Money Management

The Fed has backed away from interest rate hikes during the latter portion of the year. Will we avoid a hike at its final 2023 meeting? Read on to find out. 

Inflation utterly battered consumers in 2022, driving up the cost of everything from groceries to utilities to shelter. In response, the Federal Reserve took action by implementing a series of interest rate hikes designed to cool inflation.

How do those rate hikes ease inflation? It’s simple — they indirectly but effectively drive up the cost of consumer borrowing.

Although the Fed doesn’t set consumer borrowing rates — it merely oversees the federal funds rate, which is what banks charge each other for short-term loans — when it raises its benchmark interest rate, other rates tend to follow suit. So these days, consumers are generally paying more for things like auto and personal loans as a result of it costing banks more money to borrow from each other short-term.

Meanwhile, when the cost of borrowing increases, consumers tend to borrow less. And that’s how inflation is able to cool. When there’s less demand for goods and services, the cost of them can come down.

The Fed opted to hit pause on interest rate hikes during its last meeting. And that was the second time in a row that the central bank opted not to raise rates this year. But the Fed is set to meet again on Dec. 12 and 13. And the big question will be whether the central bank sits tight once again, or whether it opts to close out the year with one final rate hike.

Why a rate hike may not happen

In October, the Consumer Price Index, which measures changes in the cost of consumer goods and services, rose 3.2% on an annual basis. The Fed has long targeted 2% as its optimal annual inflation rate. It’s this rate, the central bank feels, that’s most conducive to a thriving economy in the long run.

Now, 3.2% inflation isn’t 2% — but it’s also not so far off. So the Fed may decide that it’s happy with the progress that’s been made in fighting inflation and just leave things alone.

Remember, the danger in raising interest rate hikes is that it has the potential to lead to a major pullback in consumer spending. That could, in turn, fuel a recession, which the Fed doesn’t want. So it needs to tread lightly as far as rate hikes go.

There’s no guarantee that a rate hike won’t happen

Although inflation has cooled nicely over the past year and a half, the reality is that the Fed is still tasked with keeping it in check. At its last meeting, after announcing a pause on rate hikes, the Fed issued a statement saying, “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”

What this means is that if the Fed has reason to believe that inflation is moving in the wrong direction, it could implement another interest rate hike at its discretion. So ultimately, another rate hike could still be in the cards for 2023, but we’ll need to wait until mid-December to see what the Fed decides.

For now, it may be a good idea to hold off on borrowing if there’s not an urgent need for it, since borrowing costs are still quite elevated. If inflation continues to cool, the Fed may be in a position to cut rates in 2024, leading to lower interest rates for products that range from auto loans to mortgages. So now’s a good time to avoid taking on more debt if it’s possible to wait.

That said, consumers with existing credit card balances should do what they can to pay that debt off. Consumers with existing fixed-rate loans don’t necessarily have to stress about another 2023 rate hike, because their interest rates are locked in. But another rate hike could make credit card debt even more expensive for existing borrowers. So shedding that debt, or a portion of it, is a great thing to do right now.

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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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The standard deduction will increase by $750 for single filers and $1,500 for married couples in 2024. Find out how that affects your tax bill. 

If you aren’t eligible for many tax deductions, you probably take the standard deduction instead of itemizing at tax time. The standard deduction is the amount the IRS lets you automatically deduct from your adjustable gross income to lower your federal tax bill.

Most years, the IRS increases the standard deduction to account for inflation. In 2024, the standard deduction will be $750 higher for most single filers and $1,500 higher for most married couples filing jointly. Read on to learn what a higher standard deduction will mean for you when you file your taxes.

What is the standard deduction in 2024?

When the standard deduction is higher than your total tax-deductible expenses, taking the standard deduction makes sense. Here’s how the standard deduction breaks down in 2023 and 2024:

Some taxpayers are eligible for an additional standard deduction, though:

Single filers and heads of household: You can take an additional $1,950 standard deduction in 2024 ($1,850 in 2023) if you’re 65 or older, or blind. If you’re at least 65 and blind, you can take two additional standard deductions, for $3,900 total ($3,700 total in 2023).Married couples filing jointly or separately: You can take an additional $1,550 standard deduction in 2024 ($1,500 in 2023) for each person who’s 65 or older, or blind. For each person who’s 65 and blind, you can take two additional standard deductions, for $3,100 total ($3,000 total in 2023).

Standard deduction vs. itemizing

When you file your taxes, the big question is often: Should I itemize or take the standard deduction? Fortunately, the best tax filing software makes it pretty easy to answer this question.

But if you can’t stand to wait until tax season to find out the answer, here’s a spoiler: Taking the standard deduction is the best move for the vast majority of Americans. In fact, recent IRS data shows that nearly 90% of taxpayers now opt for the standard deduction.

One big reason is the Tax Cuts and Jobs Act of 2017, which nearly doubled the standard deduction. The higher standard deduction meant that taxpayers needed a lot more deductible expenses in order for these costs to exceed the flat standard deduction. In fact, the Tax Foundation estimates that the higher standard deduction led to a drop of about 17 percentage points in people itemizing on their returns.

Do you have to itemize to claim deductions?

Not all tax deductions require you to itemize on your return. Some deductions are known as above-the-line deductions, which means you can claim them even if you’re taking the standard deduction. Examples include:

Up to $2,000 of interest on loans for educationContributions to a traditional IRA, depending on your income and whether you or your spouse have a workplace retirement accountHealth-savings account (HSA) contributions if you made them with after-tax moneySome self-employment expenses

But if you’re taking a deduction for mortgage interest or a tax-deductible home equity loan, you’ll need to itemize. The same goes for many other common deductions, including charitable contributions and unreimbursed medical or dental expenses.

What will a higher standard deduction mean for you at tax time?

Generally, the higher deduction we’ll see in 2024 makes it even more likely that taking the standard deduction will make sense for you when you file your return for the year in 2025.

But don’t leave anything to chance. Keep careful records for any expenses you think may be deductible in case you do opt to itemize.

Finally, always give yourself plenty of time when you’re filing your taxes in case you have questions. If you’re not sure whether to take the standard deduction or itemize, or you’re uncertain if you’re allowed to deduct an expense, it’s essential to consult with a tax professional.

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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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Reselling clothes online can be a lucrative side gig. Find out how one reseller made $3,000 in 30 days. 

Best. Month. Ever. That’s what my housemate, a professional reseller, told me after checking her eBay and Poshmark sales. Combined, she earned over $3,000 in profits in November. It’s her best 30 days of sales, period.

Here’s how she made $3,000 in 30 days:

She crosslisted to eBay and Poshmark.She created new listings consistently.She tracked inventory and sales.

My friend attributes much of her success to being a consistent seller. She runs her reseller stores (@Contempo Closet) for 20 hours weekly. She’s also a full-time mom of two, so she has limited time to spend online. Read on for a deeper breakdown of her reselling strategy.

1. Crosslisting to eBay and Poshmark

“That’ll sell,” she told me, pointing to my worn Halloween costume. I was skeptical, but she was right — the Spirit Halloween costume sold in less than a week, netting us $20. I was shocked, but that’s the magic of eBay, one of the biggest reselling platforms on Earth. Everything sells.

To reach a broad audience of buyers, my friend crosslists her items, posting the same item across two platforms. In doing so, she ups her chances of securing sales. When one item sells on Contempo’s eBay store, she quickly removes Poshmark’s sister listing, or vice versa.

Crosslisting boosts sales, but it’s time-consuming to double-post. My friend cross-posts her closet with List Perfectly, a crosslisting platform, to move things along fast. It’s an imperfect solution, but it helps, especially when she has tons to list.

Last month, 45% and 55% of her sales came from eBay and Poshmark, respectively. Without her Poshmark or eBay buyers, sales might’ve been much less. Folks like to compare Poshmark versus eBay for sellers, but it may be worth trying both.

2. Creating new listings consistently

Many members of the reselling community swear by the magic of listing consistently. One of eBay’s top sellers (@Bargainz Babylon) says, “I would list at least five a day, no more than 10 a day, and have more listings ready to go once you get through that 50 listings.”

“…any selling site rewards engagement and activity.”

Poshmark actively encourages sellers to list more. In any given week, 94% of sales go to sellers who have listed that week, according to a 2022 blog post. My friend lists at least five items daily, which takes her 20 minutes to complete. It keeps her stores visible.

3. Tracking inventory and sales

To earn lots of money, you have to sell lots of items or sell your stuff at a premium price. My friend does the former at Contempo. Her inventory includes hundreds of neatly wrapped apparel, including hoodies, dresses, boots, and bags. It’s easy to get things mixed up.

Popular reselling YouTuber Sandra the Mom Boss uses spreadsheets to keep track of inventory and sales. As your list of things to sell grows, having a go-to place to check names, prices, and listing information becomes more important. The alternative is losing track of items.

Lost items lead to canceled sales and bad reviews. Bad reviews are bad for business.

My friend uses a mix of Excel (free) and List Perfectly (paid) to track her sales. It’s a big part of her reseller routine. It also helps her track when items sell, are returned, and their value relative to similar brands. She’s used it to achieve Top Seller status on eBay, building trust with buyers.

Getting started with selling clothes online

Supporting two kids and running a business part-time is doable. The more time you spend on your business, the more you earn and the faster you learn. Soon enough, buyers will be whipping out their credit cards to buy your clothes at a good price (fingers crossed!).

Listing basics: New to reselling clothes online? Consider checking out eBay’s listing best practices. It’ll give you a head start toward learning about common problems new sellers face. And these tips will hold from your first sale through your first $3,000 payment.

My friend is excited to continue growing her business. What started as a casual gig has become a part-time side hustle that puts thousands into her checking account. It takes time to get started, but the results speak for themselves.

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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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You’ll pay extra to insure an EV…or will you? Find out how much more it could cost to insure an electric vehicle. 

It’s happening. I’m switching from a hybrid to an electric vehicle (EV), and I’m not alone. According to Pew Research, about 4 in 10 Americans are thinking seriously about making the switch. Why? Reasons people cite include “better for the environment” and “cheaper fuel prices.”

That checks out. But two things make me hesitate — still — before shelling out: sticker shock and the cost of auto insurance.

Electric vehicles in the U.S. are typically pricier than their ICE (internal combustion engine) counterparts. Take the baseline Ford F-150, which is about $15,000 cheaper than the electric Ford Lightning base model (before tax credits). Yeeouch. That, right there, could be a budget-breaker. It’s costly.

Then there’s the secondary effect. Pricier cars are typically more expensive to insure. You could pay much more to insure an EV than a lower-priced, gas-powered alternative. How much depends on everything from your location to your car’s model. In short, it’s complicated.

For a quick idea of how much more you could pay in auto insurance, I’ve pulled quotes for four models of 2023 Ford F-150s. Read on to compare the cost of insurance.

You could pay 5% less for basic EV insurance

I compared how much it costs to insure four models of the Ford F-150, the 2023 best-selling vehicle in the U.S., according to Car and Driver. I used a generic gas-powered Ford F-150 as the baseline. This is how much more expensive it is to get EV/Hybrid insurance.

Results: Progressive quoted me 98% and 24% more for EV comprehensive and collision auto insurance, but 5% less for liability insurance.

Color me surprised. Typically, specialty vehicles like the Ford Lightning are more expensive to insure. This might reflect data suggesting that Lightning drivers are less likely to be involved in accidents or cause damage, or it could be related to safety features specific to the Lightning.

There’s no way to know for sure. Prices vary significantly by location, insurer, and model. The results can be surprising. (Case in point: I’d pay Progressive more to insure some Ford Hybrids than a Ford Lightning!) Compare car insurance quotes to check how much you’d pay.

Lowering the cost of insurance

To lower the cost of insurance, I’ll be doing a few things. One is getting quotes from the best cheap car insurers in California, where I live. I’ll take the best deal available. If my family uses the same insurer, I’ll see if we can bundle to lower our premium by 5% to 10%.

Another thing I’ll do is adjust my deductible. I can lower the cost of car insurance by raising the deductible to a reasonable level. It’ll shrink monthly premiums, though I’ll pay more if I get into an accident. To compensate, I’ll contribute enough to my emergency savings to cover it.

I may opt out of collision insurance, an optional type of insurance. Most drivers only need liability insurance, which is required by state law. If I lease my car, I’ll probably need to purchase liability and comprehensive insurance. That’ll bring my premiums up.

Cost of ownership

What more you could pay in auto insurance might be partially offset by fuel savings. Tesla’s website claims the average American could save $1,200 yearly by fueling an electric vehicle. It’s worth keeping an eye on the bigger picture — total cost of ownership — when tallying costs.

The total cost of ownership of a vehicle includes sticker price, insurance, cost of fuel, cost of maintenance, and how much you could recoup by selling it used.

Comparing the cost of insurance for gas-powered cars versus EVs helps me understand cost tradeoffs, but it’s not the most important thing. More important than whether Car A is more expensive than Car B is whether I can afford to pay for the car. So long as premiums stay reasonable, I’ll pay them.

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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.Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Progressive. The Motley Fool has a disclosure policy.

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