Money Management

Costco can be a great place to shop, but you could waste a lot of money if you get sucked into these three common traps. Learn how to avoid them. [[{“value”:”

Shopping at Costco should, in theory, help you keep more money in your bank account since the warehouse club offers bulk deals. In reality, however, many club members find themselves falling into Costco traps that lead to them running up their credit card bills.

You could find yourself wasting your hard-earned cash if you make any of these big errors. The good news is, if you know what they are, they’re easy to avoid.

1. Choosing the wrong membership tier

Buying the wrong membership tier is the first trap you might fall into, and you could make this mistake even before you become a club member. See, there are two different levels of membership:

Executive membership which costs $120 a yearGold Star membership which costs $60 a year

The Executive membership comes with some tempting added perks — most notably, 2% cash back on purchases up to a maximum of $1,000 a year. But, it’s not right for everyone. If you don’t spend at least $3,000 a year at the warehouse club (or take advantage of other special exclusive Executive membership discounts like extra discounts on Costco services), then the Executive membership isn’t worth it.

On the other hand, if you spend more than $3,000, trying to save money by going for the Gold Star membership is short-sighted because you’d cover the cost of your membership and get extra cash back on top of that.

To avoid this trap, think carefully about how much you’ll be spending and make the choice that makes the most financial sense for your Costco spending habits.

2. Paying the online surcharge

While shopping online may seem more convenient, buying online at Costco.com can be a lot more expensive than visiting your local warehouse club. The price difference can be substantial, with even grocery items often costing a few dollars more per item when purchased online for pickup or delivery versus buying them in-store.

As annoying as it may be (at least to those of us who love online shopping), if you aren’t going to go visit your local warehouse club to do the bulk of your shopping, a Costco membership just isn’t going to offer you the rock-bottom prices you might be hoping for.

Don’t fall into the trap of just clicking and purchasing. Instead, aim to visit your local club around once or twice a month to buy everything you need. As a bonus, you can fill up on gas while you’re there to take advantage of low fuel prices.

3. Buying items you won’t use up

Costco is known for being great for bulk buys, but that’s useful to you only if you use all of the items you’re purchasing. If you buy 10 pounds of pancake mix for $9.99, but you later realize you don’t own an iHop and use only five pounds of it before it goes bad, you’d have been better off with the $7.12 five-pound bag of the same stuff from Walmart.

Fortunately, you can avoid each of these three big traps if you’re smart about what you buy, where you shop, and what membership tier is right for you.

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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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool has a disclosure policy.

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Saving $1,000 a month in a 401(k) this year could leave you in a sweet spot down the line. Read on to learn more. [[{“value”:”

If you want the option to contribute $1,000 a month to a retirement plan, then you may need to look outside of an IRA. That’s because IRAs max out this year at $7,000 for savers under the age of 50 and $8,000 for savers 50 and older.

But 401(k) plans have much higher contribution limits than IRAs. In 2024, 401(k)s max out at $23,000 for savers under 50 and $30,500 for those 50 and over. And while it’s really hard to come up with that much money for retirement savings in a single year, contributing $1,000 a month, or $12,000 a year, may be doable if you earn a nice wage and budget your money carefully.

Of course, to put $12,000 into a 401(k) this year, you’re going to have to give something up, whether it’s a vacation, a nicer car, or new furniture. But when you see what a $12,000 contribution in 2024 might do for your future, you may be inspired to part with that money if doing so is feasible.

Your 2024 contribution could go a long way

When you’re investing for a long-term goal, putting your savings into stocks via a brokerage account or employer-sponsored retirement plan is a good bet, despite the risks involved. Over the past 50 years, the stock market has delivered an average annual 10% return, which accounts for both strong performance years and downturns.

Now, let’s say you put $12,000 in your 401(k) this year, and over the next 30 years, your plan gives you a 10% return on your investments. That would leave you with a balance of over $209,000. And that’s just from a single year’s contribution. Talk about impressive.

How to invest your 401(k) in stocks

With an IRA, you can buy stocks on a company-by-company basis. But 401(k)s generally don’t allow you to do that. Instead, they limit you to different funds. But many of those funds naturally lead to a stock-heavy portfolio.

It’s common to find mutual funds in a 401(k), and those commonly invest in assets like stocks (though you’ll need to read each fund’s description to see which assets it tends to focus on). You can also usually find index funds offered through a 401(k). These can be a more cost-effective investment from a fee perspective, since index funds are passively managed and mutual funds are actively managed. Because of this, your fees to invest in mutual funds may be higher.

Of course, if you can’t come up with $12,000 this year to contribute to a 401(k), that’s understandable. In that case, do your best. But also, do try to contribute enough money to snag your employer match in full, if you’re eligible for one.

Let’s say you don’t even get a match in your 401(k) and are able to put in $3,000 this year. At a 10% return, you’re still looking at growing that contribution into over $52,000 in the course of 30 years. So rest assured that whatever sum you manage to put into your 401(k) has the potential to go a long way.

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If you’re buying an electric vehicle, a $7,500 tax credit can make a big difference. Find out how to make sure you can claim the full amount. [[{“value”:”

From taxes to insurance and maintenance, electric vehicles work differently from their gas-powered relatives. Much of the industry is still grappling with those differences, from manufacturers to sellers to car insurers. However, with a potential $7,500 on the table, there’s a lot of incentive for new car buyers to learn the EV tax credit rules.

The great news is that you no longer have to wait until tax season to get your tax credit. You can claim the money from the dealership when you buy your EV. Let’s dive into ways to make the most of the tax credits.

1. Understand the income restrictions

To qualify for the tax credit, you’ll need to plan to use the car yourself and drive it on U.S. roads. Income-wise, the IRS says your modified adjusted gross income must be lower than:

$300,000 for married couples filing jointly$225,000 for heads of households$150,000 for all other filers

Takeaway for making the most of EV tax credits

If your income is above the threshold, there is some wiggle room: You can choose whether you use your income from this year or the year before. As long as you earned less than the limit in one of the two years, you’ll still qualify.

Another potential loophole? You might be able to lease instead of buy. Be aware that leasing often comes under fire from financial experts. This is because if you take out an auto loan to buy a car, you’ll eventually own the vehicle. If you lease, you’re making monthly payments to rent the car and will have to return it at the end of the lease period.

Leasing an EV may make sense for some people. In terms of EV tax credits, the income restrictions do not apply when leasing. Second, there’s more flexibility in which makes and models qualify. According to Electrek, many leasing companies will pass some or all of the savings on to consumers. Plus, given how quickly EV technology is evolving, leasing an EV for a few years could also mean you’re not tied to outdated technology.

That said, auto insurance can also cost more on a leased car, and you could be on the hook for termination fees if you want to get out of the lease early. Look at the costs and research the pros and cons of leasing.

2. The EV tax credit may be more refundable than you think

Unlike a refundable tax credit, which can give you money back, the EV is non-refundable.

Once your tax goes to zero, you can’t go any further. For example, let’s say you qualified for $7,500 in EV tax credits and owed $6,500 in tax. You wouldn’t get the extra $1,000 back.

In theory, this makes it harder for middle- to low-income taxpayers to qualify for the full credit. However, the IRS guidance isn’t cut and dry.

Takeaway for making the most of EV tax credits

Talk to a tax advisor, as you could still claim the full credit. When the IRS released updated information on the tax credit last October, it made an important change. Let’s say you claim the tax credit from the dealer when you buy the vehicle. You then find your tax bill doesn’t reach $7,500. The updated rules say that nobody can come back and ask you for the difference. So it’s a non-refundable credit on paper, but that’s not how it works in practice.

It’s also worth considering a used electric vehicle. These can qualify for up to $4,000 in tax credits, and the prices have dropped considerably in recent years.

3. Know which cars qualify

Bear with me, here’s where it gets a bit complicated. To qualify for the credit, a car first needs to meet basic requirements around battery life, weight, and cost, and be assembled in North America. On top of these come additional rules about critical minerals and battery components.

The Department of Energy says this is how the two halves of the $7,500 credit work:

Critical minerals: To qualify for $3,750 in tax credit, 50% of the critical minerals need to be extracted or processed in the U.S. or a country with a free-trade agreement.Battery components: To qualify for $3,750 in tax credit, 60% of the components in the battery need to be manufactured or assembled in North America.

The percentages will increase each year, as the government wants the credit to stimulate EV manufacturing in the U.S.

Takeaway for making the most of EV tax credits

Go to the Fuel Economy website to see exactly which cars qualify. You may be surprised to learn it’s based on the individual vehicle. According to Consumer Reports, even within the same make and model, there may be cars that qualify while others do not. Price-wise, the manufacturer suggested retail price (MSRP) has to be less than $80,000 for vans, sport utility vehicles, and pickup trucks, and $55,000 for other vehicles.

You can put the Vehicle Identification Number (VIN) into the Department of Transportation website to be sure the car you want is eligible. You’ll need that number when you complete the IRS form to claim your credit.

Bottom line

Making the most of the EV tax credits might involve a fair chunk of research, both in terms of your tax situation and the car you buy. But that $7,500 can go a long way toward making an electric vehicle more affordable.

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Dating may lead to a lifetime commitment. Here’s why some in the dating world are making sure the people they meet have good credit. [[{“value”:”

What do you look for in a partner? Is it the eyes that captivate you, or a great sense of humor? What about credit score? How much weight does a potential partner’s credit score carry? If you’re like a growing number of singles, it’s pretty darn important. In fact, it’s so important that a dating app, (aptly named) Score, targets only individuals with good to excellent credit scores. Here’s how it all started.

The new thing to do

According to Pew Research Center, there are over 1,000 online dating platforms available, and 30% of U.S. adults have used a dating app at some point in their lives. The sheer number of people who’ve used dating apps makes what happened when one woman posted her credit score even more surprising. The act went viral.

A dating app user named Leah Nicewander posted a TikTok video in February 2023 sharing what happened when she included her exceptional credit score of 811 on the app. According to Nicewander, she got 17 dates in 30 days.

Nicewander’s story picked up so much steam that others were inspired to do the same, including a Dallas woman who reports having 224 matches since sharing her high credit score. What’s more, she says that her dates frequently ask how she got such a good score and for tips on how they can improve their own credit score.

And now, one year later, Score has entered the dating app market. What sets Score apart from its competitors is the fact that all its users have — at the very least — a good credit score.

Applicants must qualify

Score is the brainchild of technology company Neon Money Club. To qualify, applicants must pass an Equifax credit check with a score of 675 or higher. A good credit score is meant to signal potential lenders that a person has handled their money well in the past. What it does not illustrate is how much money a person has in their bank account, whether they invest for retirement, or how carefully they manage their money.

Score supporters consider the new app a way for singles to be transparent about their finances, and that may make sense. Forty-two percent of American adults report arguing with their partner over money. Perhaps an app like Score is one way to prompt potential couples to discuss financial issues before getting serious.

There are critics

Critics worry that apps like Score could unfairly penalize people with lower credit scores. A person’s credit score can drop for a range of reasons, including illness, divorce, or fraud. A credit score is more like a snapshot in time, and does not necessarily indicate how well a person has done with finances throughout their adult lives.

A credit score cannot capture a person’s desirable qualities, like honesty, humor, or dedication to family and friends.

Will this become a widespread trend?

Given that Score has been in operation for less than a month, we have no indication of whether it will soar or fall flat. Chances are, if the app is successful, we’ll see more dating apps move toward personal finance transparency. If not, it could fizzle out like a bad first date.

What we do know is that having an honest financial conversation with a partner is a vital part of building a strong relationship. It may not happen on the first date, but it needs to happen at some point.

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Owe the IRS money from a previous tax year? Read on to see why you don’t want to blow off that debt. [[{“value”:”

Many people who file taxes every year end up getting a refund. But what if you landed in the opposite boat somewhat recently and owed the IRS money?

A situation like that can be stressful when you’re not expecting to have to write a check. And it can be even more stressful when you don’t have the money in a savings account to cover your IRS bill.

You may be inclined to ignore an old tax debt and hope the IRS will forget about it in time. But that’s highly unlikely to happen. And if you let an old tax bill go unaddressed, it could cost you in a very big way.

You might face expensive penalties

The IRS doesn’t take kindly to delays in getting paid. As such, when you owe money and don’t pay in time (which means you don’t pay by that year’s filing deadline, which is typically April 15), you incur interest and penalties on the sum you owe.

The penalty for failing to pay a tax bill is 0.5% of the unpaid total for each month or partial month your bill is delinquent. The penalty has the potential to total 25% of your unpaid taxes. If you owe money on an old tax return, you should know that the longer you let that debt linger, the more interest and penalties you might accrue.

The IRS could come after your paycheck

If you owe the IRS money and make no attempt to pay your tax debt at all, the agency has the right to garnish your wages. This doesn’t mean the IRS can take your entire paycheck and leave you with no money left over to buy food or pay rent. But the IRS can claim a portion of your wages in an attempt to get repaid. That could put you in a really tough financial spot.

Don’t ignore an old tax debt

If you owe the IRS money on an old return, ignoring the problem is possibly the worst thing you can do. Instead, reach out to get onto a payment plan.

The IRS commonly works with taxpayers to set up installment agreements where tax debts are paid off over time. Getting onto one of these agreements won’t necessarily exempt you from accruing interest and penalties on the sum you owe. But if you stick to the terms of your agreement, the IRS will not come after your wages to get repaid. At that point, you’ll be considered current.

It’s similar to making minimum payments on a credit card. Doing so won’t stop interest from accruing on your remaining balance. But your credit card issuer is not going to report you as delinquent on your debt if you make your monthly payments in a timely manner.

The IRS isn’t going to just let an unpaid tax debt go. In some cases, it is possible to reach a settlement with the IRS where some or all of an old tax debt is forgiven. But there are specific channels to go through, and the IRS will generally only forgive a tax debt if paying it constitutes an undue financial hardship or if the agency deems you incapable of paying that debt (such as if you’re disabled and can no longer work).

Otherwise, expect the IRS to try to get its money one way or another. And if you want to avoid a hassle, reach out to make arrangements to pay your overdue taxes rather than ignore the problem and hope it goes away.

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Are you shopping online more than you’d like? You may be able to reduce your shopping trips after making a few moves. These tips may help you impulse shop less. [[{“value”:”

Many people struggle with overspending because they impulse shop. With the popularity of shopping websites and mobile apps, it’s easy and convenient to buy what you need from the comfort of home. But it’s essential to be cautious to avoid spending more than you can afford.

If you spend beyond your means, you may rack up expensive credit card debt due to your shopping habits. Are you looking for ways to reduce your online shopping trips? Here are a few tips to help you stop overspending on impulse purchases when shopping online.

1. Follow a budget

A budget can help you stay on track with your spending. If you struggle with overspending because you love shopping online, it may be time to try budgeting. You can use one of the best budgeting apps to get more comfortable with this practice and stay on top of your progress. Once you see how much you spend shopping on these purchases, you may feel more motivated to change your habits to improve your financial situation.

2. Say goodbye to shopping apps

Many of us have downloaded several shopping apps to our phones. These apps offer convenience because we can place a last-minute order while on the go, but they can also make it easier for us to spend money carelessly.

Deleting your favorite shopping apps could help you reel in your spending. You’ll likely feel less desire to place frequent orders if the apps are no longer readily available.

3. Log out after placing an online order

It can be frustrating to log into every online account you use. Keeping some accounts logged in, like your email, may make sense. But you may be more tempted to shop online if you stay logged into your favorite shopping websites and apps.

The next time you place an online order, log out of your account. Doing this may deter you from placing frequent orders because you’ll be forced to spend extra time logging back into your account (plus you’ll have to remember your password).

4. Unsubscribe from marketing emails

Many of us feel tempted to shop more when we see our favorite brands advertising a sale. It’s important to remember that only some deals are worthwhile. Many popular retailers promote non-stop sales to draw in consumers because it’s a marketing strategy that works.

You may be less likely to shop online when you no longer receive emails like this. Don’t be afraid to unsubscribe from marketing emails if it’ll help you save money. If you want to save time and unsubscribe from multiple marketing email newsletters simultaneously, you can use a service like Unroll.Me to clear out your email inbox faster.

5. Don’t save your payment details

Another tip that may help you reduce your online shopping trips is avoiding saving your payment details. Many retailers allow users to save their preferred payment method in their online accounts. This feature is convenient because you won’t have to enter your credit card details every time you check out.

However, this also makes it easier to make impulse purchases because you can hit “submit order” without deciding whether you’re making an impulsive move. It’s a good idea to remove your payment method details and avoid saving them in the future.

Keep your finances in mind

It pays to keep your finances top of mind. Many of your everyday choices directly impact your financial situation. Taking steps to curb your online shopping spending could help you keep more money in the bank, making you more likely to reach your financial goals sooner. For additional ways to save money, check out our personal finance resources.

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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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