Author: Vishesh Raisinghani

Introducing burritos to the land of biryani is a genuinely unconventional business idea. Yet, this experiment has turned into a massive success for 35-year-old American entrepreneur Bert Mueller.

In a recent interview with CNBC Make It, the young entrepreneur described how he discovered that Mexican cuisine was a perfect match for the Indian palate, which convinced him to launch California Burrito, a fast-casual Southern California-style restaurant, in 2012.

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The company now has 103 locations across the country and generates $23 million in annual revenue.

California Burrito’s rise holds three powerful lessons every entrepreneur and investor should take notes on. Here’s the secret sauce.

Being a contrarian

Mueller told CNBC that he first visited India as a foreign student.

In 2021, just 46,000 international students were enrolled in Indian colleges, according to the British Council, making it one of the less obvious choices for studying abroad. But for Mueller, that was part of the appeal.

“I wanted to go somewhere that was radically different than the U.S. and so I decided that India was the place to be given that, first off, I loved Indian food and second, people spoke English,” he told CNBC, calling the decision “contrarian.”

This contrarian mindset has helped many investors and entrepreneurs uncover hidden gems and rare opportunities in unlikely places.

By keeping an open mind and considering unconventional options, you could boost your chances of finding a lucrative niche that few others have considered.

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Working with a margin of safety

Another secret to Mueller’s success is his cautious approach to building a business. He told CNBC that his initial estimate for startup costs was $100,000, but he raised nearly $250,000 from friends and family “to be careful.”

These additional funds gave him and his team much-needed flexibility to launch California Burritos and mitigate the risks of introducing an unproven concept to a new market. This approach mirrors Warren Buffett’s investing principle of working with a “margin of safety.”

No one can predict the future with precision, so by raising more funds than you need or investing at a lower valuation than you think is fair could be the best way to mitigate unforeseen risks.

Never quitting

Mueller admitted that his journey had its fair share of setbacks. He told CNBC that the first area manager he hired turned out to be corrupt and was colluding with vendors for kickbacks. The betrayal could have derailed the entire venture while it was still in its infancy, but Mueller says giving up wasn’t an option.

“My mom is a marathon runner, and I have that trait in me,” he said.

“You have to keep going until you’ve reached the finish line. And I never felt like quitting.”

According to psychologist Angela Duckworth, this ability to deal with failure and persevere is a key trait of high achievers in various fields. Her research indicates that grit — the ability to persevere despite challenges — is a greater predictor of success than social intelligence, IQ or even talent.

Similarly, a study published in the Journal of Global Entrepreneurship Research found that undergraduate students with higher levels of grit had greater intentions of launching their own business after graduation.

Just like Mueller, if you’re considering a new venture or a new opportunity, the ability to deal with setbacks and keep pushing forward despite adversity is a key skill you’ll need to develop.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Legendary 49ers quarterback Steve Young earned nearly $49 million playing football, according to Spotrac, but you’d never guess it from the beaten-up 2011 Toyota Sienna he drives.

In a recent interview with journalist Graham Bensinger, the two-time NFL MVP admitted he could easily afford a replacement for the car, which has 132,000 miles on it. However, he’s reluctant to let it go because of advice from his father, who always told him to “get the most out of it.” And he’s not the only Young family member who’s emotionally attached to the vehicle.

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“This is a car that the kids all grew up in,” he told Bensinger. “My youngest Laila — that seat over there with the camera is the seat that she won’t give up. That’s her seat for life … she’s like, ‘No, I love this car [and] how it smells.’”

Surprisingly, multimillionaires driving modest cars isn’t as unusual as some might think.

The modest cars of millionaires

Contrary to the common stereotype, most wealthy people aren’t driving around in flashy Ferraris and bright orange Lamborghinis. A 2022 study by Experian Automotive, found that the top car brands for households earning over $250,000 were Toyota, Ford and Honda.

Even billionaires opt for relatively inconspicuous cars. Warren Buffett reportedly drives a Cadillac XTS — no Bugatti for the Oracle of Omaha.

In other words, most affluent people who could splurge on luxury vehicles simply choose not to. Meanwhile, many ordinary consumers are stretching their budgets to the limit. A recent survey by CDK Global found that 57% of car buyers said they hit the top end of their budget, while 7% exceeded it.

The strain on consumers is also reflected in auto loan data. As of mid-2024, one in every 24 drivers with a car loan was paying more than $1,000 in monthly payments per vehicle, according to Experian — a ratio that has nearly quadrupled since 2020.

For many, the family car is becoming a significant financial burden. Here’s how you can avoid the growing auto loan crisis.

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Drive smart

For most consumers, cutting transportation costs is one of the most effective ways to improve their finances. According to a 2022 report by the U.S. Bureau of Transportation Statistics, transportation is the second-largest annual expense for the average household.

One way to reduce this expense is by purchasing a car that’s within — or even below — your means. Buying a used car, for example, helps you avoid significant depreciation and can lower transportation costs substantially. As of 2024, the average used car costs roughly $20,000 less than a new one, according to Edmunds.

To figure out whether a vehicle fits your budget, consider the 20/4/10 rule:

• Put at least 20% down.
• Choose a loan term of no more than four years.
• Keep all car related expenses below 10% of your gross income.

By setting up firm financial guardrails, you can avoid the auto loan debt trap many consumers are driving into.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Gen Z consumers across the world are so financially stretched right now they’re financing burritos with buy-now-pay-later schemes.

But their financial lives could look remarkably different in just a few years, according to a recent report by the Bank of America.

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“In roughly the next five years, they will have globally amassed $36 trillion in income, and that figure is expected to surge to $74 trillion by around 2040,” says the BofA Global Research report.

Here’s why the youngest generation in the workforce is likely to see a huge bump in prosperity — and why it could slip through their fingers.

Higher income and higher spending

The Gen Z cohort earned roughly $9 trillion in aggregate income in 2023, the Bank of America estimates. As more of this cohort enters the workforce or climbs the corporate ladder, its aggregate income could quadruple by 2030.

This group is also accumulating assets at a rapid pace. At the end of 2024, the median Gen Z American had a net worth of $86,945, according to Empower. That’s 22% higher than the previous year.

Meanwhile, some young consumers are likely to experience a boost to their personal assets from inheritances. Cerulli Associates estimates that Gen Z could inherit roughly $11 trillion in assets by 2045.

However, this generation is currently spending money at a faster rate than other generations because of the cost-of-living crisis.

Gen Z household spending is growing at a faster rate than the rest of the global population, according to Bank of America’s analysis of credit and debit card data. By 2030, this cohort could be spending as much as $12.6 trillion a year in aggregate, compared to $2.7 trillion in 2024.

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This means many younger consumers are struggling to save and piling on expensive debt. On average, a Gen Z consumer has $94,100 in personal debt, far higher than millennials ($59,180) and Gen X ($53,255), according to a recent survey by Talker Research conducted for Newsweek.

For many people in their 20s and 30s, the best way to experience the full benefit of the great wealth and income transfer is to control debt and spending right away.

Short-term sacrifices for long-term rewards

Excessive spending and borrowing could diminish Gen Z’s chances of accumulating wealth in the future, regardless of the trillions of dollars that are expected to flow to the generation over the next decade.

Creating a budget is an old but effective tool to limit discretionary spending. That can provide more room to either pay off debt or start accumulating savings.

It’s also important to resist phantom debt. Buy-Now-Pay-Later (BNPL) platforms present themselves differently from traditional credit cards, but the impact on personal finances is strikingly similar.

BNPL transaction volume is expected to surge 106% between 2024 and 2028, according to Juniper Research. This new form of debt is reshaping the consumer economy and could reshape Gen Z’s financial future if they don’t treat it the same way they would any other loan.

Considering the pace of change on the horizon, just a few years of resisting debt, living within their means, focusing on their career and building up savings could put a young person well ahead of their peers.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Most homeowners believe their insurance policies will protect them when disaster strikes. But that illusion shattered for Natalia Migal.

Testifying before the U.S. Senate, she recalled how Hurricane Helene ravaged her Georgia home, only for her insurer Allstate to offer a mere $46,000 for repairs, despite independent assessments putting the damage closer to $500,000.

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Digging into Allstate’s recent financial statements, Senator Josh Hawley questioned the company’s decision to reward the C-suite after boosting revenue and profits while policyholders like Migal struggled to get compensated for their losses.

“CEO Tom Wilson was paid $26 million,” he said during the hearing.

“Ms.Miguel can’t get her claim paid out but Tom, whoever he is, gets $26 million. Why is his salary a priority but Ms.Miguel isn’t?”

Unfortunately, Migal’s case isn’t an outlier. As evidence from policymakers and industry insiders piles up, lawmakers are ramping up their scrutiny of the $1 trillion property insurance industry.

Denied claims, undeniable profits

It wasn’t just policyholders who testified before Congress on May 13 but also claims adjusters, industry professionals who assess damages and estimate losses. Two of these adjusters testified that they faced pressure to lower their initial estimates, which alarmed the committee.

“We’ve just heard testimony here, sworn testimony from multiple adjusters, that your company ordered them to delete or alter damage estimates to reduce payouts and to make you profits,” Hawley told Michael Fiato, Allstate executive vice-president and chief claims officer, during the hearing.

“It sounds to me like you’re running a system of institutionalized fraud.”

Fiato pushed back on this accusation by highlighting the fact that insurance companies like Allstate were handling more claims because of changing weather patterns and higher frequency of natural disasters in recent years.

However, Hawley pointed out that this added risk wasn’t being reflected in the company’s financials.

“I have to notice that your profits have never been better, they’re really quite extraordinary,” he said. “Fiscal year ’24, Allstate had $64 billion in revenue; that’s 12% above the previous year.”

This growth spurt isn’t limited to Allstate. Property and casualty insurers pulled in a record $169 billion in profit in 2024, according to AM Best — a staggering 90% jump from the year before and more than quadruple their 2022 earnings.

This windfall came even as insurers hiked premiums and lobbied for laws to limit payouts, all while insisting the industry was under financial strain, according to a report by the American Association for Justice.

With this pattern in mind, homeowners and policyholders should prepare for dealing with claim denials in the event of a natural disaster.

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How to deal with denied claims

Picking up the pieces after a natural disaster is hard enough, but facing a denied insurance claim can turn a difficult situation into a financial nightmare.

To improve your chances, take the time to review your policy thoroughly and reach out to your insurer to get all the details. If you face damages, make sure you document it all and collect photographs that can be submitted to the insurance company.

If your claim is denied, National Debt Relief recommends asking for a written explanation for the denial. You can also hire a public adjuster for a second opinion and fair assessment of your property’s damages and hire a legal professional to help you appeal the denial in court if necessary.

Until insurers are held to higher standards with tighter regulations, homeowners and ordinary families must prepare for unpleasant holes in their safety net.

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Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

When many people picture someone aged 16 to 24, they imagine a student buried in books or a young adult starting their first job. But for more than 4.3 million Gen Zers, neither is true — they’re not in school, not working, and increasingly unsure where they fit in.

That’s according to the latest report by Measure of America, a project of the Social Science Research Council. The study estimates that roughly 10.9% of young U.S. adults are NEET, or "not in Education, Employment, or Training."

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The report suggests that even a temporary withdrawal from society can have lasting consequences on a young person’s life.

“It’s associated with lower earnings, less education, worse health, and even less happiness in later adulthood,” the study says.

With nearly one in ten young people facing this grim future, some are now calling for a redesign of the education system to address the issue.

Worthless college degrees

Although college is traditionally seen as the path to building a bright future, political commentator Peter Hitchens argues that this belief no longer holds true.

“In many cases, young people have been sent off to universities for worthless degrees which have produced nothing for them at all,” said the author in a recent episode of his Alas Vine & Hitchens podcast. “And they would be much better off if they apprenticed to be plumbers or electricians. They would be able to look forward to a much more abundant and satisfying life.”

Indeed, nearly 52% of job postings in January 2024 did not require a formal college degree, according to Indeed’s Hiring Lab.

Meanwhile, 39% of firms in blue-collar sectors such as manufacturing and construction said they struggled to find employees in 2024, while 37% said the employees they hired were not suitable for the job, according to Angi.

This skills gap is likely to persist as young adults still see blue-collar work as less prestigious than white collar professions.

A Jobber study conducted in 2023 found that 74% of Americans between the ages of 18 and 20 perceive a stigma associated with choosing vocational school over a traditional four-year university.

Many are willing to go into debt to finance their white-collar ambitions. American households had accumulated $1.61 trillion in total student loan debt to finance some of these degrees, according to the New York Federal Reserve.

Crippling student debt for degrees that don’t lead to meaningful employment may explain why many young adults are disengaging from society. Fortunately, efforts are underway to turn the tide.

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Plugging the gap and changing perceptions

Shifting perceptions of blue-collar work and creating clearer pathways into trades and vocational careers could be key to addressing the NEET issue.

For instance, TV host Mike Rowe is giving away $2.5 million in scholarships this year to support young people pursuing skills training.

DEWALT, a leading manufacturer of power tools and equipment for construction and industrial use, is investing nearly $4 million through its "Grow the Trades" initiative.

The funding will be distributed as grants to 166 organizations across the U.S. and Canada that are dedicated to training the next generation of skilled tradespeople, including programs focused on skilling, reskilling and upskilling workers in areas such as carpentry, electrical work, HVAC and more.

Vocational training is already gaining traction. As of late 2024, 923,000 students had enrolled in a skilled trades school, up 13.6% from the previous year, according to the National Student Clearinghouse. If these trends continue, the skills gap — and the NEET crisis — could be gradually resolved.

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Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Americans believe they need roughly $1.26 million to retire comfortably, according to Northwestern Mutual.

But many seniors are rapidly approaching retirement with far less than that figure.

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In fact, 20% of U.S. adults over the age of 50 have no retirement savings at all and 61% are worried about running out of cash after they stop working, according to the AARP.

This cash squeeze has pushed some older adults to adopt creative solutions to bolster their retirement income — including geographic arbitrage, or geoarbitrage.

Geoarbitrage means moving to regions with a lower cost of living while continuing to earn income from higher-cost areas, allowing you to save more or enhance your quality of life.

Here’s how you could apply this technique to add $100,000 or more to your nest egg.

Moving could bolster your retirement

Geoarbitrage is arguably more effective if you’re a homeowner. Selling off your primary residence and moving to a cheaper home in another part of the country could unlock tremendous cash for your retirement.

Fortunately, 61% of Baby Boomers (those currently aged 60 to 78) own their own home, according to Clever Real Estate.

Of those, 54% own their primary residence free and clear, which means they don’t have to worry about a mortgage, according to Redfin.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

Tapping into this home equity — by selling and moving out of the city or to a new state — could unlock a huge chunk of cash for retirees.

Given that the median home sells for $416,000, selling it and moving to a new home that is 25% less expensive could unlock nearly $100,000 in cash for the typical homeowner.

Geoarbitrage can also work for the 39% of Baby Boomers who don’t own homes. Excluding rent, the cost of living is more than 20% lower in Miami Beach than New York City, according to Numbeo.

That means you could move to Florida and potentially save tens of thousands every year over the course of your retired life.

Many are also considering moving to another country to secure a better retirement. According to a recent Harris Poll, nearly 26% of Baby Boomers are contemplating leaving the U.S. in the next two years, and 6% of them are serious about it. A better quality of life and easier retirement are their top priorities.

However, before you add geoarbitrage to your retirement plan, consider some of the drawbacks and caveats.

Caveats

Simply moving to another location may not be a silver bullet for your retirement woes. For instance, in some locations you might be considering geoarbitrage at the same time as most of your neighbors.

According to Zillow, there is an oversupply of 12.8 million empty-nester homes that are too big and not appealing to younger buyers.

Many of these are concentrated in cities like Pittsburgh, Buffalo, Cleveland, Detroit and New Orleans. If you live in any of these locations, unlocking your home equity might be more difficult.

In other words, the window of opportunity for your downsizing plans is rapidly shutting in certain locations.

The costs of selling and moving should also be considered if geoarbitrage is an element of your retirement plan. Brokerage fees, transport costs and renovations to your new home could all quickly eat into your nest egg.

You may also want to consider all the downsides and pitfalls of geoarbitrage that go beyond finances.

For instance, would you truly enjoy living in a state that is cheaper but much further away from your friends and family? Do you want to learn a new language in your senior years? Would you need to make compromises on medical care and assisted living if you decided to move?

Your time, savings and income are all limited in retirement, which means once you move you might not have much flexibility to reverse this decision. So if you plan to apply this strategy, proceed with caution.

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• How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement

Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

According to the 2025 Northwestern Mutual Planning & Progress study, the average American now believes they need $1.26 million to retire. That’s $200,000 less than they said they needed last year and nearly the same as the figure quoted in 2022.

The fact that the target hasn’t moved much in the last three years hasn’t made it more accessible, however. The vast majority of U.S. adults are still falling short of this benchmark and are hurtling towards a difficult and uncomfortable retirement. Here’s why, and what you can do to help yourself reach that figure.

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Lack of savings and investments

Although most Americans agree that they need to enter the seven-figure club to retire comfortably, only a small fraction of the population has actually achieved this target.

As of 2024, the U.S. was home to 7.9 million millionaires, according to Capgemini Research. That’s roughly 3% of the country’s total adult population, which means that 97% of Americans haven’t yet reached millionaire status. And keep in mind: that figure includes people of all ages and wealth levels, not just those nearing retirement. Several factors contribute to this shortfall. While some Americans may not prioritize retirement savings, many face barriers that make it difficult to set aside money, including rising housing costs, student loan debt and inflation. Even those who are diligently saving can find it challenging to keep up with the growing cost of a comfortable retirement.

Starting early is key to saving for retirement

Although 97% of people aren’t millionaires, many could meet that target eventually if they start investing at a young enough age.

A 20-year old, for instance, needs to invest just $330 a month into an asset class that delivers a steady 7% annual return to reach $1.26 million by the time they turn 65. Having the luxury of time significantly boosts your chances of becoming a millionaire.

This doesn’t mean it’s too late for middle-aged savers, but it takes a significantly greater investment. If a 50-year-old hasn’t started saving for retirement, they’d need to invest $3,958 a month at a steady 7% return to reach $1.26 million by retirement.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

The real ‘retire comfortably’ number will be unique to your situation

Saving $1.26 million doesn’t guarantee a comfortable retirement for everyone. For example, if your net worth is $1 million but your annual living expenses are $200,000 or $300,000, you need much more than $1 million in savings to continue living the same lifestyle in retirement.

In fact, two thirds of millionaires don’t consider themselves “wealthy” and half of them say their financial planning needs improvement, according to another study by Northwestern Mutual. In short, being a millionaire doesn’t mean you’re ready for retirement.

If you live in a state or another country with a lower cost of living, your target might be smaller. According to Empower’s calculations of tax burdens and costs of living, states like Alaska and New Hampshire might be ideal for retirees looking to minimize their expenses. Try using a retirement calculator or consulting a financial planner to determine your personal target. With enough time and meticulous planning, you can be on track for almost any type of retirement you might want.

What to read next

• JPMorgan sees gold soaring to $6,000/ounce — use this 1 simple IRA trick to lock in those potential shiny gains (before it’s too late)
• This is how American car dealers use the ‘4-square method’ to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs
• Here are 5 ‘must have’ items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
• How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement

Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

For a man who built a media empire out of hot takes and hustle, Dave Portnoy’s biggest money lesson is surprisingly simple: “Once you get it, it’s easy to get a lot more," he told Shannon Sharpe on a recent episode of the Club Shay Shay podcast.

The entrepreneur, who sold his company Barstool Sports to Penn Entertainment for about $500 million only to buy it back for $1 a few years later, says it took him a decade to accumulate his first million. But once he did, making money became significantly easier and he now claims to be able to generate $5 million in a week.

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"Once you get over the hump it just comes [to you]," says the 48-year-old online influencer.

Here’s why wealth creation can accelerate after you hit certain milestones.

The ultra-rich rely on the snowball effect to build wealth

Portnoy is referring to compound growth, a key strategy used by many to grow wealth. The late Charlie Munger often described it as “getting a snowball rolling down a hill.”

The snowball effect helps to explain why wealth creation accelerates once a person has hit certain financial milestones. An investor who starts off with no money and invests $1,000 a month in an asset that generates 10% annual returns would make $100,000 in 6.5 years. But with compound growth, that $100,000 would take just four years to grow to $200,000, and just three more years to reach $300,000.

This is because an investor with $100,000 is earning returns not only on their monthly contributions but also their accumulated wealth.

Put another way, an investor with $100 million in net worth can easily generate $5 million quickly — perhaps within a week — because they would need to earn just 5% on their assets to do so.

In fact, Portnoy admitted during the interview that he once “spent five hours just talking about the interest" he was earning on his cash after he got rich. "I couldn’t believe it, I was making money not doing anything."

This is why your early financial milestones are so critical in your long-term wealth creation journey: the earlier you start investing large amounts of money, the longer it has to grow with the most growth opportunity.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

How to set clear targets to build wealth

If you want to reach that tipping point where wealth builds itself, you need a strategy, and that starts with setting smart, achievable goals. Think of your first major milestone, such as $100,000 in assets, as the start of your personal snowball.

However, it’s essential that you consider your age, lifestyle and location while setting financial targets. A 60-year-old in San Francisco may need far more, while a 20-something in Detroit could be ahead of the curve with far less.

Once you’ve got a target, the next step is making sure your money is actually working. Keeping a large sum in a savings account earning a low interest won’t get you anywhere. And stuffing it under your mattress would be even worse. Inflation will eat away at your purchasing power every year.

Instead, build a portfolio that’s designed to grow. That might mean investing in stocks, ETFs, real estate or even alternative assets. The key is finding the right mix of risk and reward for your goals.

If you’re not sure where to start, talk to a financial advisor or planner who can help you set targets, diversify your assets and stay on track. Because once you hit that first big number and let compound growth kick in, you might find your money growing a lot faster than you expected.

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Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

After rushing to file your taxes before the April 15 deadline, the fantasy of living in a world without the Internal Revenue Service (IRS) might feel especially tempting.

It’s certainly on the mind of President Donald Trump, who wants to “abolish the IRS,” according to Commerce Secretary Howard Lutnick.

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Given this administration’s history of bold and sometimes outlandish ideas — from threaten to use force to invade Greenland to abolishing the Department of Education — their stated goal shouldn’t be dismissed outright.

Here’s how Trump and his allies in Congress are already taking steps to dismantle the national tax agency, and what that could mean for your finances.

Trump’s plan

The Trump administration has already taken tangible steps to disrupt the IRS. According to the Associated Press, the agency has seen three leadership changes in a single week and is expected to lose tens of thousands of employees due to layoffs and voluntary retirement offers.

Abolishing the IRS entirely, however, poses a major challenge: how would the government fund its operations? Trump and Lutnick have proposed that tariffs, collected through a newly formed “External Revenue Agency” could replace the IRS.

“Let all the outsiders pay,” Lutnick said on Fox News.

But the math doesn’t add up. In 2023, the U.S. imported $3.1 trillion worth of goods but collected about $2 trillion in personal and corporate income taxes. According to the Peterson Institute for International Economics, “it is literally impossible for tariffs to fully replace income taxes.”

Republicans in Congress are proposing an alternative plan: replacing income tax with a national sales tax. Representative Earl "Buddy" Carter introduced the FairTax Act of 2025, which calls for a tax-inclusive rate of 23% beginning in the 2027 tax year.

However, the Tax Policy Center estimates that for every dollar spent, this would amount to taxpayers paying about 30 cents in federal sales tax for every dollar spent.

Whether these proposals will ever be fully implemented remains unclear. However, with serious discussions underway about tariffs and consumption taxes — and with the IRS facing significant internal disruption — American consumers should start preparing for the potential fallout.

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5 impacts on your finances

Experts say the Trump administration’s attempts to replace income taxes with tariffs or sales taxes could have five impacts on your personal finances.

• 1. Higher Costs: Perhaps the most noticeable impact is on costs. Tariffs and sales taxes raise the price of goods and services. As of April 9, the Yale Budget Lab estimates that the current tariff policies already cost the average household an additional $4,700 per year. Sales taxes are even more visible, showing up as a separate line item on receipts. Under the proposed 23% sales tax, a $30,000 car could cost $36,900.
• ** 2. Regressive Effects:** This shift would disproportionately impact lower-income households. A CEO earning millions may not feel the pinch of a price hike on a new car, but for a working family, that increase represents a significant portion of their annual income. The Peterson Institute’s analysis shows that the cost burden on low- and middle-income households is much greater than on the top 10% or 1% earners.
• 3. Market Volatility: Stock and bond markets could react negatively if the government’s revenue drops and isn’t fully offset by tariffs or sales taxes. A widening deficit could shake confidence and hit retirement portfolios, according to the Yale Budget Lab.
• 4. Risk of Recession: JP Morgan estimates a 60% chance of a recession triggered by an escalation in the trade war. A downturn, combined with rising prices and potential job losses, could mean families face the worst of both worlds: higher costs and lower income.
• 5. Job Losses: As industries react to higher tariffs and reduced consumer spending, layoffs could increase. Households may need to prepare for reduced job security in an already uncertain economic climate.

In light of these risks, it’s wise to revisit your financial plan. Consider expanding your emergency fund and adding a margin of safety to your family’s annual budget.

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Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

After paying off a staggering $350,000 in debt in just 2.5 years, Dustin and his wife are within striking distance of financial freedom. They have a plan to quickly eliminate their last remaining loan, but there’s one major hurdle.

The Palm Springs, California-based couple wants to sell their primary home and use the proceeds to pay off their vacation home, which would then become their main residence. However, the vacation home was financed with a $500,000 seller-financing note from Dustin’s friend, who refuses to accept early repayment.

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“What we want to do is sell our primary home and move into the vacation home, which we like better anyways,” Dustin explained on a recent episode of The Ramsey Show. “The net proceeds from selling our main house will pay off our vacation home, which will become our primary residence.”

This move would make them debt-free, but their friend’s unwillingness to accept early repayment complicates the situation.

The unusual situation highlights how borrowing money from friends and family can make even the most straightforward financial decisions unexpectedly tricky.

It’s tricky, tricky, tricky

Dustin’s financial arrangement is unusual but not uncommon. According to Pew Research, as of 2021, at least 36 million homeowners relied on alternative financing structures to purchase their homes. Many of these borrowers struggled to secure conventional mortgages and turned to friends and family for financial support.

While borrowing from loved ones can offer benefits — such as lower interest rates or more flexible terms — it also come with risks, including strained relationships.

“Borrowing from friends can be a fraught endeavor due to a mismatch in expectations,” notes a study published in the Journal of Consumer Psychology.

Dustin and his friend have recently encountered such a mismatch. Based on their loan agreement, Dustin believes he has the right to repay early. However, his friend insists on maintaining the original 10-year term they agreed to so that he can spread out the payments and minimize his capital gains taxes.

“He just didn’t seem jazzed about it,” Dustin said. “And it put me in a weird situation where I’m like, ‘Man, I don’t want to burn a friendship with a guy that I’ve had a long friendship with.’”

Despite the risk to their relationship, co-hosts Rachel Cruze and George Kamel said they believe there’s only one way to logically move forward.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

Prioritize family

Although friendships are valuable, Cruze and Kamel emphasize that financial security and freedom are far more important.

“The writing’s on the wall, you have to do what’s best for you and your family,” Cruze insisted. “It’s not like you’re putting a friend into debt. Boohoo, he gets $500,000 and he’s going to have to pay some taxes on it.

“He can wipe his tears with $100 bills,” Kamel interrupted, with a laugh.

The financial and psychological benefits of becoming debt-free may outweigh the discomfort of pressuring his friend. In fact, Empower discovered that 65% of Americans financial happiness as being debt-free.

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• JPMorgan sees gold soaring to $6,000/ounce — use this 1 simple IRA trick to lock in those potential shiny gains (before it’s too late)
• This is how American car dealers use the ‘4-square method’ to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs
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Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.