Money Management

Wondering how your monthly expenses stack up to your peers? See how much money Americans are devoting to housing and more. [[{“value”:”

There are some common expenses just about every American household has, like food and clothing. But people divide up their spending in different ways, depending on their preferences and lifestyle goals.

It’s sometimes fun and perhaps even helpful to compare your own personal finances to others like you. So, take a look at what your fellow Americans are spending their money on — and take the time to both think about whether the distribution of these dollars is smart, and consider how it compares to what you’re doing with your own cash.

Here’s what Americans are spending money on

According to research from Ramsey Solutions, here’s the typical breakdown of household expenses for the average American:

33% on housing16.8% on transportation12.8% on food12% on personal insurance and pensions8% on healthcare4.7% on entertainment4.1% on other expenses3.8% on cash contributions2.7% on clothing and services1.8% on education

Housing is unsurprisingly the biggest expense many people have, but unfortunately many people are spending more on it than they should. Most financial experts recommend keeping total housing costs to around 30% or less of your budget — but Ramsey’s data shows most people are spending more than that amount. Unfortunately, paying a mortgage or rent that eats up too much of your monthly income can make it more difficult to accomplish financial goals like saving for retirement.

Many people are also spending more than the recommended 10% on transportation, as evidenced by the fact that typical Americans indicated 16.8% of their money is going toward getting around.

It’s not surprising that people are spending a lot on these areas. Housing costs and the price of automobiles have both gone up in recent years, as mortgage rates and home prices skyrocketed, semiconductor chip shortages disrupted the auto market, and used cars were in short supply. Unfortunately, the fact people are devoting such a large portion of their funds to these necessities does leave a lot less for saving and also for fun spending.

Should you spend like a typical American?

It can be helpful to compare your spending to your peers to see if you’re going way overboard in some areas. For example, if you’re spending 15% of your income on entertainment while most people are only spending about 4.7%, you probably are going a little bit overboard in this area and could find some cuts to make.

But in general, you don’t necessarily want or need to spend your money like everyone else. You should aim to follow the general rules of thumb most people aren’t following — like keeping housing and transportation costs to 30% and 10% of income respectively. That’s important, because otherwise these fixed expenses can eat up too much of your money.

But beyond that, as long as you’re saving enough (ideally 20% of your income) and are keeping the bills paid, you should allocate your funds to the things that make you happiest. If you don’t care about clothes at all, for example, but you’re a bit of a foodie, then you might want to keep clothing expenditures far lower than the typical person and redirect more of that money to dining.

The important thing is to make a conscious choice — often by creating a budget — to spend your money in the way that provides the most value to you. Think about what brings you joy, and what you hope to accomplish with your hard-earned funds, and prioritize those spending categories as the biggest part of your budget.

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Emergency expenses can arise at any time. But that doesn’t mean you have to raid your savings the moment one pops up. Read on to learn more. [[{“value”:”

As a parent, homeowner, pet owner, and vehicle owner, I’m no stranger to emergency expenses. In fact, even as I type this, I’m gearing up to take my dog to the vet’s office for follow-up testing on an issue we’re monitoring. I have no idea what it’s going to cost me, but even with pet insurance, I can expect to be shelling out something.

Meanwhile, earlier this week, my daughter needed an urgent care visit that will likely result in a several hundred dollar bill. And while I haven’t had any home- or vehicle-related expenses pop up so far this month, well, March isn’t over.

Clearly, emergency expenses can arise for anyone at any time. So it’s important to be prepared by having a solid emergency fund.

But because I’ve worked really hard to build my savings account balance, I won’t just rush to raid my emergency fund every time an unplanned bill comes up. Instead, I typically do these things first.

1. See if there’s a less expensive alternative my regular paycheck can handle

In some cases, a given expense I encounter may be non-negotiable. Today, for example, my dog needs to get an x-ray. I can’t just ask my vet to use their hands to feel around my dog’s body in lieu of an actual scan, so whatever the cost ends up amounting to, so be it.

But in the past, I have been able to find cheaper alternatives that my regular paycheck could handle, thereby sparing me from having to raid my emergency fund. Not so long ago, my fence was damaged during a storm. Paying someone to fix it probably would’ve forced me to take an emergency fund withdrawal. Instead, my husband bought the parts he needed, rallied some friends, and did the work himself.

2. See if I can work more

As a freelance writer, I have the opportunity to take on extra work to boost my income. So before raiding my emergency fund, I’ll always try to pick up extra projects to cover the cost of the item in question, even if that means giving up a lot of sleep and downtime.

Now sometimes, that’s just not possible. Last year, we spent $12,000 to replace the heating system in our home. There’s no way I could’ve boosted my income to the tune of $12,000 within a single month to cover that cost outright. But for smaller expenses, working more during the month sometimes does do the trick, such as when it’s a $300 medical bill.

3. Put the expense on a credit card and pay it off by the time the bill comes due

When surprise bills arise, I often pay for them on a credit card rather than just withdraw the cash from my emergency fund. Why so?

With a credit card, I earn cash back or rewards on my purchases. So the way I see it, if I’m going to get stuck with an extra expense, I might as well get a little money back on it. What I’ll then do is dip into my emergency fund as necessary to pay off my credit card to avoid accruing interest.

This system won’t always work, because sometimes, you’ll pay more to charge a given expense on a credit card. This can happen in the context of home repairs, where a contractor’s price will be higher if you use a credit card. Last year, when we replaced our heater, there was no surcharge for using a credit card. So we put that expense on our card and got the cash back, and then paid the bill in full out of emergency savings.

Don’t make raiding your savings your go-to option

It’s important to have money in the bank for surprise expenses. And if you have a fully loaded emergency fund — one with enough money to cover at least three months of essential bills — then you’re ahead of the game. That’s because as of last year, 63% of Americans didn’t have enough cash in the bank to cover an unplanned $500 bill, according to SecureSave.

But it’s also important to know when to tap your emergency fund. And in some cases, it may be possible to seek out a lower-cost alternative or increase your income to cover the expense you’re facing. Even if you’re not a full-time freelance worker like I am, if you don’t want to raid your emergency fund, you may be able to drive for Uber or DoorDash or a similar service for a month to scrounge up the cash.

And remember, if you have the money in a savings or checking account to cover your unplanned bill, it does not pay to go into debt to deal with that expense. But if you can put it on a credit card, get cash back, and then use your savings to pay off the balance in full, why not go that route and snag a little benefit?

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.

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Discover how to live luxe on a budget. From designer wardrobes under $100 to first-class flights with points. Click to learn more. [[{“value”:”

Let’s be real for a second. Landing in the top 1% of income earners isn’t a stroll in the park. With an annual paycheck of around $700,000 — give or take, depending on where you live — it’s a lofty climb. Yet, the allure of sipping martinis on a yacht or jet setting in first class without a care in the world is undeniable.

But what if I told you that you could nibble at the edges of that luxurious lifestyle without selling your soul to a corporation or inventing the next big tech marvel? Buckle up as we dive into the three most wallet-friendly ways to live like you’re part of the elite without actually having to be a part of it.

1. Rent designer clothes

First things first, let’s talk threads. Designer labels and fashion-forward pieces can catapult your style straight into the stratosphere, but who really wants to drop thousands on an outfit that screams, “I’m trying too hard”? Enter Rent the Runway. This gem lets you rent high-end fashion for a fraction of the cost.

While you can rent a single item like an $890 Badgley Mischka dress for $115, you can also get a membership ranging from $94 to $234 a month, which gives you regular access to five to 20 designer items per month.

Imagine slipping into a Versace dress for your next big event, knowing full well you’re as chic as they come — without the mortifying credit card bill. It’s like having your cake and eating it, too, but in this case, the cake is a designer wardrobe.

2. Utilize credit card reward points for first-class travel

Next up, let’s jet off to somewhere fabulous, shall we? Flying first class is a hallmark of the 1%, but those tickets can cost more than a small car. Here’s where your everyday spending comes to the rescue.

Using credit card rewards points wisely, you can upgrade your travel experience from “meh” to “wow” without the eye-watering price tag. Sign up for cards with hefty welcome bonuses and high purchase reward rates. Before you know it, you’ll be sipping champagne at 35,000 feet, wondering why you ever settled for less.

Consider the possibilities: Transferring your points to airline partners often yields the most value. Take Qatar Airways’ famous QSuite; you can book a one-way flight between the U.S. and Doha for around 70,000 Avios plus taxes and fees. Transfer your welcome bonus points plus a few months of spending 1:1 with Avios, and you’ll be jetsetting in a lay-flat bed in no time.

3. Have a virtual personal trainer

The Future app revolutionizes the personal training landscape, making the luxury of a customized fitness regimen more accessible at $199 a month. What sets Future apart from generic workout plans is the personalized attention you receive from a certified personal trainer who crafts and adjusts a workout plan just for you every week. This unique service offers unparalleled flexibility, ensuring your exercise routine evolves with your lifestyle and schedule.

Through video calls, your trainer dives deep into your fitness aspirations, the equipment you have access to, and any past injuries, building a program that’s as unique as you are. Every Sunday, your coach unveils a bespoke workout plan, drawing from a vast library of over 1,000 exercises, giving you the freedom to exercise on your own terms — anytime, anywhere.

The icing on the cake? Daily check-ins from your coach keep your motivation levels high and ensure you’re always on the right path. They tailor your program based on your feedback and biometric data, fine-tuning it to continuously enhance your fitness journey.

Living like the 1% without actually being in the 1% might sound like a dream, but with a little creativity and some smart choices, it’s closer to reality than you might think. By leveraging the tips above, you can dip your toes into a world of luxury and extravagance, all while keeping your finances firmly grounded. Who knows, you might just find that the high life suits you — but at a fraction of the cost.

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Want to make your 401(k) grow faster in 2024? Here are a few tips to get the biggest results from your 401(k). [[{“value”:”

Everyone needs to save for retirement, but beyond putting a percentage of your income into your 401(k), how can you make that money grow faster? If you want to retire comfortably, it’s important to save and invest in a way that really gets the most from your 401(k).

While you’re working hard on the job, let’s look at a few ways to make that 401(k) work harder for you.

1. Get your employer 401(k) match

Your first priority for making your 401(k) work harder should be to contribute at least enough to get the full company 401(k) match from your employer. Not every company offers a match, but many do — for example, if you put 5% of your salary into your 401(k), your company might match 50% of that amount, giving you a total of 7.5% of your salary invested in your 401(k) account.

If your company will match your 401(k) contributions, take them up on that offer. That is money that you have earned and deserve to get. Don’t leave it on the table.

2. Are you age 50 and up? Use catch-up contributions

The usual 401(k) contribution limit for 2024 is $23,000 — but if you’re age 50 or over, the IRS has a special bonus for you. People aged 50 and up are allowed to make “catch-up contributions” to their 401(k)s, in the amount of $7,500. So that means for 2024, you can put up to $30,500 into your 401(k).

Many people who are 50-plus are at a point in their careers where they’re earning more money than ever. Take advantage of your peak earning years and max out your 401(k). Especially if you’re a high earner whose income is too big to qualify for a Roth IRA or tax deductions from a traditional IRA, maxing out your 401(k) could be your best way to boost your retirement savings.

3. Invest appropriately for long-term goals

Are you investing in stocks that will (hopefully) generate larger long-term growth, or do you have too much money tied up in fixed income assets like cash and bonds? Leaving your long-term money invested in low-yield assets like cash or bonds can cause you to miss out on massive gains. Cash and bonds might not keep up with inflation; stocks can be risky in the short run, but they will often help you build meaningful wealth for the future.

As a general rule, if you have many decades left until retirement age, your 401(k) money should mostly be invested in stocks — because you need maximum long-term growth, and you have enough time to recover from possible downturns in the stock market along the way. Sometimes people are too worried about the risk of losing money in the stock market, thus they don’t invest retirement savings that “should” be in stocks.

There’s no one right answer for asset allocation. Deciding how much of your retirement savings to put into stocks, bonds, or other assets will depend on your risk tolerance, time horizon, and what helps you sleep at night. But many younger investors who still have 10-20 years (or more) to save for retirement should try to adopt a stronger comfort level with having a high percentage of stocks in their portfolio.

4. Use a target date fund

One good way to make sure your retirement savings are invested appropriately for your age is to use a target date fund, or other professionally managed asset allocation. If your company’s 401(k) plan offers it, a target date fund can automatically invest your money in an age-appropriate blend of stocks and bonds, and then gradually rebalance the portfolio as time passes and you get closer to retirement. For example, some target date funds might start out with 90% stocks and 10% bonds, and after twenty years, be at 50% stocks and 50% bonds.

Target date funds can help you get an appropriate mix of investments to get the best possible returns, while managing risks and relieving you of the burden of too much complex decision making and research about your investments. According to a 2023 Vanguard study, as of 2021, 44% of employees who had voluntarily signed up for their employer’s retirement savings plan were using target date funds or other professionally managed allocations. This was up from only 8% of employees in 2006.

More people using professionally managed allocations, whether it’s target date funds or robo-advisors, is a good sign that more people will benefit from the right blend of stocks, bonds, and other assets to grow their wealth for retirement. Taking some (smart, calculated) financial risks now by investing in stocks can pay off in the future. And missing out on stock market gains can be damaging to your retirement plans.

Bottom line

To make your 401(k) money work harder for you, start by getting every possible dollar of employer matching contributions. People who are age 50 and up should take advantage of catch-up contributions to add an extra $7,500 of 401(k) savings in 2024. Target date funds or other professional financial advisory help can get you the right blend of stocks and bonds to suit your long-term investment goals.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Certain conveniences are worth paying for. Read on to learn more. [[{“value”:”

There are certain expenses in life we all pay for due to the convenience involved. When we don’t want to walk home or wait for the bus after a long night out, we hail a ride. When we’re too tired to cook, we summon delivery or order takeout.

Sometimes, these conveniences are just that — things that make our life easier. But as a self-employed writer, there are three expenses I spend money on for the express purpose of freeing up my time so I can work. And believe me when I say that they’re all more than worth the money.

1. A house cleaner

It takes my house cleaner about six hours to make my home look spotless (or as spotless as it’s going to get when you live with kids and a giant dog). But since this is what she does for a living and is therefore efficient at it, I’m pretty sure that if I were to do the equivalent amount of cleaning, it would take me more like eight hours.

That’s an entire day of work. By contrast, the amount I pay my house cleaner is roughly the equivalent of what I can earn in an hour. Because of this, keeping her on board is an easy call — even aside from the fact that I don’t particularly like to clean.

2. A lawn mowing service

Mowing the lawn used to take my husband 90 minutes, which means I’d probably be looking at two hours — and that’s with a decent lawn mower. Our local gardening service, on the other hand, charges $900 for 30 weeks of lawn maintenance when you pay upfront, so that amounts to just $30 a cut.

Since I can earn well more than $30 in the course of two hours, it makes sense to pay for this service rather than spend the time. Also, allergic-to-everything me probably wouldn’t do well breathing in grass particles for hours at a time. While I might save myself $30 a week, I’d also likely have to spend that much on additional allergy meds.

3. An accountant

I have an accountant who does more than just help me prepare my taxes each year. He also manages my books and makes sure things are running smoothly financially.

While I definitely need the tax help, some of the other work he does is work I could possibly do myself. But the way I see it, my job is to write, not to do accounting. And my accountant knows more about accounting and is more efficient at it than I am. So even though his fees add to my expenses (and those hinge on different factors, so it’s hard to put down a single cost), they’re worth paying.

When you’re self-employed like I am, every minute you spend handling a household or administrative task is a minute you’re not working and earning money. So if you work for yourself, you may want to think about ways you can free up hours during the week to work. And if your earnings potential outweighs the expenses you’ll face, then it’s probably worth it.

Even if you’re not self-employed, if you’re in a good place financially, it’s also OK to sometimes spend money to free up hours in your schedule for downtime. If you hate mowing the lawn and paying for the service fit into your budget, why not reclaim your weekends when you work hard and deserve that break?

Every time you spend money, it comes at the cost of something else. But you may find that paying for the gift of time is possibly the best use of your money.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Struggling to keep up with payments is just one sign you may have too many credit cards. Find out some other red flags here. [[{“value”:”

Having several different credit cards is not a bad thing, as different cards have their own unique rewards programs and cardholder perks. But you can definitely have too much of a good thing.

How can you tell if the number of credit cards has gotten out of control? Watch for these key signs that you have too many cards in your wallet, so you can take action.

1. You can’t keep up with payments

Not being able to keep up with payments is an immediate red flag that you have too many credit cards. If this happens, you could miss a payment by mistake, which could do serious damage to your credit as even a single late payment could reduce your score by more than 100 points.

If you are having a hard time monitoring your spending to stay on budget and you end up carrying a balance on your cards, you could also end up paying a fortune in interest charges.

So, be sure you keep your cards to a manageable number. It’ll help you keep track of your balances so you can pay them in full, and ensure that you know when every payment is due and can pay them on time out of your checking account.

2. You lose track of cardholder benefits, perks, and rewards offers

One of the main purposes of having multiple credit cards is to take advantage of different rewards programs and cardholder perks. For example, you might have one great travel credit card that provides you with airline lounge access and that you use to book all your trips to get bonus points and miles. And you might have another card you use for gas and groceries because you get more cash back for these purchases with that card.

It makes sense to have a couple of cards to take advantage of the special features and bonus rewards that each one offers. But at some point, you may end up with so many cards that you can’t remember which to use for each purpose or what rewards each one even offers.

If you’d need to consult a list to decide which card to use when, if you regularly use the wrong card, or if you have tons of redundant perks on cards and can’t possibly use all of them, this is a good indicator that it’s time to simplify your financial system.

3. You aren’t getting enough rewards on any one card to make them worth redeeming

Finally, if you have so many cards you don’t end up accruing enough points on any one to be able to redeem your rewards, then you should cut down the number you have.

Say, for example, that you have a travel card that earns miles and you need around 100 miles on the card for each $1 of flight cost. So, to book a $300 flight, you’d need 30,000 miles. If you have so many cards you barely use your travel card, you may never build up enough miles for it to make sense to redeem.

For many people, it’s a good idea to have a few cards — maybe three to five, depending on how varied your spending is and how interested you are in maximizing your rewards. But the important thing is to keep the number manageable for you, so you can actually redeem your rewards, know which card to use when, and make your payments in full on time every time. If you can’t do that, stop using some of your cards ASAP to get things back under control.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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