Money Management

It looks like a recession won’t hit in 2023. But read to see why you should prepare your portfolio for one regardless. 

Throughout 2022, especially the latter part, economists were quick to issue warnings about a 2023 recession. But thankfully, we’ve made it all the way to October without the economy taking a notable turn for the worse.

In fact, unemployment only sat at 3.8% for September. Historically speaking, that’s a low rate. And consumer spending increased $83.6 billion in August compared to a month prior.

All told, it seems pretty likely that a recession is not going to hit in 2023. And as an investor, that may be the sort of news you want to hear. But just because the economy didn’t tank in 2023 doesn’t mean you shouldn’t be mindful of your portfolio.

A recession could hit at any time

Let’s be clear about one thing — recessions don’t always cause brokerage account balances to plummet, and it’s possible for the stock market to take a beating even when the broad economy is doing extremely well. In fact, despite healthy levels of consumer spending and low unemployment, as of this writing, the S&P 500 index is down roughly 3.4% over the past month.

But it’s easy to see why investors can get so worked up over the idea of a recession. The reality is that a broad economic downturn could impact portfolio values for the worse, so it’s natural to be worried about the idea of that happening.

It’s also important to realize that while we may have skirted a recession in 2023, there’s no telling when one will hit. So it’s important to make sure that your portfolio is recession-ready at all times.

Diversification is key

A recession is the sort of thing you might experience multiple times in your life. And it’s important to set up your portfolio to withstand a recession or stock market decline. In that regard, diversifying may be your best bet.

If you load up on a wide range of stocks across different market sectors, you might minimize your losses in the event of broad economic or market-related upheaval. And if you think the idea of going out and buying stocks from 12 or 15 different industries is daunting, you can invest in the broad market instead.

If you buy shares of an S&P 500 ETF, or exchange-traded fund, you’ll effectively be putting your money into the 500 largest companies that trade publicly today — only without having to go out and buy shares of each and every one. You can also buy sector-specific ETFs so that if, for example, you already own plenty of tech and bank stocks, you can branch out by buying shares of an auto or retail ETF.

You might also want to make sure your portfolio contains at least a few stocks that are fairly recession-proof. Granted, any stock could lose value during a recession. But certain industries tend to be less vulnerable to recessions. Healthcare stocks, for example, are a good bet in this regard because people will always need medical care, regardless of economic conditions.

Make sure you’re ready

It looks like we may be in the clear as far as a 2023 recession is concerned. But don’t be lulled into a false sense of security. An economic downturn could happen in the not-so-distant future, so it’s important to set up your portfolio to withstand one.

Finally, do remember that if a recession does hit and your portfolio is negatively impacted, that hit isn’t guaranteed to be permanent. Often, if you leave your investments alone, your portfolio can recover in time. But it’s still a good idea to take steps to try to minimize a recession-related hit — for your own peace of mind.

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Costco has so many perks, it’s hard to keep track of them all. Find out which three you might be missing out on. 

Some time ago, an experimental horror novel, House of Leaves, told the story of a strange house whose rooms kept expanding on the inside even as the house remained unchanged on the outside. This, to me, is the best metaphor for how I’ve experienced Costco. Materially, the Costco warehouse hasn’t changed, and yet I keep discovering new products inside. If you don’t see it yourself, just take one look at its site map online and your local Costco warehouse will suddenly grow a few hundred square feet.

In the midst of all these products, you could easily feel so overwhelmed as to leave Costco’s labyrinths unexplored. And while just shopping regularly at Costco often means improving your grocery budget and personal finances — for most people — some perks could help you save even more. Like these three.

1. Costco “Special Events”

Costco “Special Events” are a savings perk that often go unnoticed. They’re basically roadshows that bring discounts and special products to your local Costco warehouse for a limited period and while supplies last. For instance, at my local store in Portland, our Special Events in October include discounted Lovesacs, Pure Fiber bedding, and massage chairs.

To be fair, these aren’t always products that you want or even need. That said, Costco does schedule Special Events well in advance, so you can peruse its calendar, get a sense for what will be on sale, and plan for certain big purchases when the deal is ongoing.

2. Discounted sports tickets

If you’re a college football fan, Costco could become your new ticket venue. While Costco doesn’t sell tickets for every university’s team, it sells them extremely cheap for those it does. To give you an idea, here’s how much you’ll pay for five different college football games.

You can also find tickets for other sporting events, like NFL games and races.

3. Rental car booking

“Wow, renting that car was so easy!” — said no one, ever, unless they’re using Costco’s travel portal.

Indeed, if you dread renting a car because of the hassle these companies subject us to — from prices never being exactly as they’re advertised to getting a different car than the one you rented — Costco’s rental car service might give you a new experience. I wouldn’t say you’ll have a flawless transaction, as Costco doesn’t rent out cars itself but connects you with the very companies you’re trying to avoid. But Costco does give you honest prices, lets you compare multiple companies online, and has no cancellation fees.

Plus, if you’re an Executive member, you’ll get 2% in cash back on your purchase.

Bonus: Costco shopping app

Another perk you might not be using is the free shopping app. You can compare gas prices at different warehouses, check your rewards balance, look up previous orders, make shopping lists, and store your membership card. It lacks the powerful tools of other shopping apps, but it’s decent for a company whose tech-savviness has long lagged behind.

All in all, Costco has more hidden perks than you might realize. To get the most value out of your membership, take a look at Costco’s site map for yourself — or pay close attention to the various service booths you’ll find throughout your local store — and see what perks you might be missing.

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If your work situation has changed, it might not make sense to have a car. Learn why one writer still wants to own a vehicle. 

Owning a car isn’t cheap, and if you’re trying to cut your costs to improve your personal finances, getting rid of yours might be one way to get ahead. I’ve become a fully remote freelance worker in the last few years. You might assume that I no longer need a car, but that isn’t the case. Here’s why I’m happy to still own a vehicle.

1. My car is paid off

If you’re making payments on an auto loan, they likely make up a significant part of your monthly budget. Edmunds reported that the average payment for a new car hit $730 in the first quarter of 2023 — a record high. But this is only an average. You could be paying more or less (especially if you bought your car used).

When I did have a car payment, it was thankfully a little less than half of the current average, but it still represented a solid chunk of money leaving my checking account every month. I made my last car payment almost a decade ago, and so my cost to own the car has come down significantly.

2. My insurance costs are low

I might not have a car payment anymore, but it’s still not free to own a car. I have to pay for maintenance costs and gas, of course. I also keep an auto insurance policy on the car, but I’ve been able to save money there, too.

The car is old and less costly to insure, but I also completed a driver education course that saves me 10% on my premiums. And I have a renters insurance policy through the same insurer — bundling policies can often save you money.

3. I take a lot of road trips

Beyond the lower costs of ownership that come from having an old paid-off car, I’m hanging onto my vehicle because it enables me to travel cheaply and easily. I don’t fly very often (an overseas vacation earlier this year was my first flight in almost seven years), and I tend to take a lot of road trip vacations instead.

Sure, I could rent a car for these excursions, but I’d have to pay for the privilege. And I certainly wouldn’t feel at ease driving a rental for a long distance on unfamiliar terrain. My car is excellent for road trips, as it gets great gas mileage and is comfortable to drive.

4. Public transportation isn’t a great fit for my schedule

I may work remotely, but this doesn’t mean I don’t have places to go besides work. In any given week, I might have a doctor’s appointment or other errands, and I do a weekly grocery run as well. My city isn’t large enough to have an especially robust public transportation network like many big cities do, but in a pinch, I might be able to take a bus somewhere. However, this would mean adding extra time to my errands to accommodate time spent waiting for transportation. And since time is literally money when you’re self-employed, this would end up costing me more than just the bus fare.

Giving up the financial commitment of owning a car could be a great way to significantly increase the amount of money you have free to save, pay down debt, or spend on other things. But it’s worth taking the time to evaluate your needs and see whether it might be worth swapping a new car for a cheaper used one, or even just hanging onto an older vehicle you’ve paid off.

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The best savings account rates top 4.30% and could put hundreds of dollars in your pocket each year. But you won’t find deals like that with these banks. 

When we think about growing our savings, we typically think about doing things like working more or foregoing things we want so we can hold onto more cash. There’s no denying these actions can help. But there’s an easier way to grow your wealth that a lot of people overlook.

Your savings account pays you each month for keeping your money there. And with the best savings account interest rates today over 4.30%, it’s possible to add hundreds of dollars to your balance in a year without any work on your part. But not all banks are this generous. Even in times of high rates like these, there’s one type of savings account I’d steer clear of.

How much does your bank think you’re worth?

Not so long ago, your only option for savings other than keeping your cash in your home, was to take it down to your neighborhood bank and put it in a savings account. That’s still an option today and it works more or less like it did back then. But if you’ve ever owned a brick-and-mortar savings account, you know that you probably don’t earn much over time.

The problem with physical bank branches is that banks have to pour a lot of money into maintaining them. There’s the cost of operating the building itself — property taxes, utilities, etc. — and then there’s the salaries of the people who work there. It adds up quickly, and it leaves brick-and-mortar banks without a lot of cash to spare.

As a result, they’re not able to offer competitive annual percentage yields (APYs) on their savings account products. Some of them only offer around 0.01% APY. To give you a sense of just how low this is, if you had $1,000 in your savings account and earned 0.01%, you’d only make $0.10 in a whole year. And if your savings account has a monthly maintenance fee you can’t waive, you’ll probably lose money over time.

It’s not a great deal for most people. Unless you have a strong preference for doing your banking in person, an online bank is probably a better fit for you. These banks don’t have large branch networks to maintain and as a result, they have more cash available they can use to offer higher APYs while charging fewer fees.

How to choose the right online savings account for you

Online savings accounts have exploded in popularity in recent years, so there’s no shortage of options for you to consider. But that can feel overwhelming, especially if you’ve never heard of most of these online banks.

But finding the right one isn’t as complicated as you might think. The first step is just knowing what’s most important to you in a savings account. Understandably, a high APY is key for most people. Don’t feel like you need to find the highest rate around, though. Banks change their APYs all the time, and what’s highest today might not be highest tomorrow. Instead, look for one that offers a rate that’s pretty close to the top savings account offers.

Then, you need to think about how you like to access your money. Some questions to ask yourself include:

How often do I plan to withdraw money from this account?Do I want a checking account at the same bank so I can easily transfer funds between the two?How much money do I plan to keep in the savings account?Do I want an ATM card so I can withdraw cash directly from the account?

Use your answers to these questions to guide your selection. For example, if an ATM card is important to you, you can skip over any online savings accounts that don’t offer one. And if you want to do all your banking in one place, avoid online banks that don’t offer checking accounts as well.

After you’ve looked through some of the top offers and chosen a few that stand out to you, dive deeper into their features. Review the fee schedule on the bank’s website and make sure you have enough money to meet any initial deposit requirements. Don’t hesitate to reach out to the bank if you have questions about how its account works. You may also want to look into reviews for its online and mobile banking tools as these will be your primary way of managing your funds.

If you try out a new bank and decide you don’t like it, you can always move your money down the road. But this can be a hassle, so it’s best to take your time and thoroughly research your options until you find one you’re comfortable with.

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Sometimes, appraisers will indicate that their estimation of a home’s value is based on repairs being completed. See what this means for your home sale. 

When you get a mortgage to buy a home, you typically need to have the house appraised. Your mortgage lender will mandate an appraisal to find the fair market value of the house. Lenders want to know this because the home guarantees or serves as collateral for the loan, so they need it to be worth enough that they could sell it and get back their money.

In some cases, your home appraisal will come back “subject to repair.” If this happens, what exactly does it mean for you?

Here’s what it means when an appraisal is subject to repair

Appraisers are not home inspectors. When they look at a house, their job is to consider its features and overall condition to decide what it is most likely worth. While they aren’t there to catch every potential problem with a house, they are on the lookout for certain health and safety issues that could hurt the home’s value or its ability to be used as collateral.

If an appraiser sees signs of a health and safety issue, such as a leaky roof, peeling lead paint, a major plumbing problem, wood rot, or a broken HVAC system, the appraiser will note these problems on the appraisal. And, in some cases, they will make the appraisal “subject to repair.”

If it is subject to repair, that means their valuation is based on what the home would be worth if those issues were fixed. The appraiser is not valuing the house in its current condition because there is a serious issue with it, but instead is indicating problems must be solved.

Since mortgage lenders care about making sure the collateral is structurally sound and worth enough to guarantee the loan, getting an appraisal subject to repair could create issues. Specifically, the problems identified by the appraiser usually must be fixed before closing.

After the problems have been solved, the lender will likely want a re-inspection performed to make sure the home is satisfactory.

How to respond when an appraisal is subject to repairs

If your home appraisal is subject to repairs, go back to the seller and ask them to make the fixes. Hopefully, they will be cooperative because otherwise, this could derail not only your sale but future sales as well. Almost no lender will provide a loan for a home with serious structural problems or health and safety issues because that house would not be good collateral.

If the seller won’t fix it, you’ll have to find another solution. You could agree to make the repairs before closing, but it’s often not smart to put money into a house you don’t yet own in case something falls through with the sale. Or you could do an escrow holdback, which means a certain amount of money — usually 110% of the estimated repair costs — would be held back after your closing and not paid to the sellers until the repairs are made.

You should talk to the seller and lender about these options to find a solution. Otherwise, your “subject-to-repairs” appraisal could make it impossible for you to get the loan you need to move forward with buying the home.

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Allowing a child to become an authorized user on your credit card can make their adult life a little easier. Here’s how. 

Remember when you took out your first credit card? Chances are, you were a fairly young adult, and perhaps, a bit naive about money. If you were fortunate, your family prepared you to handle your finances while you were still living under their roof. If not — like many of us — you were left to your own devices.

Here’s where leaving us to our own devices has led. According to BadCredit.org, nearly 20% of Americans have a subprime credit score. That means they’re considered high-risk borrowers, and if they do land a credit card or personal loan, their rate is higher (sometimes, much higher) than a borrower with a good credit score.

There’s no shame in being a subprime borrower. Some people experience a credit score hit due to circumstances totally beyond their control. For example, none of us controls whether we’re laid off from our jobs or come down with a chronic illness. The same is true of our children. No matter what we do, we can’t control every hardship they will face. However, we can teach them to manage their finances in a way that makes bumps in the road a little easier to manage. We can teach them to make their credit cards work for them, rather than the other way around.

The right age, according to credit card companies

Just like a checking or a savings account, a child cannot have a credit card in their own name before the age of 18. However, they can become authorized users on their parent’s or guardian’s credit card. The age at which that is allowable depends on the credit card issuer.

How your child can benefit

Allowing your child to become an authorized user on your credit card is about more than being the “cool” parent. Here are four real-life ways it can help.

By making safer purchases

Paying by card is typically safer than paying with cash. There are consumer protections attached to credit cards that don’t otherwise exist. For example, credit cards provide purchase and fraud protection, greatly diminishing the odds of being ripped off or losing out because they purchased a lemon of a product.

By learning the rules of the road while still under your guidance

One thing that comes as a surprise to some adults as they manage their first credit card is how quickly interest piles up. If your child is using the credit card under your careful watch, you have the opportunity to teach them the value of paying it off in full each month so that interest never has a chance to build up. They can also learn about credit limits, buying only what’s necessary, and protecting the card so that it’s never stolen.

By building a positive credit history

Roughly 20% of American adults have no credit history and no credit score. That means landing a loan from a reputable lender may be difficult or even impossible. Once a child is an authorized user on your credit card, each payment you make on the card gets reported to the credit reporting agencies in your name, and in your child’s name. Becoming an authorized user makes it possible for your child to leave high school with a healthy, established credit score.

By having an emergency payment method

Imagine your child stuck in a bad situation, and unable to afford to get out. It may be something as simple as a broken down car on a road trip with friends. Whatever’s going on, as long as there’s plenty of available credit on the card, your child can pay to get home.

The reason age requirements vary so dramatically among credit card issuers is likely because every child develops at a different pace, and only you know if your child is ready. Once you believe it’s time, you can take comfort in knowing that you’re teaching your child important money-management skills that most people don’t learn until they’re full-grown adults.

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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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