Money Management

America’s debts are stacking up. Here’s how to stay on track with your retirement if you’re paying your debt down. 

Americans are starting to feel more financially stretched as inflation remains elevated, housing costs have soared, and credit card debt recently surpassed $1 trillion.

As life has gotten more expensive, many Americans are looking to cut spending and pay down their debt. It’s a wise strategy, but sometimes, making loan payments comes at the cost of putting money aside for retirement.

So, how can Americans save for their future while tackling loan payments? Here are a few ways to manage both saving for retirement and paying down your debts.

1. Set a savings goal

This one seems obvious, but creating a goal is one of the best ways to achieve what you want. Research from Dr. Gail Matthews shows that writing goals down daily makes people 42% more likely to achieve them.

Make your retirement savings goal realistic, especially if you still have loans to pay off. And don’t be too worried if you come up short of your savings goals, either. The point is to move closer to your goals and have a plan to get there. You can always adapt your strategy later if needed.

2. Automate your retirement savings

Automating your retirement savings is one of the easiest ways to stay on track with retirement goals. Many experts call this concept “paying yourself first,” meaning that you pay money toward your future self before setting aside money for bills and loan payments. This can be as easy as transferring a small monthly amount from your checking account to a savings account or a brokerage account.

By paying yourself first, you’ll continue to build your retirement savings each month and then put any remaining money toward your loan payments.

3. Consider a debt consolidation loan

If your retirement savings are more or less on track and you’re having trouble coming up with enough cash to pay down your debt, then you may want to consider a debt consolidation loan.

For example, if you have multiple credit cards you’re trying to pay off, getting a personal loan that consolidates all of that debt into one payment, potentially with a lower interest rate, may be a good choice.

You’ll want to ensure that the offered interest rate, repayment terms, and monthly payment suit you before you sign up for a debt consolidation loan. One way to determine if this is the right move is to compare debt consolidation loans.

By consolidating your debt into a lower payment, you can better manage your personal finances and cover the cost of paying off debt and saving for retirement.

4. Take advantage of your 401(k) match

If your job has a 401(k) plan you can sign up for, there’s a good chance it also has an employer match program. For example, some companies may match 50% or more of the contributions you make toward the plan, up to a certain percentage of your income.

Signing up for your company’s 401(k) employer match program helps you achieve financial goals by taking some of the retirement savings burden off you. For example, if you save $200 per month in your 401(k) and your employer has a 50% match program, then it will add an additional $100 into your account each month.

Since your employer is helping you save that extra $100 per month, consider using the savings and put it toward your debt.

5. Consider opening a high-yield savings account

Many banks are competing for your business right now and offering high-yield savings accounts. While putting all your money into a savings account isn’t the best way to make it grow over time, it can be a good place to keep extra cash before investing.

You can compare the best high-yield savings accounts to find the right one for you. Some banks even offer hundreds of dollars to open an account if you deposit a certain amount or sign up for automatic deposits.

You may be able to put some extra cash in your pocket through a sign-up bonus offer, which you can then put toward paying down your debt.

Remember that while tackling loan payments is a wise financial decision, it’s also smart to balance it out by setting some money aside for your future.

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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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Many people want to save money on car insurance. But read on to see why one tactic might backfire on you. 

Many people are familiar with the concept of deductibles in the context of health insurance. But if you’re new to buying auto insurance, you should know that paying a deductible is something that will come into play every time you file a claim against your policy.

A car insurance deductible is a sum of money you’ll have to fork over before your insurer pays out on a claim. Progressive says that car insurance deductibles generally range from $100 to $2,000, and that the most common deductible its drivers choose is $500. So if you have a $500 deductible and file a claim for $1,500 worth of car repairs, you’d pay the $500 and your insurance company would cover the remaining $1,000.

Now, you’ll often hear that a good way to save money on auto insurance premiums is to choose a higher deductible. And you may be inclined to go that route since your premiums will be due no matter what, but if you don’t end up with vehicle damage, you may not have to pay your deductible at all.

That logic does make sense. But it could also, unfortunately, come back to bite you.

When the insurance numbers don’t work out in your favor

Car insurance premiums and deductibles tend to have an inverse relationship — the higher one is, the lower the other is. You can’t get out of paying auto insurance premiums, so you may be inclined to choose a higher deductible to keep your premiums down. But if you get into multiple accidents during the year, or if your vehicle sustains damage on more than one occasion, then you might end up spending more money all in.

U.S. News & World Report says that the average cost of auto insurance in the U.S. is about $1,550 per year. But let’s say that premium comes with a $500 deductible. You may be able to whittle that premium down to $1,000 with a $750 deductible.

In that case, if you were to get into one accident during the year requiring you to file a claim, you’d be spending $1,750. In the other scenario, you’d be spending $2,050.

But what happens if you end up having to file three claims during the year. Between laying out $750 three times and your $1,000 premium, you’re looking at $3,250. On the other hand, if you were to pay a $500 deductible three times a year plus a $1,550 premium, your total costs would be $3,050.

A tough call to make

You might spend less on auto insurance by raising your deductible and lowering your premium — or not. So one thing to consider when making your choice is your neighborhood.

If you live in a suburb where parking is abundant, the likelihood of your car getting sideswiped or dinged may be lower. Similarly, if you live in an area that’s relatively safe, the chances of your car getting vandalized may be lower. In those cases, you may be less likely to end up having to file claims for damage in a non-moving situation, so it could make sense to go with the higher deductible.

But accidents are a different story, and they can happen anywhere and at any time. So ultimately, choosing your deductible may be a matter of how much risk you personally want to take on. If you get lucky, a higher deductible might save you a lot of money. But if you’re unlucky, it could end up costing you big time.

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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 recommends Progressive. The Motley Fool has a disclosure policy.

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The holidays are coming. Read on to see how to steer clear of a credit card mess as that season approaches. 

Although it’s only the end of September and the days are still nice and long, the holidays will be here before we know it. And while the holiday season is, at least for some folks, the most wonderful time of the year, it can also be the most expensive time of the year.

That’s why it’s so important to be savvy with your spending ahead of the holidays. You don’t want to rack up debt before the holiday season only to then pile on in November and December. And so to that end, in the coming month or so, it pays to do everything you can to avoid these credit card traps.

1. Chasing a welcome bonus

Many credit cards offer welcome bonuses that put a lump sum of cash back or reward points in your pocket if you meet a certain spending threshold within a few months of opening your card. But if you rack up extra charges in the coming weeks for the express purpose of snagging that bonus, you might kick off the holidays with debt.

That could make the season more stressful for you. It could also create a scenario where your credit card balances spiral out of control as you add to them in November and December.

A better bet? Don’t buy extra things just to snag a welcome bonus. If your deadline to meet your spending threshold for a recently opened card is early November, don’t spend the next five weeks or so making additional purchases. Even if they result in a $200 payday, you might lose more than that to interest charges by carrying your balance for a long period of time.

2. Taking advantage of a 0% introductory APR

If you have a credit card with a 0% introductory APR, you may be inclined to use it as often as possible while that interest-free period is still in effect. But remember, once that introductory period comes to an end, the interest rate on your existing balance has the potential to soar. And if you then add to that balance during the holidays, it could make for a financially devastating situation.

If you have a credit card with a 0% introductory rate, first, pay attention to when that period wraps up. And then, make a plan to get ahead of your existing debt rather than continue to add to it.

You might, for example, be able to go out and get a seasonal side hustle that boosts your income. That could make it possible for you to knock out your balance before your introductory period ends and costly interest starts to accrue.

3. Applying for a store credit card

You may be tempted to apply for a store credit card or two in the period leading up to the holidays. That way, when you spend money at those retailers on gifts and other holiday purchases, you’ll be able to rack up rewards.

If there’s a specific retailer you shop at frequently, then it could pay to apply for a store credit card there, since you might benefit from not just rewards, but discounts and other perks. But in general, it’s a good idea to try to keep your store credit card collection to a minimum.

Remember, store credit cards are often closed-loop cards, meaning they can generally only be used at the retailer that issues them. And similarly, any rewards you rack up will generally only be redeemable at that retailer. But given that the holiday season is nearing, you may find it far more helpful to score cash back on your credit card purchases that you can use for any purpose.

You should also know that store credit cards are notorious for charging high interest rates. This means that any balance you don’t pay off in full could end up costing you big time.

If you’re someone who loves the holidays, then you may already be starting to get into that mode, despite the fact that we’re still months away. But do your best to avoid these credit card traps so they don’t mar the season in any way.

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Mortgage rates tend to fall during a recession. But read on to see if a recession is a good time to buy. 

After months of warnings about a 2023 recession, as of now, it seems likely that we’ll avoid a broad economic downturn this calendar year. But that isn’t to say a recession won’t strike in the future.

Recessions are a part of the economic cycle. And while they’re not always drastic and lengthy, they do tend to happen from time to time. So there’s a good chance that at some point in your life, you’ll end up having to grapple with a recession.

If it comes to be that you need a mortgage at that time, you should know that mortgage rates tend to fall when recessions hit. But that doesn’t necessarily mean you should purposely try to buy a home when economic conditions aren’t great.

Why a recession could lead to lower mortgage rates

There are different ways you can define a recession, but the gist of it is a general slowdown in economic activity. Because of that, there tends to be less demand for mortgages when economic conditions aren’t stellar. And mortgage lenders tend to respond to that by lowering their rates in an effort to drum up business.

In early 2009, for example, when the U.S. was deep in the throes of the Great Recession, mortgage rates fell to around 5% for the 30-year loan. A year earlier, they averaged around 6%.

Similarly, in 2020 and 2021, economic activity slowed due to the COVID-19 pandemic. Back then, mortgage rates fell to around 3%, representing the lowest rates borrowers had seen in years.

This isn’t to say that mortgage rates are guaranteed to drop when a recession hits. But there’s a good chance they will as economic activity generally slows down and fewer home purchases occur.

Should you sign a mortgage during a recession?

It can be tempting to sign a mortgage when borrowing rates are favorable. And that might happen during a recession.

However, you should know that signing a mortgage during a recession can be a risky move, especially if the recession is more extreme in nature. That’s because job loss tends to be more common during economic slumps. And so if you sign a mortgage and then lose your job a few months later, you might be stuck with large monthly payments at a time when it’s difficult to find a new job and replace your missing paycheck.

On the other hand, it’s also possible for there to be a recession that doesn’t affect your income. In fact, there are certain industries that are generally said to be recession-proof. And if you work in one of them, you may be in a better position to take on the expense of a mortgage at a time when economic conditions aren’t so favorable.

If you’re a doctor, for example, you may have some added job security since your services are apt to always be in demand. Similarly, there’s a perpetual need for educators. If you’re a teacher, your job might be safe even if economic conditions deteriorate. So you’ll need to think about your specific job situation when deciding whether it’s a good idea to sign a mortgage during a recession or not.

Your savings should play a role in that decision as well. If you know that you’ll have enough money in the bank to cover a good three to six months of essential living expenses after making a down payment on a home, then you’re in a pretty strong position to sign a mortgage, even if the economy isn’t doing so great. But if your down payment will pretty much wipe out your savings, then signing a mortgage is risky (during a recession or otherwise).

All told, a recession could lead to lower mortgage rates. Whether that’s something you’re able to jump on, however, will depend on your personal circumstances.

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Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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

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Beat the lines by skipping ahead. Read on to cut DMV wait times in half in the Golden State. 

Ding. The email sailed into my inbox without fanfare. Dreading the contents, I clicked the headline. A quick skim confirmed the worst: It was time to renew my driver’s license (DL).

Visions of DMV lines snaking out the door consumed me. But a quick Google search saved me from scheduling an appointment at car purgatory. Turns out, you can easily skip the line at the California DMV by renewing your ID via the official state website.

Ordering a new driver’s license online took me less than 10 minutes. A-maze-ing. I did a bit more browsing on your behalf. There are three simple ways California residents can save time (and a little money) at the DMV. Here’s how.

1. Renew IDs online

I renewed my driver’s license online. You can, too, but that’s not all. California residents can renew any of the following vital documents online:

Driver’s License and REAL IDVehicle RegistrationCommercial Driver’s License

How to renew:

Navigate to the official CA DMV website and create an account (or log in to an existing account).Click “Online Services” in the header.Scroll down to survey your options.Click what you’d like to do.Follow instructions.

To create an account, you must provide an email address, a California ID number, and other personal information, including a phone number and the last four digits of your Social Security number.

Creating an account took me less than 10 minutes — it’s quick and easy. Order ahead of time if you can — the renewed card may take three to four weeks to arrive.

2. Make in-person appointments online

Do you need to take an in-person driving test? You can jump the line by scheduling a test online. Navigate to the DMV Appointment Scheduler and enter your information. Doing so could cut wait times in half or more.

Most things you can do in person, you can also do online faster. But you can book visits to the DMV for just about anything. Use the Service Advisor to the right of the Appointment Scheduler to explore your options. Be sure to bring all necessary documents to the DMV.

In 2021, the average wait time for someone without an appointment was 26 minutes (and longer for busy DMV offices). But the average wait time for someone with an appointment was less than half that, according to California DMV data. If you can make an appointment, it’s worth doing.

3. Pay fees with a linked bank account

It costs just as much money to use DMV services online as it does in person. The best way to pay is with a linked bank account. That way, you aren’t charged a 1% fee for using a credit card. It could save you a couple of dollars on renewal fees.

To pay with a checking account, you’ll need your routing and account numbers. Have them handy before making an online payment.

Tip: Online banks like Chime let you quickly find routing numbers on the website. Log into your account and search for a page that says something like “Account Information.” On the Chime website, you click your name in the upper-right dropdown menu. Then, click “Account Numbers.”

Benefits of using the website

Use the California DMV website to skip lines, save time, and go at your own pace. If the DMV stresses you out like it does me, you may appreciate being able to skip it entirely.

You save money by paying with linked bank accounts and driving less, thereby saving you gas money. Creating an account is easy, and I highly recommend doing so — it took me less than 10 minutes and zero stress. It should save you time and (and a little money).

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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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Millionaire status is pretty rare. But read on to see how you can achieve it. 

There are 5.3 million millionaires in the U.S. Given that millionaires make up just 2% of the U.S. adult population, those folks are very much in the minority. And if you’re an average earner, you may be resigned to the fact that you’ll never join their ranks.

But hold on just a hot second there.

Yes, it’s true that the more money you earn, the easier it becomes to grow wealth over time and reach millionaire status. But that doesn’t mean you have to give up on that goal so easily. Here are a few things you should try doing before assuming that becoming a millionaire is out of the question.

1. Building up a solid emergency fund

What does having cash reserves in the bank have to do with becoming a millionaire? A lot, actually.

One thing that tends to stop people from accumulating wealth is debt. And that makes sense. If you charge a $1,000 expense on a credit card that ends up costing you $1,500 after you account for interest charges, that’s $500 you’re not putting to work by investing it.

An emergency fund, meanwhile, could be your ticket to avoiding debt when unplanned expenses land in your lap. So over time, aim to build up enough cash in your savings account to cover at least three months of essential living expenses. It’ll serve as a nice foundation for growing your net worth.

2. Buying a home

Homes are incredibly expensive to buy right now not just because of elevated prices, but also, sky-high mortgage rates. But housing market conditions are apt to change eventually. And if you end up in a position where you’re able to afford a home, doing so could help you grow your net worth to $1 million or more.

Homes tend to appreciate in value over time. So if you buy a home for $300,000, in 20 years, that home might be worth $800,000. At that point, you have $500,000 in equity, which is half of what you need to have a net worth of $1 million.

Now that said, let’s be clear that buying a home is not the only way to grow wealth. Rather, it’s one of several things you can do. If homeownership isn’t desirable to you, and you’d prefer to keep renting indefinitely, rest assured that doing so won’t necessarily mean that you’ll never become a millionaire. You may just need to invest more money in other assets, like stocks.

3. Investing in the stock market

Investing in assets like stocks that usually gain value over time is a great way to grow your personal wealth. And the good news is that you don’t need to invest a ton of money monthly to eventually become a millionaire.

In 2021, the average U.S. household income was $97,962. But let’s say you don’t even earn that much. Rather, let’s assume you earn a $60,000 salary. It may not be reasonable to invest more than 5% of your income for the future. But if you’re able to do that, it means investing $3,000 a year.

Meanwhile, let’s say you invest that sum over a 40-year period. Over the past 50 years, the stock market has delivered an average annual return of 10%. So if you’re able to snag that same return in your portfolio, you’d be looking at around $1.3 million right there.

You might think your chances of becoming a millionaire are pretty slim given your income. But you might also be pleasantly surprised at how attainable millionaire status actually is if you manage to avoid debt and invest in assets whose value increases nicely over time.

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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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