Money Management

Accidentally spending more than you have in the bank often comes with fees. Learn how one writer keeps her checking in the black. 

Having a bank account is unquestionably good for your finances — it gives you a safe place to keep your money and an easy way to pay your bills. But it’s not enough to just have the money in the bank; you also need to stay on top of how much you have, because if you accidentally spend more than what’s in the account, you’ll incur a headache.

Some banks have done away with nonsufficient funds (NSF) fees (the amount you’re charged when you overspend your account), but a lot more have persisted with them, and they’d be very happy to ding your account when you overdraft, putting you further into the red. I’ve got a lot of experience avoiding overdrafts — here’s what I do to keep my checking account in the black.

1. I keep an extra cushion

In my long, long history of living paycheck to paycheck, I always aimed to keep at least $100 (and ideally, $200) in my checking account once my bills had been paid. Sometimes, I succeeded — and other times, I sweated it out until payday with less than $100 (or less than $50) and hoping that no surprise bills popped up (I also didn’t have emergency savings in those days).

These days, thankfully, this is no longer my reality, but I still don’t want to come close to overdrafting my account. To that end, I keep a larger cushion in the account — $500 to $1,000. Keeping extra money in your checking means that money won’t grow with interest like it would in a savings account, but the peace of mind you’ll get is worth it.

2. I get low-balance alerts

I’m a big fan of mobile banking apps, and the bank I keep my main checking account with is a big national bank with a stellar app. One of the options within the app is the ability to set up alerts for important information, including a low account balance. I have mine set to alert me if my checking balance drops below $100. If your bank offers this, I recommend signing up — and while you’re at it, opt in for alerts about suspicious activity in your account, as this can help you stop fraud in its tracks.

3. I check my balance frequently

Just in case the previous two measures aren’t enough, I’m also in the habit of logging into my bank account and seeing what’s going on there frequently. I don’t check daily, but I aim to have a look every couple of days. This helps me stay on top of my finances in a couple of ways. I get to see what my balance is, sure, but I can also make sure that money for bills I’ve paid actually leaves the account.

4. I opted in for overdraft protection

Some banks allow account holders to sign up for overdraft protection via a linked account. I did this several years ago, when I opened a linked savings account to go with my checking. If I accidentally overdraft the checking account, money will be sent from the savings to cover it. If you can sign up for this, it’s an extra way to ensure your peace of mind about overdrafts.

5. I maintain a paper record of bills paid

Paper checks seem to be going the way of the dodo; according to GOBankingRates, just 55% of Americans wrote one in 2022. I am one of those Americans (I think I wrote maybe two checks last year?), but I don’t keep track of my checking expenditures by way of a traditional checkbook. Instead, I have a spiral notebook that functions as one. Every payday, I make a note of my checking account balance and write down all the money leaving the account to pay bills and be funneled to my high-yield savings account at a different bank. By doing this math, I know how much money is supposed to be left in my account. So if I log in and see that the number is off, I know to investigate further.

Overdrafting your bank account can be an expensive headache, and if you do it too often, your bank could report you to ChexSystems, thereby making it extremely difficult to open new bank accounts in the future. If you’re frequently unsure of your balance and always teetering on the edge of overdraft, consider implementing some of my moves for your own bank account management. An overdraft fee can put you even further into the hole, and nobody needs that.

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Lean on automatic investments to help you reach millionaire status. Read on to learn how. 

If you want to become a millionaire, there’s a proven path to do it. If you follow a few simple steps, you will almost assuredly end up with a seven-figure brokerage account balance. Here’s what they are.

1. Calculate the amount you need to invest based on your age when you get started

Investing is the surest path to becoming a millionaire because when you invest you do not have to earn every dollar — or even most of the dollars — of your million. Your money earns money. As you make a profit on your investments, that can be reinvested so your profits grow or compound.

The earlier you start investing, the more compounding works for you and the less you have to personally put aside in your savings account to become a millionaire. But the key is to figure out how much you personally need to invest and your timeline for hitting millionaire status.

You can use the calculator at Investor.gov to figure this out, and the table below also shows the necessary monthly investment for people with different timelines. It assumes you earn a 10% average annual return.

If you have a short timeline, finding the necessary amount of money each month may be really hard. But if you have many years until you want to become a millionaire, it will likely be more affordable to invest the amount you need.

2. Automate your investments

After calculating the amount of money you need to invest based on your age, there’s another crucial step to take. You should arrange to have that money transferred directly into an investment account from your checking account on the days you get paid.

If you make your investing automatic, then saving for your future will be the status quo. You’d have to make an extra effort not to do it. If you instead try to manually invest each month, it may be too tempting to skip a contribution. If you have the money transferred right when it comes into your account, you also won’t be able to spend it on other things.

This will maximize your chances of actually investing the necessary amount, which means you’ll easily be able to stay on track toward millionaire status.

3. Invest wisely

You’ll need to earn the rate of return you projected in order to successfully become a millionaire. That means you need to make wise investments.

If you pick individual stocks, you may be able to earn more than a 10% average annual return if your investments perform well. But this also involves taking on added risk and you need to be sure you have a sound investment strategy.

You can also take the simple approach and invest in an S&P 500 index fund. The S&P 500 is a financial index made up of around 500 of the largest companies in the U.S. and it has historically earned a 10% average annual return for many decades, so there’s not a huge risk of your investments underperforming if you leave your funds invested for the long term.

If you take these three simple steps, it’s an almost surefire recipe for becoming a millionaire. Get started now, because the longer you wait, the more you have to invest monthly to hit your ultimate target.

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Many Costco products have amassed a cult following. Here are three great Costco buys that might become your new favorites. 

Costco has become the cornerstone of our grocery budget and a major help to our personal finance goals. In fact, according to our Mint budget, we’ve been saving about $200 a month since we started shopping there more frequently.

Granted, we live in the Pearl District of Portland, Oregon, and some of those savings are likely because we’re driving out of town. Shopping at Costco also means we now avoid a former drain on our budget — Whole Foods. Even so, there’s no denying the warehouse is saving us money on items we use frequently. I could name dozens, but if I had to pick three, the following products we would buy nowhere else.

1. Diapers

Recently, my wife and I had our first baby and quickly discovered why it costs about $300,000 to raise a child from birth to age 17.

Costco, however, has really come in handy, especially for diapers. For a box of 192 Kirkland Signature Diapers, you’ll pay $34.99, which comes out to about $0.18 a piece. Even if you opted for the more expensive Huggies, Costco would still give you a very competitive price. For perspective, here’s how it stacks up against some competitors.

Costco also has great deals on other baby necessities, like wipes, baby monitors, and cribs.

2. Olive oil

Our household uses a lot of olive oil. Everything has to be sott’olio, as my grandparents would say, which basically means submerged in a pool of oil. As frugal as we are, this is one product whose quality we can’t sacrifice to save a buck, even though olive oil prices have surged with inflation.

Costco’s olive oil isn’t the cheapest on the market, but the price is really good for this level of quality. For a 2-liter bottle of Kirkland Signature 100% Italian Extra Virgin Olive Oil, you’ll pay about $17.99 in-store (or $18.99 online). That’s a price we’re willing to pay, especially after tasting the olive oil and realizing it’s not a cheap generic brand.

If you’re not a stickler for olive oil, you could save even more by buying two 3-liter jugs for $49.99, which comes out to about $8.33 a liter. That’s pretty competitive with other stores. For example, Walmart sells 3-liter jugs for $25.87 and Amazon sells half a liter for $5.99.

3. Gift cards

Lately, I’ve gotten in the habit of checking prices for Costco’s gift cards online before I buy from another retailer. Why? Because buying gift cards from Costco means getting about 10% to 30% of your gift card’s total value for free.

Costco typically rotates its gift card selection, but you’ll often find restaurants, airlines, gaming companies, movie theaters, and other retailers. Two gift cards that have really caught my attention recently are from Southwest and Alaska Airlines. When you pay $449.99 for gift cards from either airline, Costco will give you another $50 to make it $500 in total value. Since my parents live in Georgia — and are eager to come see their granddaughter — we’ve been looking at these gift cards as a way to fly them out more frequently.

How to find more good deals at Costco

One of the best ways to stay on top of good deals is to download the Costco shopping app. You can enable Costco to notify when it posts new products and deals. The app doesn’t have the strongest features — it won’t let you scan-and-go like other stores — but it can at least make navigating Costco’s unruly website a bit more manageable.

All said, Costco’s low prices on baby supplies and essential foods have really helped us save money this year. Like other members, I’m grateful Costco can help me rack up less on my credit card without forcing me onto the ol’ beans-and-rice diet. Take a look at these products next time you’re at the warehouse and see if they can find a place in your lineup of favorites.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Shopping at dollar stores may seem like a good way to save money, but it’s not always the best option. Check out three signs you should avoid dollar stores. 

The Dollar Tree and other dollar stores offer items at very low prices. This can be great for your bank account if you are on a strict budget. However, while the things you can buy at Dollar Tree may not cost a ton of money, this doesn’t mean it’s a good idea for everyone to grab their credit cards and head to their local $1-or-less shop.

In fact, here are three big signs that this kind of shopping isn’t right for you and that you should steer clear of dollar stores entirely.

1. You tend to overspend on low-priced items

One of the really attractive features of dollar stores is that each item costs very little. If you shop at the Dollar Tree, for example, most things are priced at $1.25.

The problem is, if you buy a ton of items that cost $1.25, this can really add up — especially if you are visiting dollar stores regularly. Unfortunately, many people have a hard time not impulse buying when those things only cost a buck.

Take note of what you tend to leave your local dollar store with. If you come out with only the things you needed that were on your list, then you have no reason not to keep going back.

But if you have a cart full of random unnecessary impulse purchases like LED candles when you already have dozens at home or fancy face scrubs when your beauty-products cabinet is already overflowing, it may be time to step back and stop your shopping trips for a while until you can trust yourself not to overspend.

2. You prefer shopping online

If you tend to purchase most or all of your stuff online, dollar stores probably aren’t for you. They usually aren’t set up to allow you to just buy what you need and ship it at an affordable price.

The Dollar Tree, for example, generally requires you to buy at least a case of anything you’re purchasing on its website. So if you want a pair of skeleton hands for your halloween decor, you would actually need to purchase 30 pairs of them for a whopping $37.50 if you bought them online. Shipping would also cost you an additional $9.99.

With such unfavorable terms for web purchases, it makes little sense to indulge in dollar store shopping unless you plan to visit the store.

3. You can get better deals at other stores

Finally, you should avoid visiting Dollar Tree or other dollar stores if you can get better deals on the things you’re buying elsewhere. This is especially likely if you are a member of a warehouse club like Costco or Sam’s Club where you tend to get good bargains by buying in bulk.

Say, for example, you were considering buying toilet paper. The Dollar Tree has a four-pack of Scott Comfort Plus for $1.25 that has 48.8 square feet of paper. That comes to around $2.56 per 100 square feet. Costco, on the other hand, offers Kirkland Signature Bath Tissue for $1.65 per square foot online (and for even less in store).

You should compare prices on things you buy regularly to see if the Dollar Tree really does offer the best bargains for your budget. If you find it doesn’t — or if you tend to splurge too much at dollar stores or are disappointed you can’t shop online — then steering clear of dollar stores could be the best bet for your personal finances.

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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.Christy Bieber 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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Your emergency fund isn’t something to set and forget. Read on to see why you should do an annual checkup on yours. 

A recent survey by SecureSave found that 63% of Americans don’t have enough cash on hand to pay for an unexpected $500 expense. So if you’re someone who has a far more robust emergency fund than that, you’re in good shape. (And if not, you can always do your best to build up more savings over time.)

The general convention is that it’s a good idea to have an emergency fund with enough money to pay for three months of essential expenses — things like rent, groceries, utilities, and healthcare. That way, if you were to lose your job, you’d have a way to pay your bills for a few months without immediately having to resort to debt.

It’s also a good idea to build a three-month emergency fund in case a major home or car repair comes up unexpectedly. The logic is that if you have enough money in the bank to pay for three full months of essential bills, chances are, you have enough to cover the $2,500 to $5,000 it might take to replace your vehicle’s transmission, just as one example.

Of course, it’s a good idea to try to replenish your emergency fund as quickly as possible after taking a withdrawal. But what if you haven’t touched your emergency fund in well over a year? You might think that in that case, there’s nothing to do. But you’d be wrong.

It’s really important to assess your emergency fund from one year to the next. If you don’t, you might end up short on cash when something goes wrong.

Why you need to do an annual emergency fund checkup

We just talked about the fact that your emergency fund should, ideally, contain enough money to pay for three full months of essential bills. But as we all know, living expenses have the potential to rise from one year to the next. And it’s important to make sure you’re padding your emergency fund as your living costs rise.

Let’s say you were paying $1,200 a month in rent in 2022. If your rent increased to $1,280 this month, it means you might need an extra $240 in savings to ensure that you can pay for three full months of bills.

Also, maybe you signed up for home internet service on a promotional basis last year, so your cost was $40 a month. If it’s now $60 a month because your promotion ran out, that’s an increase your emergency fund should account for. (And yes, while your emergency fund is meant to cover essential bills, it’s easy to argue that internet service is something you can’t do without. If you were to lose your job, you’d probably need it to search for a new one.)

A yearly review could go a long way

You made sacrifices to build yourself a fully loaded emergency fund, so you no doubt want it to be adequate. So carve out an hour once a year to assess your savings and make sure you have enough cash for three months of bills.

In a nutshell, all you really need to do is make a list of your current essential expenses, see what they cost, and compare that to the amount you have saved. It may be that you’re actually just fine on emergency savings despite an increase in your bills, because your money earned a lot of interest in your high-yield savings account over the past year. But it’s still a good idea to check, so you have the peace of mind your emergency fund is supposed to give 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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