Money Management

You must have enough money saved for emergencies. Check out a few key lifestyle changes that could mean you need to put more money away. 

Saving money in a high-yield savings account for emergencies can do more than just give you peace of mind. If you have funds put aside for a rainy day, you can avoid a huge financial disaster if things don’t go your way.

Most experts recommend you have enough emergency savings to cover three to six months of living expenses, but that’s a pretty wide range. And there are some circumstances where you might want even more money ready for a rainy day. Not only that, but the amount that you should have in your emergency fund could potentially increase in certain circumstances, so it can become even more complicated to figure out just how big your fund should be.

If you’re not sure if it’s time to grow your own emergency account balance, watch out for these major lifestyle changes. They could mean it’s time to start putting away more cash in case of an unplanned expense.

1. Taking on a big new expense

Most experts recommend having an emergency fund big enough to cover three to six months of living expenses. So if you have a big new recurring expense, that’s a situation where you need more emergency money.

Say, for example, your mortgage payment used to be $1,200 a month, but you bought a larger house and now your monthly payments have gone up to $3,000. Since your mortgage payment is $1,800 higher per month, if you wanted three months of living expenses, you’d need to add an additional $5,400 to your emergency fund. If you wanted six months of expenses, you’d need to add double that.

Remember, your emergency fund is specifically designed to ensure you can fulfill your obligations if something goes wrong — so be sure you’re updating the amount saved when you have new commitments.

2. Your partner stops working

If you have a spouse or partner and you currently share household expenses, then even if one of you lost your job or could no longer work for some reason, you’d still have the other person’s income coming in.

If your partner leaves the workforce, that’s a different story. Now, you have the only income coming into the home, so if you also stopped working, you’d have nothing to cover the bills. You’ll want to increase the amount you have saved for emergencies to account for the fact that the risk is far greater when there’s only one breadwinner.

If you have three months of living expenses saved right now, you might want to up that to six months. Or if you have six months saved, then perhaps nine or 12 would be better. This will give you more of a cushion to find a new job or get back to work despite having no other income if something goes wrong.

3. A serious medical diagnosis

Medical expenses cause about 66.5% of bankruptcies, which isn’t surprising. Getting medical care is very expensive in the U.S. even with insurance, and having serious medical issues could also make it difficult to earn a living.

If you get a serious medical diagnosis, this increases the chance you’ll face high costs and an income loss. If you can, it’s important to increase the amount of your emergency savings ASAP. You may even want to aim to double the amount you have saved, because the chances of an emergency that impacts your personal finances is so high.

4. Increased instability in your career

Finally, if your career becomes less stable and there’s a greater risk of you losing your job or seeing a decline in income, you should bulk up your emergency fund. That way, you’ll be more prepared if a job loss actually does happen sometime soon. Think about how many opportunities are available in your industry and how long you’re likely to be out of work and make sure you feel confident your emergency savings will provide enough to cover you.

If you have any of these four lifestyle changes, start working today on growing your emergency savings. You can set up automatic transfers with the bank to send cash from your checking account to your high-yield savings account until you have the funds you need to be prepared for any emergency that comes your way.

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Looking for a new job? Take a look at some benefits you should put on your radar. 

There’s a reason workers are often encouraged to job hunt in January. First, it’s when many companies have their budgets renewed, which means there’s room for more hiring.

Also, similar to how individuals set financial resolutions, companies often set their own goals for a new year. And sometimes, it takes more workers on board to bring those goals to life.

If you’re going to search for a new job this month, your primary goal may be to boost your salary. Higher pay could do a lot of great things for your personal finances. But it also pays to aim for a job that comes with these important perks.

1. Paid vacation time

It’s important to take time away from work to recharge and spend quality time with the people you love. A recent Pew Research study found that 62% of Americans say it’s extremely important to them to have a job that offers time off for vacations.

Some companies even have an unlimited vacation policy. You may want to pursue a role with that benefit if you’re someone who’s passionate about travel or has family out of state.

2. Subsidized health insurance

Health insurance is something you should really never go without, and buying it yourself can be horrendously expensive. So it’s best to find a new job that not only comes with subsidized health insurance, but one that allows you to join its group plan right away.

Also, if you have a spouse and kids, you’ll want to make sure that putting them on your plan will be possible.

3. A retirement plan

If you don’t have a retirement plan through work, you could always go out and open an IRA on your own. But that’s a step you may not take right away because it requires some legwork.

As such, you may want to find a company that has a 401(k) so you can sign up and start saving for retirement with ease. Plus, many companies that offer 401(k) plans also match worker contributions to some degree. That’s not something you’ll find with an IRA.

4. Sick time

Some companies offer a blanket time-off policy where you get a fixed number of days to use for any purpose, whether it’s to take a beach vacation, nurse an illness, or care for a sick child who can’t go to school.

But during your job search, you may want to focus on companies that treat sick time separately from vacation time. After all, they’re two completely different things. And you don’t want to end up in a situation where you can’t take a vacation because your household happens to get hit with a string of ailments in short order.

5. Mental health days

Some employers are starting to recognize the importance of helping employees maintain good mental health. As you look for a job, see if any of the companies you’re talking to offer mental health days. These are usually separate from sick time or vacation days. They’re one-off days you can take at certain intervals when you feel you need a break from the grind or you’re going through a personal crisis and need an opportunity to decompress for a bit.

January can be a great time to seek out a new job opportunity. But keep these perks on your radar in addition to salary, because all of them could really tie into a better quality of life.

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Amazon Prime has its benefits. But read on to see why you may not want to get a membership this year. 

The start of a new year is when many people assess their finances and review their expenses. In the coming weeks, you may decide to dump some of the expenses on your list that don’t add much value to your life. But you might also decide to sign up for new services you feel can enhance your life, like Amazon Prime.

Amazon Prime costs $14.99 a month, but if you pay for a year at a time, it’s only $139. Your Prime membership gives you access to benefits that include:

Free two-day shipping on orders of any sizeThe option to try on clothing and footwear before committing to a purchaseFree books, music, and streaming content (though you’ll soon need to pay an additional fee if you want that content to be ad free)

You may be tempted to get a Prime membership this year. But here are three reasons not to.

1. You’re already trying to pay off debt

Maybe you racked up a lot of credit card debt over the holidays. Or maybe you’re carrying debt because you had to charge a big car repair on your credit card last summer.

Either way, if you’re trying your hardest to chip away at an existing balance, then any new expense you take on is money you can’t use to get rid of your debt. So if you’ve managed without Amazon Prime in the past, chances are, you can do so for another year, and instead use your money to knock out your credit card balance.

Also, with a Prime membership, you may be tempted to buy more things because you don’t have to meet a shipping minimum. And you don’t want the temptation to spend money when you’re trying to get out of debt once and for all.

2. You tend to shop online when you’re bored

Maybe you don’t have high-cost debt to worry about and you can easily afford the cost of an Amazon Prime membership. Even so, if you’re someone who tends to shop out of boredom, then a Prime membership could be a dangerous thing.

Perhaps a big reason you’ve managed to steer clear of debt thus far is that you haven’t had a service like Prime to open the door to added spending. If you want to stay debt free, you may want to stay away from Amazon Prime.

3. You have easy access to many stores and don’t need the free shipping

Amazon Prime can be a great investment for people who live in rural areas. The savings you reap by not having to drive long distances to stores can easily offset the cost of a Prime membership, if not exceed it. Similarly, if you don’t have a car, then a Prime membership could be a lifesaver.

But if you have a vehicle and live near many large stores that are easy to access and park at, then you may not end up getting much use out of a Prime membership. And why spend that money when you could save it or use it for an important goal?

Amazon Prime is a worthwhile expense for a lot of people. But if these situations apply to you, you may not want to sign up for it in 2024.

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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. The Motley Fool has a disclosure policy.

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Afraid of using credit cards because you don’t want to end up in debt? Read on for an easy way to boost your credit score. 

Using credit cards responsibly can be one of the very best ways to earn good credit. The two most important factors in determining your credit score are your payment history and your credit utilization ratio, which measures how much of your available credit you have used. This means if you get a credit card, charge a little bit on it, and pay your bill on time, you’ll be well on your way to building a credit score you can be proud of.

Unfortunately, despite the credit-building benefits cards offer, many people are scared to use cards because they’re afraid of ending up in debt. This is a valid concern, since cards have high interest rates (averaging 21.19% right now). And it can be easy to lose track of what you’re spending and find yourself with a bill you can’t just pay off from your checking account.

The good news is, even if you’re scared you can’t be responsible with a credit card, there’s a way to use one to build your credit without risking going into debt. Here’s what you should do.

Set up this simple system to use a credit card to build credit

If you want to use your credit cards to build credit and not risk debt, the trick is to find a way to “use” them without putting yourself in a position where you could end up spending more than you should.

Fortunately, there’s a very simple way to do that, and you don’t have to charge a lot on your cards, or carry a balance and pay interest, in order to build credit. Simply set up autopay to cover one or two streaming services that you’re using already and have a recurring monthly payment for.

For example, if you have a $15.49 monthly Netflix charge, you can just make your credit card your Netflix payment method. Then, set up autopay to automatically make a credit card payment out of your bank account for $15.49 a month a few days before your credit card bill is due.

Each month, you’ll have a charge go on your card and will make a payment, so your payment will be reported to the credit bureaus. Your utilization ratio will also be really low, even if you don’t have a very high credit limit. If you charge just $15.49 a month, even if you have only a $500 line of credit, you’d only be using about 3% of your available credit. This number should be kept under 30% to get the best credit score, so you’d be in great shape.

Once you do this, you can store the card somewhere safe or even cut it up so you aren’t tempted to use it for other purchases or bills. And you’ll still get the credit-building benefits a card offers but without the risk of winding up with a big bill (and high interest charges). Just be sure to take a quick check at your statement each month to make sure the payment cleared as it should have.

Using credit cards wisely can have huge benefits

Trying this simple trick can go a long way toward helping you build credit, as payment history alone accounts for 35% of your FICO® Score and credit utilization accounts for 30%. Of course, credit cards do offer other benefits such as cash back or rewards points, but the rewards you can earn don’t make up for any interest charges you’d have to pay. So, if you aren’t confident you can use credit responsibly, taking this route is a good way to go.

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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 Netflix. The Motley Fool has a disclosure policy.

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We avoided a recession in 2023. What’s in store for the coming year? Read on to find out. 

Despite the many dire warnings that sounded in 2022, the U.S. economy managed to steer clear of a recession in 2023. At no point last year did economic indicators seem to even point to a recession.

But will we be as fortunate this year? Or should consumers start gearing up for a recession over the next 12 months?

Some experts are cautious, but the economy looks good right now

From a job-related perspective, the U.S. economy is in pretty good shape at this moment. Unemployment is low and job opportunities are out there.

Plus, the Federal Reserve not only paused interest rate hikes at its last three meetings, but it also indicated that rate cuts could be in store for 2024. If the Fed lowers interest rates, it could make borrowing less expensive for consumers. That could, in turn, lead to an uptick in spending, which would make a recession less likely.

A December survey from the National Association for Business Economics also found that 76% of economists believe the odds of a 2024 recession are 50% or less. And last fall, the New York Fed’s recession probability indicator showed a 56% chance of a downturn over the following 12 months, down from a 66% reading in August.

These numbers, however, may only be somewhat comforting. And while the economy is in a good place now, it’s hard to say where things will stand several months from now, or during the second half of the year. So a smart bet is to do what you can to prepare for a 2024 recession — even if that scenario doesn’t come to be.

How to set yourself up to withstand a recession

A recession has the potential to wreak havoc on your personal finances, especially if a broad economic downturn results in the loss of your job. So it’s important to prepare accordingly.

First, make sure you have at least a three-month emergency fund — meaning, enough money in savings to cover three months of essential expenses, like rent and groceries. And if you already have a three-month emergency fund, aim for four months, and so forth.

Next, do your best to chip away at high-interest debt. If you can whittle your credit card balance down to $0 in the coming months, you’ll be in a much better spot if a recession hits and you lose your job, since you won’t have an extra monthly debt payment to make.

Plus, the sooner you rid yourself of costly debt, the less interest you’ll accrue on it. And money you don’t have to spend on interest is money that can go into your savings. You may want to consider using one of the best balance transfer credit cards to help you reduce your debt faster.

Finally, do your best to build added skills at work so you’re potentially less likely to land on the chopping block if cuts need to be made. Along these lines, consider a side hustle. A second job could make it easier to build savings and pay down debt. It also gives you a backup source of income should your primary job go away.

The idea of a recession can be scary. Right now, we don’t seem to be on the cusp of one, but things have the potential to change. The more prepared you are, the easier it might be to sleep at night.

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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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