Money Management

Skipping IRA or 401(k) contributions for even a single year could have major consequences. Read on to learn more. [[{“value”:”

These days, a lot of people are still having trouble paying bills and digging their way out of lingering debt. So it’s understandable that you may not have a lot of money to contribute toward retirement.

But if you don’t make a single contribution to an IRA or 401(k) plan this year, you might sorely regret it down the line. Here’s why.

When you lose the chance to grow your money

The problem with taking a year off from saving for retirement is that you lose out on the chance to invest the money you’re putting into your IRA or 401(k). Over the past 50 years, the stock market’s average yearly return has been 10%. Let’s say your portfolio can deliver the same return.

If you were to put $3,000 into a retirement plan this year and leave it alone for 30 years, you’d grow it into over $52,000. For all you know, that could be enough money to pay your retirement expenses for an entire year once you stop working. So skipping IRA or 401(k) contributions this year could leave you short on funds down the line — because in this example, you’re not just losing out on $3,000, but rather $52,000.

Try to eke out some money for savings

It’s definitely not easy to find the money for retirement savings when you have so many other pressing expenses to contend with. But some tips for finding money for retirement savings could include:

Picking up extra shifts at your job, if possibleGetting a side hustleSelling items you don’t needCutting a few non-essential expenses from your budgetMaking an existing expense more affordable (such as getting a roommate to split the cost of rent)Negotiating a raise with your employer (a strategy that might work if your pay didn’t go up at the start of the year)Using your tax refund to make an IRA or 401(k) contribution

Another thing it really pays to do when saving for retirement is put enough money into your 401(k) plan to snag your full employer match. That’s free money you can not only bank, but invest the same way you invest the money you contributed yourself.

Let’s say your employer will match up to $3,000 in 401(k) contributions this year. If you put in $3,000 so you get a total of $6,000 and you leave it invested at an average annual 10% return over the next 30 years, that sum will grow to almost $105,000.

Remember, you don’t have to come close to maxing out a retirement plan in 2024 if money is tight and that’s not in the cards. Of course, the more money you can put away, the better. But at the very least, try to contribute some amount so you don’t miss out on the chance to grow that money into a larger sum.

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Want to win the credit card rewards game? See what you might have in common with people who get the best deals with these cards. [[{“value”:”

Want to know the secret for how to get the most out of rewards credit cards? It’s not your income. It’s not how much you spend. It’s how much value you get from your cards, while reducing how much you pay for your cards.

According to a recent study from the Federal Reserve, one special group of people tends to get the biggest benefits from rewards credit cards. Want to see how you can join them?

Let’s look at what it takes to get the biggest credit card rewards while avoiding the risks and costs.

What are the benefits of rewards credit cards?

Why do people use rewards credit cards in the first place? Is it really worth all the effort and hassle to use different cards at different stores, and pay multiple credit card bills each month?

The truth is: not everyone wants to use rewards credit cards. It might seem like too much work to juggle all the details, for not enough benefits. But if you’re savvy about credit cards, if you enjoy the process of paying your bills each month and managing your budget, you can get a lot out of credit cards that’s worth more than the time you put in.

To get the best deal from rewards credit cards, you should try to:

Pay your credit card bills on time and in full: Don’t carry a balance, don’t get charged interest. These cards should help make you money, not take your money.Manage your credit responsibly: Opening too many cards too soon, or running up a balance and hurting your credit utilization ratio, can cause your credit score to take a hit.Be strategic about the cards you use: Do you want to save money on travel, airline tickets or hotel stays, or get cash back on everyday spending? There’s no one right way to use rewards credit cards, but having a plan can keep you motivated and focused to get the best results.

Your goal in using credit card rewards should be to earn more benefits (cash back, free travel, and so on) than you spend on fees and interest. Even if you use a rewards card with an annual fee, this can still be worth it if you get hundreds of dollars of extra value out of the card.

Now let’s see who gets the biggest benefits from rewards credit cards, according to Federal Reserve economists.

How to get the best deal from credit cards: Have a high credit score

A 2023 study from the Federal Reserve, called “Who Pays for Your Rewards? Redistribution in the Credit Card Market,” found that people with high credit scores — not just higher incomes — tend to get the best deals from rewards credit cards.

The Fed study looked at a few different levels of income and credit scores among rewards credit card customers. People with “higher incomes” defined as $79,000 per year or higher, and “super-prime” credit scores (FICO® Scores above 780) tend to get the biggest benefits from rewards credit cards. This group got the largest amount of “net rewards” (how much dollar-value benefit they get from the cards after subtracting how much they pay in interest and fees).

Does this mean that rewards credit cards are only a good deal for wealthy, high-income people? Not exactly. The Fed study found that lower-income customers with high FICO® Scores can also get a good deal from rewards credit cards, although their gains are not as big as higher-income people.

The biggest “losers” of the rewards credit card game, according to the Fed study, are actually people with higher incomes ($79,000 and up) but “sub-prime” credit scores (defined in the study as FICO® Scores below 660). These people make good money but struggle to manage their credit. As a result, they tend to spend more on their cards, but then rack up more fees and interest charges when they fail to pay off their balances in a timely, cost-effective way.

Bottom line

You don’t need to have a high income for a good experience with rewards credit cards, but it does help to have a higher credit score. The Fed study used the word “sophisticated” to describe customers who get the biggest benefits from rewards cards. If you are financially sophisticated, you’re more likely to understand how credit cards work, and be attentive to how you manage your monthly bills.

Even if you’re earning a low income or need to increase your credit score, you can learn more about banking and credit cards to increase your financial sophistication. Knowing how to manage your personal finances can help you get a better deal from credit card rewards — and get the most out of your money in everyday life.

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Don’t take the risk of not filing your California taxes. Read on to see the penalties you face if you don’t. [[{“value”:”

California is known as a laid-back place of beaches and sunshine. But don’t get too lackadaisical about paying your California state taxes. If you don’t file your California state income tax return — and don’t pay any state taxes you might owe — you could get hit with painful penalties.

Here’s what to watch out for when filing taxes in California — and how to stay in the good graces of Golden State tax authorities.

Californians get an automatic state tax filing deadline extension

In California, the deadline for filing state income taxes is April 15, 2024, just like for federal income taxes — but California gives its state taxpayers one extra bonus. Every California taxpayer has an automatic six-month deadline extension to file taxes.

In case you cannot file your California tax return by April 15, 2024, it’s OK — you can wait until Oct. 15, 2024. You don’t have to file paperwork, fill out an application, ask permission, or do anything to get this deadline extension.

But here’s the catch: You have to pay any California taxes owed by April 15, 2024. Even if you won’t be able to file your return until October, try to crunch the numbers using tax software to figure out if you will owe tax to California. If so, you need to pay the balance due by April 15.

What if you don’t file California taxes?

If you don’t file your California tax return by the extended deadline of Oct. 15, you’ll have to pay a delinquent filing penalty. This penalty amounts to 5% of the amount of California state income tax you owe, per month (or part of a month) since the original filing deadline, up to a maximum penalty of 25% of your tax balance due.

As an individual taxpayer, if you owe $540 or less in California taxes and you don’t file your state tax return on time, your delinquent filing penalty will be $135 (which is 25% of $540) or 100% of the amount due, whichever is less. For example, if you owe $200, your penalty will be $135. If you owe $134 of taxes, your penalty will be $134.

What if you don’t pay your California tax bill?

Paying tax penalties is no fun. But if you’re late to pay your California taxes (as well as late to file your state tax return), you might get into even deeper financial trouble. Here are a few more California tax penalties that you could get hit with if you don’t settle your tax bill.

Late payment of tax penalty

If you don’t pay the amount of California state income tax that you owe by the due date (April 15 for most individual taxpayers), you’ll be charged a late payment fee of 5% of the unpaid tax. In addition, you’ll be charged a fee of 0.5% of the unpaid tax for each month (or part of a month) it goes unpaid — for up to 40 months.

For example, if you owe $1,000 of tax on April 15, and you pay it by May 14, you’ll owe $55 of late payment penalties.

Bad check penalty

You never want to overdraw your checking account or bounce a check, but especially not when you’re writing a check to the state of California. If you try to pay a tax bill but the check gets declined, or you have insufficient funds in your bank account, you’ll owe an extra penalty:

Payment amounts of $1,250 and over: 2% of the payment amountPayment amounts of less than $1,250: $25 or the payment amount, whichever is less

For example, if you owe $2,000 of late California taxes and your check bounces, you’ll have to pay a penalty of $40. If you owe $1,000, your penalty will be $25.

Collection cost recovery fee

If you fail to quickly pay your overdue tax bill and it drags on so long that the state tax authorities have to take you to collections, that’s going to cost you even more. The state of California will charge you a fee of $332 if it has to take involuntary action to collect delinquent taxes.

Liens

As a more extreme and final step, if you do not pay your California taxes, respond to letters from the California Franchise Tax Board, or otherwise deal with your tax debt, the state of California could record and/or file a Notice of State Tax Lien against you. This is bad!

If California hits you with a tax lien, the state basically attaches a big red flag to your credit report. Liens can be attached to your home or other real estate, or personal property like your car or business equipment and assets. California state tax liens can become public record and show up on your credit report, making it harder for you to get approved for credit, buy or sell property such as real estate, or even get (or keep) a job.

The quickest way to get out of a state tax lien is to pay your tax debt in full. Hopefully your tax problems will never get this bad, but if they do, contact the California tax authorities and work out a payment plan. It’s not worth wrecking your credit score and losing your job.

Bottom line

State taxes are part of life in the Golden State. If you don’t file your return on time and pay your tax bills in full, your life is likely to get more stressful. Pay taxes online at the State of California Franchise Tax Board website.

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Raising kids is a labor of love — an expensive one. Check out these stats that may make you think twice about the cost. [[{“value”:”

Although many parents will tell you they wouldn’t trade their kids for any amount of money, the cold, hard fact of the matter is — that’s kind of the decision you’re making when you choose to have kids. Raising kids is expensive.

It would be utterly irresponsible to choose to have children without considering the financial implications. These three stats alone could be enough to make you think twice about your options.

1. It costs around $300,000 to raise a kid

Right off the bat, the cost of raising a child should give you pause. There are a lot of zeros in that total.

Worse, even if you break it down, it’s still a lot. You’re talking about $16,667 a year — $1,389 a month — for (at least) 18 years.

Sure, this is an estimate. But even if it’s half of that, you’re still talking about $700 a month, every month, for almost two decades (if you’re lucky).

Child care costs alone can eat into your budget like acid. One Care.com survey suggests the average parent spends 24% of their household income on child care. That’s nearly a quarter of your income gone before you start worrying about feeding, clothing, and entertaining your kids the rest of the time. (Fun fact: Kids’ sports can cost $2,000-plus a year!)

The other side: You don’t need to cut a $300,000 check the day you give birth. And there are lots of ways to reduce the costs of child-rearing, especially if you take the time to build a strong village before you have children.

In any case, yes, you’re going to need to invest a great deal of money to turn an infant into a functioning adult human. But all that money doesn’t just disappear; you get a person out of it. And the journey of watching that person evolve and grow can be very emotionally rewarding. (You may even get free stuff along the way, like a weird lopsided mug or some truly gross perfume.)

2. A four-year degree starts at $40,000

You finally get your kid to adulthood and you’re excited to see them work toward their own financial independence. Too bad most jobs require a college degree.

According to U.S. News, the average cost of one year of tuition and fees at a four-year college is over $10,000. And that’s for public, in-state university:

Public, in-state: $10,662Public, out-of-state: $23,630Private: $42,162

Multiply that by at least four (assuming your kid stays on track and doesn’t need a fifth year to finish up), and you’re looking at a minimum of $40,000 to get your kid a basic bachelor’s degree. (And that’s if they live at home the whole time!) That’s an awful lot of money to dredge up while you’re trying to save for retirement.

The other side: There are a lot of paths to a career these days. Your kids may skip college in favor of a trade or train-in-the-field career. (Or, you know, become a YouTube star.)

Even if college is the answer, there are ways to cut those costs, too. Scholarships and grants are one method. Community college (plus a job) is another great option. I’d also recommend setting up a college savings account when they’re born so you can get some help from our friend compound interest.

3. Around 57% of young people still live at home

According to the Current Population Survey from the U.S. Census, roughly 57% of young folks ages 18 to 24 are living at home with their parents. So that idea of getting your life back after they graduate high school — or even college? Not so much.

Moreover, you won’t be getting your bank account back, either. Unless you charge your kids rent, you’ll get stuck footing the bills for their everyday expenses. And the number we talked about earlier for the cost of raising a kid? Yeah, that one stops counting at 18. Anything after that is on top of the $300,000 you spent to get them there.

The other side: Multigenerational living has been the norm for most of human history, so there must be something to it. Indeed, one Pew Research survey suggests most people in multigenerational households find it to be at least convenient, and more than half say it’s even rewarding.

Realistically, as long as you have productive children, they actually can contribute to the household financially. You just need to make it clear what the expectations are — and follow up on them. Beyond that, young adults can take on most household tasks, freeing you from chores you dislike.

An individual decision

There are lots of scary stats out there about raising kids. And I get it — the world is a damn mess. But if it’s something you truly want to do, there are often ways to make it work, financially and otherwise. Low-income families have to work harder at it, that’s certainly true, but it’s not impossible.

There are pros and cons to both sides of the coin. In the end, the decision to have children (or not) is something only you can decide for yourself.

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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.Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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A hybrid beats out all other vehicles for being environmentally friendly. Read on to find out why they might not be the best choice for your wallet. [[{“value”:”

Recently, the American Council for an Energy Efficient Economy (ACEEE) assessed hybrid and electric vehicles to determine the most environmentally friendly. The result was surprising.

The group looked at a handful of factors, including vehicle emissions and pollutants generated when the cars are being assembled and manufactured, and found that the 2024 Toyota Prius Prime, a hybrid, was more environmentally friendly than many pure EVs.

Hybrid vehicles are having their day in the sun right now, with many Americans preferring them over EVs because they’re cheaper and you don’t have to hunt for charging stations on long trips.

But there’s one thing that hybrid buyers could still pay a hefty price for: car insurance. Here’s what you need to know.

A few benefits of hybrid vehicles

The ACEEE evaluated vehicles from this year’s models based on air pollution created from vehicle manufacturing and disposal, production and distribution of fuel and electricity used to power the vehicles, and tailpipe emissions.

Based on its findings, the 2024 Toyota Prius Prime, a plug-in hybrid, was the greenest vehicle. Hybrids have grown in popularity recently because they’re much cheaper than EVs.

In 2023, the average hybrid was about $17,000 cheaper than an EV. While traditional vehicles are cheaper than hybrids, a hybrid is a great choice if a consumer wants an eco-friendly car that’s not as expensive as an EV.

Many consumers also prefer them because there is still a lack of adequate EV charging infrastructure in many places. Even when fast-charging stations are available, refueling an EV with electricity to 80% takes between 20 minutes and 1 hour, which is still too long for many consumers.

It’s also more expensive to repair many EVs right now because of the lack of EV technicians and higher costs for replacement parts. Batteries are the most costly part of an EV, accounting for up to 40% of the car’s cost. Hybrids use batteries as well, but they’re much smaller and typically cost about half as much to replace.

One downside for hybrid owners

One drawback of buying a hybrid is that you’ll likely pay more to insure it than for a traditional vehicle, though it may still be cheaper than an EV. Hybrids have more complex powertrains than conventional vehicles do, making them more expensive to repair and, as a result, to insure.

If you bought a hybrid recently, here’s how to lower your rates.

Improve your credit score

Many insurance companies use your credit score to help determine your premiums. One way to boost your credit score is to lower the amount you owe. For example, paying your credit card balance down so you use less than 30% of your available credit could help improve your score.

Look for discounts

Most insurance companies will apply available discounts to your policy, but there are additional steps you can take to get even more of them. For example, taking a defensive driving course can lower your premiums by up to 10%. Some companies also offer usage-based discounts that track your driving habits and adjust your premiums based on how well you drive.

Bundle home and auto

As the commercials suggest, bundling your auto insurance with your home (or renters) policy can usually save you money. The more coverage you have, the more your savings, which can be up to 7%.

Compare insurance companies

Sticking with your current car insurance provider may be convenient, but it could cost you. A recent survey found that 60% of drivers who shop around for car insurance find cheaper car insurance.

Unfortunately, auto insurance prices aren’t expected to come down anytime soon, so it might be a good idea to consider one or two of these suggestions. If nothing else, comparing your current premiums to one or two other car insurance companies will let you know whether you’re getting a good deal.

Our best car insurance companies for 2024

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

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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It’s nice to enjoy a delicious restaurant meal you don’t have to cook yourself. But read on to see why cutting back might serve your finances well. [[{“value”:”

As a busy working mom with a jam-packed schedule, I’m no stranger to relying on restaurant food to keep my family fed. Most of the time, that food comes in the form of takeout, as opposed to sitting down at an establishment to eat. But still, I can admit that on an average week, at least 1 out of 7 dinners is a meal I didn’t cook myself.

Now, you’re probably aware that dining out frequently can negatively impact your finances, since it’s almost always more expensive to pay for restaurant food than to cook meals at home. But recent inflation data shows that the cost of dining out has truly soared. And that’s reason enough to consider a change to your habits.

RELATED: Best Credit Cards for Dining and Restaurants

Restaurant prices have skyrocketed

In January 2024, the Consumer Price Index, which measures changes in the cost of consumer goods and services, showed that restaurant food was up 5.1% on an annual basis. The cost of food at home only rose 1.2%.

But regardless of that, the fact of that matter is that cooking at home is almost always cheaper. See, restaurants have to make money. And they can’t charge you extra for comfortable chairs or a nice ambiance. What they can do, however, is mark up the cost of the food they’re serving you so that a dish of salmon, rice, and vegetables with an ingredient cost of $8 can result in a $28 charge on your credit card.

Of course, some people are willing to pay for the convenience of not having to cook and for the ability to enjoy a meal that may be tastier than one they can prepare themselves. But at a time when the cost of dining out is so high, you may want to consider different ways to make cooking at home more palatable.

How to overhaul your approach to cooking

Right now, there are two things that tend to keep me from cooking more at home: being busy during the week and having kids who are picky. So I’ve done my best to adjust my approach to cooking to account for those factors. Even though I still rely on takeout quite heavily, I’ve been ordering restaurant food less this year than in previous years.

The first thing I did to change my approach to cooking was to make larger meals in batches over the weekend. But I’ve also tried making what I call “flexible” dishes that can be tweaked to accommodate my kids’ needs.

For example, I might make a big batch of five-bean chili on a Sunday so that there are leftovers for Monday, Tuesday, and Wednesday. But I like to put different vegetables in my chili, like zucchini and squash, which my kids don’t always love. So what I’ll do instead is saute those in a pot separately. Then, when I heat up my own chili during the week, I’ll toss them in.

What I might also do is bake some chicken on a Sunday to throw into my chili for the meat-eaters in my family. I don’t eat chicken, and my daughters will only eat it in nugget form. But this way, my son and husband get a customized chili bowl they’ll enjoy more.

What you may want to do is identify your biggest challenges on the cooking front, and then take steps to address them. If one of your issues is time, like mine, then you may want to get into the habit of making large-batch meals like soups, stews, and chilis that reheat quickly and easily. If your issue is a small kitchen with limited tools, stick to basic meals — things like pasta dishes or chicken breast with roasted potatoes.

If your issue is that you’re not someone who can eat leftovers all week, try preparing a basic food item and incorporating it into a few different dishes during the week. Let’s say you grill a bunch of chicken on a Sunday. That night, serve it with rice and vegetables. The next night, put it into some store-bought taco shells with lettuce and shredded cheese. The night after that, put it into a Caesar salad mix you picked up at the supermarket. And so forth.

Cutting back on restaurants: It can be done

If you’re doing fine financially and enjoy spending money on restaurant food, then you may not need to take any of these steps. But for me, a big reason I’ve been trying to cut back on restaurant food isn’t just financial. In many cases, cooking at home is healthier.

But whether your reasons for relying less on restaurants and takeout stem from a desire to save money or eat a little more wholesomely, the reality is that making changes will probably boil down to identifying your personal pain points when it comes to cooking and finding ways to overcome them. And if you are able to cut back, you may find that on the nights when you do decide to splurge for a restaurant meal, it actually feels like more of a treat.

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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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