Money Management

Saving money can seem difficult, but there are some techniques you may not have thought of that can reduce your spending. Give these methods a try! 

Finding more money to put into savings can be a real challenge. This is especially true right now due to the post-COVID inflation surge that seems to cause money to disappear from our bank accounts faster than ever.

The good news is, there are almost always some modifications you can make to reduce your expenditures. You sometimes just have to think outside of the box to find them. Here are four money-saving techniques you may not have thought of.

1. Turn down your hot water heater temperature

Having hot water is nice, but you don’t need scalding water. Unfortunately, many people have their hot water heater set to a temperature that’s much higher than it needs to be — and this comes at a cost.

Manufacturers typically set the default temperature on water heater thermostats to 140ºF but most households are fine with the heater being set at 120ºF unless they don’t have a dishwasher with a booster heater.

If you can reduce your hot water temperature to 120ºF, you could cut your electric bills by $36 to $61 annually or more just by avoiding standby losses. Since you’ll be using cooler water for things like showers, laundry, and washing dishes, you could end up saving more than $400 a year by making this one simple change that will have virtually no impact on your quality of life.

2. Join a “buy nothing” group

The Buy Nothing project aims to help people save money and reduce waste. You can find groups in your local area, ask for anything you want, and give away anything you don’t want.

In my local Buy Nothing group, people have given away everything from Halloween costumes for kids to entire dining room sets. It’s often possible to get a need met by posting a request (as long as you’re reasonable), and you can satisfy your urge to “shop” by browsing these free items instead of a store that you’d have to spend money at.

It’s free to join the group, so why not give it a try to see if it could save you money?

3. Barter for goods and services

Trading with friends and family for goods and services can also be a great way to reduce spending. For example, in my local mom’s group, we regularly trade off babysitting. Taking turns watching each other’s kids can be a lot cheaper than paying for a babysitter and it also means the kids get a playmate, which is fun for everyone. We also trade baby clothes and toys our kids have outgrown instead of buying new.

You may be able to barter for all sorts of goods and services with friends and with professionals in your social circle, if you have a talent or skills to share.

4. DIY cleaning products

Finally, making your own cleaning products is another way to reduce your costs. Most DIY cleaners can be made for under $1 with simple ingredients that you may already have at home, while cleaning products can cost $5 to $15 in the store — and those store-bought products are often full of chemicals.

There are tons of recipes online to make products that can clean everything from a bathroom to granite countertops to stainless steel appliances. Check them out by searching sites like Pinterest and see if you can DIY.

Try as many of these tips as you can today and you may be surprised at just how much you save.

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For some, it may be a good idea to get a new credit card in 2024. But that’s not the right choice for everyone. Find out what to consider before you apply. 

When used responsibly, credit cards are a valuable financial tool. As we approach the end of the year, you may wonder if it’s time to add a new credit card to your wallet in 2024. Whether your existing card is no longer meeting your needs or you want to get an additional one, it’s essential to ensure you take your time and make the right choice.

While you can apply for a credit card at any time, that doesn’t mean it’s the right time for you. Here are a few considerations to make before you apply for a new credit card.

How are your spending habits?

Before adding another credit card to your wallet, you should review your current spending habits. If you’re prone to overspending, you may want to hold off on getting a new card. Instead, take some time to learn better money management habits. You can use one of the best budgeting apps to monitor your habits and set spending limits.

When using credit cards, you should pay the entire statement balance off monthly. Otherwise, you’ll be charged credit card interest. If you continue to spend money with your card while carrying a balance, you can quickly develop an expensive credit card debt problem. You want to make sure you’re not setting yourself up for failure by getting another card.

Have your needs changed?

Why do you want to get a new card? If your needs have changed, that may be a good reason to apply for a new one. Perhaps you’ve previously used credit cards to establish credit and are ready to dive into the world of credit card rewards.

Determine what you’re looking to get from your card and consider what your current needs are so you choose the right card. If your needs haven’t changed and you already have credit cards, you may want to hold off for now. There’s no point in getting a card without a purpose.

What kind of credit card rewards are you looking to earn?

If you’re new to earning credit card rewards or want to boost your rewards potential, you might consider applying for one of the best rewards credit cards. But make sure you apply for a card that fits your lifestyle. There are all kinds of rewards credit cards available. Consider what purchases you tend to make most often and what kind of rewards you want to earn to decide on the right card. Here are a few options to explore:

Dining and restaurants credit cardsGas and groceries credit cardsTravel rewards credit cardsAirline credit cardsCash back credit cards

Will you use the benefits offered?

There are some excellent no annual fee credit cards. However, many credit card issuers charge an annual fee. Before getting a new card, carefully review the benefits offered. If there’s a yearly fee, consider whether you’ll put the benefits provided to use. Otherwise, you could waste money on a credit card that doesn’t meet your needs. You can review the options on our best credit cards list to find one with benefits that matter to you.

Always think through every financial decision

Getting a new credit card is a big deal. If you’re considering applying for a new card, make sure you choose one that meets your needs and are getting a card for the right reasons. Otherwise, you could put yourself in a difficult financial situation. For additional money tips, check out these free personal finance resources.

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Your emergency fund can keep you from going into debt on unplanned expenses. Keep reading to see how you can calculate your ideal emergency fund. 

Saving money for emergencies is vitally important. An older Pew Trusts study found about 60% of households had experienced a financial shock over the course of the prior year, with those shocks carrying a median cost of $2,000. Being unprepared for this could leave you reaching for your credit cards and struggling with the fallout for a long time to come.

But just how much emergency money should you have in a savings account? Here are four easy steps to help you decide what an appropriate rainy day fund looks like.

1. Consider your debt

If you have a lot of high interest debt, it makes little sense to save up a huge emergency fund. After all, the average credit card interest rate was ​​21.19% as of August 2023. If you put many thousands of dollars into a high-yield savings account earning you about 4% interest instead of paying extra on that high-interest debt, you’ll be losing a lot of ground.

You should have some money for emergencies though, even while working to repay debt. Otherwise, any unexpected expense could force you to borrow again and potentially cause you to lose momentum since you’ll find yourself back owing more. You may end up discouraged that you’ll never break the cycle.

It’s typically a good idea to save around $1,000 for an emergency fund prior to making extra debt payments. That’s not so much that it will set you way back in your payoff efforts, but it’s enough to cushion you against more minor disasters that could have you reaching for your cards.

2. Calculate your essential living expenses

If you don’t have a lot of high interest debt, you’ll want to prioritize saving an emergency fund that covers your essential expenses for a few months. This can help you to avoid disasters like late payments or even foreclosure or car repossession if something goes wrong and you can’t pay the bills from your income.

You don’t need to necessarily have enough to cover every monthly expense, though — only the essential ones you’d keep incurring in a time of crisis. If you budget $100 a month for a pedicure and have five streaming service subscriptions with a total price tag of $100 a month, you could easily suspend spending $200 a month on these in case of emergency.

Consider the costs you’d definitely want to continue incurring even if you lose your job or get sick and can’t work, and use that to determine how much your emergency fund should be.

3. Determine the level of risk you face

The general rule of thumb is to save enough money in an emergency fund to cover three to six months of living expenses. But that’s a pretty wide range. Say you found your essential expenses were about $3,500 a month, including costs like rent, food, and bills. In that case:

Saving three months of expenses would mean saving $10,500Saving six months of expenses would mean saving $21,000

There’s a big discrepancy. So, you’ll need to think about how long you’d likely need to rely on your savings — and that decision is based on the level of risk you face.

If you are:

Prone to health problemsIn an unstable jobAre the sole source of support for your dependentsHave an old house prone to major issuesWork in a field where it would take you a long time to find new work if you become unemployed

Then you may want to err on the side of a six-month emergency fund. Or you could be even more conservative, defy the experts, and decide to save nine months or a year’s worth of essential expenses.

If, on the other hand, you have:

An extremely reliable incomeAre in perfect healthRent your homeHave great health and disability insurance coverage

Your risk may be lower, and you could opt for just a three-month emergency fund.

4. Save enough to cover expenses for a reasonable number of months

Once you’ve decided how much risk you face, you can make an informed choice of how many months of living expenses you need saved. Then just multiply that amount by the essential costs you incur. So, if you’ve opted for a six-month emergency fund with your $3,500 of monthly expenses, your goal would be to save $21,000.

By going through these four steps, you can make an informed choice and ensure you have the necessary funds set aside to protect your future financial security. Then you just need to work on saving that money ASAP by transferring funds automatically from your bank account, working a side hustle for a while, and depositing “found” money (like cash gifts for holidays) in your emergency savings.

When disaster strikes, you’ll be very glad you took these steps to save enough to feel secure.

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Many organizations offer information about starting a business for a price. Take a look at two of the best that want to help for free. 

The adage “knowledge is power” applies to those starting a new business. After all, the more a business owner knows, the less likely they are to make mistakes. However, for someone starting a new business, it can be challenging to figure out where to gain that knowledge. If that describes you, this article will point you to the people and organizations you should know.

1. Small Business Administration

The Small Business Administration (SBA) is like one-stop shopping for the emerging business owner. Created in 1953, the SBA is an independent agency of the federal government. It was designed to assist and protect the interests of small businesses.

If you’re just starting out, the SBA can help you with everything from how to fund your business to the research you need to do if you want to be competitive. Here’s just a taste of what the SBA offers entrepreneurs like you.

The SBA’s Business Guide covers practical tips for running your business, including:

Business taxesBusiness insuranceApplying for necessary licenses and permitsHiring (and managing) employees

The goal, of course, is to put money in your business checking account while conducting business ethically and legally. The SBA can teach you the ropes.

The agency also provides information for funding your business, including:

Ways to self-fund your businessHow to work with investorsHow to take out small business loans

There are no federal grants available to start a business, making it doubly important to understand your other sources of funding. If you want to take out an SBA-guaranteed loan, this agency can help you understand how the process works.

2. Service Corps of Retired Executives

The Service Corps of Retired Executives (SCORE) is a resource partner of the SBA. Through its network of 10,000 volunteers, SCORE has provided free mentoring and education to current and aspiring entrepreneurs since 1964.

Are you worried about starting a business while trying to save for retirement? A SCORE mentor can explain your options. Wonder how to attract talented employees? Your SCORE mentor has undoubtedly been down that road.

As questions arise, you have access to someone who either knows the answer off the top of their head or knows where to find the answer. Better yet, you may meet with a mentor one on one or in small group sessions. The beauty of meeting with a small group of like-minded entrepreneurs is hearing questions and answers that may have never occurred to you. Plus, there’s something comforting about knowing people on the same path as you.

Here’s how finding a SCORE mentor works:

After logging into the SCORE website, you enter your ZIP code in the box provided and complete the mentoring request form.Or, if you’re seeking specific expertise (such as expert advice on opening a daycare, pet store, or online business), you can use the Mentor Matchmaker. Mentor Matchmaker focuses on what you need and helps you locate an expert based on that need.

Once you’ve submitted a mentoring request, you’ll receive an email from your mentor scheduling an appointment. Appointments can be accomplished by phone, video conference, email, and in person.

What’s even better is that there’s no expiration date on the mentorship. You can work with your mentor (or mentors) as often as you need, for as long as you need. Mentorship support is available for all stages of your business, from starting the enterprise to selling it or retiring.

As you prepare to dive into the role of business owner, you’ll find many organizations that are happy to provide you with assistance – for a price. The truth is, with SBA and SCORE, there’s no reason to pay less experienced organizations for support available to you for free.

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Saving for retirement? Read on to see why a Roth IRA may be your best bet. 

If you’ve decided you’re ready to start saving for retirement, congrats. You’re making a savvy decision that could set you up for a more financially stable future.

You have choices when it comes to finding a home for your savings. You could open a traditional IRA and enjoy an upfront tax break on your contributions. Putting $3,000 into a traditional IRA, for example, will mean not being taxed on $3,000 of income.

Roth IRAs don’t offer that same benefit. However, Roth IRAs allow you to enjoy tax-free investment gains and tax-free withdrawals in retirement. With a traditional IRA, you’ll pay taxes on your investment gains when you take withdrawals, which are taxed in retirement.

But while tax-free investment gains and withdrawals are a huge perk of saving for retirement in a Roth IRA, there’s another lesser-known benefit you should be aware of. And it may push you to choose a Roth IRA for your long-term savings.

When you get more flexibility with your money

Because the IRS gives you a tax break on the money you put into a traditional IRA, it imposes strict rules about when you can touch those funds. If you take a distribution from a traditional IRA prior to age 59 1/2, you’ll face an early withdrawal penalty of 10% of the sum you remove.

There are limited exceptions to this rule, such as that you’re allowed to withdraw up to $10,000 penalty-free to purchase a home for the first time. But generally, you can’t just tap a traditional IRA early without consequences.

This means that if you run into an emergency expense, like a home or car repair, and you need $5,000 to address it, you can’t just raid your traditional IRA. If you do, you’ll lose $500 off the bat.

Roth IRAs don’t impose that same penalty, provided you’re only touching the principal portion of your balance and not the gains portion. The reason is that you don’t get a tax break on your Roth IRA contributions. Because of that, if you need to remove $5,000 from a Roth IRA before age 59 1/2 to deal with an emergency expense, you won’t automatically lose $500 as long as you put at least $5,000 into your account out of your own money.

So let’s say that over a 10-year period, you contribute $3,000 a year to your Roth IRA, or $30,000 total. Through savvy investments, you might end up with $50,000. As long as you don’t touch the $20,000 gains portion of your account before age 59 1/2, you shouldn’t have to worry about penalties.

To put it another way, a Roth IRA can serve as a backup emergency fund so you have money you can tap in a pinch. Seeing as how 63% of Americans don’t have enough emergency savings to cover an unplanned $500 expense, as per a recent SecureSave survey, having your retirement funds in a Roth might really bail you out of a jam.

Don’t fall back on a Roth IRA for emergencies

The fact that you can use a Roth IRA for emergency expenses might drive you to choose one of these accounts over a traditional IRA. But remember, the more money you remove from your retirement savings, the less of a nest egg you’ll have once your career comes to an end.

So while you can tap a Roth IRA early to cope with emergency expenses, you really shouldn’t go that route if you can help it. A much better bet is to put money into a regular savings account that’s earmarked for emergency expenses.

In fact, it’s a good idea to build a strong enough emergency fund to cover a full three months of essential bills. This way, if you were to lose your job, you’d have the money on hand to pay your expenses in the absence of a paycheck.

A three-month emergency fund also puts you in a good position to cover even an enormously expensive home or car repair. So if you’re going to save for retirement in a Roth IRA, also try your best to build up three months’ worth of savings so you don’t have to tap your nest egg prematurely.

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A recent report revealed useful insights into how wealthy people manage money. Learn how adopting these financial trends can improve your finances. 

Julius Baer Group released its 2023 Global Wealth and Lifestyle Report earlier this year. It contains some fascinating insights into financial trends among the wealthy — or “high-net-worth individuals” (HNWIs), as they’re referred to in the report. Specifically, Julius Baer Group surveyed people around the world with household assets of at least $1 million.

If your own net worth isn’t quite there yet, you may be wondering how relevant this information will be for you. But the major financial trends among the wealthy are all moves that you can implement yourself. You don’t need to be rich to benefit from them. In fact, these trends could help you improve your personal finances and other aspects of your life.

1. They’re investing more

Investing is one of the best ways that people at all income levels can build wealth. By purchasing assets that can increase in value, you’re able to grow your money. The wealthy, in particular, have been accelerating their investments recently.

In all regions of the world, at least a quarter of HNWIs said they invested more during 2022 than in the previous year. The regions that led the pack were Asia, where 67% of respondents reported investing more, and the Middle East, where 73% reported investing more.

What you can do: Bump up your contributions to your 401(k), individual retirement accounts (IRAs), and/or brokerage accounts. A good way to ease into this is by investing 1% more of your income. For example, if you currently invest 10% of your income, raise it to 11%.

If money’s tight, another option is to get a cash back credit card. Use it for all your regular spending, and pay the bill in full every month so that you aren’t charged interest. Then, invest the cash back you earn.

2. They’re prioritizing health and fitness

Jeff Bezos is jacked now. Mark Zuckerberg pals around with professional fighters and practices Brazilian jiu-jitsu. And wealthy people as a whole are doing what they can to stay healthy.

More than half of HNWIs said they’ve used gym memberships in the past year. In Europe and Asia, 1 in 4 exercised almost once a day. HNWIs in all regions also said that they spent more on health insurance so they can have the best possible healthcare, should they need it in the future.

What you can do: Make physical activity a part of your daily routine. The best way to do this is to find something you enjoy, which could be weightlifting, yoga, basketball, or anything else that’s fun for you and gets the blood flowing. It doesn’t have to be an intense, hour-long session at the gym. It could be something as simple as a 20-minute walk.

3. They’re spending more on travel and experiences

It’s not all work and no play for the wealthy. They take time to enjoy themselves, as well, and they don’t mind paying for it.

Julius Baer found that hospitality spending, which includes gourmet meals and five-star hotels, increased in all five regions it surveyed. The frequency of leisure travel has gone up quite a bit, particularly in Asia, Europe, and the Middle East. That increase in demand led to large price increases for hotel suites, fine dining, and business-class airfare.

What you can do: Set aside time for fun activities and experiences. That could mean going out to eat on the weekend, taking at least one vacation per year, or seeing your favorite artist in concert.

Remember that experiences don’t need to be expensive. Plenty of budget-friendly options exist, too, such as inviting friends and family over for a game or movie night. There are also ways to save money on travel and experiences, including using travel credit cards.

4. They’re sticking to stocks and real estate investing

Stocks and real estate have historically been some of the best ways to invest. The stock market has delivered an average return of about 10% per year. Real estate investment trusts (REITs) have done even better with returns of nearly 12% (here’s a breakdown of REITs vs. stocks, if you’re interested in seeing that data).

Julius Baer found that wealthy North American and European investors haven’t changed their portfolios much. They largely stick to stocks and real estate. Wealthy investors in other regions have more diverse portfolios.

What you can do: Keep it simple with your investments. For U.S. investors, stocks and real estate are the most proven options. An index fund that tracks the S&P 500 (an index of 500 of the largest publicly traded companies on U.S. exchanges) is an easy way to invest in stocks and get a competitive return.

For the most part, habits that work for wealthy people work just as well for everybody else. These recent financial trends aren’t hard to follow, and they’re all good habits to adopt for yourself.

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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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