Money Management

Shopping at Costco can save you big bucks, but it’s not a good fit for my lifestyle. Here are five reasons a Costco membership doesn’t make sense for me. 

There are a lot of reasons I love Costco, like its cheap gas, its Kirkland Signature products, and its food court. Costco has a well-deserved reputation as a bargain-seeker’s paradise. But even though the membership price is reasonable — starting at $60 a year — I refuse to buy a membership. Here are five reasons a Costco membership isn’t right for my personal finances at the moment.

1. I live alone

The No. 1 reason I won’t buy a Costco membership is that I live alone, and if I bought food in bulk, I’d end up throwing a lot of stuff away. I also don’t have a ton of storage space, so buying massive quantities of items like toilet paper and toothpaste would only add clutter to my home.

2. I’m a failure at meal prep

Even though I live alone, shopping at Costco could be worth it for me if I were one of those meal-planning pros who blocks off an afternoon each week to do prep work and freeze meals. But I’ve failed miserably in my past efforts at meal prep. Though I aim to get better in this arena for 2024, I’m starting small.

I intend to buy enough groceries so that I can make several easy-to-cook meals each week, but I’m also giving myself a bit of room to order takeout a few times a week. Since I know I’m not the type of cook who will invest significant time in preparing meals ahead of time, a Costco membership just doesn’t make sense for me.

3. I don’t drive much or rent cars often

I’m fortunate to live in an area where I don’t need to drive a lot. Aside from a few sweltering months here in the Florida summer, I usually prefer to ride my bike instead of driving my car. I also prefer to take Uber and Lyft rides when I travel, instead of renting a car.

If I were frequently driving, the gas savings alone might be enough to cover the cost of a Costco membership. Likewise, if I regularly rented cars, Costco’s car rental program could tip the scales in favor of buying a membership. But since I’d rarely take advantage of these perks, I’m holding off on a Costco membership.

4. I’m prone to silly impulse buys

Just as I know I’m prone to buying lots of food and never cooking it, I also know that I’m prone to loading up on impulse purchases, like snacks, dog toys, and clothes I don’t need. Because I don’t need another source of temptation, I’m skipping the Costco membership for now.

5. You can use some Costco services without a membership

If you want to load up on $5 rotisserie chickens or buy 40 rolls of toilet paper at a time, you’ll need to shell out for a Costco membership. But several Costco perks don’t require a membership. For example:

Depending on your state, you may be able to buy alcohol at Costco even if you’re not a member.You can get prescriptions filled at Costco pharmacy (though you’ll need a membership to take advantage of exclusive discounts through the Costco Membership Prescription Program).You can get eye exams through Costco Optical without a membership, though buying eyeglasses and contact lenses requires a membership. If you get a prescription, you can take it to another eye-care professional.

Sadly, I don’t live in a state where you can stock your home bar at Costco without a membership. I also have health insurance that requires me to fill my prescriptions at a pharmacy other than Costco, and I don’t wear eyeglasses. But if these are your main reasons for joining Costco, it’s worth researching whether you could use these services without a membership.

Is a Costco membership right for you?

Don’t get me wrong: A Costco membership can be a great way to save money, depending on your situation. If I were feeding several mouths and lived within a few miles of a warehouse, a membership would be an easy call.

Consider whether your consumption habits are a good fit for buying things in bulk. If you have limited space, you don’t have much time to devote to meal prep, or you don’t live near a warehouse, you may be better off saving your $60 to avoid buying things you’ll never use. With the right grocery credit card, you may be able to earn perks while shopping somewhere that better fits your needs.

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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.Robin Hartill, CFP® has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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It’s a good time to have money in the bank. Check out three accounts you may want to consider given where interest rates are today. 

The Federal Reserve, like consumers, has had a pesky inflation problem on its hands for quite some time. Thankfully, the central bank knows just how to deal with inflation. After all, that’s its job.

Rampant inflation tends to come as a result of too much consumer demand relative to the availability of goods and services. So to solve the problem of inflation, the Fed needs to get consumers to spend less. It does so by raising interest rates to make the cost of borrowing more expensive.

Consumers may not mind signing a loan at 5% to buy the things they want. But consumers may be less than thrilled with signing a loan at 8% or 10%.

That’s how rate hikes work to cool inflation, and the 11 rate hikes the Fed implemented over roughly the past two years have finally brought inflation down to a more tolerable level. Those rate hikes have also resulted in higher interest rates for people with spare cash.

If you’re in that boat, you’ll want to do what you can to take advantage. Here are three options to consider at a time when interest rates are high.

1. A savings account

With a savings account, the interest rate you’re eligible for is not guaranteed — meaning, you can start with one rate and see that rate fall (or rise) over time. But the beauty is that you get complete control over your money.

If you want to empty your savings account to buy a boat, that’s your choice (even though it may not be the most financially sound decision). You’re not required to keep your money in the bank any longer than you want to.

2. A CD

With a certificate of deposit (CD), you’re committing to keeping your money in the bank for a preset period. In exchange, you get a guaranteed interest rate on your cash that’s typically higher than what a savings account will pay.

Now’s actually a good time to lock in a CD because as inflation continues to cool, the Fed may opt to cut rates in 2024. If you lock in a CD before that happens, you may be able to benefit from a higher rate at a time when banks are starting to pay less.

3. A money market account

A money market account offers many of the benefits of a savings account, only there’s a bonus perk: You can also, to some degree, treat that account like a checking account. This means that you may, for example, be able to debit funds from your account to pay for purchases, while earning interest on your money.

Just be aware, though, that you won’t get the same flexibility as with a regular checking account. You may, for example, be subject to a relatively small number of monthly transactions.

Choosing the right home for your money

To decide between a savings account, CD, and money market account, ask yourself whether you can commit to tying your money up for a period and whether you want the option to treat your savings as a checking account of sorts. But from there, you’ll want to find the right bank.

To that end, to make your choice, look at:

Interest ratesMinimum deposit requirementsPenalties (in the case of CDs, as these tend to apply to early withdrawals)

If you find two banks with the same minimum deposit requirement of $1,000 and the same penalty structure for a CD with one paying 5% on a 12-month term and another paying 5.1%, there’s little reason not to go with the latter. But get all of that information before making your decision.

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Paying cash for a home might seem like a good idea — until it isn’t. Read on to learn more. 

In 2020 and 2021, mortgage lenders slashed their rates to drum up business in the wake of economic turmoil fueled by the pandemic. But by mid-2022, when my good friend had started to look for a house to buy, mortgage rates were already much higher.

That summer, borrowers who needed a 30-year mortgage loan were looking at rates of above 5%. Seeing as how rates climbed to almost 8% at one point last year, and they’re well into the 6% range now, those mid-2022 rates don’t seem so bad.

But my friend wasn’t interested in paying over 5% to borrow for a home. And frankly, she didn’t have to.

My friend didn’t decide to purchase a home on a whim. Rather, it was something she planned and saved for over many years.

Not only did she have cash in a savings account to put toward a home purchase, but she was able to liquidate some investments to free up additional cash. She figured that by making a cash offer, she’d not only avoid having to pay a higher mortgage rate, but also, give herself an edge over the competition at a time when inventory was very limited.

After losing out on more than one home as a cash buyer, my friend was eventually successful in purchasing a home. And she did, indeed, pay for that home in cash. But that’s a decision she now regrets.

When you leave yourself short on cash to keep up with homeownership

My friend didn’t empty her savings completely to buy her home — she’s savvier than that. However, she spent the majority of her savings on her home purchase.

At the time she became a homeowner, she still had an emergency fund with enough money to cover almost six months of bills. The problem, though, is that her bills began to rise immediately after she moved into her house.

First, the air conditioning stopped working — not a good thing during the heat of summer. Next, she discovered some issues with her plumbing.

When winter rolled around, she realized her heating system needed a major overhaul, to the point where replacing it became her best bet. And she’s faced countless additional problems due to having bought an older home that, unfortunately, wasn’t so well maintained by its previous owner.

All told, my friend has been in her home for less than 18 months, and she’s already pretty much drained her savings. If something major were to go wrong at this point, she’d be looking at having to borrow money to cover the cost. And that’s a cruddy situation to be in, because chances are, if she does have to borrow, she’ll be looking at a much higher interest rate than the interest rate she would’ve paid on a mortgage signed in mid-2022.

Lesson learned

My friend can’t go back in time and undo her cash purchase. And these days, she’s doing everything she can to build her emergency savings back up for when the next home disaster strikes. All told, though, she regrets putting so much money into her home that she’s now left with limited cash reserves.

When you buy a home, you never know what hidden problems may be lurking. This holds true even if your home undergoes a thorough inspection, which my friend had.

Be careful about buying a home in cash. It can be tempting to do so at a time like this, when mortgage rates remain elevated. But if you spend almost all of your savings on a home, you may be left to scramble once you move in.

Of course, being a cash buyer can put you at an advantage when you’re facing competition for the home you want. But there are other ways to get around that.

You could be flexible with your closing date so your seller is more inclined to work with you. Or, you could make an offer that’s over your seller’s asking price to potentially avoid a bidding war in the first place.

Hopefully, my friend will build back her savings over time. But right now, she’s in a stressful situation. So if you’re contemplating a home purchase in cash, think very carefully before moving forward.

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After 25 years of bipartisan support, the WIC program could be in jeopardy. If you’re a WIC recipient, find out how a budget shortfall might impact you. 

The U.S. Department of Agriculture (USDA) warned there could be a $1 billion hole in its WIC budget if Congress does not approve its funding. The WIC program (which is short for Special Supplemental Nutrition Program for Women, Infants, and Children), provides food assistance as well as advice and support for breastfeeding mothers and young children.

The department says that almost 40% of young children in America participate in WIC. It warns that the “current funding levels will not cover all eligible participants.” If you’re unsure about how a WIC budget shortfall might affect your benefits, you’re not alone. The USDA says around 6.7 million women, infants, and children benefit from WIC.

Why WIC may run out of money

Government spending (and government debt) is a political hot potato right now. For months, lawmakers have been scrambling to agree on spending bills and avoid a government shutdown. Without getting into the details, WIC funding has to be approved differently from SNAP benefits, and it isn’t clear whether WIC will get the extra money it needs.

One issue is that WIC participation has increased. This, combined with higher food costs, means the program needs extra money to continue. According to the Center on Budget and Policy Priorities, in 2021 WIC provided an average of almost $60 worth of food each month in nutritious foods per participant. Eligible women and children receive nutritional food, such as baby foods, cereal, milk, whole wheat bread, and canned fish.

If Congress doesn’t approve the additional funding, the latest press release from the USDA says:

States may have to introduce waiting lists to prioritize who gets assistanceWIC may cut clinic hours and introduce other cost-cutting measuresIn a worst-case scenario, states may have to discontinue or suspend WIC benefits altogether

How you can prepare for possible WIC shortfall

If you rely on WIC benefits, the idea that what’s happening in Washington could impact your ability to care for your family is probably very stressful. Particularly if high living costs are already hammering your personal finances.

Try not to panic. For starters, Congress may still approve the WIC budget. The program has had bipartisan support for the past 25 years and many lawmakers want the program to continue. Especially as both of the recent short-term measures passed by Congress supported higher WIC spending.

However, if the funding does not get approved, officials say the impact will be felt in the final months of the fiscal year. That’s around July, August, and September of 2024. Here are some steps you might take between now and then:

Talk to your WIC provider: The funding situation varies from state to state, so try to find out what’s happening in your area. Ask about any potential cost-cutting measures that might be introduced, particularly whether your state might implement waiting lists and how these would work.Understand the waiting list: If WIC does not have enough money to help all its participants, it will group people by priority, starting with people with serious health conditions. Check what group you and your children would be on its priority list.Try to save a little now: The idea of saving may seem impossible, especially if you’ve already cut back a lot. But if you’re able to put even $5 or $10 into a savings account each week, you can build up a cushion against any WIC changes.See if you qualify for extra assistance: Go to Benefits.gov to see if you might qualify for any other financial help. For example, if you are a low-income household and don’t already claim SNAP benefits, this could give your budget a boost. Outside of food, you may be able to get help with healthcare costs and energy bills.Watch out for Summer EBT: Summer is still a way away. Even so, if you have kids of school age, see if your state is one of the 35 to pay extra benefits during summer vacations. Eligible families can receive $40 per child, per month.Check out food pantries and soup kitchens: If you don’t have enough food for you or your family, see what food pantries and soup kitchens are in operation near you. They are there to help. Homeless charity Feeding America estimates that 1 in 6 Americans received some kind of charitable food assistance in 2022.

There is a lot of uncertainty right now about the economy and what 2024 will bring. The political wrangling over government funding only adds to this. Try to look at your budget now and think about how you might handle any changes to WIC. That way if the worst does happen and Congress does not approve the extra money, you’ll already have a plan in place.

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You might not need to check your credit score as often as you think. Find out how frequently you should do this depending on your current credit situation. 

Credit scores are important. There are many situations in life where you may have to go through a credit check: applying to rent an apartment, setting up utility bills, and even getting car insurance, to name just a few. A high credit score can save you money and make your life easier.

There are plenty of free online services you can use to find out your credit score. Many credit card companies also offer free credit score tools to their cardholders.

But some of these services send out notifications all the time. You get an email about every little thing that happens regarding your credit, sometimes as minor as making your credit card payment. How often do you really need to check your credit score? That depends on where it’s at and your current goals.

If you’re building your credit score, check it monthly

Most credit score services are updated monthly. While you’re improving your credit score, that’s also how often you should check it. This way, you can make sure it’s moving in the right direction.

You’ll also be able to review the factors that are positively and negatively affecting your credit score. Some of these can only improve with time. For example, if you’re getting started with credit and have a limited payment history, that’s not something you can fix overnight. It typically takes at least a year of on-time payments to build a good payment history.

Other factors can be fixed more quickly. If you have a low credit score because you have quite a bit of credit card debt, paying down your balances could have a fast and significant impact on your score.

If you’re maintaining your credit score, check it every three to six months

After enough time managing your credit well, you’ll reach a point where you don’t need to raise your score. You don’t need a perfect 850 credit score, either. Once you have a score of at least 760, there’s no benefit to going any higher. A score in that range is already good enough to qualify for the best credit cards and the lowest mortgage rates.

Your credit score won’t change nearly as much from month to month, so you don’t need to check it so often. You can if you want, but it’s also fine to dial it back to every three to six months. What you’ll probably find is that your score keeps ticking upwards or stays in the same range.

If you get a notification of anything serious, then you should check in to see what happened. For example, if a payment was reported as late, that’s something to investigate right away, because it can cause a huge drop in your credit score.

Review your credit two to three months ahead of credit applications

Any time you’re going to be applying for credit, make sure your credit’s in tip-top shape. This includes applying for credit cards, as well as any of the following:

MortgagesAuto loansPersonal loans

In addition to checking your credit score, it’s also a good idea to pull your credit report. You can get a free credit report every week from the three credit bureaus: Equifax, Experian, and TransUnion. Go to AnnualCreditReport.com to request yours. Review these for errors, because any mistakes could affect your credit score.

Do all this two or three months before applying for credit. If you find any mistakes, you’ll have enough time to get them corrected.

When you’re building or rebuilding your credit, it makes sense to keep an eye on it. Once you’ve set yourself up with a high credit score, you can take it easy. As long as you’re paying your bills on time and following the same habits as before, there won’t be any drastic changes to your credit.

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Tax season is starting soon. Read on to see why you may want to get moving early. 

Filing taxes may not exactly be something you’re looking forward to. But soon enough, it’s a task you need to tackle. And you may want to tackle it on the earlier side if possible.

The first day the IRS will accept a tax return this year is Monday, Jan. 29. And to be clear, this year, you’re filing a tax return for 2023.

All told, the IRS is anticipating almost 129 million individual tax returns this season. And many of those will no doubt trickle in closer to the Monday, April 15, filing deadline. But filing your taxes early this year could benefit you for a few key reasons.

1. An early filing means an early refund

The sooner you submit your tax return, the sooner the IRS can begin to process your tax refund. And if you’d like to get your hands on that money so you can do things like pay off your credit cards or manage your bills more easily, then that’s reason enough to finish your taxes early.

Of course, getting a refund in the past does not guarantee that you’ll be in line for an IRS refund this year. But if your financial situation didn’t change much in 2023 compared to 2022 with regard to income, then it may be fair to anticipate some amount of money back.

2. An early filing could save you from fraud

Criminals have been known to file fraudulent tax returns on people’s behalf. Why would someone do that? It’s simple: So they can steal your refund by directing it to a bank account they control.

The IRS is set up to file tax returns by Social Security numbers. If you submit your tax return early in the season and then a criminal files a fraudulent return a few weeks later using your Social Security number, that second return will get rejected as a duplicate.

Of course, this is something criminals might know, and they may try to get that advantage by filing early themselves. But then, at that point, at least you become aware of the matter early in the filing season so you have time to report and address it.

3. An early filing could give you more time to round up funds you might owe

As mentioned above, tax refunds are not guaranteed. And you may end up in a situation where you owe the IRS money this year. If so, it’s good to find out about it earlier in the filing season than later.

Let’s say you learn that you owe the IRS $150. That may not be such a big deal if you have the money on hand. But let’s say you find that you owe the IRS $1,150. That amount of money may not be so easy to come up with. If you find out that you owe it in late January, you’ll have a good number of weeks to take steps to drum it up, like cutting spending or working a side gig, by the April 15 deadline.

You may not be ready to submit your taxes on Jan. 29 this year, and that’s OK. But if a late January filing isn’t doable, try your best to get your taxes ready as soon as you can.

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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.
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