Money Management

It’s not too late to plan a fun Halloween celebration with friends. But don’t ignore your budget as you plan. Here are some tips to help you celebrate affordably. 

Spooky season is here, and it’s time to start planning what Halloween activities and events you want to participate in. You may want to host a Halloween party. If you’re working hard to meet your personal finance goals, you likely want to keep your Halloween bash affordable, though. Planning a fun fall gathering is possible without draining your checking account. I’ll outline a few tips below to help you throw a fun and memorable Halloween bash while staying on budget.

1. Ask your guests to bring a dish

Hosting a party can be fun, but after spending so much money on food and drinks, it can quickly become less enjoyable for the host. Since food and drinks typically make up the majority of a party budget, you may want to plan a fall potluck event. Asking your friends and family to bring a dish can make the event more affordable and lessen your cooking and cleaning responsibilities. Plus, it allows everyone to contribute in some way — and most guests want to show up with something.

2. Use the holiday decor you have

If you hope to decorate your home for the occasion, don’t feel tempted to run up a costly credit card bill at the local party store. You can reuse the decorations you already have. Look around your home and figure out if you can move some of your existing fall decorations around so it feels more festive for the event.

If you need to buy some decorations, shop at a discount retailer — like a dollar store. If you’ve never shopped at one of these retailers, check out some of the little-known perks of dollar stores.

3. Pick an event date that’s closer to Halloween

Another way to save money while throwing a fun Halloween bash is selecting a later event date. If you can host your party closer to Halloween (or even the weekend after the holiday), you can save money. Many stores mark down fresh pumpkins later in the season before they go bad and after-Halloween sales are a great time to stock up on cheap decorations and candy!

4. Choose free activities

You’ll probably want to have some activities planned to keep your party guests entertained. There’s likely no need to spend money on activities. Instead, think of free ways to celebrate and have fun together. You don’t want to risk racking up credit card debt from overspending.

One option is to host a Halloween movie night. You can watch movies using a streaming platform you already pay for to avoid extra costs. Another idea is to plan a scavenger hunt. You can make a pumpkin or something spooky that you have at home the prize for the winning player. It’s the thought that counts.

5. Keep the event simple

Another money-saving tip is to keep the party simple. You don’t have to plan an elaborate party that stretches well into the night. You could plan a simple two-hour afternoon event. By doing this, you can keep the event manageable and less costly. It also gives your guests time to attend other events on the same day — after all, October is a busy month for most people.

One easy idea is to host a pumpkin-carving event. You can have each guest bring a pumpkin and tell them you’ll have carving tools available. All you’d have to do is buy some extra carving tools (which you can save for next season!) and lay down newspaper for easy cleanup.

Don’t feel pressure to overspend when celebrating Halloween

Consider your finances before making holiday plans or deciding to host a party. Only agree to what you can afford, and don’t feel pressure to overspend when celebrating Halloween. You can enjoy the holiday and have fun with your favorite people without breaking your budget. Often, the most memorable occasions are simple and planned at the spur of the moment.

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Higher costs are making vacations less attainable. Read on to see how your credit card might be your answer to taking the trips you want to go on. 

Although inflation has cooled pretty nicely since raging throughout 2022, it’s still a problem for a lot of consumers. And it’s causing them to rethink the way they spend their money.

In fact, inflation is the primary reason why consumers today are hesitant to travel, according to data from Barclays. Higher costs for airfare, lodging, and dining are making it harder for people to pick up, pack up, and explore new corners of the world.

If you’ve had to put off travel plans due to higher costs, you may be bummed about the fun you’ve been missing. But before you give up on travel this year, see if your credit cards can help make it possible.

Reward points can offset your costs

Many credit cards today offer generous reward programs. If you have reward points banked, you can potentially redeem them for things like free hotel stays. Or, you can redeem those rewards for cash that you use to cover your travel expenses.

Better yet, some credit cards offer bonus rewards for expenses incurred in the course of travel. For example, you might get 2% back at hotels or 3% back on restaurant purchases. So if you charge your next trip on one of your credit cards, you might quickly replenish your rewards balance.

Travel credit cards can come loaded with money-saving perks

The type of credit card you use can also make a difference in the cost of your trip. Specifically, travel rewards credit cards tend to come with money-saving benefits that could make your next adventure less expensive.

It’s common for airlines to charge a fee for checked bags. On Delta, for example, you’ll pay $30 each way to check a bag for a domestic flight. If your travel rewards credit card gives you a free checked bag per leg of your journey, you might save yourself a nice amount of money — especially if you’re traveling with family or friends.

Your travel rewards credit card might also come with benefits like airport lounge access. If you have a long layover, getting to sit in a lounge and eat free food can be a source of savings as well as comfort. You might also be eligible for discounts on in-flight purchases with a travel rewards credit card, so if you have no choice but to eat dinner on a plane, you might pay less for it.

It’s not so surprising to see that consumers are hesitant to travel because of higher costs. And to be clear, it’s a smart thing to cut back on travel if you feel you can’t easily swing the expense right now. It’s much more important to be able to pay your rent and put food on the table than see a new city or country. And you don’t want to rack up expensive debt simply to take a vacation. But if you make the most of your rewards credit cards, you might find that a 2023 trip is in the cards — even if you’ve already resigned yourself to putting off travel until 2024.

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U.S. homeowners are sitting on trillions of dollars of home equity. Here are the three main ways to access yours. 

U.S. home equity is near an all-time high. According to the St. Louis Federal Reserve, U.S. homeowners have nearly $30 trillion in home equity, which is just below the peak in 2022.

Using your home equity can be a good way to pay for home renovations or repairs. It can also be a smart way to pay off high-interest credit card debt, pay for college, or fund other large purchases. But unless you plan on selling your home, there are three main ways to tap into your home equity — through a cash-out refinancing, a home equity loan, or a home equity line of credit (HELOC). Here’s an overview of the pros and cons of each option.

Cash-out refinancing

A cash-out refinancing was the clear best option when mortgage rates were in the 3% ballpark. Not only could you tap into your home equity, but in most cases you could lower your mortgage interest rate in the process. Now, refinancing activity has ground to a halt, and it’s easy to understand why.

The average 30-year fixed mortgage interest rate is approaching 8%. Refinancing replaces your entire mortgage with a new one, and since the bulk of U.S. homeowners have mortgage rates well below 5%, this isn’t a desirable option in the current environment in most cases.

Think of it this way. Let’s say that you have a mortgage with a $300,000 remaining balance and 20 years remaining on its repayment term, and your interest rate is 4%. Your monthly principal and interest payment is $1,818.

Now, let’s say that you want to use $75,000 of your equity to fund a renovation project. You could obtain a new 30-year mortgage for $375,000 at an 8% APR. This would not only increase your monthly payment to $2,752, but it would also add 10 years to your repayment term. It’s tough to make the numbers make good financial sense.

The biggest advantage to a cash-out refinancing in the current economic climate is that it’s usually the easiest of the three options to get approved for. A cash-out refinance is a primary mortgage loan, so it represents less of a risk to the lender than a home equity loan or HELOC, which are secondary liens. In other words, if you can’t pay your HELOC, your primary mortgage lender has first claim to the property in the event of foreclosure.

Home equity loans and HELOCs

In the vast majority of cases, home equity loans and HELOCs are the best ways to tap into your home equity in the current interest rate environment. To be sure, rates on these instruments are likely to be even higher than cash-out refinancing rates. In fact, I recently filled out a pre-approval for a home equity loan just to see what I’d get, and the best APR I was offered was about 10%.

However, you’re only paying the higher rate on the equity you’re tapping into. In the previous example, you’d keep your $300,000 primary mortgage at 4% interest, and would take out a second loan with a higher rate, but only on $75,000 of principal. And although home equity borrowing rates are much higher than they were a year or two ago, it can still be a much lower rate than you’ll find with a personal loan and can be the best option to fund a large expense.

There are a couple of key differences between home equity loans and HELOCs to know. Home equity loans are generally fixed-rate loans with a set monthly payment and term. And they work much like a personal loan, in the sense that the entire amount is disbursed to you upon closing. On the other hand, a HELOC is a credit line from which you can draw (or not draw) funds up to a certain amount. You’ll only pay interest on the money you choose to draw from the HELOC, and these typically have a variable interest rate that will go up and down over time. HELOCs are often the best choice if you want the ability (but not the obligation) to use your home equity as needed.

The bottom line

Tapping into your home equity can be a smart way to pay for large expenses — especially renovations and repairs that will increase the value of your home. This is even true given the rapid rise in interest rates in recent years.

However, the cash-out refinancing loan as a way to tap into home equity has lost its appeal, with home equity loans and HELOCs emerging as the smart ways to go, assuming your primary mortgage has a sub-5% interest rate like most in the U.S. do. If you think using your home equity is the best way to access the capital you need, a good next step is to compare some of the top home equity lenders to see which might be the best fit for you.

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Spending less doesn’t work for everyone. Learn why it isn’t always a good approach and what you can do instead to improve your finances. 

My financial situation used to be pretty unstable. I didn’t make much money, I lived paycheck to paycheck, and I even had credit card debt for a little while. Even though I’m extremely happy to be in a better place now, I’m also appreciative that I went through those challenges.

Because I’ve been in that situation, I know a lot of the typical advice about money is out of touch and unhelpful. I would frequently read articles about improving your finances, and most of them gave the same basic advice about reducing spending. With so many people recommending this, it seemed like spending less was the most important thing in the world.

I tried to follow that advice, but it didn’t work for me. Fortunately, I found a much better solution to my money problems.

Why spending less isn’t always a good financial plan

Every time I tried to reduce my spending, I’d go over my expenses. What I always found was that I just didn’t have many places where I could cut back.

I was living in an affordable one-bedroom apartment. My car was paid off. I bought cheap groceries. I didn’t go out that often, and when I did, I didn’t spend much. It’s not as if I was living in a luxury apartment, leasing a car I couldn’t afford, or buying bottle service every weekend on my credit cards.

Therein lies the problem. Reducing your spending doesn’t work if you’re already on a tight budget, like I was. And even if it works in the beginning, it’s not a sustainable long-term solution. There’s only so much you can cut. You’ll eventually reach a point where you either can’t or don’t want to keep cutting back.

If I had really wanted to, I could have lowered my spending more. I could’ve moved into an apartment with roommates instead of having my own place, gone on a rice-and-beans diet, and stopped going out at all, instead of every now and then.

But each of those changes would’ve had a big impact on my quality of life. When I thought about how much I’d save compared to what I’d be giving up, it clearly wasn’t worth it. Who wants to survive on the cheapest food and never go out, just to save another $100 or $200? Even if you can do it temporarily to save some extra money, is it a strategy you’d want to follow for the rest of your life?

I wanted to improve my finances without ruining my life. The more I read about personal finance, the more I knew that earning more money was the only good solution.

How I increased my income

Spending less was a swing and a miss for me. Increasing my income was what completely changed my financial situation. It has allowed me to build my savings and invest in stocks, which I could never do when I was living paycheck to paycheck.

I realize that making more money is easier said than done. It definitely didn’t happen overnight for me. But I have been able to significantly increase my income, and I’m going to share what worked for me:

I applied for new jobs every day. When I was working for peanuts, I constantly looked for job opportunities. The vast majority (probably over 99%) didn’t pan out. But I found a few that did, and they made all that job hunting worth it.I’ve worked hard to improve my skills. I’m always looking for ways to do my job better, which has led to more opportunities for me. I also try to see how I can work more efficiently. Since I’m a freelancer, being able to work more efficiently means I can get more done and increase my earnings.I built my network. When I was starting out, I used LinkedIn to add contacts in my industry. One of my first good gigs came from messaging with one of these contacts. That network continues paying dividends. Even though I’m not very active there anymore, I’ve still gotten job opportunities through LinkedIn.

There are some situations where spending less is worth it. If you’re spending too much on things you don’t need, then tightening up your expenses could be a good solution. But if you’re already on a tight budget, then you’re much better off focusing on raising your income.

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Tempted to put extra cash into your mortgage? Read on to see why that may not be the most financial sound decision. 

Your mortgage might easily represent the largest sum of money you’ll ever borrow in your lifetime. And you’re probably aware that the sooner you manage to pay off your mortgage, the less money you’ll spend on interest.

Now, many people can barely afford to keep up with their actual mortgage payments. But what if you happen to be someone who bought an inexpensive home relative to your income? In that case, you might have extra money at your disposal regularly. Or, you might come into a large sum of money from a work-related bonus or inheritance.

Either way, you may be tempted to put your extra cash into your mortgage so you can pay it off ahead of schedule. But before you do that, consider whether that’s really a sound financial choice.

Investing could be your better bet

These days, a lot of homeowners are sitting on record-low mortgage rates due to having signed their loans or refinanced them in 2020 or 2021. If you have a mortgage whose interest rate is somewhere in the vicinity of 3%, then you may want to think twice before putting extra cash into your mortgage.

Right now, you can earn 4% or more in a regular old savings account that’s risk-free. So until that changes, it generally makes more sense to stick extra cash in the bank than pay off a 3% mortgage ahead of schedule.

However, at some point, savings account rates are bound to drop. Also, you may not have a 3% mortgage rate. If you signed your loan in 2022, you might be paying 5% on your home loan. Even so, investing your extra money could make a lot more sense than putting that money into your mortgage.

Over the past 50 years, the stock market has delivered an average annual 10% return, as measured by the S&P 500. It doesn’t make sense to give up 10% to save interest on a mortgage with a 5% rate attached to it.

In fact, let’s say you signed a 30-year, $200,000 mortgage at 7% interest a couple of months ago, and now you’ve come into a $200,000 inheritance. If you were to pay off your home in one fell swoop, you might save yourself about $279,000 in interest.

But let’s say you were to invest that $200,000 in stocks instead. At a 10% average yearly return in your portfolio, in 30 years, you’d be looking at a balance of almost $3.5 million. So in this situation, even with a higher mortgage rate, it actually pays to stick to your regular payment schedule and put your money to work in the stock market.

A lingering mortgage balance isn’t always a bad thing

You’ll often hear that it’s not a great thing to carry debt, and that it’s best to do what you can to eliminate it as soon as you can. But mortgage debt tends to fall into a different category.

There are tax benefits to carrying a mortgage, and the debt you incur when buying a home might allow you to build equity in an asset that gains value over time. While it’s easy to see why you’d be inclined to try to pay off your mortgage early, when you run the numbers, you might realize that investing your extra cash makes a lot more financial sense.

Of course, if you’re sitting on a credit card balance with a 20% interest rate that has the potential to climb, then by all means — use your extra money to whittle it down. But when it comes to a mortgage, paying off debt early isn’t always the savviest choice.

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Car insurance can be pricey, but sometimes going with the bare minimum can cost you more. Here’s why. 

The average annual auto insurance premium for minimum coverage in the U.S. is $787, and residents of some states pay a lot more just to drive legally. Add extra protections and premiums can easily rise to thousands of dollars per year.

You might be wondering why anyone would want to fork over more money than they have to. Below, we’ll look at some of the most common car insurance policy additions and how they could actually save you money in the long run.

1. More liability coverage

State minimum car insurance typically consists of two parts: bodily insurance liability and property damage liability. Neither of those things protect the policyholder. They’re designed to pay for damages to people and property if the policyholder causes an accident.

Each state sets its own rules for how much liability insurance drivers need to operate legally, but many require $25,000 of bodily injury coverage per person and $50,000 per accident, along with $25,000 of property damage coverage. This is sometimes known as 25/50/25 coverage. But this isn’t always adequate.

Let’s say the policyholder plows into a stranger’s Lamborghini and totals it. A $25,000 property damage claim won’t be enough to cover the costs, and the Lamborghini’s owner might sue the policyholder to try to recoup the rest. Similarly, if the policyholder severely injures or kills someone in a crash, $25,000 won’t come close to covering their debts.

Opting for higher liability coverage limits may mean paying higher premiums, but it gives drivers a lot more protection if they are at fault in an accident. Though many drivers go years without ever filing an auto insurance claim, it’s impossible to know when an accident will occur, so it’s always better to be prepared.

2. Collision coverage

Collision coverage is an optional protection that pays to repair the policyholder’s vehicle if it’s damaged in a crash, regardless of who was at fault. It protects drivers in single-car and multi-car accidents. This coverage isn’t required by law, though lenders typically require it of borrowers who have a lease or loan on their vehicles to protect their investment.

If a driver doesn’t have collision coverage and then they find themselves in an accident, they’ll have to pay for all the repairs to their vehicle on their own. The average car repair, according to Kelley Blue Book, is now about $548, and some things, like a fuel pump replacement can easily cost thousands of dollars. But with collision coverage, the driver just has to pay their deductible and the insurance company will take care of the rest.

3. Comprehensive coverage

Comprehensive coverage goes hand in hand with collision coverage. It protects the vehicle from a variety of hazards other than crashes with another vehicle, including theft, vandalism, severe weather, and animal-vehicle collisions. This is another coverage that lenders often require, but it’s worth investing in even if this isn’t the case.

Any one of the issues mentioned above could cost a driver their vehicle in an instant. In some cases, like theft, repairs may not even be possible if police can’t locate the vehicle. If this happens, the driver has to either purchase another vehicle or go without transportation. That could be a lot more costly than just adding comprehensive coverage to an auto insurance policy.

What to do when money is tight

The cost to add these extra protections depends on where the driver lives, their driving record, and their vehicle’s make and model. But most drivers can expect to spend a few thousand dollars annually on their auto insurance policy with these added coverages. That’s not always easy to do when on a tight budget.

Shopping around can be a big help. Each car insurance company has its own algorithm for assessing risk, and that’s why the same driver gets different rates from each one. Sometimes one company might see a particular driver or vehicle as less risky than the others and may offer them a more competitive premium. But the only way to know which company will be the most affordable is to get several quotes and compare them.

Opting for a higher deductible is another wise move for drivers trying to lower their premiums. This will lead to higher out-of-pocket costs in the event of an accident. But if the driver is able to save for the deductible in an emergency fund, this may be a better fit for them.

Finally, if you aren’t able to purchase all the protections you want, get what you can. Drivers need state minimum coverage in order to avoid trouble with the law. That’s better than nothing. But if they have just a little extra cash, it’s best spent on more liability coverage. At most, policyholders will have to pay for a new car if they’re lacking in collision and comprehensive coverage. But there’s virtually no upper limit to how much they can get sued for if they injure someone else in a crash.

Re-evaluate options every policy period to see if there’s a better deal somewhere else. It might be possible for drivers to secure the additional insurance coverage they want in the future, even if they can’t afford it now.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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