Money Management

Love Target? Follow these rules to avoid overspending. 

During the second quarter of 2023, U.S. credit card balances rose by $45 billion, topping the $1 trillion mark. And my personal theory is that Target contributed heavily to that increase.

OK, I’m kidding. Clearly, we can’t point to a single retailer as a reason for U.S. credit card balances growing at such a rapid rate. A more likely culprit is inflation, which has been forcing consumers to spend more on essential needs, like groceries.

But if there’s one store that’s known to tempt consumers into busting their budgets, it’s Target. Among my circle of friends, there’s a joke that it’s impossible to walk out of Target with a tab of less than $100.

But actually, that joke isn’t so funny. A lot of people I know have not just credit card debt, but minimal cash in their savings accounts. And so they can’t afford to be blowing $100 or more at Target on a whim.

Thankfully, I don’t have credit card debt, and I do have savings. But I still don’t enjoy the feeling that comes with overspending at a store like Target. So before I visit, I set these three ground rules. And you may want to adopt them as well.

1. Have a reason to go

I’m in a strange boat in that my closest Target is a good 20 minutes away. But because of that, what I used to do was pop into Target any time I happened to already be in the area. That resulted in a fair amount of needless spending on my part.

These days, I’ll only go to Target if I have a specific reason to. Target-brand pants happen to fit my son really well. So when he needs a wardrobe refresh, I’ll head over. And while I’m there, I might grab some trail mix since my kids and I enjoy Target’s different blends. But I won’t go to Target just for snacks, because I can also buy trail mix at my regular supermarket.

2. Make a list

During periods like the holidays, I may have a host of different items I’m looking for at Target. That’s fine — but I need to shop with a list so I stay focused.

Sometimes, what I’ll do is check out sales for items like groceries and household essentials ahead of a visit. If Target has Bounty paper towels marked down, which are my go-to brand, then I’ll buy them there because it makes sense to do so. But either way, my rule is that I need to have a list that I’m sticking to.

3. Steer clear of aisles that don’t apply to my list

Target is filled with fun products that many of us, myself included, would love to bring home if they were free. But alas, they’re not. And so rather than open the door to temptation, one thing I now do at Target is only visit aisles that contain an item on my list. If I don’t need apparel or housewares, I don’t go looking at Target’s inventory so I’m not tempted to make extra purchases.

I also try my best to walk out of a given aisle once I’ve gotten my list item from it. For example, let’s say I’m buying trail mix. Once I have my container, I’ll try to force myself to exit the snack aisle so I’m not tempted to buy other goodies.

We can’t blame Target alone for Americans’ credit card debt problems, but the store has certainly contributed to debt among a number of people I know. That’s why I highly recommend following these rules when you go to Target — especially if you’ve been known to overspend while shopping there.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has positions in Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Buying a condo seemed like a good idea to a friend of mine a few years ago. Read on to see why she regrets that choice. 

Buying a home isn’t such an easy thing to do when you’re single. Although mortgage lenders will write loans to single applicants, there are income requirements you’ll have to meet that are harder when there’s only one salary at play.

When a good friend of mine was buying a home several years ago on her own, she decided to purchase a condo instead of a standalone home. At the time, mortgage rates were much lower than what they are today. But she felt that a condo would lend to a more affordable mortgage overall.

My friend was reasonably happy in her condo — until she wasn’t. And now, she regrets her decision for one big reason.

When you need more space but can’t afford to upsize

When my friend purchased her condo, she was single. Now, she has a romantic partner she’s looking to live with. The problem? There’s not enough space in her home.

My friend worked out of an office at the time she purchased her condo, so she didn’t consider the need for a home office. Then the COVID-19 pandemic happened, and now, like many other people, she’s working remotely for the foreseeable future. So is her partner. But that doesn’t work so well when you have a one-bedroom home.

My friend’s condo offers a decent amount of space for one person. But it’s not so well-suited to having more than one person live there.

Meanwhile, my friend’s partner currently rents, so he doesn’t have a place to sell or equity to tap. My friend has equity in her condo, but because home prices and mortgage rates are up, she can’t afford to upsize. So she’s basically stuck.

And the frustrating thing is that she probably could sell her condo with relative ease if that were an option. Realtor.com says that condos tend to sell faster than single-family homes even in a down market, because these homes commonly cost less and can have lower maintenance costs than standalone homes.

My friend’s condo is also located in a desirable neighborhood within a well-known city. So chances are, she’d be able to find a buyer. She just has nowhere to go.

Be careful when buying a condo

A condo can be a good starter home and alternative to a single-family home, especially if you’re buying a place on your own. And it’s generally a wise choice if you’re someone who doesn’t need a lot of space and doesn’t have the time, patience, or skill to perform home maintenance. (You’ll need to clean and maintain the interior of your home, but with a condo, building and exterior maintenance are generally handled by someone else through the fees you pay.)

But if you’re going to buy a condo, remember that your situation might change, and you might end up needing more space down the line. Upsizing may not be easy based on what the housing market looks like. Purchasing a small standalone home may be a better choice if you can afford it and are willing to do the maintenance.

My friend, meanwhile, insists that she’s stuck in her condo until the housing market cools and mortgage rates drop. At that point, she and her partner may be able to pool their financial resources and buy a small standalone home.

Until then, moving in together just isn’t feasible. And it’s a shame that a lack of square footage is getting in the way of my friend’s romantic plans.

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Have remaining funds in your FSA? Read on for ways to make sure that balance doesn’t go to waste. 

When it comes to socking money away for healthcare expenses, you have choices. You could put cash into a savings account. Or you could open a flexible spending account (FSA) through your employer.

The upside of using an FSA is that you get a tax break on the money you contribute. So pumping $1,000 into an FSA means not paying taxes on that much of your earnings.

The downside of FSAs, though, is that these plans generally require you to use up your plan balance by the end of the year. If you don’t, you risk giving up money that came out of your paychecks.

Some FSAs are a little more flexible than others. If your plan has a grace period, you may have until mid-March of 2024 to use up your balance. You may also be allowed to carry up to $610 into 2024.

But again, your plan has to allow for one of these options, and it’s not required to. So you may now be in a position where you have less than three months to put your remaining FSA funds to good use. If you’re not sure how, here are some options.

1. Push up medical appointments scheduled for early 2024

Maybe you’re planning to see your gastroenterologist or ENT in January or February. If you can get an appointment for December, you can dip into your FSA to cover your copay. Plus, your specialist may want to send you for follow-up tests or treatment, so if that happens this year, you can use your FSA for that as well.

2. Renew prescriptions early if you’re eligible

Some people take prescriptions on an ongoing basis. If you’re able to renew some of your pills in late 2023 instead of early 2024, you can pay for them out of your FSA. Just make sure your insurance company will allow you to do so, as insurers tend to have a waiting period between refills.

3. Tackle the dental work you’ve been putting off

FSA funds can be used to cover dental care that isn’t solely cosmetic in nature. So while a teeth whitening treatment generally isn’t eligible, a root canal is. If you’ve been putting something like that off, now’s the time to schedule it.

4. Get that orthodontist consult for your child

The idea of having to pay for braces for a child can be overwhelming. So if you’re able to at least use your FSA to cover the cost of your consultation, you might as well.

If your dentist has told you to get your child over to an orthodontist at some point in the not-so-distant future, now’s a good time to get the ball rolling. And if you want one of those coveted appointments during winter break so you don’t have to pull your child out of school, call now.

5. Buy a spare pair of glasses or extra contacts

Glasses have the potential to break, and contact lenses can pretty easily get lost or ripped. If you rely on glasses or contacts to see, why not buy some spares using your FSA balance? You can even purchase sunglasses with an FSA as long as your lenses are prescription.

6. Stock your cabinet with eligible over-the-counter medications and supplies

Bandages. Sunscreen. Contact solution. These are all things many people keep on hand for when they need them. The good news is that there’s a host of over-the-counter medications and supplies that are FSA-eligible. Take inventory at home and restock the items you’re getting low on. And if you’re not sure exactly which purchases qualify, you can find a comprehensive list at fsastore.com.

The money in your FSA is money you didn’t receive in your paychecks, so it’s important to make sure it doesn’t go to waste. These are all good options to consider as we approach the end of the year.

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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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Gig workers have some unique retirement accounts available to them. Which is best for you? Keep reading to find out. 

If you’re a gig worker, your financial situation can be a little more complicated, and not necessarily in a good way. For example, you might have to pay self-employment tax, which can increase your effective tax rate by as much as 15.3%. You’ll also be responsible for providing your own health insurance, and you don’t get many other benefits commonly available to employees.

You’ll also need to plan for your own retirement savings, as self-employed people don’t have an employer’s plan like a 401(k) or 403(b) to use. However, this can be one of the biggest financial perks of being self-employed. Here are three accounts you have access to as a freelancer or gig worker.

SIMPLE IRA

The first of two special types of individual retirement accounts, or IRAs, available to self-employed individuals is the SIMPLE IRA. “SIMPLE” stands for “Savings Incentive Match Plan for Employees,” and for 2023, the SIMPLE IRA contribution limit is $15,500 from employees, with an additional $3,500 catch-up contribution allowed from those age 50 or older.

Self-employed people are the employer as well as the employee, so they can make employer matching contributions in addition to these limits. Employers are allowed to match employee contributions dollar for dollar to a maximum of 3% of their compensation. So, to make a long story shorter, this means that self-employed people can contribute as much as $31,000 to a SIMPLE IRA, or $38,000 if they’re 50 or older, if their income allows it.

SEP-IRA

SEP-IRA accounts (“SEP” stands for “Simplified Employee Pension”) have higher overall contribution limits than SIMPLE IRAs do, but a rather complex contribution cap. Specifically, all contributions to a SEP-IRA are considered to be employer contributions and can be as much as 25% of total compensation. With self-employed individuals, there’s an exclusion that essentially limits contributions to 20% of net self-employment income.

Overall, the maximum contribution limit to a SEP-IRA in 2023 is $66,000; however, a self-employed individual would need net income of $330,000 or more to be able to put that much into their account. To figure out how much you could put into a SEP-IRA, multiply your Schedule C net income by 20% (0.2).

Solo 401(k)

A solo 401(k) — also known as a one-participant 401(k) or individual 401(k) — is specifically designed for self-employed workers. The downside is that compared to the other two account types, solo 401(k)s have more paperwork requirements (especially as the account starts getting larger), but they also typically have the highest contribution limits.

Solo 401(k) owners can make contributions as both the employee and employer. As the employee, the maximum contribution for 2023 is $22,500, with an additional $7,500 allowed for those 50 and older. But on the employer side, you can contribute up to 25% of your net self-employment income. The maximum overall contribution limit in 2023 is $66,000, or $73,500 for those 50 or older.

Traditional and Roth IRAs

While they don’t have the highest contribution limits, it’s worth mentioning that traditional and Roth IRAs are still available for self-employed individuals. In 2023, eligible individuals can contribute as much as $6,500, with a $1,000 catch-up contribution allowed for account owners aged 50 and older.

In some cases, one of these can be used in combination with one of the special retirement accounts discussed earlier. For example, since a SEP-IRA only allows for employer contributions, you may be able to make traditional IRA contributions to the account as well.

Which is best for you?

Like most financial strategies, there’s no perfect option for everyone. It depends on your income level, your retirement savings goals, and several other factors. The best bet is to weigh the pros and cons of each one to decide which is best for you.

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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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Costco’s CEO is stepping down. Read on to see what that might mean for members. 

Many people visit Costco on a regular basis to stock up on low-cost groceries and household essentials. But a lot of us probably don’t stop to think about what’s going on at Costco behind the scenes. And even if you happen to own Costco stock, you may not be one to keep tabs on its management team because you’re busy with, you know, life.

But it may interest you to know that a big change in Costco’s leadership is coming down the pike. Costco’s long-time CEO, Craig Jelinek, is stepping down and being replaced by President and Chief Operating Officer Ron Vachris.

Under Jelinek’s leadership, Costco expanded its footprint both domestically and abroad. Jelinek was also at the helm when Costco announced an increase in membership fees back in 2017. That change saw the cost of a basic membership rise from $55 to $60, while an executive membership offering 2% cash back rose from $110 to $120.

Now that a new CEO is taking over, you may be wondering whether the cost of your membership will go up and whether other big changes are in the works. Right now, we know very little. But one thing we do know is that a membership fee hike is inevitable at some point, and that other changes are likely.

Changes may be in the works — and many could be positive

It takes innovation and creativity to grow a business. So it won’t be surprising to see Costco’s new CEO try to breathe new life into the company (even though it’s doing well already) and help grow its customer base and revenue even more.

To that end, in the coming years, we could see an increase in Costco locations. We could also see new products and services introduced.

For all we know, Costco will soon get into the business of specialty footwear, selling everything from construction boots to soccer cleats. Or it might introduce an in-warehouse aesthetic center so you can enjoy a facial before you buy a week’s worth of milk and eggs.

To be clear, these are just hypotheticals. And chances are, Costco isn’t going to be opening in-house salons (though you never know). The point, rather, is that if you’re a Costco fan, you might get to enjoy even more benefits in the coming years as a new CEO tries to boost revenue.

A membership fee hike is likely — but not because of new leadership

Costco has not raised membership fees in more than six years, and it’s overdue for an increase based on its previous cadence of fee hikes. On a recent earnings call, CFO Richard Galanti called a membership fee hike “a question of when, not if,” but didn’t specify anything in terms of timing.

As such, it’s possible that Costco membership fees will rise in 2024. Or maybe not; the next fee hike may not arrive until 2025. But chances are, it’s coming, so that’s something to gear up for.

All told, a new Costco CEO may not impact your shopping experience in the near term. But in time, the chain might undergo positive changes that offer even more value to customers.

If you’ve been on the fence about joining Costco, you may want to sign up for a membership now that there’s a new leader taking charge. Remember, one thing Costco has always maintained is a desire to offer great customer service. That’s a core value of the company and it’s extremely unlikely to change. So if you find yourself unhappy with your membership, you can anticipate being able to get a refund in the future just as you can right now.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Many CDs have FDIC insurance, but there are other ways you can lose money on CDs. Find out how it could happen here. 

On a scale of least to most risky places to save or invest your money, stocks would fall on one end of the spectrum, while savings accounts would fall on the opposite end. Somewhere in the middle, nestled close to bonds, are certificates of deposit (CDs), a savings product that has FDIC insurance but carries some risks.

Excluding no-penalty CDs, most CDs have an early withdrawal penalty. The penalty is designed to discourage you from withdrawing money before your term is up. Often, you’ll forfeit some interest if you do.

But in some scenarios, you could even lose some of your initial deposit. Here’s how.

Early withdrawal penalties are equal to several months of interest

The most common way you can lose money is by breaking a CD contract before you earn enough interest to pay the penalty.

Most short-term CDs, like those with six to 12 month terms, impose an early withdrawal penalty that’s equal to several months of earned interest, while long-term CDs may have a penalty equal to 12 months or more. If you have a 12-month CD that charges a penalty worth three months of interest, breaking your contract before the three month mark would result in a loss.

Don’t miss that. It doesn’t matter if you’ve earned that interest; your CD provider will expect you to pay the penalty. That means it could take some money from your principal if you don’t have enough to cover the fee. Depending on how long you’ve had the CD before breaking the contract, this could be a sizable amount.

Brokered CDs come with their own risks

Brokered CDs are offered through brokerage accounts, like Fidelity. They often boast high APYs with a variety of terms. To buy one, you must have a brokerage account with the broker, and you typically buy them in set amounts (like $1,000). But the higher APYs are appealing and could help you earn the most interest on your savings.

These CDs don’t have early withdrawal penalties. In fact, the only way you can break your term is by selling the brokered CD on a secondary market. This would involve finding a buyer who wants to take the CD off your hands.

Sometimes, this works in your favor. For instance, if you have a CD with a 6% APR at a time when the ongoing CD rate is 3%, you won’t have trouble finding a buyer. But if the opposite was true, and you had a 3% CD while CD rates were as high as 6%, you might have to take a loss to attract buyers at all.

You won’t lose money if you don’t break your terms

Finally, rest assured that your money is safe if you stay within your CD contract. As long as your CD provider has FDIC insurance, your CD deposit will be safe up to $250,000.

If you have savings you won’t need in the near term, an early withdrawal penalty shouldn’t scare you. Today’s CD rates are high in comparison to years past. Stashing cash in a CD could help you keep pace with inflation (assuming CD rates are above the inflationary rate), not to mention prevent you from spending money in a checking account.

Of course, don’t be tempted by CD rates if you don’t have much savings in your bank account. Earning high interest means nothing if you have to forfeit it or your principal to access your money. A high-yield savings account or money market account would be better for your money.

In sum, yes, you can lose money on a CD. But as long as you don’t withdraw too early, you’ll be left with at least your principal. Keep your money in for the entire term, and you won’t lose anything at all — you’ll have your principal, plus money earned on today’s high APYs.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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