Money Management

A study found that consumers are spending an average of $44 on subscriptions each month. Discover some ways to save money on subscription costs. [[{“value”:”

If you pay for multiple subscriptions, you’re not alone. Whether you’ve subscribed to streaming app services, software subscriptions, or monthly fitness solutions, these services can add up fast. Many companies have increased the prices of their subscriptions in recent years.

A recent Capterra study found that some consumers have had enough and are ready to cancel if price hikes continue. Canceling subscriptions can free up more money in your bank account. Should you wave goodbye to some of your favorite subscription services?

44% of U.S. consumers are sick of subscriptions

According to a Capterra study, many Americans are feeling subscription fatigue. Data shows that 44% of U.S. consumers are tired of using subscription services. One big reason is the impact on their wallets. The study found that consumers, on average, have three subscriptions at once and pay around $44 per month for these services. That’s a lot of money.

Some consumers are getting rid of unwanted subscriptions. In fact, 42% of respondents shared that they had canceled one of their subscriptions within the last three months. Of those who canceled, 65% said they did because it was too costly.

Some subscribers have had enough of rising prices. Thirty-eight percent of respondents said that if one of their current subscriptions increased in price, they’d cancel the service. Since many products and services have become more expensive, it’s no surprise that many consumers feel this way.

Should you ditch some of your subscriptions?

If you’re feeling financial stress and are looking for a way to get some relief, consider reducing some of your monthly expenses. One way could be to ditch one or more of your subscriptions. Doing this could help you free up more money so you feel less strain.

If you’re not ready to ditch your favorite subscriptions, you may be able to save money while remaining a subscriber. Here are some suggestions that could help you save some cash:

Switch to an annual plan: Some but not all companies offer customers a discount when they subscribe to a yearly plan. You’ll need to pay the entire year upfront, but the total savings may be worthwhile. Check to see if you can get a deal by switching to an annual subscription.

Don’t ignore discounts: Some subscriptions may be available at a discount. For example, a student discount may be available to eligible college students. Verify that you’re not missing out on any deals like this that could help you keep more money in the bank.

Find a cheaper alternative: For some subscriptions, like software, you may be able to find a more affordable alternative. Ditching a more costly solution for one with a better price could be a win for your wallet. Research comparable products and services and their prices to learn more.

Pause unused services: If you’re not using one or more of your subscriptions, pause them. You’re wasting money if you’re continuing to pay a fee, but aren’t using them. Many service providers allow customers to pause their services and pick it back up later.

This study is a good reminder to keep your finances in mind. If you’re feeling stressed because you have little money left over after paying all your monthly bills, it may be time to review your spending. Trimming extra expenses like subscription costs could make a noticeable difference. For additional ways to save money, check out our personal finance resources.

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Hoping to see interest rates go down? Read on to see why you may end up waiting longer than you’d like. [[{“value”:”

If you’re been trying to sign a personal loan, auto loan, or pretty much any type of loan, then you may be painfully aware of just how expensive it is to do that these days. And there’s a reason for that.

In 2021, inflation started to climb, and in 2022, it downright soared. Recognizing the severity of the situation, the Federal Reserve began implementing interest rate hikes in early 2022 and continued to do so well into 2023. The goal was to drive consumers to spend less, thereby bridging the gap between supply and demand that drove inflation levels upward.

During 2023, inflation managed to cool to a notable degree — so much so that the Fed paused its interest rate hikes at its last few meetings. The Fed has also signaled that interest rate cuts could be in store for 2024. Once that happens, the cost of borrowing is likely to come down across the board. And that could be a personal finance lifeline for consumers.

But recent inflation data tells us that interest rate cuts may still be a ways off. And that could deal a blow to consumers who really can’t wait to borrow money.

Why rate cuts may not happen right away

The Federal Reserve does not set consumer interest rates directly. Rather, it oversees the federal funds rate, which is what banks charge each other for overnight borrowing.

But when the federal funds rate rises, it tends to drive the cost of borrowing up as well. So these days, consumers are looking at higher costs for a variety of loan products, as well as higher credit card interest rates.

On the plus side, savers are making out like bandits via the higher interest rates savings accounts and CDs are paying. But all told, today’s higher interest rate environment is causing a lot of consumers to struggle.

The Fed has indicated that it will be ready to cut rates once inflation cools to a notable degree. That should, in turn, drive the cost of borrowing downward.

But January’s Consumer Price Index, which measures changes in the cost of consumer goods and services, measured annual inflation at 3.1%. Inflation also rose 0.3% on a monthly basis.

Meanwhile, the Fed has long taken the stance that 2% annual inflation is the optimal level it likes to target. And since 3.1% is a ways off from 2%, it could be a while until the central bank decides it is ready to move forward with interest rate cuts.

The one silver lining

Many consumers might be in a bad place due to the high cost of borrowing today. The one silver lining from January’s inflation report is that if the Fed holds off on cutting rates, savers with money in the bank may be able to benefit from higher interest rates on their money for a bit longer than expected.

But still, those who really can’t put off taking out loans — for example, anyone needing to finance a car purchase — remain in a tough spot. If you need to borrow and can’t wait for rate cuts to happen, at the very least, try to boost your credit score before putting in a loan application. The higher that number is, the more competitive an interest rate you’re likely to snag.

You can boost your credit score fairly quickly by paying off a chunk of credit card debt (which may be easier said than done) and checking your credit report for errors. If your credit card accounts are in good standing and your income has risen since you applied for your cards, you may also be able to snag a credit limit increase. That, too, could help your credit score improve provided you don’t add to your existing balances, and it may be an easier route to take than attempting to pay those balances off.

In time, the Fed is likely to start cutting interest rates. But don’t be surprised if that doesn’t happen until the second half of 2024.

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Understanding these tax concepts can help you save money and plan for the future. Learn what you should know as we kick off tax season. [[{“value”:”

The U.S. tax code is complex. The federal internal revenue code is millions of words in length, and there are some important concepts that many Americans don’t understand. While I can’t debunk every tax myth, here are three of the biggest misunderstandings you should know the truth about as tax season gets underway.

Misunderstanding 1: A tax extension gives you extra time to pay

If you aren’t ready to file your tax return by the April tax deadline this year, it’s fairly easy to file for an extension. If you file an extension, you’ll get an extra six months to file, making your tax return due on Oct. 15, 2024. (Note: You may need to file a separate extension with your state as well.)

However, one of the biggest (and most costly) misconceptions is that a tax extension gives you more time to file and more time to pay. This is not the case; your federal income tax is still due in April. If you anticipate that you’ll owe money, you’re expected to pay it along with your extension request.

Having said that, if you can’t pay, still file for an extension. The penalties for failing to file a tax return are far more severe than the penalties for not paying on time. But the point is that you will face interest and penalties on any money you owe after April 15, even if you file an extension.

Misunderstanding 2: Only rich people get audited

Higher-income households certainly have a higher probability of being audited than the average taxpayer. But you might be surprised to learn that one of the most common groups of taxpayers who get audited are those on the lower end of the income spectrum, and that’s especially true if you claim the Earned Income Tax Credit (EITC). In fact, returns with less than $25,000 in gross income and the EITC had a higher audit rate than business owners who earned $200,000 to $1 million.

The reason for this is that the EITC credit is valuable and has high potential for fraud, so it naturally receives more scrutiny.

Misunderstanding 3: An audit is always a terrible experience

When many people hear the term “tax audit,” they picture a bunch of IRS agents in suits showing up at their homes or being asked to come into an IRS office.

While this is certainly possible, especially if there’s a big issue with your return (such as failing to report a large amount of income), the most common type of audit is known as a correspondence audit. This simply means that the IRS sends a letter in the mail, typically to ask for more documentation on a specific item or to make an adjustment to a taxpayer’s return based on information it has received. And in these cases, you can simply send in documents to support the information in your tax return or agree with the IRS’s proposed changes.

In fact, 85% of all tax audits in 2022 were correspondence audits. And with only 0.38% of all tax returns receiving any scrutiny, this means that the chance of an audit by an actual IRS agent is about 0.06%, or six returns of every 10,000.

Not an exhaustive list

To be sure, the U.S. tax code is extremely complex, so there is quite a bit that the average American doesn’t fully understand about the tax code. However, these are three of the most common misconceptions that I see people make that could have major personal finance implications.

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When you open a CD, you make a commitment. Read on for ways to help ensure that you won’t regret going this route. [[{“value”:”

If you’re looking to earn interest on your money beyond what a savings account will pay, then opening a CD could be a good bet. Because CDs require you to lock up your money for a preset period, CD rates are typically higher than savings account rates.

But remember, in exchange for that higher rate, you’re committing to keep your money in the bank until your CD comes due. If you cash out your CD before its maturity date, you’ll generally risk an early withdrawal penalty, the exact amount of which will depend on your bank and the length of your CD.

That’s why it’s important to think carefully about opening a CD. You don’t want to open one only to cash out your money early and kick yourself for it. But if you make these moves, you may not end up bemoaning your decision to put money into a CD.

1. Make sure your bank is FDIC insured

You could run into a hairy situation if you have money tied up in a CD and your bank goes under — that is, if your bank isn’t FDIC insured. With FDIC insurance, your deposit is protected provided it doesn’t exceed $250,000. And if you have a joint CD, that limit rises to $500,000.

Now, if you’re shopping around for CD rates online, you may find that some of the most competitive offers are from banks you’ve never heard of. But you can check here to see if a lesser-known bank you’re considering opening an account with is FDIC insured.

2. Make sure your emergency fund is complete

Unplanned expenses can pop up at any time. Unfortunately, if your money is tied up in a CD, you can’t use it to do things like pay for car repairs unless you want to risk a penalty.

Before you open a CD, make sure you’re all set as far as your emergency fund goes. At a minimum, make certain you’re covered for at least three months of essential bills. And make sure to keep your emergency fund outside of a CD so you can access that cash at any time.

Along these lines, try to anticipate any near-term expenses that might arise and set money aside for them outside of your CD. If a close friend of yours was recently engaged, and they’re talking about a destination wedding, you may want to take an extra $1,000 and put it into regular savings instead of a CD in case you end up having to shell out money sooner than expected for a flight and hotel.

3. Set up a ladder

Laddering your CDs can be a good way to avoid early withdrawal penalties. That’s because you’ll have money freeing up at different times.

You can take a couple of different approaches to laddering. First, you could take the money you’re looking to put away and split it up into a 3-month CD, 6-month CD, 9-month CD, and 12-month CD. This way, your funds will become available every three months.

Another option? Take a portion of your money and put it into a 12-month CD today. Wait three months, and then put another portion into a 12-month CD, and so forth.

Why might you do this, as opposed to the first approach? If 12-month CDs offer a more favorable interest rate than shorter-term ones, you might benefit financially.

That said, CD rates could fall this year if the Federal Reserve cuts interest rates. So because of that, the first approach might actually be preferable.

You don’t want to open a CD only to regret it after the fact. Take these steps before making that leap so you’re less likely to end up unhappy with your decision.

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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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