Money Management

Having an emergency fund could help you avoid financial disaster — but how do you actually build the fund you need? Just follow these simple steps. 

Unexpected expenses happen to everyone, and they happen often. According to the Federal Reserve, 20% of adults experienced a major unexpected medical expense over the prior year with the expense coming in at a median cost of $1,000 to $1,999. Almost 1 in 6 adults were also affected by a natural disaster that damaged their property or interfered with their income. These are just two of many potential things that could go wrong, in addition to common issues like cars or appliances breaking or a job loss.

To ensure these unexpected expenses don’t cause long-term financial damage, you need an emergency fund. But how do you do that? Here are the steps you need to take.

1. Assess your risk level to set your emergency fund goal

If you want a solid emergency fund, decide what that means to you. Most experts recommend you have three to six months of living expenses saved. But that’s a big range. So, to decide where you fall within it, you’ll need to assess just how much risk you face. To do that, think about these key issues:

How solid is your job? If you’re the CEO of your own company you’ve been running for 20 years, you’re a lot less likely to experience an income decline than if you’re a new hire in an industry doing a lot of layoffs.How long would it take you to find another job? The longer your job search is likely to take, the greater risk you face. If you have a highly specialized job and are likely to be in great demand, you face less risk than if you work in a field where there are too many trained workers and not enough positions.How is your health? If you are at a greater risk of getting sick or being ill for long periods, you may need more money set aside.What is the likelihood of large repair bills? Some people face a greater chance of having to pay a big bill for essentials than others. For example, if you’re a renter in a big city with no car, you have a lot less to worry about than the owner of a 100-year-old suburban home with minimal reservations.

If you’re at the higher end of the risk scale and more likely to face big bills or a long income loss, then you’ll want either six months of living expenses or even as much as nine or 12 months’ worth. If you face very few risks, a three-month fund is probably fine.

2. Calculate your living expenses

Remember, your goal is to replace a certain number of months of living expenses. This is not necessarily everything you spend. You can cut back on certain things if you must do so due to a job loss or a health issue.

When adding up living expenses, include things like:

Rent or mortgage paymentsAll debt payments including credit cards and car loansUtilitiesTransportation costsGroceriesInsurance costsPersonal care itemsHealthcare expensesCellphones

You don’t need to include the entire amount you’re currently spending on dining out or entertainment or your vacation fund — although you want a little extra so you don’t have to live a life of complete deprivation if you’re unemployed for a while.

Once you’ve added up your essential living expenses, multiply that amount by the number of months you decided was appropriate. For example, if your monthly essential living expenses add up to $4,500 and you want three months of living expenses, you’d need to set the goal of saving $13,500.

RELATED: Emergency Fund Calculator

3. Figure out how much you want to put into your emergency fund each month

Chances are, you aren’t going to be able to immediately save every dollar you need for an emergency fund, so set a monthly goal for how much you will save toward it. Ideally, you can set a goal that’s large enough to help you hit your target number in 2024. If you wanted to save $13,500, you’d need to put $1,125 per month into your account.

Take a look at your budget and see just how close you can come to putting that much aside. If it’s completely impossible, try to get as close as you can. Make some cuts to other spending (remember, it’s just for a short time), or look into a side hustle to increase your income temporarily until you’ve saved enough.

Make sure to set specific goals. If that goal has to fall short of your desired number, then see if you can make up the difference by saving windfalls or selling items. For example, if you decide you can only put $900 a month toward your emergency fund instead of $1,125, you’d be $2,700 short of having the money you want by the end of 2024. But if you deposit your tax refund, a few cash birthday gifts, and the proceeds from the sale of some old electronics, you might be able to make up that money and hit your target.

4. Transfer the money into high-yield savings

Finally, the last step is to set up a high-yield savings account that will hold your emergency money and set up an automatic transfer of funds into it.

You should put your emergency money into savings so you don’t risk losing it. And you should automate the transfer of your desired amount into that account so the day you get paid, it’s moved there and you never miss a contribution. That way, you won’t be tempted to do other things with your emergency money.

If you take these four steps, you’ll build the emergency fund you need in 2024 and can end the year with the financial security you deserve.

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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 Target. The Motley Fool has a disclosure policy.

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Investing more money is one of my main goals for the new year. Learn how I’m approaching this. 

In 2024, I hope to put more money into my brokerage account. After focusing on other financial goals this year, like buying a house, I’m eager to switch my focus toward more long-term goals like getting more money into the stock market where I can earn better returns.

Finding more cash to invest isn’t always easy, though. Here’s how I’m planning to do it, and the steps I’m taking to make sure I can accomplish my goal.

This is the most important step I’m taking to try to invest more

I want to invest around $5,000 more in my brokerage accounts this year, which is a lot of money. But it’s well worth the effort since that $5,000 can grow into quite a lot over time as the table below shows (it assumes a 10% average annual return, which is what the S&P 500 has pretty consistently produced over time).

I’m excited to end up with all that extra cash in my account over time. And in order to make it happen, I am going to make one key move. I’m going to work on increasing my income.

To invest an extra $5,000 over 2024, I’ll need to find about $416.66 more per month. Now, I could try to cut spending to do that. Unfortunately, reducing my spending by that much would be really difficult. And I can’t cut my housing expenses because I have a mortgage and I’m not going to move.

I could try to eat out less and spend less on entertainment, but none of that is likely to give me enough. In fact, the average American spends about $166 per month per person dining out, and my family of four comes pretty close to that — so we’d need to basically give up restaurant meals for an entire year, which is probably not going to happen.

Rather than trying to deprive myself throughout the entire year — and probably ending up not being able to do it because cutting so much from spending is so hard — I’d rather work on trying to increase my income.

Increasing income means working a little more, but there’s theoretically no limit on how much a person can earn each month (depending on the time available). It can be a whole lot easier to put in a few extra hours each month on the job, rather than spending 30 or 31 days struggling to spend less and sacrificing every day.

In fact, since the average side hustle brings in around $483 per month, almost anyone willing to do a little extra work could join me in trying to end 2024 with $5,000 more in a brokerage account (or put toward whatever financial goal they find important).

I’ll also be automating the process

There’s also another step I’m going to take to make sure I invest my desired amount. I’m going to automate the process. Once I’m confident I can earn an extra $417 a month, I’ll be having the money transferred on the day I get paid right from my checking account to my brokerage account. That way, I won’t be tempted to spend the extra cash I worked so hard to earn to set myself up for a secure future.

If you want to accomplish any financial goals in this coming year, consider taking these steps yourself. Whether you work some overtime, find a side job, or try to raise the rate you charge for freelance work, look for ways to earn a little more this year and put it toward something that matters to you.

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Want to improve your personal finances in 2024? Keep reading for a list of financial wellness benefits your employer might offer. 

In the past few years of low unemployment and lots of job openings, more companies are trying to attract employees by offering better wages and benefits. But along with traditional employee benefits like health insurance and 401(k) plans, some employers are starting to offer a more comprehensive package of financial wellness benefits.

These financial wellness benefits are intended to help people take care of a wider range of money challenges, so employees can relieve their financial worries and stay focused and happy at work. When employees don’t have to worry about money problems, they can give their best effort on the job. Financial wellness benefits can be a win-win for companies and employees.

If you’re starting a new job this year, or if you want to get the most out of your employee benefits package, here are a few financial wellness benefits that your company might offer.

1. Financial advice and coaching

Do you want to see if you’re on track for retirement, need advice about your investment portfolio, or have questions about budgeting, saving money, or improving your credit? Some companies are now offering free financial advice as part of a financial wellness benefits package. These benefits could include:

Access to credit counseling and debt management, or referrals from an Employee Assistance Program.Annual sessions with a financial advisor to review your investment portfolio and retirement savings plan.Ongoing financial coaching for a wide range of questions about your personal finances.

Financial Finesse is one example of a company that partners with employers to offer free financial coaching to employees. Other employers might connect you with local financial planners or advisors. These financial advice sessions could be free or discounted, depending on your employer.

2. Emergency savings accounts

Many companies offer 401(k) plans to help employees save for retirement. The 401(k) can be a great way to boost your retirement investments, because you automatically put money into it with every paycheck. But what if you could build your emergency fund in the same way? That’s the idea behind employer-sponsored emergency savings accounts (ESAs).

In recent years, there’s been growing awareness among employers about just how little cash savings so many Americans have. A recent survey from SecureSave (a company that provides ESA plans for employers) found that 63% of American employees don’t have $500 to cover an emergency expense. Ask if your company has an emergency savings account option to help employees save cash for emergencies.

If you can save automatically, with payroll deductions out of every paycheck, this can be a powerful way to build your savings without even noticing the money “missing” from your checking account. If you have enough cash to cover car trouble, home repairs, or out-of-pocket medical costs, you’ll be less stressed and more able to give your best effort on the job.

3. Flexible paydays

Sometimes it can be helpful to get paid early. This is especially important for employees who get hit with unexpected expenses, are living paycheck to paycheck, or otherwise don’t have enough cash to make it to the end of the month. Gig workers and shift workers can also benefit from getting paid on a more flexible schedule.

Instead of a rigid schedule for monthly or every-two-weeks paydays, some employers are now offering flexible paydays, also called “on-demand pay” or earned wage access (EWA) programs. This financial wellness benefit lets people choose to get paid before payday.

But it’s not a payday loan! With flexible paydays or on-demand pay, you still get the full amount of paycheck that you’ve earned, but you can get it earlier, and on your own terms. Flexible paydays can help improve your cash flow and avoid missed bill payments, late fees, and other stressful financial problems.

There are several benefits providers that help employers set up programs for flexible paydays or on-demand pay. If your employer offers these benefits, here are a few company names to watch for in your employee benefits information:

Clair: This fintech company offers online banking services with on-demand pay for shift workers and other employees. You can get up to 50% of your gross pay in advance, before payday, with no fees.Paychex: This payroll service can provide on-demand pay as part of an employer’s payroll program, depending on what the employer chooses to offer.Paylocity: Paylocity is an HR and payroll platform that helps employers manage paydays and employee benefits. It offers flexible pay capabilities as part of its payroll services.

Not all employers offer flexible pay, and not every on-demand payday program will have the same details. Some of these programs might charge you a fee, depending on what your employer chooses to offer. But if you’re in a cash crunch, or if you just want more control over when you get paid, flexible paydays can be a valuable financial wellness benefit.

Bottom line: These are just a few of the financial wellness benefits that your employer might offer in 2024. Ask at work to see what your options are to get extra help with saving, investing, paying off debt, and improving your personal finances beyond your paycheck.

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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 a good time to open a CD with a one-year term. Read on to see why. 

If you have money you’re looking to put in the bank for unplanned expenses, then it’s best to stick with a regular savings account. That’s pretty much always the most optimal home for your emergency fund. But if you have savings beyond that, you may want to consider opening a certificate of deposit (CD).

CD rates tend to be higher than savings account rates in general because with a CD, you’re making a commitment to keep your money in the bank. And right now, CD rates are pretty strong across the board. However, you may want to specifically focus on opening a 12-month CD this month for these key reasons.

1. The 12-month CD rate is very competitive right now

At Capital One, you’ll get a 5.25% APY on a 1-year CD right now. With a 5-year CD, you’re looking at 4.10%.

Similarly, at Barclays, you can earn a 5.30% APY on a 1-year CD. With a 5-year CD, you’re looking at 4.15%.

Now, the upside of locking in a 60-month CD is that your rate is guaranteed for five full years. But if your goal is to score the highest rate possible right now, then a 12-month term may be your best bet today.

Of course, each bank ultimately sets its own rates, so you’ll need to check to see what yours is offering. But chances are, you’ll find plenty of banks paying more generously for a 1-year CD than a longer-term one.

2. Rates have the potential to fall in the near term

There’s a reason banks are paying a higher rate of interest on shorter-term CDs than long-term CDs. The Federal Reserve is expected to begin cutting interest rates this year as inflation hopefully continues to cool down. Once that happens, interest rates for CDs and savings accounts could fall across the board. So it’s a good idea to lock in a strong interest rate while you can.

It may be that the difference between what your savings account and what a 1-year CD is paying today isn’t so substantial, depending on your bank. And if there’s not a huge difference, you may be inclined to stick to a savings account since that lets you access your cash at any time.

But remember, savings account rates are never set in stone. With a 12-month CD, your rate is guaranteed for a year.

3. You’re not making an overly long commitment

The downside of putting money into a CD is that you’re required to leave it alone for a specified period of time. Cashing out a CD before it matures could result in penalties, the exact amount of which will depend on your bank.

The good thing about a 12-month CD is that you’re not committing to an unreasonably long term. It may be difficult to predict what expenses will come your way over the next five years, so a 60-month CD could be risky. But chances are, you have a pretty good sense of what the next year has in store.

Of course, either way, you do not want to put your emergency fund into a 12-month CD. But if you’re talking about separate funds, and you don’t have specific near-term expenses on your radar, then opening a 1-year CD could be smart.

When it comes to finding a home for your money, you clearly have plenty of options. But for these reasons, at least consider a 12-month CD at a time when you’re likely to score a really sweet interest rate on one.

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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 recommends Barclays Plc. The Motley Fool has a disclosure policy.

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Before you take out a $50,000 loan, think about what the monthly payments will look like. Here’s what you need to know. 

If you need to borrow a large amount of money, you may be considering a personal loan. Some personal loan lenders allow you to borrow as much as $50,000, or even $100,000 so you can finance very large purchases that it generally wouldn’t make sense to put on a credit card.

Before you move forward with taking out a large personal loan, though, you’ll want to get a clear idea of what it will cost you. Specifically, you should look at both monthly payment and total repayment costs.

Here’s what a $50,000 loan would cost you each month

The costs of a $50,000 loan are shown in the table below. Both your monthly payment and total interest costs change depending on how long you take to repay your loan and what interest rate you are offered, since rates do vary from one lender to another.

The table shows the payments with three different interest rates, including 12.35% (the average rate on a personal loan as of November 2023).

Should you take out a $50,000 loan?

As you can see, the monthly payments on a $50,000 personal loan are very substantial. Even if you take 10 years to repay your debt, you’ll be sending hundreds of dollars a month to a lender. You can’t use it to invest for retirement or do anything else (like covering your living expenses). So you don’t want to make the decision lightly.

It’s not surprising the payments and interest costs are so high, since $50,000 is a lot of money. If you are considering borrowing that much, the first big question to ask yourself is whether you really need such a large sum. Could you save a little bit longer to cover more of the costs in cash, or scale down the scope of whatever you are borrowing for?

You’ll also want to consider whether a personal loan is the right type of loan. If you’re borrowing for a car, for example, it’s worth comparing the rate on personal loans to the rate on car loans. Car loans may have a lower interest rate because they are secured (the car acts as collateral to guarantee repayment). If you’re doing home improvements, a home equity loan could be a better option. The interest may be deductible if you itemize on your taxes and are improving the home that is securing the loan.

Finally, ask yourself if you are absolutely sure of the following:

You can afford the loan now and in the future without putting off retirement savings or anything else.You are comfortable with the total costs, including interest — especially since you could end up paying almost double for whatever you are buying if you get a high interest rate and take a long time to repay your loan.Whatever you are borrowing for is going to improve your situation substantially for a long time. For example, a home improvement project may be worth it since it will increase your home’s value and make your property more livable — but what about a wedding, which will be over in a day?

If you can’t afford the loan, aren’t comfortable with total costs, and feel as if the loan will be worth it over the long haul, do not even consider borrowing $50,000. Save up for whatever you’re buying — or scale down your expectations — instead.

Our picks for the best personal loans

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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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Hertz is selling 20,000 used electric vehicles to save money on repair costs. See why this could be good news if you want to buy a used EV in 2024. 

Car rental company Hertz recently announced that it is selling 20,000 EVs, about one-third of the company’s electric vehicle fleet. According to reporting from Bloomberg, Hertz has decided to cut back on EV rental cars because of high repair costs and weak demand from its customers.

This announcement was somewhat surprising to industry analysts, because Hertz had previously made big EV purchasing deals with electric vehicle makers like Tesla and Polestar. But if a major rental car company like Hertz is seeing slow demand (and high costs) for electric vehicles, this could be a sign of additional trouble for EV owners. After all, if a big rental car company can’t afford the repair costs of EVs, what hope is there for ordinary people who have to pay for EV car insurance and other EV maintenance costs?

Let’s look at a few high-level insights on how this Hertz EV sale might affect EV prices for car buyers and EV owners.

Bad news for EV owners: Your EV’s value might take a hit

First, the bad news. If you’re an electric vehicle owner who paid top-dollar for a new EV a few years ago, this selloff of EVs from Hertz is a bad sign. That’s because 20,000 more used EVs are about to come onto the market, helping to drive down prices of used EVs. If you were hoping to sell your EV or trade in your EV in 2024, your used car might have just depreciated by a larger amount.

The fact that Hertz is selling so many EVs because of repair costs is also a bad sign for electric vehicle owners. If Hertz — a big rental car company with lots of employees who can fix cars — can’t afford to cope with EV car repairs, this could mean that EVs are still having trouble with reliability and expensive parts. The high cost of repairing EVs can also make these vehicles more expensive to insure.

If you’re worried about your total costs of EV ownership (maintenance, insurance, etc.), you might want to consider leasing an EV instead of buying. Leasing a car has some drawbacks, but it gives you a lower monthly payment and (often) lower maintenance costs compared to owning an older vehicle that’s no longer under warranty.

Good news for EV buyers: Buying used EVs might get cheaper

Are you thinking of buying an EV in 2024? This news from Hertz might give you pause. What if new EVs are still too expensive, too unreliable, and too much hassle for now? Many would-be EV buyers are waiting for the next generation of cheaper, better batteries. If you’re still worried about EV maintenance and have battery range anxiety, you might want to wait before buying a new electric vehicle. Especially since many new EVs no longer qualify for the full $7,500 EV tax credit in 2024.

But what if you want to buy a used EV in 2024? In that case, the Hertz EV selloff could be good news for you. Buying a used EV can be a good value if you’re committed to EVs, you can charge your vehicle at home, and you want to stop burning gas. Many used EVs qualify for a tax credit of up to $4,000 that you can get at the dealership as an instant rebate.

Bottom line: By selling 20,000 used EVs, Hertz is showing that there are growing pains in the market for electric vehicles. Used EVs might get cheaper in 2024. This can be bad news for people who bought higher-priced new EVs in recent years, because their vehicles might depreciate faster than expected, driving up their cost of car ownership. But more used EVs on the market can be good news for electric vehicle buyers — especially if you buy a used EV that qualifies for up to $4,000 in used EV tax credits. Make sure to shop around for EV auto insurance price quotes before you buy an EV in 2024. The best car insurance companies might quote you a competitive rate to insure your new EV.

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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 positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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