Money Management

You can use a credit card for just about any expense. But keep reading to learn about one to avoid at all costs. 

Credit cards are a convenient way to make your everyday purchases as well as pay for occasional expenses, like medical bills. If you’ve ever played the lottery and dreamed about becoming a millionaire (or even a billionaire, based on the big Powerball jackpots we’ve seen the last few years), you might have wondered whether you could put your lotto ticket purchases on your trusty credit card. In some states (but not all of them), using a credit card to buy lottery tickets is permitted. It may ultimately be up to the discretion of the store where you’re buying your tickets, though.

But should you actually buy lotto tickets with your credit card, then? No. Here’s why.

Credit card interest is expensive

Credit card interest is a bear to reckon with — as of this writing, the average APR on a credit card is 28.15%, according to Forbes. Of course, you’ll only pay this (or a comparable figure) if you carry a balance forward on your credit cards month to month. Credit cards come with a grace period for purchase transactions — this means you have time between when you buy something and when credit card interest will be charged. If you pay off your purchase before your bill’s due date, you’ll only pay for the amount you charged, and not pay any interest at all.

This is really the ideal way to use credit cards — pay them off in full every month, if possible. (I’ll note here that you can use a 0% APR credit card to finance a large purchase over time without incurring interest, assuming you can pay off the full amount before the 0% APR period expires — for the best 0% APR cards, that could be as long as 21 months). The rules for interest on a lottery ticket purchase are different, however.

Lottery tickets are considered cash advances

Purchases that can easily be converted to cash (such as money orders, cryptocurrency, and lottery tickets) are considered a type of cash advance by your credit card issuer. Cash advances are best avoided, because they are expensive.

First, you’ll be charged a cash advance fee (usually equal to 3% to 5% of the amount of the cash advance). And then interest will start accruing immediately — no grace period. And some credit cards even charge a higher APR on cash advances than on regular purchases. Plus, you won’t earn points, cash back, or other rewards on a cash advance. In short, you don’t want to do this.

Don’t go into debt to gamble

Another reason not to pay for lottery tickets with your credit card is that you’re basically borrowing money to gamble. Just because you can buy a chance at a big jackpot at your corner convenience store rather than at a casino, doesn’t mean it’s not gambling.

Lottery tickets command a lot of money from Americans; last year, we spent a record $108 billion on them. Playing the lottery has become quite normal for a lot of people, and if you’re one of them, it’s far better to buy lottery tickets with cash — and ensure you’re not overspending in the process.

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Many store credit cards have financing offers with 0% interest. Learn about the serious drawback of these offers to avoid an expensive bill later. 

Lots of store credit cards offer 0% interest financing for six months, 12 months, or longer. If you have any big purchases to make, this type of offer might seem like an amazing deal. You could get that laptop, furniture, or new pair of shoes that you want now, then just pay it off over time, without any interest charges.

While 0% interest store card offers can be useful, there’s a huge drawback that many people don’t know about. Before you consider buying anything this way, you need to know how this type of offer can end up costing you.

Most store credit cards only defer the interest charges

There are multiple types of 0% interest offers. Most store credit cards have deferred interest. That means there are still interest charges, but they’re deferred until the end of the promotional period. If you pay off your full balance within that time frame, then you’re not charged any interest.

However, if you fail to pay off the full balance, then you’re charged all that deferred interest going back to when you made the purchase. What makes these offers even more dangerous is that minimum payments may not be enough to pay off the balance within the promotional period.

Imagine that you use a store card to buy a $1,000 laptop. The card normally charges a 25% APR on purchases, but it has a 0% interest offer if you pay in full within 12 months. If you pay that down to $0 within 12 months, then it truly is interest free. To accomplish that, you’d need to pay about $84 per month. But your minimum payment may only be $30 or $40 per month.

Let’s say you decide to pay $70 per month. You’d still have a balance of $160 after 12 months. At that point, the card issuer would go back and tack on interest charges for every month. That would come out to about $150 in interest charges.

Waived interest offers are a better option

The other type of 0% financing is waived interest. This is where interest charges are waived entirely during an introductory period. If you have any remaining balance after the intro period, you’re only charged interest on that balance going forward.

Waived interest is usually what 0% intro APR credit cards offer. These credit cards aren’t tied to a specific store, which also means you can use them to finance purchases anywhere, not just with one specific retailer.

The disadvantage is that it’s harder to qualify for waived interest offers. You typically need a good credit score of 670 or higher to get approved for a 0% intro APR card. Store credit cards, on the other hand, are often available to people with lower credit scores.

If your credit score is high enough to qualify for either one, then a card with waived interest is the better choice. You won’t need to worry about getting hit with hefty interest charges if you don’t pay off your balance in time.

Know what you’re getting into with store card offers

Does this mean you should never use a deferred interest offer? I wouldn’t go that far. They should be used sparingly, if at all, but they can have their uses.

For example, I paid for vision corrective surgery in my early 20s with a deferred interest offer. It cost $4,000, and I definitely didn’t have $4,000 to spare at that age. So, I got a medical credit card with CareCredit and paid off the bill over time. I still consider it one of the best decisions I’ve made. I may have taken on some debt, but I was able to pay it off with no interest, and I don’t regret jumping on an opportunity to have perfect vision.

If you’re considering a financing offer from a store card, here’s how to make sure it doesn’t backfire on you:

Check how much you’ll need to pay per month to pay off your balance within the 0% interest period. For example, if a store card offers 0% interest if paid in full within six months, divide the purchase price by six to get the monthly payment amount you’ll need to make.Always make your payments on time. Even with zero-interest offers, there’s still a minimum monthly payment. If you miss your payment, you’ll be charged a late fee. The card issuer could even cancel your 0% interest offer if you go too long without making your payment.Don’t overdo it with zero-interest offers. If it’s an important purchase you can’t pay for in full, this type of offer could be worth it. But you shouldn’t use them for just anything, and it’s usually not a good idea to finance multiple purchases at a time this way.

A 0% interest rate seems like a steal, but it’s one of the ways retailers get customers to spend more. It could also come back to bite you if you don’t pay off your balance on time. Stick to 0% APR credit cards when possible, and if you use store financing, make sure you’ll be able to pay it off within the designated time period.

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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.
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Health insurance keeps getting more expensive. Read on to see what it costs this year. 

Everyone needs health insurance. Without it, you might end up owing thousands of dollars for medical treatment or a hospital stay. The result? An enormous credit card balance.

Meanwhile, Americans are spending a lot of money to get health insurance this year. Here are some of the numbers you might be looking at.

What workers with coverage through work are paying

Many people are privy to subsidized health insurance through their employers. The Kaiser Family Foundation found that the average annual premium for family coverage soared to $24,000 this year, marking a 7% increase from last year.

Thankfully, employers are subsidizing the bulk of that sum. But the average employee with family coverage is still shelling out $6,575 for their share of their annual premium. Ouch.

Meanwhile, the average premium for individual coverage rose to $8,435 this year. That, too, is a 7% uptick from a year prior. Of that, the typical worker is paying $1,400 as their share, with employers picking up the rest.

Of course, it’s not just premiums that those paying for health insurance need to cover. There are also deductibles to meet. Workers are paying an average of $1,735 among those with single coverage whose plans impose a deductible.

What workers without coverage through work may be paying

It’s hard to get an accurate read on what people without employer-subsidized health insurance are paying for coverage on average. Many variables dictate how much a marketplace plan (one purchased individually) costs, including location and income.

For example, in New Jersey, a single 40-year-old might pay $317 a month for a bronze-level plan (the lowest tier for marketplace plans, resulting in the highest deductibles and out-of-pocket costs). A silver plan (the next tier up for marketplace plans) might cost that same person $399 a month and come with a lower deductible and out-of-pocket costs than a bronze plan.

Marketplace plans come in four tiers: bronze, silver, gold, and platinum, with bronze being the lowest and platinum being the highest. The higher the tier, the more premiums tend to cost, but the less deductibles and out-of-pocket expenses tend to be.

How to choose the right health insurance plan

Whether you’re about to choose a health insurance plan through your workplace or the open insurance marketplace (you can go to HealthCare.gov, and from there, you’ll be directed to your state’s site, if applicable), it’s important to find the most cost-effective coverage. That doesn’t automatically mean choosing the plan with the lowest premium, though.

Rather, you’ll need to look at the following for each plan you’re considering:

Premium costsDeductiblesCopays/coinsuranceOut-of-pocket maximums

A plan with a lower premium might come with a higher deductible and higher co-pays, as well as a higher out-of-pocket maximum you might have to pay for the year. A plan with a higher premium might result in a lower deductible and copays, and a lower out-of-pocket maximum.

Crunch all of those numbers when assessing your choices, and keep your general medical needs in mind. If you have kids who tend to get sick a lot, you may be more likely to have to shell out your entire deductible than someone who’s single and doesn’t tend to see a doctor all that often.

Finally, once you choose your plan, do your best to pad your savings account balance so you have enough to cover your annual deductible. If your plan has a $1,500 deductible, for example, aim to have at least that much cash on hand in case a single injury or issue makes it so you have to come up with that sum in one fell swoop.

It’s also a good idea to add to your savings so you can cover copays and other costs you might incur outside of your premium and deductible. Remember, even if your employer is generous and covers 100% of your annual premium, that doesn’t mean you won’t spend anything on healthcare during the year.

Keep cash on hand so you’re not left scrambling. And, if you’re eligible, you may want to save for healthcare in a tax-advantaged manner by contributing to an HSA or FSA.

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A recent financial survey revealed some surprising data. See how high the average family’s net worth is and what you can do to raise yours. 

You read that right — the average American family is now worth over $1 million. The average net worth is $1.06 million, to be specific, according to the 2022 Survey of Consumer Finances. That’s a survey of U.S. families that the Federal Reserve Board conducts every three years. Net worth, by the way, is a measure of total wealth (the value of all your assets minus your debt).

That figure probably seems hard to believe, or you might be wondering just how many of your friends and family are secretly millionaires. While the numbers are legit, in this case, they’re also a little misleading.

The average family’s net worth

To clarify, $1.06 million is the mean net worth for families across the United States. The median net worth is $192,900. Here’s a quick explanation of the difference:

The mean is calculated by adding every family’s net worth together, and then dividing by the number of families. Mathematically, it’s the average.The median is the middle number in a data set. In this case, it’s found by arranging every family’s net worth from smallest to largest, and then taking the one in the middle.

The problem with a mean is that if there are any major outliers, those can skew the data. When that happens, then the mean doesn’t accurately represent the average of the group. That’s the case here. While the mean may be over $1 million, only those in the top 25% actually have a net worth that high. Those in the top 10% have a mean net worth of $7.81 million, so they’re doing most of the heavy lifting, so to speak.

The median of $192,900 is a more accurate representation of the average family’s net worth. It’s also worth noting that age and income both play key roles. Older Americans have higher average net worths, because they’ve had more time to accumulate wealth. And a large salary makes it much easier to save and invest.

Ideally, your net worth will increase over time. That probably won’t always be the case, as everybody’s net worth fluctuates. Home and stock prices go through ups and downs, and these are the most valuable assets for most people. But it is good to make raising your net worth one of your personal finance goals. Now, let’s look at how you can do that.

How to build your net worth

The good news is that increasing your net worth isn’t complicated. Now, that doesn’t mean it’s easy. It takes discipline and consistently following a few good financial habits:

Don’t get into expensive debt. Credit card debt is one of the biggest wealth killers. Using quality credit cards is smart — they have lots of potential benefits, including rewards and building your credit score. But make sure to pay the bill in full every month so you don’t get charged costly interest.

Set aside money for savings and investments. For your net worth to go up, you need to spend less than you earn. Commit a percentage of your income to building your savings and investments, every month. A good starting point is 10% or 20%, but it can be whatever works for you. What’s important is that you’re setting aside something.

Invest in the stock market. The stock market has historically been one of the best ways to build wealth. The S&P 500 (an index with 500 of the largest publicly traded companies on U.S. stock exchanges) has delivered an average annual return of 10%, going back decades. If you’re not sure where to invest, index funds are a popular choice. These invest in a specific market index, such as the aforementioned S&P 500, and they’re available with all the top stock brokers.

Unless you win the Powerball, building your net worth takes time. While it won’t happen overnight, if you follow these habits, they’ll pay off in a big way.

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Owning a business could benefit you in many ways. Read on to learn more. 

Owning a small business takes work. When you’re a business owner, you generally need to be involved in a lot of decisions. And at times, that could mean having very little downtime for yourself.

But owning a business can also be extremely rewarding. You can take pride in bringing your ideas to life and seeing your venture grow.

Recent data from the Federal Reserve found that as of 2022, 20% of U.S. families owned a privately held business. That’s the highest level on record.

You may be toying with the idea of starting a business of your own. If you’re not sure about it, here are some big benefits to consider.

1. Autonomy

When you own a business, you don’t have to report to a boss. You can call the shots, make decisions, and implement practices that align with your personal values.

Owning a business might make you feel good about the work you’re doing. And that could work wonders for your mental health.

2. Boosted earnings

You could work your hardest at a salaried role year after year and never see your wages increase if your employer opts to keep your pay stagnant. When you own a small business and are willing to put in the time and effort, you have an opportunity to boost your business checking account balance and grow your wealth.

3. Future financial security

Some people end up retiring earlier than planned when they’re forced out of a job later in life and struggle to find a new one. When you own a business that’s doing well financially, you give yourself the option to work for as long as you want. You could even decide to continue working part time in retirement to generate income outside of your Social Security benefits and IRA withdrawals.

What’s more, retirement can be a challenging period because not having a job can be a tough adjustment. If you own your own company, you can decide to work as many hours as you see fit. It’s a good way to stay occupied when your fellow retirees may be struggling.

4. Employment opportunities for your children

You never know what the labor market will look like by the time your children graduate high school or college. If they’re ready to enter the working world during a recession, they might struggle.

The upside of owning a business is that you can carve out employment opportunities for your kids. Granted, there can be disadvantages to working alongside your offspring. But at least your business can serve as their safety net if they need a job.

Starting a business isn’t for everyone. And before you go this route, you’ll need to make sure you have:

A solid, thought-out planAccess to fundingCash in a savings account in case it takes a while to turn a profit

But if you’re able to say yes to all of these things, and you’re actually interested in starting a business, then it could pay to make that leap. It might end up being a really good decision.

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Net worth is a measure of a person’s total wealth. Check out the shocking statistics on the average net worth of the top 10%. 

Wealth varies quite a bit in the United States, and it’s no secret that much of it is concentrated at the top. Even knowing that, the amount of wealth of the richest families could be surprising.

With the release of the Federal Reserve’s 2022 Survey of Consumer Finances, there’s new data available on the net worth of families in the top 10%. Net worth is calculated by adding up a family’s assets and subtracting any debts. Here’s the latest data.

The net worth of the top 10%

The top 10% of families have a median net worth of $3.79 million. The median net worth for the United States as a whole, on the other hand, is $192,900. That means families in the top 10% have nearly 20 times as much as the typical U.S. family.

On a positive note, overall net worth has been increasing. During the previous Survey of Consumer Finances in 2019, the median U.S. net worth was $141,100, so it has gone up by 37%. That’s actually a larger increase than the median net worth for the top 10%, which went up by 26% from 2019 to 2022.

In fact, all the groups analyzed in the survey saw positive changes in their net worths. That includes every income group and age range. The wealthiest Americans certainly have much, much more. But anybody can increase their net worth, and that’s a good goal to set for yourself. As a general rule, if your net worth is going up, that’s a sign you’re doing the right things with your personal finances.

What are the keys to a high net worth?

Reaching a high net worth, such as $1 million or more, is a common financial goal. While there’s more than one way to get there, the recent survey data can give us an idea of what tends to work best for building net worth. Here are the common characteristics of people with higher net worths:

They earn large incomes. Net worth rises significantly in every income percentile. The median net worth is $14,000 for earners in the bottom 20%, compared to $2.56 million for those in the top 10%They have higher levels of education. People with a college degree have a median net worth of $464,600. That’s more than four times as much as high school graduates ($106,800) and more than 12 times as much as people with no high school diploma ($38,100).They’re homeowners. Homeowners have a median net worth of $396,200, compared to $10,400 for renters.They’re older. Net worth rises for older Americans. Those younger than 35 have a median net worth of $39,000. It peaks at $409,900 for those between 65 and 74.

This doesn’t mean you need to fulfill all those requirements to have a high net worth. It’s certainly possible to build wealth with an average income, without a college education, and as a renter. But these characteristics show some strategies that have worked for many Americans, so they’re worth considering.

If you’re trying to build your net worth, a great place to start is with your income. As you earn more, it becomes easier to save more. See if there are ways to advance and make more money at your current job, or if you could increase your earnings with a new job or a side hustle.

The other key ingredient is where you put your money. As the data shows, many people build wealth through their homes, but that’s not your only option. Investing in stocks is another way to build wealth. Even if you’re a homeowner, it’s still a good idea to buy stocks, as well. They offer excellent growth potential, with the average stock market return being about 10% per year. They’re also more liquid than owning a home, as you can buy and sell stocks quickly with online stock brokers.

Building your net worth ultimately comes down to how much you earn versus how much you spend. If you consistently save and invest a portion of your income, you’ll see positive results.

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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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