Money Management

Shopping at Costco can lead to big savings on your grocery bill. But take a look at these lessons that can be applied to other areas of your financial life. 

Costco is a popular warehouse club with many devoted shoppers. There are currently 863 warehouse locations around the world, including 593 just in the U.S. With membership approaching 128 million cardholders, there’s a good chance you know someone who shops at Costco.

While many people visit Costco to take advantage of the discounted prices they can find there, it’s worth taking a step back to see what other lessons can be learned by shopping at the mega store. I don’t currently have a Costco membership (as I don’t live especially close to a location), but I used to visit the store back in college. Here are a few life lessons I learned while shopping at Costco that make for great financial lessons as well.

1. A name brand doesn’t automatically make an item better

We all know someone who only purchases items from big-name companies — they likely have a prominent company logo plastered across most of their clothing, and their kitchen cupboards are loaded with products from the most recognizable brands on TV. When I first moved out on my own, I mostly followed this shopping habit, too. The bigger the brand, the better the product should be, right?

Here comes Kirkland to upend that idea. Costco’s signature brand can be found on products all over the store and can lead to major savings compared to other name-brand items. In fact, many Kirkland products are actually made by well-known brands, from Starbucks to Ocean Spray. So what’s in a name, really?

2. Buying more doesn’t equal more savings if you don’t use the item

This was one of those learn-the-hard-way lessons for me, and I still laugh about it when I remember. One of my college roommates and I were in charge of food shopping for our graduation party with our families. We knew we’d have about 20 guests at our apartment, and we didn’t have any issues with our shopping list until we got to the tortilla chips.

If you know anything about Costco, you know that products come in large packages. Somehow, my roommate and I chose to get not one, but two three-foot-tall bags of chips. (Picture Santa’s bag of toys and you’ll have an idea what we looked like walking back to our car.) They were a great price, and people love to munch on chips at a party, so we figured we’d need that second bag. Of course, we didn’t even make a dent in the first one.

Lesson learned: Just because something is priced well doesn’t mean you should buy it. Rather than saving money on chips compared to buying them at the grocery store, we wasted money on a whole bunch of food that no one ate.

3. Take advantage of any and all benefits offered

While the financial benefits of shopping discounted items at Costco are well known, many shoppers might miss out on some of the other benefits that can be found at Costco.

I didn’t know about the photo printing service at Costco until I needed large prints made up for my wedding. I also didn’t know until recently that you can buy eyeglasses or hearing aids at Costco. That can be a huge relief to your personal finances if you need these items. And I certainly didn’t think booking travel through Costco was even on the table, but it’s another major perk of being a member.

My interaction with Costco was very limited in college, and I definitely wasn’t taking advantage of all the benefits of club membership. But seeing now how much I missed out on has made me realize how important it is to research all the perks on offer, whether it’s from a rewards credit card or a store membership. If you don’t use all the benefits available to you, you’re leaving value behind.

Never stop learning

Life lessons can come from anywhere if you keep your eyes open. It may seem silly to gain financial knowledge from a bag of tortilla chips, but if learning from that experience can help grow my savings account balance in the future, who am I to turn down a (deeply discounted) financial lesson?

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

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Experts can’t agree on whether a recession is coming. But you can get your finances in better shape no matter what happens. Find out what to focus on. 

Recessions are a normal part of the U.S. economy, but they can be scary. The typical recession comes with increased layoffs and reduced output, slower consumer spending, lower home values, and negative impacts on the stock market.

Many workers are already on edge right now because elevated inflation has already hurt their personal finances, eroding their buying power as high interest rates have driven up the cost of everything from buying a car to owning a home.

Lots of experts predicted an impending recession when the Federal Reserve began hiking interest rates to fight inflation. But that has yet to happen, and some economic experts are now divided on whether it will happen in 2024, or not all.

These experts think a recession is coming

The Federal Reserve Bank of New York says that there’s a 56% probability that the U.S. economy will slip into a recession by September 2024. Interest rates are at their highest level in two decades as the Federal Reserve has tried to tamp down inflation, and rising interest rates often lead to a recession.

Additionally, a recent Bloomberg Economics model shows a slightly greater than 50% chance the U.S. will fall into a recession in 2024. The model factors in consumer spending, employment, factory output, and certain measures of income to determine if a recession is likely.

Other experts think a recession isn’t likely

As with any topic, there are experts on the opposing side predicting that a recession probably won’t happen. Part of the reasons for their optimism come from recent economic data. For example, an economist at U.S. Bank says we may avoid a recession next year thanks to the economy’s growth of 4.9% in the third quarter of 2023, which was much better than growth in the first half of this year.

UCLA economists agree and recently said there won’t be a recession next year, though they expect the economy to be weak.

Adding to those who don’t expect a recession for this year is Federal Reserve Bank of Atlanta President Raphael Bostic, who said recently that while the economy is slowing down, he doesn’t predict that there will be a recession.

How to prepare your finances

Whether an official recession materializes or not, most economic experts expect economic growth to be modest in 2024. That could lead to some companies pulling back on hiring, keep businesses from making new investments, and result in consumers spending less money. That could impact your finances even if an official recession never shows up. So here are a few tips for getting your finances in order, regardless of what happens.

Pay off debt: With interest rates currently high, your credit card debt or auto loan is costing you much more than in the past. There are lots of different ways to tackle debt, including the debt snowball method, but the most important thing is to get started. If an economic slowdown comes, having high-interest debt paid off will put you in a better financial position.Save money: 62% of Americans are living paycheck to paycheck, so this is easier said than done. But putting even a little money aside in a high-yield savings account now will help protect you if you lose your job, face a pay cut, or encounter a financial emergency.Cut back on spending: This one goes hand in hand with saving money, but I’m mentioning it here because if your finances are currently in good shape, you may not be thinking about it. But if an economic slowdown is around the corner, now is the time to cut back on spending. Find a few monthly expenses you don’t really need and instead begin funneling that money into savings.Consider a side hustle: More than 50% of Americans already make money from a side hustle or gig work. If you’re already feeling the pinch of higher interest rates and elevated inflation, you don’t need to wait for a recession to start earning some extra income. The average gig worker brings in about $473 per month.

Instead of spending too much time trying to decipher whether a recession is around the corner, taking a few steps now to get your finances in the best shape possible will benefit you whether a near-term downturn ever comes or not.

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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.Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends U.S. Bancorp. The Motley Fool has a disclosure policy.

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Planning to shop on Black Friday? Read on to see why some of the deals you’re interested in may not be so great after all. 

You’re probably aware that Black Friday is a popular time to shop. But for context, Capital One Shopping says U.S. consumers spend almost $10 billion shopping online during Black Friday. And with the addition of in-store spending that day, U.S. retail revenue for Black Friday exceeds $20 billion.

Capital One also says the typical shopper spends an estimated $480 on Black Friday. That’s not a small amount of money.

Of course, your motivation to shop on Black Friday may be to save money on a host of purchases. But are you really going to be looking at a lower credit card tab that day?

Black Friday indeed tends to be loaded with sales. But here’s why some of those sales aren’t what they seem.

1. The original price has been inflated

If you notice a $50 item marked down to $25, you may be inclined to jump on it. After all, you’re getting 50% off the original price, right?

Well, not necessarily. There’s no law stating that retailers can’t inflate prices on the items they sell and then conveniently mark them down so it appears as if the savings at hand are huge. But what if the $50 item you’re looking at was really only originally priced at $35? Suddenly, your discount isn’t as deep.

It pays to make a list of the items you want at the start of the holiday shopping season and use a price-tracking app to keep tabs on their cost. Also, jot down prices a few weeks before Black Friday so you can see if the so-called original prices have been inflated or not.

2. The item you’re getting may be a lower-quality derivative version

The amazingly low-priced TVs and laptops you see on Black Friday may not be the items you think they are. Rather, they may be lower-quality derivatives of the electronics you normally see on shelves.

Retailers commonly partner with manufacturers to produce Black Friday versions of popular products. The problem is that these special runs tend to result in items that are lower in quality — hence retailers’ ability to offer up much lower prices.

If you intend to buy electronics on Black Friday, make a list of the items you want along with their model numbers. Then, on Black Friday, check for those model numbers. If they’re different, it means you’re getting a different version of the item you thought you were getting. And while you may be OK with that if the price works better for you, just know that your product may not last as long or perform as well.

3. There’s only a limited quantity of the item you want

Retailers will often try to lure customers in on Black Friday by offering doorbuster deals — popular items at incredibly low prices. But for all you know, your local retailer only has four or five of each doorbuster item in stock. So yes, while the advertised price may be legitimate, you’re not getting a fair shot at the items you want.

This tactic is problematic not just because you might end up disappointed, but also because you might feel compelled to make a comparable purchase in the absence of getting the product you were initially looking for. Only that comparable purchase might cost you a lot more money.

You should expect to see your fair share of Black Friday sales this year. Whether they’re really good deals or not, however, is up for debate. Do your best to shop savvily, so you don’t end up regretting your purchases.

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College has gotten expensive. Before you flip out about your lack of savings, have a long talk with your kids. Here’s what to discuss. 

Some people start saving for college from the moment their children are born. And while that might seem like an overly early start, it’s actually not when you consider how much college tuition costs today.

U.S. News & World Report says the average cost of tuition and fees at private colleges is $42,162 based on the 2023-2024 academic year. And to be clear, that’s one year of tuition and fees.

For public out-of-state schools, a year of tuition and fees costs $23,630 on average. And at public in-state colleges, you’re looking at $10,662.

If your kids are already in high school and you’ve saved pretty much nothing for college, or you’ve only saved a few thousand dollars, you may be starting to panic. Before you do, though, it could pay to have a talk with your kids.

Set expectations and see what your kids’ plans entail

You might assume that if you’re unable to present your kids with a giant pile of cash to cover college tuition in a few years, you’ll be letting them down. But before you make that assumption, talk to them about their higher education plans.

You may find out that one of your children doesn’t want to attend college, but rather, has the goal of starting a small business. So let’s say you only have $7,000 by the time that child graduates high school in a savings or brokerage account for higher education. That $7,000 might be enough to help your child get their venture off the ground and lead to a successful career.

Meanwhile, you may have a second child who wants to get a degree but is perfectly OK with doing their first couple of years at a community college before transferring to an in-state four-year school. That could lower your costs tremendously.

Even if you have multiple children who want to go to college right after high school, it pays to be honest about what you can afford. If you don’t have a lot of savings, and you come clean about that early on, your children can approach the application process more efficiently. They may opt to focus on colleges that are known to offer more financial aid, or they might limit their search to in-state schools only.

Also, knowing your college savings are limited might take some of the pressure off of your kids to try to get into top schools that are notoriously expensive. If you know those schools are financially out of reach, there’s no sense in your kids stressing themselves out to get in.

Figure out how to focus your savings efforts from here on out

If you’re behind on college savings, rest assured that a lot of people are likely in your boat. So rather than bemoan being behind, try to look forward and do your best to save as much as you can for college from this point onward.

But also, be smart with that money. You may be inclined to invest it in stocks to try to grow it into a larger sum quickly. But it’s actually not a good idea to put money you expect to need within a few years into stocks. The market is just too volatile for that, and you don’t want to risk seeing your portfolio crash at a time when you need your money to pay tuition bills.

If you have less than five years until your kids go to college, you may want to stick to cash and bonds. In fact, now could be a good time to open a longer-term CD (like a 5-year CD), since rates are high. Plus, your money is protected as long as you’re banking at an FDIC-insured institution.

Being behind on college savings is an understandable scenario to land in, and it happens to a lot of people. But before you panic, talk to your kids. That way, you can at least all get on the same page and map out a plan together.

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The wealthiest Americans rake in plenty of cash each year. Find out how much and how your income stacks up. 

We all know that rich people make a lot of money. That’s what makes them rich, after all. But as for how much money most make in a year, a lot of people are in the dark. But a new Federal Reserve survey has cast some light on this subject and the results are really interesting.

If you’ve ever wondered how your annual income stacks up to the richest Americans’, you’re about to get the answer. And if you happen to find that answer a little depressing, we’ll also look at ways you can beef up your salary.

How much do rich people earn in a year?

The latest Survey of Consumer Finances lays out the median household income for American families broken down by percentile of income. Here are the most recent results based on 2022 data:

To be clear, the above figures are household numbers. So if you’re trying to figure out how you stack up and you live with someone who also brings money into the household, you need to add your annual incomes together for an accurate comparison.

Don’t be discouraged if you’re nowhere near the top earners. Even those in the 80th- to 89th-percentile range make less than half of the top 10%’s annual income. And the wildest part is that some in the top 10% make a lot more than that.

If you look at mean household income rather than median, the result for the top 10% climbs to a jaw-dropping $720,530 per year. This is exactly why most sources don’t use mean household income when talking about American finances. When you add in very high earners, they skew the mean upward so it appears as though the average person is much better off than they actually are. Median chooses the middle income value of a group, so it’s a better representation of actual household income for typical Americans.

How can you increase your income?

No matter which of the above income brackets you fall into, your personal finances could probably use a little extra cash. Cutting back spending can sometimes work to increase savings if you have a lot of wiggle room in your budget. But this isn’t the case for a lot of people. So rather than trying to cut costs, it’s better to look for ways to increase your salary.

Start by looking at your current job. You might be able to make a little extra by working overtime or pursuing promotions with your current employer. But if not, it might be worth exploring other employment opportunities in your area. If your job is something that could be done remotely, you could also look at companies headquartered farther away.

Side hustles are also a popular way to earn extra cash if you have a little spare time. There are dozens of options out there. If you have a vehicle, you might want to be a rideshare driver or act as a personal shopper for others. Or if you’re artsy, you could create handcrafted items to sell. Think about what best suits your skills and resources and weigh the potential income against the time involved.

A longer-term approach is to pursue higher education or advanced certifications in your field. This will take time and cost money, but it could lead to much higher-paying salaries down the road. If you’re thinking about going this route, look for an employer that helps pay for their employees’ higher education costs. But make sure you understand the terms of these programs before you apply. You may have to commit to working for that employer for a set period if you get help paying for classes.

Even doing all of the above, the only way most of us will hop up to the top 10% is if we happen to win the lottery. But that’s no reason to get discouraged. Even having a few thousand dollars extra in your bank account per year could make your life a lot more comfortable. But don’t try to do too much too fast and burn yourself out. Focus on making slow and steady progress instead, and celebrate your wins along the way.

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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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More than half of spenders break their budgets during the holidays. Find out how to spend less without compromising on gift quality. 

Your family. You appreciate them — hence, the hours you spend on the computer, searching for the perfect gift card, subscription service, or Etsy marvel. Yes, you’d rather not break the bank, but is there really such a thing as spending too much during the holiday season?

Research says yes. According to research from Rocket Money, about 13% of Americans reported overspending during the holidays in 2022. And according to an Affirm Consumer spending survey, a whopping 7 out of 10 Americans say they typically go over budget on the holidays.

You may be thinking, big whoop. Sometimes people spend too much; no need to be all Scrooge about it. Hold your reindeer. There are ways to deal with overspending without skimping on the good holiday vibes. Read on for three ways to stretch your winter budget without compromising.

1. Track spending

No need to create a fancy budget. Instead, track your spending with a money-tracking app. That way, you can keep track of how much you’ve spent on gifts. It’ll keep you from thinking you’ve only spent $500 when you’ve actually spent $1,500.

Knowledge is power. Even if you spend more than planned, you’ll know you’re over budget before you get slapped with a surprisingly large credit card bill. I’ve been hit with one or two after the holidays. Yee-ouch. Not fun. I like my spending to be transparent, thank you.

2. Spend with cash or debit

You can’t spend money that doesn’t exist. Cash isn’t just green (therefore, Christmas-friendly); it’s also a money-saver. You can’t borrow on cash. If you want to spend only $300 at Macy’s, bring $300 to Macy’s in cash and leave your credit cards at home. Easy. No fancy budget needed.

You can also spend with a debit card for a similar effect. It’s not the same as watching cold, hard cash slip through your fingers, but it caps spending to dollars in your checking account. I prefer cards to cash, so using a debit card is how I cap spending.

3. Partner with a loved one

Play a game like this: You and your partner can only spend $50 at most on each other. The specific number is up to you. Playing the game feels great; it takes the pressure to overspend off both of you. Instead of stressing about money, you can have a good time.

Chances are, you’re not the only one stressing about overspending. Keep the holidays fun by making “responsible spending” a friendly competition. I like to do this with my brother; both of us tend to stress about buying the “best gift ever,” and this helps us keep spending in check. We pay less and have a better relationship; it’s a win-win.

How much should you spend on holiday gifts?

This depends on what your loved ones want. Ask your family and friends what gift they’d like to receive this holiday season. Studies show that gift recipients prefer getting gifts they asked for rather than random yet thoughtful presents, even if they are expensive. Experiences tend to go over better than material goods, and many people get turned off by price tags.

So. What do your loved ones want?

People have different preferences. Some people care quite a bit about price; others prefer fun experiences over gift cards. Personally, I love a good gift card. Preferences vary. Playing the guessing game can stress you out. No need for that: Ask what the other person wants.

The point of the holiday season is to celebrate with loved ones. When I catch myself freaking out about holiday budgeting, I remind myself of this. It’s not about the money. It’s about having a good time. That means tracking spending and partnering with loved ones to create win-wins.

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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 Etsy. The Motley Fool has a disclosure policy.

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