Money Management

Sam’s Club offers great products at affordable prices. But take a look at some circumstances where it simply makes no sense to go to the warehouse store. 

If you’re a Sam’s Club member, shopping at the warehouse store could help you keep more money in your bank account — if you take advantage of the store’s good prices on products you need to buy anyway.

But there are times when shopping at Sam’s Club is actually a bad idea. In fact, here are three reasons to say no to heading out to this warehouse store.

1. You don’t really need anything

Around 84% of Americans report engaging in impulse shopping at least once, and 90% of shoppers admit to giving into an impulse purchase in the prior three months. Unfortunately, all this impulse buying can leave you with a big credit card bill or with less money in your bank account than you should have.

Visiting Sam’s Club when you don’t have a pressing need is just asking to engage in impulse buying. After all, the store is set up to be full of enticing products that are designed to make you part with the cash in your wallet and put a dent in your personal finances.

Unless you have a list of exactly what you need to buy at Sam’s Club and there are some actual necessities on the list, why put yourself in the path of temptation? There are plenty of other fun things to do if you’re bored and looking to kill time rather than wandering around a warehouse store where you’re going to be enticed to make unnecessary purchases.

2. You tend to overspend when you visit the warehouse store

If you have a habit of overspending when you visit Sam’s Club, you may want to skip the trip. Spending too much could leave you struggling to pay off your credit cards before you get stuck with interest. And paying credit card interest charges — or even taking too much out of your bank account if you aren’t charging your items — is going to limit what you can do with your money later.

Instead of visiting Sam’s Club when you tend to overspend, consider buying whatever you truly need from the warehouse club online. If that’s not feasible, take advantage of Curbside Pickup, which is free if you’re a Plus member.

3. You have already spent your budget limits for the month

If you have already exhausted your spending limits for groceries, household items, or whatever it is you’re thinking about buying at Sam’s Club, then don’t visit the warehouse club again until next month when you have money available to spend.

Instead of going over budget, make do with what you have so you don’t end up with too little money to do the things you’ve planned on. The entire point of budgeting is to stick to it, so skip your warehouse club trip if you’ve already hit your limits.

Sam’s Club membership is supposed to help you do better with your money by scoring bulk discounts. If any of these three reasons apply to you, that obviously isn’t happening, so you may want to rethink whether a current Sam’s Club visit is a good choice and even perhaps whether keeping your membership is the right financial move for the long haul.

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If you don’t save enough money for retirement, you could struggle to afford basic necessities. Here’s what else might happen. 

It’s important to save for retirement in an employer’s 401(k) or in another tax-advantaged account that you open with a brokerage firm of your choosing.

If you do not have enough savings when you get to retirement, the consequences could be dire. Here’s what you can expect to happen if you have insufficient savings when the time comes for you to leave the workforce for good.

1. You’ll have to live on much less income

If you do not have retirement savings, you may be forced to rely solely on your Social Security benefits, which are designed to replace only about 40% of pre-retirement income. Taking a 60% pay cut is most likely going to be a huge problem for most seniors.

The reality is, while many experts recommend replacing at least 70% of your pre-retirement income, studies have shown that many seniors end up spending 90% or more of what they earned on the job. If you need 90% of what you were making to be able to cover things like housing and healthcare and you only have 40%, that’s a very big problem.

2. Your money could run out during your lifetime

If you have some retirement savings but not enough, you’re at a very high risk of draining your nest egg too quickly.

See, you should withdraw only a small amount of money from your investment accounts each month so you can leave enough invested to earn reasonable returns and stop your balance from declining too quickly. Most experts recommend limiting withdrawals to about 4% of your balance (or less) in the first year of retirement and then adjusting up for inflation.

If you can’t live on just 4% of your nest egg (along with Social Security) because you have too little saved, you’ll probably be tempted to take out more. Your account balance could dwindle quickly, leaving you without any savings to rely on later in retirement.

This is an especially big problem because health issues are more likely to develop in the later years of retirement, you’re less likely to be able to work then, and your buying power from Social Security will likely have declined because benefits aren’t fully keeping up with inflation.

3. You may struggle to afford the necessities

Sadly, if you don’t have a lot in retirement savings, you could find yourself struggling to cover all of the basic costs you need to pay out of your checking account. In fact, according to Fidelity research, a single 65-year-old in 2023 may need as much as $157,500 saved (after taxes) in order to be able to afford to cover healthcare expenses in retirement. And that is just one of many expenses.

You’ll also have to pay for things like housing, food, and transportation. And the sad reality is, there may simply not be enough to cover all of these things and you may find yourself forced to choose between groceries and medication or heating bills.

4. You may have to downsize your lifestyle

Without enough retirement savings, you will likely need to make drastic lifestyle changes. This could mean selling a home, if you have one, or moving to a lower cost of living area. It could also mean giving up life’s little luxuries you’ve come to enjoy.

You do not want to find yourself in this situation. So, try to save as much as you can for retirement from as young of an age as possible — you’ll have longer to benefit from compound growth in your retirement account. This will help you ensure you have the money you need to enjoy your later years instead of facing a dire financial situation.

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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.Christy Bieber 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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There’s a lot of misinformation about personal loans out there. Read on to learn the truth about some big myths. 

If you’re considering signing a personal loan, you’re probably in good company. As of the first quarter of 2023, U.S. personal loan balances were at $225 billion, according to data from TransUnion. That’s a 26.3% increase from a year prior.

But while there are benefits to taking out a personal loan, there’s also a lot of misinformation out there that might lead you astray. So it’s important to get to the bottom of these big myths before committing to a personal loan.

1. A personal loan is always going to be the cheapest way to borrow

A personal loan has the potential to be your least expensive borrowing option — but that won’t always automatically be the case. Sure, you might end up with a much lower interest rate on a personal loan compared to carrying a credit card balance. But if you own your home, you may find that it’s less expensive to borrow money by taking out a home equity loan.

Of course, you won’t really know until you do some research and ask around for different rates. The point, however, is that you shouldn’t assume that a personal loan is your best bet from an interest rate perspective. And in some cases, it could even pay to use a credit card for borrowing purposes to save money.

Let’s say you need to borrow $2,000 to fix up your home, and you’re eligible for a 0% introductory APR credit card. If your introductory rate will remain in effect for 12 months and you only have two more months of paying your $500 monthly auto loan, that means that shortly, you should have the option to bank that cash instead. That gives you plenty of time to knock out a $2,000 balance before 12 months are up.

Of course, you must be very careful when borrowing money in the form of a 0% interest credit card, since eventually, that introductory period will run out on you. The point, however, is that it may be a more cost-effective alternative to a personal loan under limited circumstances.

2. Getting a personal loan will wreck your credit

You may be hesitant to take out a personal loan for fear it will send your credit score plunging. But that shouldn’t happen if you make your loan payments on schedule.

Applying for a personal loan might result in a minor hit to your credit score — somewhere in the ballpark of five to 10 points. That sort of drop tends to happen any time you apply for credit. But if you’re timely with repaying your loan, your credit score should not sustain any damage beyond that. In fact, making timely payments on a personal loan could actually help your score improve.

3. It’s no big deal to fall behind on a personal loan since they’re unsecured

When you fall behind on car payments, you risk having your vehicle repossessed, since your car is used as collateral for your auto loan. Personal loans aren’t secured by a specific asset, so you might think that falling behind on one is no big deal.

But as just mentioned, your credit score might sustain serious damage if you fall behind on your personal loan payments. From there, it could become very difficult to borrow money again when you need to.

And also, if you completely blow off your loan, your lender might sue you. If the lender is successful and a judgment is entered against you, you may be subjected to wage garnishment so your lender can get repaid.

It’s important to read up on personal loans before committing to taking one out. And it’s just as important to get the real scoop on these myths so you don’t sign a personal loan and then regret it after the fact.

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There are benefits to running a remote workforce, including the ability to hire from anywhere. But you can’t ignore these downsides either. 

When you are running a small business, there may come a time when you need to hire employees. Bringing in more workers can enable you to grow your company’s bank account balance by scaling up.

As you bring on staff members, you’ll need to make a decision, though. Do you want to have your employees come into an office or would you prefer to build a remote workforce? There are some pros and cons of both options that are worth thinking about as you make your choice.

The biggest advantages of remote work

Here are the biggest benefits of remote work:

You don’t have to pay for office space: Office space can be expensive — especially in areas where there are a lot of talented people eager to work. In New York City, for example, you’d pay an average of $993.17 per square foot in 2021 to purchase office space or an average of $76.34 per square foot to rent space. This is a lot more than most small businesses can afford. And, even in less expensive locales, renting or buying space can still eat up a lot of your profit. If you can eliminate this cost, it’s easier to become cash-flow positive. You may find it easier to attract employees: Remote work is popular. In fact, some surveys have shown as many as 65% of workers would prefer to work remotely at all times. Since offering the option to work remotely is attractive to so many people, you may have an easier chance attracting talented workers to join your team. You can recruit workers from anywhere: When you build a remote workforce, you can hire the best people no matter where they are from. You aren’t restricted to one specific geographic area. You can also hire in locations where the cost of living is more affordable, so you don’t have to pay extremely high salaries just to attract top talent.

The biggest disadvantages of remote work

There are also some downsides as well, including the following disadvantages:

Collaboration can be much more difficult: When people aren’t together in person, it can be more difficult for them to work together. Often, the best ideas come from group brainstorming and collaborating closely on big projects. While you can try to make this happen on Zoom, it’s often just not going to work as well when everyone isn’t in one place. It’s harder to tell if employees are being productive: In an office, you can see when people are working and get a better idea of what they’re doing. That’s not the case when people are working from home. You’ll need to have a lot more trust in your employees, which may not always be easy — especially in light of stories about people working multiple remote jobs at the same time without disclosing this to their employers. You won’t easily be able to build a company culture: Finally, if you don’t have staff together in person, it can be harder to build a company culture. This is a problem because a company culture can often help you retain talent and because a good one can help your business thrive.

Ultimately, you’ll need to decide if the pros outweigh the cons. But be sure to take the time to think about advantages and disadvantages so you can make the right choice for your small business.

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Money market funds are a type of mutual fund. Keep reading for a breakdown of how new rules for money market funds impact consumers. 

The Securities and Exchange Commission (SEC) voted last week to change the regulations governing money market funds. In March 2020, money market funds experienced significant outflows due to the emergence of the COVID-19 pandemic. This led to the U.S. government stepping in to stabilize the situation, similar to 2008. The purpose of the new rules is to discourage these runs and protect the remaining shareholders.

What are money market funds?

Money market funds are a type of mutual fund that invest in low-risk, short-term debt securities, such as government bonds and commercial paper. They are a popular investment option for investors seeking liquidity and safety.

These funds are considered safe because of their low-risk investment strategy. They are primarily used by individuals and institutions, such as corporations and pension plans, to store cash reserves. The share price of a money market fund is generally $1.

Money market funds have experienced significant growth this year, reaching an all-time high of nearly $5.5 trillion. This surge can be attributed to their ability to provide customers with higher interest rates compared to traditional banks.

The recent failures of several banks have further contributed to the popularity of money market funds. According to Crane Data, these funds paid an average interest rate of 4.81% in late June, significantly surpassing the mere 0.42% offered by bank savings accounts.

Why is the SEC making these changes?

The goal for these changes is to balance two things: protecting people with money in investments and making sure money market funds are secure.

The changes aim to prevent future financial crises and protect shareholders from instability and higher costs when there is a high level of redemptions. The act of redeeming a large number of shares can have a significant impact on the expense of a fund and decrease the value of the remaining shareholders’ investments.

When the pandemic began to cause instability in the markets, the Federal Reserve had to intervene to save money market funds, marking the second time in 12 years. As a result, there have been demands for the SEC to implement stricter regulations. The goal for these new rules is to prevent similar incidents in the future and ensure the stability of money market funds.

What are the new changes?

The SEC made revisions to its 2021 proposal in light of feedback from lobbyists and lawmakers. The new version eliminates the need for some funds to adopt swing pricing, which is a practice utilized in Europe to protect investors from share dilution during periods of market turmoil.

The revised rule mandates that money market funds designed for institutional investors charge fees if daily net redemptions exceed 5% of the fund’s total assets. In simpler terms, if investors pull their money out of a particular fund quickly, the funds will charge extra fees, which should discourage people from taking more of their money out.

The new rule also mandates that funds must now keep a minimum of 25% of their holdings in assets that mature within a day, compared to the previous requirement of 10%, and at least 50% of their holdings must mature within one week, an increase from the previous requirement of 30%.

This is the third change since 2008, when investors panicked after the Reserve Primary Fund lost a lot of money and its share price dropped below $1. The SEC made changes in 2010 and 2014 that required stress testing, allowing money market funds to stop people from taking out their money if there weren’t enough liquid assets in the fund. Many in the industry said these changes have backfired, and the new rules will replace some of the 2014 rules.

How will these changes impact investors?

According to SEC Chair Gary Gensler, “Money market funds…have a potential structural liquidity mismatch. As a result, when markets enter times of stress, some investors — fearing dilution or illiquidity — may try to escape the bear. This can lead to large amounts of rapid redemptions. Left unchecked, such stress can undermine these critical funds.”

While some believe the changes haven’t gone far enough and others believe they have gone too far, Gensler believes the changes will increase the stability, liquidity, and transparency of money market funds, helping investors.

The SEC’s decision to change the rules governing money market funds seeks to improve their stability and maintain confidence in the financial system. With the new regulations, investors will need to evaluate their investment strategies and risk preferences carefully. At the same time, the increased transparency in the money market fund market benefits investors by providing them with more information about the risks associated with their investments. Before putting any of your money into any investment, it is important to do your research.

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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.
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Sam’s Club could be a better warehouse club than Costco, depending on a few key factors. Find out what you need to know. 

Sam’s Club and Costco are both warehouse clubs known for offering great prices. Those looking to keep more money in their bank accounts by shopping at a warehouse club will likely want to choose between them, as paying two membership fees makes little sense when your goal is to spend less.

But how can you decide which warehouse club is right for you? Here are a few key signs that joining Sam’s Club may be a better bet.

1. You want to pay the lowest possible membership fee

Costco offers a Gold Star membership for $60 per year or an Executive membership for $120 per year. Sam’s Club offers a Club membership for $50 per year and a Plus membership for $110 annually.

The cost of the Costco membership, therefore, is a little bit more no matter which membership tier you choose. If you’re looking for the lowest upfront cost because you don’t want to put a big membership fee on your credit card, then join Sam’s Club instead of Costco.

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2. You’ll primarily be buying staples

If you’re hoping to do much of your basic grocery shopping at the warehouse store and you want to pay rock bottom prices for your basic staples, you may be better off shopping at Sam’s Club instead of Costco.

Things like ketchup, chicken breasts, tomato soup, and pancake mix are all cheaper at Sam’s Club than at Costco. While the difference is sometimes just a few cents on these products, that can add up when you’re doing your grocery shopping for an entire year and when Sam’s Club has better prices on many of the things you buy regularly.

3. You prefer Member’s Mark to Kirkland products

Sam’s Club sells Member’s Mark products as its house brand, while Costco sells Kirkland’s products. Some Member’s Mark items have devoted fans, including the spices, nuts, broth, and canned tomatoes. Of course, there are also people who love Kirkland products as well.

If you have a strong preference for one generic brand over the other, it may make sense to join the warehouse club that offers it. After all, you can’t buy Member’s Mark products unless you are a Sam’s Club member, and you don’t want to miss out on your favorite grocery or household essentials.

4. It’s more convenient for you to visit Sam’s Club

Sam’s Club has a few more stores than Costco does, with Sam’s Club having close to 600 locations across the U.S. compared to 584 for Costco. If you happen to be closer to a Sam’s Club, then you may decide it makes sense to opt for a membership there rather than Costco. After all, you don’t want to end up negating the savings that a warehouse club provides by spending a lot of extra money on gas.

If you choose the more convenient warehouse store, you’ll also be more likely to visit that club compared over other grocery stores or pharmacies that may be more expensive. This means you’ll be more likely to get your money’s worth out of your membership.

By considering all of these key issues, you can decide which of these warehouse stores is right for you. You may just find that Sam’s Club is the best option, or you may find that actually Costco could be the right choice for your household.

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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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