shares in the taxable account now qualifies for lower long-term capital-gains tax rates.

The Younger Spouse Rule

In the beginning of this story, we gave you the standard RMD calculation that most original owners will use—but original owners with younger spouses can trim their RMDs. If you are married to someone who is more than 10 years younger, divide your year-end account balance by the IRS life-expectancy factor at the intersection of your age and your spouse’s age in Table II of IRS Publication 590-B. 

Pro Rata Payout for RMDs

If you can’t reduce your RMD, you may be able to reduce the tax bill on the RMD—that is, if you have made and kept records of nondeductible contributions to your traditional IRA. In that case, a portion of the RMD can be considered as coming from those nondeductible contributions—and will therefore be tax-free.

Figure the ratio of your nondeductible contributions to your entire IRA balance. For example, if your IRA holds $200,000 with $20,000 of nondeductible contributions, 10% of a distribution from the IRA will be tax-free. Each time you take a distribution, you’ll need to recalculate the tax-free portion until all the nondeductible contributions have been accounted for.

Reinvest Your RMD

If you can’t reduce or avoid your RMD, look for ways to make the most of that required distribution. You can build the RMD into your cash flow as an income source. But if your expenses are covered with other sources, such as Social Security benefits and pension payouts, put those distributions to work for you.

While you can’t reinvest the RMD in a tax-advantaged retirement account, you can stash it in a deposit account or reinvest it in a taxable brokerage account. If your liquid cash cushion is sufficient, consider tax-efficient investing options, such as municipal bonds. Index funds don’t throw off a lot of capital gains and can help keep your future tax bills in check.

Make an In-Kind Transfer of Your RMD

Remember that the RMD doesn’t have to be in cash. You can ask your IRA custodian to transfer shares to a taxable brokerage account. So you could move $10,000 worth of shares over to a brokerage account to satisfy a $10,000 RMD. Be sure the value of the shares on the date of the transfer covers the RMD amount. The date of transfer value serves as the shares’ cost basis in the taxable account.

The in-kind transfer strategy is particularly useful when the market is down. You avoid locking in a loss on an investment that may be suffering a temporary price decline. But the strategy is also useful when the market is in positive territory if you feel the investment will continue to grow in value in the future, or if it’s an investment that you just can’t bear to sell. In any case, if the investment falls in value while in the taxable account, you could harvest a tax loss.

Donate Your RMD to Charity

If you are charitably inclined, consider a qualified charitable distribution, or QCD. This move allows IRA owners age 70½ or older to transfer up to $100,000 directly to charity each year. The QCD can count as some or all of the owner’s RMD, and the QCD amount won’t show up in adjusted gross income.

The QCD is a particularly smart move for those who take the standard deduction and would miss out on writing off charitable contributions. But even itemizers can benefit from a QCD. Lower adjusted gross income makes it easier to take advantage of certain deductions, such as the write-off for medical expenses that exceed 7.5% of AGI in 2020. Because the QCD’s taxable amount is zero, the move can help any taxpayer mitigate tax on Social Security or surcharges on Medicare premiums.

Say your RMD is $20,000. You could transfer the whole $20,000 to charity and satisfy your RMD while adding $0 to your AGI. Or you could do a nontaxable QCD of $15,000 and then take a taxable $5,000 distribution to satisfy the RMD.

The first dollars out of an IRA are considered to be the RMD until that amount is met. If you want to do a QCD of $10,000 that will count toward a $20,000 RMD, be sure to make the QCD move before taking the full RMD out.

Of course, you can do QCDs in excess of your RMD up to that $100,000 limit per year.

Use Your RMD to Pay Your Taxes

You can also use your RMD to simplify tax payments. With the “RMD solution,” you can ask your IRA custodian to withhold enough money from your RMD to pay your entire tax bill on all your income sources for the year. That saves you the hassle of making quarterly estimated tax payments and can help you avoid underpayment penalties.

Because withholding is considered to be evenly paid throughout the year, this strategy works even if you wait to take your RMD in December. By waiting until later in the year to take the RMD, you’ll have a better estimate of your actual tax bill and can fine-tune how much to withhold to cover that bill.

Source: kiplinger.com

6 Budget Friendly Ways to Support Small Businesses

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When it comes to helping out small businesses, cash is king. The best way to make sure your local mom-and-pop bookstore or coffee shop stays in business is by shopping there as possible.

But for those of us on a budget, extravagant spending sprees aren’t always an option. So let’s take a look at some budget-friendly strategies to support your favorite small businesses.

Write Positive Reviews

During the height of the Covid-19 pandemic, one of my favorite local restaurants requested that customers leave positive reviews on Google and Yelp. Several people had recently left negative reviews, complaining about the restaurant’s mask policy. These negative reviews were dragging down their rating average.

I went online, left a five-star review and noticed that several other people had also left positive reviews. Pretty soon, their average rating was higher than it had ever been. Posting positive reviews can have huge implications for a small business to attract more visitors, especially if they’ve just opened.

If you want to support your favorite businesses without dropping massive amounts of cash, leave a review on Google, Yelp, Facebook and TripAdvisor. If you’re reviewing a restaurant, you can also go to delivery apps like DoorDash, GrubHub and PostMates to leave a review there as well.

Search for the business on Google and see where they’re listed, then post a review on as many of those platforms as possible. For example, if you bought a pair of earrings from a local maker at a craft fair, find their Etsy site and leave a review.

Make sure to be descriptive and post pictures if possible. Encourage your friends, neighbors and coworkers to also leave reviews. In a time when many small businesses are struggling to stay afloat, a few positive reviews can make a huge difference.

Share on Social Media

When you buy something from a small business, one of the best things you can do is to post a photo of the item and tag them on social media. This strategy may encourage your followers to check out the small business, follow them and even buy something.

You can try this out even if it’s been weeks or months since you purchased something. For example, if you bought a novel at your local bookstore, post a picture of you with a caption like, “Just finished this amazing book. Thanks to My Local Bookstore for always having my favorite authors in stock!”

Sometimes a business will even offer you a special coupon if you tag them, so it can help you save money on your next purchase. Not every business will offer a discount so don’t expect a special reward, but every once and awhile you may get a nice surprise or thank you from the business.

Interact with Their Social Media

Social media platforms like Facebook and Instagram don’t show posts in a linear order. They only show them based on relevancy. If Instagram thinks you won’t like a post, they may not show it to you.

Unfortunately, social media algorithms can make it hard for small businesses, especially new ones, to gain new followers. It’s much harder for them to successfully advertise if potential customers don’t see their posts.

One of the best ways to help a small business for free is to interact with them on social media. Regularly engaging with a business will show the social media algorithms that their posts deserve to be shown to more people.

You can engage by following the account, liking their posts, leaving a comment, tagging friends, watching their videos and more. Find out which social channels your favorite business uses and follow them on all of those sites.

Mention this strategy to others, because the more people that engage, the more traffic will be driven to their posts.

Answer Google Review Questions

If you ever look at Google Reviews, you may see questions from users about local businesses. If you know the answer, you can respond to the question and help drive more customers to that business. For example, if someone asks if a restaurant offers vegan entrees, you can respond if you know the answer.

Replying to these questions may seem trivial, but it spreads more information about the business and makes hesitant customers more likely to give them a try. At the very least, it can prevent the kind of unnecessary confusion that ultimately leads to a negative review.

Buy Gift Certificates

If you want to support small businesses but don’t need anything from them right now, you can buy a gift card to use later on. Before doing this, make sure their gift certificates don’t have a strict expiration date.

If you’re shopping for a friend’s bridal shower, birthday or baby shower, consider getting them a gift certificate to a small business. With the holidays coming up, you can even implement this strategy with your loved ones. They may actually appreciate the chance to pick out their own gift.

Offer Help

One of the best ways to help a small business is to volunteer your time. For example, if you’re a graphic designer, you could ask if they have design needs. Make it clear you don’t expect to be paid for your work, though they may offer you a gift card or store credit in exchange.

Sometimes you don’t even need to have special skills. Recently, a local record store needed help moving boxes from its basement to a storage unit. Anyone could come and help, and it was a free way to support the business.

What are your favorite ways to support small businesses? Let us know below in the comments!

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Source: mint.intuit.com