Money Management

You don’t want to rack up tons of interest on your holiday purchases. Read on for tips on paying that debt off quickly. 

If you spent more money than anticipated in the course of the 2023 holiday season, you’re not alone. Gallup data from December found that Americans intended to spend $975 on holiday gifts on average, up $100 from a year prior.

No matter what your spending total amounted to, you may have decided to put your holiday charges on a credit card in the absence of having the money in your savings account. And if you were able to charge your expenses on a 0% interest credit card, your thought process may have gone something along the lines of “Oh, hey, this is no big deal.”

After all, with a 0% interest credit card, you’re not racking up interest charges from the start. Rather, you get a grace period that could last as long as 18 months or more, depending on your card. That’s plenty of time to pay off that debt, right?

Well, maybe not. At this point, it’s about a month since the holiday season wrapped up. And if you haven’t yet saved any money in 2024 to put toward your credit card balance, then chances are, you’re going to run into similar hiccups next month, and the month after that, in the absence of having a plan.

And you should have a plan, because here’s a little secret about 0% interest credit cards: If you don’t pay your entire balance off by the time your introductory period is over, the interest rate on your debt could suddenly skyrocket, leaving you in a really bad financial spot. So if the clock is ticking down on your 0% interest credit card balance, here’s what to do.

1. Examine your spending

The more spending you can cut in the coming months, the more money you’ll free up to pay off your credit card balance before your 0% introductory period comes to an end. Take a close look at recent bank and credit card statements to see where every dollar of yours has gone.

From there, identify some expenses you can cut in the coming months, whether it’s streaming services, other subscriptions, or weekly takeout.

2. See if you’ll be getting any windfalls

If you have a February birthday, it may be that you can expect a nice check from your parents. Or maybe your job pays quarterly commissions, and based on your January sales so far, you know you have at least a few hundred dollars coming your way at the beginning of April.

Either way, take a look at the timing of your anticipated windfalls and see if that money will arrive before your introductory period comes to an end. If so, that’s at least some cash you can potentially plan for.

3. Join the gig economy

When you’re racing against the clock, an income boost from a second job could be the thing that spares you from having to pay interest on a credit card balance. Explore your options for bringing in extra money, whether it’s by driving for a ride-hailing company, waiting tables on weekends, or pet- or house-sitting in your spare time.

When your credit card tells you it won’t charge you interest on your purchases, it’s important to recognize that that’s a limited-time offer. If you took advantage of a 0% interest credit card to cover your holiday buys, it may not be too late to pay off your balance before interest starts to accrue. But start working toward that goal now, before you run out of time.

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This writer thinks a laptop upgrade is in store for 2024. Read on to see how I intend to save on that purchase. 

When you’re a freelance writer like I am, you need a few key things to do your job — a desk, an internet connection, and a laptop. The latter, however, is something I may be looking to replace this year.

My laptop has recently been showing signs of wear. It’ll freeze on me from time to time, and lately, the fan seems to be running perpetually, which I know could wear out its components.

It’s also worth noting that my laptop is more than four years old, so I’m not shocked that these things are happening. But it’s time to face reality and start padding my savings account for a replacement — which, thankfully, is something I already started doing late last year.

One thing I don’t want to do when buying a new laptop is overpay. So to save on that purchase, I’m taking this approach.

1. I’m not going to wait until I’m desperate

Right now, my laptop is still technically working just fine. My husband, who knows a thing or two about computers, said it might easily last another year. But I’m not going to wait for my laptop to stop working to shop for a new one. At that point, I’ll be in a jam and won’t have time to research my options carefully. Instead, I’ll need a new laptop that day, which won’t be a good situation.

Instead, I want to start looking at different models in the coming weeks. As the geek that I am, I also plan to make a spreadsheet where I list those models, their features, and their prices at different retailers. That way, I can track prices for a bit of time and then make an informed decision.

When comparing prices, though, I’ll consider various features like warranties. Costco, for example, offers a free second-year warranty on all electronics. So if Costco has a comparable price on a given laptop to Best Buy but Costco’s warranty is better, that’ll be the more logical choice.

I may also try to find a retailer that offers free tech support in case I run into issues with my new laptop. My husband is great with computers, but he doesn’t always have the time and patience to serve as my personal tech support guru, which I understand.

2. I’m not going to be lured in by mega sales events

Last year, Amazon held its now-famous Prime Day shopping event in July with a follow-up event in October. And the online retail giant will most likely host at least one mega-sales event this year.

But I’m not going to plan to buy a laptop on Prime Day. Nor will I assume that Black Friday or Cyber Monday will be the best time. Plus, I’m not sure I want to wait for those events, since I may need to replace my laptop much sooner. Instead, I’ll stick to my plan of researching prices in the winter and tracking them for a few months to see if things change.

3. I’m not going to pay for features I don’t need

The laptop I currently have is an older version of this one. And I’m looking for something with a similar amount of memory and a reasonably fast processing speed. These are features I need to be efficient at my job, so it makes financial sense to pay for them.

But I don’t need the fanciest on-screen graphics or the best laptop speakers. On the rare occasion that I have to sign into a remote meeting, standard sound should work just fine.

In the world of laptops, there’s a huge range. I could spend $500 or less on a new one, or I could spend upward of $1,500. The right answer for me is probably a happy medium — somewhere in the vicinity of $1,000. I don’t want to cheap out on this purchase because that could truly affect my productivity.

Plus, I’m looking at a new laptop as an investment of sorts. I don’t necessarily expect it to last five years or more, but I’d like to get three years out of it. So I’m willing to pay a little more to make that happen. And since this is a business expense, I do get some of my money back in the form of a tax break, since I can take a deduction for a purchase like this that’s essential to my job.

If you’re looking to make a big purchase that enables you to do your job, do plenty of research. But also, it’s important to know how to strike a balance between not being cheap and not overpaying. Whether it’s a laptop or something else, think about the features you really need and the amount you’re comfortable spending. But make sure you address your need for that item in a non-rushed fashion, so you don’t end up making a bad choice due to running out of time.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Costco Wholesale. The Motley Fool has a disclosure policy.

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When you have spare money, don’t keep it in your checking account — and not just because you’re more likely to spend it. Read on to see why. 

Your checking account is most likely where your paycheck is deposited, and it’s a good place to keep money that you’ll use to pay bills and to spend on routine expenses.

Your checking account most likely offers bill payment services, and chances are good you can also access the funds in it using an ATM or debit card, making your cash easily accessible. That’s great if you’re using it to pay your rent or credit card bills or to buy groceries.

What you don’t want to do, though, is keep extra money in a checking account. Here are a few big reasons why you should make a different financial move.

It will be too easy to spend the extra money without thinking

One of the biggest reasons why you don’t want to keep extra money right there in your checking account is because it is so accessible and it’s not earmarked for any purpose. What will most likely end up happening is that you’ll use it for various things without really paying attention to where it’s going or whether you’re getting value from it.

In an Intuit survey, 3 in 5 Americans indicated they had no idea what they had spent their money on the prior month. If there’s money just sitting in your checking account, there’s a very real chance you’ll end up being one of those people and just using the money for random lunches out or splurge purchases at the store or whatever other things come up.

If, on the other hand, you put the extra money — the cash beyond what you’ll need to cover upcoming bills — into a savings account or a certificate of deposit (CD) instead, then you wouldn’t be able to spend it so effortlessly without thinking about it. You’d have to go to extra effort to withdraw it from savings or might have to pay a penalty for withdrawing funds from a CD account before the term is up. So you’d be a lot less likely to buy things you don’t really need just because you feel as if you have the extra cash to spend.

You won’t earn a very good return

Another big issue with keeping extra money in checking is that the money isn’t going to work very hard for you.

Many checking accounts do not pay any interest, and those that do typically pay very, very little. The FDIC reported that the average interest rate on a checking account is .07%. At that rate, you are basically earning almost nothing, since it’s such a small sum and it’s unlikely it will even allow you to keep pace with inflation.

By contrast, you could often get much better returns if you invested in a high-yield savings account or, if you didn’t need the money for a long time, if you invested in index funds tracking the performance of the stock market.

The table below shows the difference in your potential return on investment (ROI) over the course of a year if you had an extra $2,000 and were trying to decide whether to keep it in checking or do something else with it. It’s based on typical rates you might find on these different financial products as of mid-January 2023.

Why would you want your extra money just sitting in checking when you could move it elsewhere where it could actually do something useful for you?

Ultimately, if you want to get the best use out of money you don’t need for immediate expenses, you should put it into a savings account if you’ll need it in the next couple years, or a brokerage account if you won’t need it for a while. It can earn better returns and you’ll be less likely to waste it, so it’s a win win.

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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 Intuit. The Motley Fool has a disclosure policy.

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Need a credit score boost? Read on for some lesser-known ways to make that happen. 

A higher credit score could do a lot of important things for your finances. It could make you more likely to get approved for a new credit card or loan, and it could make it easier for you to rent a home, since it’s common for landlords to run credit checks on applicants.

Now, you may be aware that paying bills on time is a good way to give your credit score a lift. Not owing too much money on your credit cards is another one. Those two factors combined account for 65% of your credit score, according to the FICO model (which is the most common one used in the U.S.).

But there may be some less obvious steps you can take to raise your credit score. Here are a few worth looking into.

1. Ask for a credit limit increase — but don’t use it

Your credit utilization ratio, which measures how much of your available credit you’re using at once, accounts for 30% of your credit score under the FICO model. Paying off existing credit card debt is a good way to lower that ratio. But that’s not so easy.

What may be easier, though, is getting a credit limit increase. If you have a higher income now than you did when you applied for your credit cards, you may find that your various issuers are willing to increase your credit line to some degree.

How does that help? Let’s say you owe $4,000 on a total credit card limit of $10,000. That puts you at 40% utilization, which isn’t so optimal from a credit score perspective. (Usually, utilization of less than 30% is considered positive, but the lower you can get that number, the better.) But if you were to get your credit limit increased to $15,000, that same $4,000 balance would put you at about 27% utilization, which could help your score improve.

If you’re going to employ this tip, though, there’s one big rule to follow: Do not then charge more expenses on your credit cards as your higher limit allows for. For this trick to work, you have to not add to your credit card balances as your limit rises.

2. Get added as an authorized user to an existing account

The length of your credit history accounts for 15% of your FICO® Score. It may be that all of your credit card accounts are fairly new. But if you get yourself added as an authorized user to an existing account that’s been open for decades, it increases the average length of your open accounts. The result? A potential credit score boost.

Of course, just because you’re added to someone’s (like a family member’s) existing credit card account doesn’t mean you should feel free to charge expenses when you feel like it. You’ll need to set ground rules, and you may even have to agree not to add to that card’s balance at all. Be sure to follow those rules so you’re not removed from that account (and also, because if someone is doing you a favor, it’s the right thing to do).

3. Get a secured credit card

A secured credit card doesn’t really give you much buying power. That’s because with these cards, you put down a deposit from your own cash reserves that serves as your personal spending limit. For example, if you put down $1,000, that’s your credit limit, and when you charge expenses, you’re effectively just dipping into your own $1,000 pool of cash.

However, what a secured credit card does is help you establish a positive credit and payment history. So it’s a fairly painless way to boost your credit score over time.

A higher credit score could have a positive impact on your finances. If your score needs work, try out these options. They might do your score a world of good.

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Knowing how to use your savings will help you reach your financial goals. Check out advice on this subject from five experts. 

Saving money is a smart financial habit. To get the most out of this habit, it’s also important to know what to do with your savings. For example, if you leave it all in a checking account, you won’t earn much interest on that money.

So, how should you use your savings? Here are great pieces of advice from five big names in the world of personal finance.

1. “Make a quick switch from a traditional savings account to a high-yield savings account.” — Vivian Tu

Vivian Tu, founder of Your Rich BFF, has a simple tip that can make a world of difference. Don’t leave your money in a traditional savings account paying a rock-bottom rate. Check out the best high-yield savings accounts, pick one, and put all your savings there.

Here’s why: The average savings account rate is 0.47% right now. Some big banks pay as low as 0.01%, while some high-yield savings accounts are offering 5.00% or more. On a $10,000 balance, that’s over $450 more in interest per year just by choosing a better bank account.

2. “The one thing that every single person needs is an emergency savings account.” — Suze Orman

Everyone is going to have financial emergencies. You can’t always avoid them, but as Suze Orman explains, you can prepare for them with an emergency fund.

Set aside a portion of your savings every month for this. The standard recommendation is an emergency fund with three to six months of living expenses. If your household’s living expenses total $4,000 per month, your emergency fund savings goal would be $12,000 to $24,000.

3. “Invest in an index fund, because it tracks the market.” — Humphrey Yang

You can get a solid return through savings accounts and the top CDs (certificates of deposit) right now. But for long-term wealth building, nothing beats investing.

Former financial advisor Humphrey Yang recommends investing in index funds. As he explains, the stock market has historically averaged an 8% to 10% annual return. All the best stock brokers have low-cost index funds that track the market — S&P 500 funds are a popular choice. These are simple, effective ways to start investing and growing your money.

4. “Invest in as much of yourself as you can.” — Warren Buffett

Investing legend Warren Buffett also talks about the importance of investing in index funds and saving for emergencies. In addition, he has shared the age-old wisdom of investing in yourself.

Don’t be afraid to spend your money in ways that could increase your skills and earning potential. A college education is one of the most common ways people do this, but it’s far from the only option. You could try other methods, such as online courses. Books are another excellent way to improve your knowledge — they’ve helped me quite a bit in both my career and managing my money.

5. “Choose how you want to spend your money — and how to live your rich life.” — Ramit Sethi

Ramit Sethi, author of I Will Teach You to Be Rich, advises people to follow a conscious spending plan. This plan provides a balance between financial security and your quality of life.

He recommends putting money toward savings goals, such as a down payment on a home or a vacation, and investing. But he also recommends spending money on the things you love, through what he calls guilt-free spending. It’s an important lesson that some of the best savers forget. Success isn’t about always saving as much money as possible. It’s about using the money you save to build the life of your dreams.

The consensus among most experts is that you should use your savings for an emergency fund, upcoming goals, and investments. Those are all moves that can help you build financial security. Remember to reserve some of your savings to spend in ways that make you happy, so your money is also good for your quality of life.

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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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