Money Management

Sometimes, you need to adjust your habits to cope with higher costs. Read on to see what younger Americans are doing in light of inflation. 

Although inflation isn’t quite as rampant these days as it was back in 2022, many Americans are still feeling the strain of higher living costs. This extends to members of Gen Z, who may not be as established in their careers and, as such, may be grappling with lower wages.

Now inflation has impacted consumers in different ways. But one thing it’s done consistently over the past couple of years is drive up the cost of restaurant meals. In fact, in November, the cost of restaurant food was still up 5.3% on an annual basis, according to that month’s Consumer Price Index. And while grocery prices remain elevated, too, they were only up 1.7% last month.

As such, it could pay to start making more of your food at home if you’ve been struggling with higher living costs and are tired of raiding your savings account just to keep up with basic expenses. In a recent Bank of America survey, 43% of Gen Zers said they’ve been cooking at home more frequently, rather than dining out. And 90% say they plan to maintain this lifestyle change in the next year.

You may be interested in doing more cooking to save on food costs, too. But if you’re not so experienced in the kitchen, that might seem daunting. Here’s how to ease in.

1. Don’t expect to become a gourmet cook overnight

If your culinary skills as of now are limited to making scrambled eggs and toast, then you’re probably not going to go from that to suddenly whipping up plates of restaurant-style duck confit. And that’s okay.

It’s important to set reasonable expectations about the meals you’re capable of preparing — and the meals you actually have time to prepare. So rather than push yourself way outside your comfort zone, browse some recipe sites online and come up with a few dishes at a time you think you can handle. Consider basic dishes like pastas, chicken breast, and rice and beans while you’re working on your skills.

2. Do some meal planning

Planning out your meals in advance can help you grocery shop more efficiently. At the start of the week, figure out what meals you’ll make and how much leftovers each recipe will yield.

It’s also a good idea to see what’s on sale at your local grocery store and then plan your meals based on that. If a vegetable you like is marked down substantially, for example, you have an opportunity to buy it and have it be the star of the dish you’re making. That may not be as feasible when that item goes back to its full price.

3. Turn to meal kits to get started

If the idea of going it alone in the kitchen is truly overwhelming, as a starting point, consider subscribing to a meal kit service for a few months. You’ll generally pay more for meal kits than you will for store-bought groceries. But the upside is that these kits come not only with the ingredients you need to whip up different dishes, but clear step-by-step instructions.

Once you’re more comfortable in the kitchen, you can ditch those meal kits or try to emulate the recipes you’ve been making. But starting off with meal kits is a reasonable approach if you’ve really never cooked before. And it’s apt to be cheaper than dining out.

Clearly, Gen Zers are rolling with inflation by spending more time in the kitchen. Do the same, and you may find that your personal finances are suddenly easier to manage.

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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.Bank of America is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.

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Inflation was persistently high for months. Read on to see where things stand today. 

Many Americans felt the brunt of inflation in 2022 when it peaked at over 9% at the midpoint of the year. Inflation has thankfully cooled nicely since that point. But in an August CNBC survey, 61% of respondents said that inflation was still contributing to their financial stress.

Is inflation actually getting better? And when will it go away?

Where inflation stands today

In November, inflation was measured at 3.1% as per the Consumer Price Index (CPI). That’s a far cry from where it stood in mid-2022. However, 2% inflation is far more ideal, and it’s the level the Federal Reserve likes to target for a healthy economy.

One thing you should know about inflation is that it’s a persistent part of the economy and never really goes away completely. There are sometimes individual years where deflation takes over, but for the most part, it’s natural for the cost of goods and services to rise modestly over time. But the hope is that in time, inflation as it currently stands will cool even more.

How to cope with lingering inflation

November’s CPI report is a clear indication that certain living costs are still higher than average. Last month, the cost of groceries was up 1.7%, while the cost of restaurant food was up 5.3%. Shelter costs were also up 6.5%.

All told, we may be stuck in this period of elevated (but not so drastic) inflation for a while. And so it may be best to accept that and find ways to cope.

One option is to reduce one of your larger expense categories. Maybe that’s transportation. If you can get by without a vehicle and take the bus instead, you’ll shed your auto loan and car insurance payments.

Or, maybe it’s possible to reduce your housing costs by getting a roommate, or by renting out a portion of your home, like a finished basement, and using your rental income to help pay the mortgage. There are different options you can consider, depending on your situation.

If it’s not possible to cut down on a large expense, look to the gig economy. If you’re able to work a second job, you can use the extra income you earn to make up for your higher costs. And if you earn enough, you might have enough left over to pad your savings account, giving yourself a cushion for those months when your bills are higher than usual.

Finally, don’t hesitate to fight for a raise at work, especially if your employer did not boost salaries this year as a cost-of-living adjustment. And you don’t have to go it alone. Rally your fellow employees and demand (respectfully) to be paid enough to keep up with rising expenses.

It’s not so surprising to learn that Americans remain stressed over inflation even though it’s cooled nicely since 2022. Unfortunately, though, living costs might remain higher than average for a while. Do your best to cut back where you can, advocate for a raise, and hustle at a second job if necessary so you can manage your personal finances and avoid costly debt.

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

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Some credit cards are more trouble than they’re worth. Here are the most common red flags of bad credit cards. 

It’s a good idea to have at least one credit card. Credit cards are a safer way to pay for purchases than cash. If you don’t overspend with your card, and you always pay the bill on time, then it can also help build your credit score. A higher credit score has quite a few benefits, including lower interest rates on mortgages and other loans.

When you’re new to credit, or you’ve had credit score problems in the past, it’s harder to find a card. And unfortunately, many of the cards for people in this situation aren’t the best. There are great starter credit cards, but there are also some that seem more designed to take advantage of cardholders.

That’s why it’s important to know what red flags to look out for in a credit card. If you notice any of these, stay far away.

1. An annual fee with nothing to show for it

An annual fee on a credit card isn’t necessarily a bad thing. Some of the best credit cards charge annual fees, but they also have benefits that make their fees worth it.

But there are also cards with annual fees and few, if any, benefits. This is common among credit cards for people with bad credit. There are card issuers that will approve almost anyone for a card, but then charge a massive annual fee on that card. I’ve seen fees of over $150 on cards that offered nothing of value.

When you’re building credit, look for cards with no annual fee. If a card has an annual fee, see if it has anything that could balance out the fee, such as the chance to earn cash back.

2. A bad reputation for the card issuer

Here’s an easy way to avoid many of the worst credit cards: Look up the card issuer online before you apply. See if it has been a part of any J.D. Power rankings, and check what people are saying about it on communities like Reddit and MyFICO.

If a card issuer has solid customer satisfaction scores, and people online like its cards, then it’s probably a safe choice. If every Reddit post about a card issuer says something like “I’ve made a mistake,” “Avoid at all costs,” and “How can I cancel?”, then you know to steer clear.

3. Repeated mail offers

Lots of credit card companies send out mail offers, so this alone doesn’t guarantee a card is one to avoid. But mail offers are also a common tactic among card issuers that prey on people with bad credit.

Make sure to research any card you learn about in a mail offer before you apply. If you have a low credit score, and you keep getting offers about the same card, be especially cautious about it.

4. A sky-high interest rate

Credit cards as a whole charge high interest rates, which is why it’s good to always pay in full and avoid interest charges. Earlier this year, credit card interest rates hit a record high of 22%. The only cards that are good for paying off balances over time are 0% intro APR credit cards. They offer a 0% APR for an intro period, which can be 12 months or longer.

While you won’t find many cards with low interest rates, you should still look at a card’s APR before you apply. Mediocre credit cards often charge high interest rates, even by credit card standards. If a card has an APR of 30% to 35%, or higher, it’s probably not worth getting.

5. No way to upgrade

Credit cards for building credit usually aren’t feature-packed, and that’s fine. The point is to raise your credit score, without paying unnecessary fees.

But good cards will include the option to upgrade in the future to a card with more benefits. This is especially important with secured credit cards, a popular option for building credit. These cards are easier to get, because they require a refundable security deposit to open.

Ideally, you’ll eventually be able to upgrade to an unsecured card. That way, you can get your deposit refunded without needing to close your account.

There are plenty of quality credit cards available, but there are also some that aren’t recommended. Now that you know the red flags to watch out for, you can make sure you pick a winner.

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Timeshares are a $10.5-billion industry. Find out why buying a timeshare is a financial decision that could come back to haunt you. 

Timeshare salespeople can be very persuasive. Case in point, the timeshare industry did $10.5 billion in sales in 2022, according to the American Resort Development Association (ARDA). So even if you go into a presentation with every intention of saying no, you could find yourself changing your mind.

After all, you’ll get a nice place to vacation every year. And if you decline the offer enough times, those salespeople will probably cut you a sizable discount. Tempting as it may be, buying a timeshare is almost certainly a decision you’ll regret later.

How timeshares work

Before getting into why timeshares aren’t worth buying, we’ll cover how they work. This can vary depending on the timeshare company, but here’s the general idea:

A timeshare is a shared vacation home with various owners. Each owner can use it at a different time during the year.When you buy a timeshare, you get one stay per year. This is normally for one week, which may or may not be the same week every year.You pay upfront to purchase the timeshare (you can also finance this). In addition, you’re responsible for maintenance fees and property taxes every year.Most timeshare contracts last either indefinitely or for a lengthy period of time, such as 20 years.

Timeshare companies offer people gifts to get them in the door. If you get an offer for a discounted stay at a hotel, a free breakfast, or tickets to a show, chances are you’ll have to sit through a timeshare presentation. The salespeople can be pushy, and they’re known for using underhanded tactics.

If you’re looking for a cheaper alternative to a vacation home, or if you want to save on the cost of a hotel stay, a timeshare may seem like a good deal. Here’s why it’s not.

It’s expensive, and costs can increase every year

Timeshares sold for an average of $23,940 in 2022, according to the ARDA. And if you think that will eventually balance out with all those free vacations, don’t forget about the annual maintenance fees. Those cost an average of $1,170, and they often increase faster than inflation.

You’re prepaying quite a bit of money to have a vacation home for one week per year. Keep in mind that there are other, better ways to get free accommodations. For example, it’s possible to use travel credit cards to book free hotel stays — I’ve saved thousands of dollars this way.

You’re stuck going to the same place

You might love the area where you’re vacationing. But are you sure you want to go there every year for the next 20 years or more? I doubt many people can confidently say yes.

Travel habits change as you get older. The destinations you love at 30 may not appeal to you as much in your 40s or 50s. And if, like almost everyone, you have limited vacation time, you might eventually want to visit somewhere new and not go to Orlando for the eighth time in a row.

You don’t need to visit your timeshare every year, but you need to pay the maintenance fees whether you visit or not. Some timeshares at least give you the option of trading your time for a stay at another property. But there’s not always availability at other popular destinations, and there could be an additional exchange fee.

It’s hard to get out of your timeshare contract

As many timeshare owners have learned, contracts are easy to get into, but hard to get out of. You could try to sell your timeshare. At that point, you’ll learn that the salesperson wasn’t being so honest about how timeshares are a fantastic investment opportunity.

It’s hard to resell a timeshare. There’s not a lot of demand on the secondary market. While it’s possible to sell yours, don’t expect to get anywhere near what you paid upfront and in yearly maintenance fees.

The other option is to ask the timeshare company to take it back. However, timeshare companies don’t always accept this arrangement, even though you’re giving it back for free. They’d rather keep charging you the annual maintenance fees.

There are much better places to put your money

From a financial perspective, a timeshare doesn’t make much sense. It’s not going to grow in value, and it won’t generate income. Let’s say that you were thinking of buying a $25,000 timeshare. Here are a couple of better ways you could use that much money:

Invest it in the stock market: The stock market has historically returned an average of about 10% per year. If you invest $25,000 through a stock broker and get a 10% annual return, you’d end up with $168,188 after 20 years.Put it toward a house: Buying a home is almost always a better decision than buying a timeshare. You can have a place to live the whole year, not just one week. With $25,000, you could make a 10% down payment on a $250,000 home.

Don’t be fooled by a flashy sales presentation. A timeshare isn’t a good investment by any stretch of the imagination, and it doesn’t even mean you’ll be able to vacation for free — you’re still on the hook for those yearly maintenance fees. You’ll be better off financially if you use your money for savings, investing, or the down payment on a mortgage loan, and just pay for a hotel room or vacation rental on your trips.

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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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There’s a ton of misinformation floating around about taxes. Read on to get to the bottom of it. 

Taxes are something all of us have to deal with year after year. And unfortunately, there’s a fair amount of misinformation about taxes. Here are a few tax matters a lot of people don’t understand, but should.

1. You should aim for the largest refund you can get

As of April 21, 2023, the average tax refund for 2022 was $2,753. If you got a large refund this year, you no doubt enjoyed seeing that money hit your checking account.

But one trap you don’t want to fall into is erring on the side of having more tax withheld during the year so you can end up with a larger refund. In that scenario, all you’re doing is setting yourself up to wait longer to get your money.

Remember, a tax refund is not a gift from the IRS. When you get a refund, all the IRS is doing is returning the money it was supposed to give you initially. So rather than celebrate a large refund or try your hardest to snag one every year, your goal should be to score as small a refund as possible.

To be clear, most tax-filers either get a refund when they file a tax return or owe the IRS some money. It’s very, very difficult to get your taxes exactly right during the year to the point where you’re not owed anything or you’re not writing out a small check.

But remember, if you get a refund of $2,400, it means you could’ve gotten access to an extra $200 a month during the year, only instead, you didn’t. That’s hardly beneficial to you.

2. You’ll be audited if you itemize deductions

A good number of tax-filers itemize deductions on their tax returns because doing so results in more savings. It could make sense for you to itemize if you pay a lot of interest on a mortgage, have high property taxes and state income taxes to write off, and have a lot of expenses to deduct related to side hustle or freelance income.

But one thing you don’t want to do is avoid itemizing because you’re afraid of getting audited. If you claim legitimate deductions, that’s less likely to happen.

And let’s say you do get audited. Maybe the IRS wants to question the $8,000 in supplies for your business you deducted. All you have to do is submit your receipts, and the IRS will see that you did, indeed, purchase the items you claim you did.

3. You’ll be taxed more on all of your income if you’re a higher earner

You may have heard that the higher your income, the higher your tax rate is. That’s true, but only to some degree.

Our tax system works on a marginal basis, which means you pay a higher rate of tax on your highest dollars of earnings. However, the tax bracket you fall into applies to your highest dollars of income only.

Let’s say you’re single and earn $100,000. That puts you in the 22% tax bracket for 2024. But that bracket, for singles, applies to income of $47,151 to $100,525. You’re not being taxed 22% on your entire $100,000 salary. You’re only being taxed at that rate on earnings of $47,151 to $100,000.

It’s easy to get bogged down by misinformation when it comes to taxes. But a better bet is to talk to a tax professional about ways to save money on your IRS bills every year. A professional can help you not only understand how the tax system works, but how you can use certain provisions to your financial benefit.

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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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Thinking of stepping into the freelance world? Make sure you have extra savings in the bank. Find out why you need to have an emergency fund. 

I’ve been a full-time freelance writer for seven years. It’s been an exciting journey and a continued learning process. But some lessons have taken me quite a while to master, including financial ones. I didn’t always prioritize financially protecting myself in my early freelancing days. If you’re a new freelancer or are thinking about transitioning into this lifestyle, I may be able to save you some time by sharing one crucial financial tool that I ignored for too long. I believe all freelancers and self-employed professionals need this tool to protect themselves. Here’s why.

Establish an emergency fund before you start freelancing

After experiencing what it was like to live abroad and work a job with a generous number of vacation days, I was willing to do whatever it took to avoid sitting in an office cubicle working a stressful 9-to-5 job the rest of my life. So, when I returned home, I jumped right into freelancing.

As a new freelancer, it can take time and effort to cobble together enough work to pay all your bills. Since I jumped in with both feet, I didn’t have an emergency fund those first couple of years. I wish that I had, because I may have felt more confident when work suddenly dried up or when there were months when I barely had enough money to cover my expenses.

I always made it work, but I know those early years would have been less stressful had I had a stash of extra cash to fall back on. I know there was more than one occasion when I carried a balance on my credit card, so I wasted money on credit card interest fees.

If you continue to carry a balance on your credit cards, you can quickly develop a costly credit card debt problem. Luckily, I didn’t make overspending beyond my means a habit. But if you’re not careful, it can be too easy to rely on credit cards to cover purchases and bills you can’t afford. Luckily, you can avoid this if you have emergency savings stashed away.

Here’s why you need an emergency fund

When you’re self-employed, your income will likely fluctuate. You might make thousands one month and almost nothing the next. It’s also possible to lose a client or project without much notice. You’ll be left scrambling to cover your upcoming expenses if this happens, so having an emergency fund is a good way to financially prepare.

Another reason to have an emergency fund is because life happens, whether you work a W-2 job or are self-employed. Even if your small business is doing well financially, a surprise costly bill can change your entire financial situation and cause significant stress. You’ll feel better knowing you can afford to cover emergency expenses if you have savings in the bank.

Whether you’re an established freelancer without emergency savings or are a brand-new freelancer, I suggest you make your emergency fund savings a priority. Here are a few tips:

Start small: Even if you can only afford to set aside $100 a month, do it. Saving a small amount of money is better than saving nothing. As you continue to contribute extra cash, your savings balance will grow. Every dollar saved adds up and makes a difference.Automate the process: When you’re busy running a company, it can be easy to be forgetful. If you struggle with remembering to save money, you can automate your savings. Automation can ensure you reach your emergency fund savings goal sooner.Earn interest: Make sure you keep your savings in a bank account that earns interest. As your money sits in the bank, you’ll get rewarded with extra cash. Opening one of the best high-yield savings accounts is an excellent option.

For additional tips, check out our personal finance resources.

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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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