Money Management

Planning to shop on Black Friday? Here’s why you may want to reconsider. 

Shopping is something I generally do not enjoy. That’s why I aim to do as much of it online as possible.

But during the holiday season, shopping is something I inevitably have to focus on lest I disappoint my children and the other important people in my life. So even though I’d rather occupy my time with other things, I’ll commonly spend several weeks in November scoping out sales in an effort to fulfill my gift list while saving money.

But there’s one November shopping event I refuse to participate in — Black Friday. The average shopper spends an estimated $480 on Black Friday, according to data from Capital One. But if I have it my way, this Black Friday, I’ll spend $0. That’s because I’m convinced Black Friday is a trap for the following reasons.

1. The things you want most might only be available in very limited quantities

Have you ever tried to actually take advantage of a Black Friday sale without getting up at 4 a.m.? Stores do a great job of luring customers in on Black Friday with the promise of popular items at almost unbelievably low prices.

But often, there will only be a handful of those highly desirable items available. So if you get to the store after they’ve run out, what’ll likely happen is that you’ll have to settle for something else.

That something else probably won’t be as good a deal, though. So you’ll likely end up spending money for the sake of justifying your trip to the store without getting to feel good about your purchase.

2. The electronics you buy might be of inferior quality

I used to find it highly suspect that a TV that normally retails for $899.99 could magically become available for $699.99 during Black Friday. So years ago, I decided to dig deeper. And what I found is that some — though to be fair, not all — retailers strike deals with manufacturers to produce special product runs for Black Friday alone.

What this means is that the TV or laptop you’re getting for $200 to $300 off of its normal price probably isn’t the same exact model you’d normally pay more for. Rather, it’s most likely a comparable item that’s made with less expensive parts that allow retailers to offer such low prices.

If you’re going to buy electronics on Black Friday, you must, I repeat, must look at the model number. And if you can’t find that model number for sale anywhere else, know that it’s a special run. Only in this context, “special” generally means “not as good.”

3. There’s so much pressure you can’t think straight

There’s something inherently stressful about Black Friday that puts consumers in a less favorable position to make smart decisions. Maybe it’s the throngs of people hitting the stores or the hour-by-hour deals online retailers might take it upon themselves to drop.

But either way, it’s hard to think clearly when you’re stressed. And that could lead to added spending, or misguided spending. No, thank you. I’d rather do my shopping another time when the pressure is off, so I don’t regret my credit card tab after the fact.

Some people really look forward to Black Friday and specifically aim to do the bulk of their shopping then. But if you ask me, Black Friday is nothing but a giant trap. You may be much better off doing your shopping in the weeks leading up to and following the day after Thanksgiving.

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Starting to invest in your 50s? You’ll want to take a strategic approach. Read on to learn more. 

The earlier in life you’re able to start investing, the more wealth you have the potential to accumulate. So if you’re able to begin investing in your 20s, you can take advantage of compounded returns in your brokerage account or IRA and grow yourself a nice balance.

But what if you’re only able to first start investing in your 50s? It can happen for a lot of reasons.

If you graduate college with a lot of debt, paying it off might take priority in your 20s, as might building an emergency fund for near-term expenses that are unexpected. And in your 30s and 40s, you might be saddled with housing expenses and child care costs, from daycare centers when your kids are young to ongoing summer camp tuition.

So if you’ve reached your 50s and are only now starting to invest, don’t beat yourself up. But also, make sure to approach the process strategically.

There’s still time to put money into stocks

Stocks have the potential to generate strong returns, but they can be very volatile. When you’re close to retirement age, it can be dangerous to have too much of your portfolio in stocks.

But the good thing about being in your 50s is that you’re not necessarily on the cusp of retirement. You might conceivably be anywhere from 10 to almost 20 years away, depending on your specific age and retirement plans. So if you’re first building up a portfolio, it’s a good idea to put the bulk of your assets into stocks — either a mix of companies across different industries or different exchange-traded funds (ETFs) for diversification.

If you’re going the individual stock route, you’ll want to aim for around two dozen stocks or more. But don’t go overboard, either. You need to be able to track your stocks, so buying 82 of them may not serve you so well.

How far can you get if you start investing in your 50s?

It’s impossible to pin down a specific return for a stock portfolio that’s put in place in someone’s 50s because there are many variables involved. But over the past 50 years, the stock market has delivered an average annual return of 10%, as measured by the performance of the S&P 500 index.

So let’s say you begin investing $500 a month at age 51 and want to retire at age 69. That gives you 18 years. Let’s also assume you go heavy on stocks during that time and only start shifting more heavily toward bonds a few years before retirement.

In that case, it’s reasonable to assume that your portfolio might generate an average annual return of 8%. And that would leave you with a balance of about $225,000.

For context, the average 60-something has a retirement plan balance of $112,500, according to Northwestern Mutual. So with $225,000, you’d be looking at twice the balance the typical near-retiree has.

It’s ideal to start investing well before your 50s. But if that didn’t happen, don’t dwell on it. Instead, start putting your money to work as soon as possible so you can still retire with a nice chunk of cash.

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Financial success depends on your money mindset. Discover the difference in how millionaires think, so you can follow their approach. 

Millionaires aren’t as rare or as different as some people think. About 2% of U.S. adults are millionaires, according to research by Henley & Partners. Becoming a millionaire isn’t easy, but it’s a realistic goal if you manage your money well.

What sets millionaires and future millionaires apart isn’t their job or their salary. It’s their mindset about money. There are a few key differences between the way millionaires think about money and how much of the world does. By learning how to think like a millionaire, you’ll be able to improve your personal finances and build lasting wealth.

1. Focus on the long-term impact of financial decisions

Millionaires are good at taking a big-picture view of their finances. They zoom out and look at how a decision will affect them five, 10, and 20 years down the road, not just in the moment. That’s one of the reasons they don’t fall into the trap of instant gratification.

For a straightforward example, if there’s $1,000 left each month after paying bills, lots of people would be tempted to spend it. That might make you feel good in the present, but it does nothing for you in the future.

Let’s say you invested your extra $1,000 per month, instead. The average stock market return is about 10% per year. At that return, after 30 years of investing, you’d have $1.97 million. Of that total, only $360,000 would be money you contributed. The rest is your return on investment (ROI).

2. Look for ways to increase your earning potential

You don’t need a massive salary to build wealth, but it doesn’t hurt, either. Americans with larger incomes have higher net worths, on average. For example, those in the middle of the pack (in the 40th to 60th income percentiles) have a median net worth of $169,420, according to the 2022 Survey of Consumer Finances. Those in the top 10% of incomes have a median net worth of $2.65 million.

By raising your income, you have more money to save and invest. One of the ways millionaires do this is by developing multiple sources of income. In a study on self-made millionaires, Thomas Corley found that 65% had at least three sources of income before making their first $1 million.

If you’re interested in building more income streams, consider setting up your own freelance business. If not, having one source of income is fine, too. Make the most of it by looking for opportunities to increase it, whether that’s by getting a promotion or switching jobs.

3. Have a detailed plan for your finances

Millionaires tend to be planners. In Northwestern Mutual’s 2023 Planning & Progress Study, 77% of the millionaires surveyed described themselves as disciplined or highly disciplined planners.

For financial planning, it helps to set short- and long-term goals for yourself. For example, you could set a monthly goal to save 10% of your income and invest another 10%. Your yearly goal could be to add $5,000 in savings to your emergency fund and $5,000 to your retirement accounts. Concrete goals like these give you a target to aim for, which works much better than just saving whatever you can every month.

4. Invest in yourself

Investing in yourself refers to spending your time and/or money to improve your knowledge and skills. A common example is getting a college degree. It costs money to go to college, but a college education makes you more knowledgeable and can also help with landing higher-paying jobs.

Wealthy people understand the importance of investing in themselves. A study by Ramsey Solutions found that a staggering 88% of millionaires graduated from college. Keep in mind that there are also plenty of other ways to invest in yourself, such as taking courses online. Another form of self-investment that many millionaires practice is reading every day to build knowledge.

5. Understand that building wealth is a gradual process

Practically everyone would love to be an overnight success — hence the popularity of get-rich-quick schemes. But the reality is that very few people become millionaires in a year or two.

Millionaires and future millionaires know that building wealth takes time, and it isn’t all that exciting. It’s really just about following good financial habits year after year, including:

Spending less than you earnSetting aside a portion of your income to put in your savings and invest (10% is a good place to start)Avoiding high-interest debt, such as credit card debtInvesting in the stock market to grow your money

Where people get into trouble is when they try to take shortcuts, such as day trading or putting all their money in crypto. High-risk strategies like these usually end up costing you time and money. Slow and steady is a much better way to build wealth.

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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.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Need a home for your long-term savings? Read on to see why a Roth 401(k) could be your best choice. 

You’ve probably heard by now that you should be saving for retirement consistently so that you have plenty of money to live on later in life. And it’s important to find the right home for your retirement savings.

A traditional IRA or 401(k) could be a good choice for your long-term savings because these accounts give you a tax break on your contributions. But you’ll have to pay taxes on the money you withdraw in retirement. And you may not want that added expense at a time when your income might be limited.

As such, you may be more inclined to save for retirement in a Roth IRA or Roth 401(k). Roth retirement plans give savers the benefit of tax-free investment gains and withdrawals.

It’s easy to make the argument that a Roth IRA or a Roth 401(k) is a good place to save your money. But you may want to favor a Roth 401(k) for these reasons.

1. There’s no income limit to worry about

Higher earners are barred from contributing directly to a Roth IRA. The income limits for doing so change every year. Currently, singles earning more than $153,000 and married couples earning more than $228,000 cannot contribute to a Roth IRA. In 2024, these limits are rising to $161,000 and $240,000, respectively.

Roth 401(k)s, on the other hand, have no income-related restrictions. So even if you’re single and earning $1 million a year, you can put money into a Roth 401(k).

2. You can put more money into a Roth 401(k)

The IRS sets annual contribution limits for IRAs and 401(k)s. And those limits don’t differ between traditional and Roth accounts. Right now, IRAs max out at $6,500 for savers under 50 and $7,500 for those 50 and over. In 2024, these limits will rise to $7,000 and $8,000, respectively.

But the contribution limits for 401(k)s are much higher. Right now, savers under 50 can contribute up to $22,500 to a 401(k), and those 50 and over can contribute up to $30,000. Next year, these limits are rising to $23,000 and $30,500, respectively.

It’s important to note that the money you contribute to a Roth retirement account won’t result in a near-term tax break. But the more you’re able to pump into your account, the more tax-free investment growth you have the potential to benefit from.

3. Starting in 2024, you won’t have to worry about required minimum distributions

It used to be that Roth IRAs were the only tax-advantaged retirement plan to not impose required minimum distributions, or RMDs. RMDs effectively force savers to spend down their savings in their lifetime.

Starting in 2024, though, Roth 401(k)s will stop forcing savers to take RMDs. So if you’re someone who wants the option to leave money behind for younger generations, a Roth 401(k) will soon be able to help you achieve that goal.

There are plenty of good reasons to save for retirement in a Roth IRA. And to be clear, not everyone has access to a 401(k) through a job. And even if you do, your employer’s savings plan is not guaranteed to offer a Roth option. But if you have the ability to save in a Roth 401(k), you may want to strongly consider it for all of these reasons.

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Drivers who buy only the minimum auto insurance coverage could really come to regret their choice. Find out why. 

Minimum coverage auto insurance refers to the minimum amount of auto insurance a driver must buy in order to avoid violating state law.

Usually, this means it includes only bodily injury and property damage liability coverage, and the limits on this might be pretty low (as little as $10,000 or $20,000 per person or $40,000 or $50,000 per accident).

Some drivers opt to purchase the minimum amount of coverage in order to keep the premiums coming out of their checking account as low as possible. But is doing so a big mistake?

Here’s why buying minimum coverage could be a disaster

Only buying minimum auto insurance coverage could be a huge financial disaster. There’s a simple reason why that’s the case.

Insurance transfers the risk of losses to an auto insurer. A driver who purchases only the required minimum coverage will only transfer the risk of the losses that could come if a claim was made against them for injuries or for property damage after they caused an at-fault crash. And drivers aren’t even fully transferring this risk to their insurer, since they are buying only a very small amount of coverage.

There are many other financial risks most people can’t afford to take on. For example, the average cost of a new car is over $48,000 and even a used car tops $25,000. Without the right insurance, a driver could be forced to pay any remaining loan balance on a totaled vehicle and pay out of pocket for a new car. That would be a financial disaster.

Even the cost of repairing a car could be several thousand dollars, which is money many people simply don’t have sitting around. But, without collision insurance, a driver would have no coverage at all to pay to replace their own car unless another driver happened to damage it.

The bottom line is, there is a reason why many other types of auto insurance coverage — beyond the minimum — are offered and purchased by so many motorists. The financial loss that could come from not being covered is simply too great.

Here’s what to do instead

Rather than buying the minimum required coverage, motorists should strongly consider getting a comprehensive insurance policy that protects against most or all of the losses they could experience. Generally, this will include:

At least $250,000 per person and $500,000 per accident in bodily injury liability so that most injury claims will be covered (and perhaps more for those with substantial assets)Collision insurance to pay for damage to the policyholder’s own carComprehensive insurance to pay for any damages not occurring in a crashGap insurance to pay the difference between the fair market value of a vehicle (which is what insurance pays for a totaled car) and any remaining loan balance

A driver should also consider buying new car replacement coverage (to ensure there’s money to buy an equivalent model, since cars depreciate quickly) if their vehicle is new. And rental car reimbursement (to pay for a car to drive when a vehicle is being repaired due to a covered cause) may also be a good investment.

Drivers can consider speaking to an independent insurance agent to find out what coverages are right for them, or they can do the research themselves to make an informed choice about all of the risks they’d like to transfer to an insurer to protect their future financial security.

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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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