Money Management

Annual inflation is cooling. Read on to see what that means for consumers. 

What happened

The Consumer Price Index (CPI), which measures changes in the cost of consumer goods and services, rose 0.2% in June compared to May. But on an annual basis, the index is up just 3% from a year prior. That’s a vast improvement from previous readings, and it may be enough to prevent any more interest rate hikes from the Federal Reserve this year.

So what

Inflation has been wreaking havoc on consumers since mid-2021, forcing many people to raid their savings and take on debt just to keep up with basic expenses. The fact that annual inflation has crept downward to 3% means that consumers may finally be in for some relief when it comes to everyday essentials.

“We don’t have to worry quite as much as we were about rising prices,” William Ferguson, economics professor at Grinnell College in Iowa, told CNN in response to June’s CPI report.

For context, last June, the CPI measured annual inflation at 9.1%. This June’s reading shows that consumer prices aren’t up to nearly the same extreme.

Now what

The Federal Reserve has been raising interest rates since March 2022 in order to cool inflation. In fact, it had raised interest rates for 10 consecutive meetings before halting that practice at its most recent June 2023 gathering.

In light of the latest CPI reading, the Fed may decide to continue to pause interest rate hikes and see if inflation continues to moderate. The Fed’s ultimate goal is to get annual inflation back down to the 2% mark. It’s this level, the central bank feels, that’s most conducive to economic stability.

Now to be clear, 2% inflation is inflation nonetheless. The cost of living tends to rise over time, and that’s something consumers should anticipate and prepare for — namely, by not maxing out their paychecks on expenses in case their bills rise from one year to the next and their wages can’t keep up. It’s especially helpful to keep larger expenses, like housing, on the low side to allow for the continuously rising cost of goods and services.

Meanwhile, a pause in interest rate hikes would be a good thing for consumers who are grappling with sky-high borrowing costs on the heels of the Fed’s recent moves. These days, it costs more money to borrow in just about any form, from credit cards to personal loans.

Of course, consumers will still need to borrow judiciously and be careful in how they spend. Though annual inflation has cooled, grocery prices, for example, are still up 4.7% from a year ago, while electricity costs are up 5.4%. But all told, June’s CPI report is encouraging.

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Home appraisals are required by lenders. Read on to learn why one writer has serious questions about the accuracy of them. 

Home appraisals are supposed to tell you the fair market value of your home. A professional appraiser comes to your property to take a look at its features and condition. The appraiser then looks at comparable properties that sold recently, makes adjustments to the cost based on how your home differs from theirs, and then gives you a valuation.

Although this process can seem very technical, I do not trust home appraisals at all. But, despite the fact I think the valuation process has serious flaws, I still have to get a home appraisal. Here’s why.

This is the big reason why I don’t trust the accuracy of appraisals

There’s a very simple reason why I do not think home appraisals are accurate. At various times, I have had to get multiple appraisals within a very short time period. Each time, the appraisals came back with wildly different valuations.

The first time this happened was when I was closing a loan on my new home build. I had a construction loan and needed to get a permanent loan to pay it off. I applied for a loan with a lender my builder had recommended, got an appraisal, and the appraisal was for substantially less than the amount we needed to pay off the construction loan.

I reached out to a different lender, reapplied for a loan just four days later, and they sent out an appraiser who valued the exact same house for over $100,000 more than the first appraiser. They chose different comparable properties in the area — each of which were equally as valid to compare my house to as the ones the first appraiser chose.

A similar thing happened when I was refinancing my mortgage — the first appraisal came in for lower than we needed, so we appealed and the valuation increased by more than $100,000. This time, I provided some suggestions on comps for the appeal and the entire appraisal changed overnight even though it was done by the same person.

Ultimately, the process is pretty subjective in terms of what comps to choose and how much to add and subtract for various home features — and that’s why I don’t trust it at all.

Here’s why I’m going to be paying for an appraisal despite my distrust

With my most recent home purchase, I paid for the property out of my savings account and I did not get an appraisal. When I buy my next home, though, I will be getting a mortgage. And, since there is a lender involved, I’m unfortunately going to need to pay for an appraisal this time around.

See, lenders require appraisals because they want to make sure the home is valued highly enough to serve as collateral for the loan. An appraisal is the most objective tool they have to do that, so banks rely on them.

While I may think the valuation process is kind of silly and subjective, it’s not up to me — I have to comply with the bank’s requirements in order to get the loan. If you are going through the buying process and working with a mortgage lender, you’re likely going to have to do the same.

Just be prepared for the fact that the appraisal may not really reflect what you think the home is worth — but you’ll still be stuck with the valuation the appraiser provides unless you appeal or switch lenders. It’s an annoying part of the home-buying process, but something we all have to live with because the system is just set up that way.

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Although I always put purchases on a credit card, I would never charge investments on my card. Read on for a few reasons why. 

My credit cards go everywhere with me. And rather than relying on cash or a debit card linked to my bank account, I use my credit cards to buy everything possible. I even pay utility bills and my cellphone bill using my credit card.

I use my card for anything I can both for convenience and because I want to maximize the rewards available. But, despite the fact I’m very comfortable charging things (and paying off the balance), there is one thing I would absolutely never do with my card: buy investments. Here’s why.

Most reputable firms won’t allow you to charge investments

One big reason why I am not interested in charging investments is that my brokerage account won’t allow me to purchase stocks or ETFs with a credit card. In fact, most reputable brokers don’t accept credit card payments for investments.

While I could do a cash advance to get money from my cards that could then be deposited into my brokerage account, cash advances typically come at very high rates. In fact, the average rate for cash advances is about 24.80%. It’s extremely unlikely that I would be able to earn high enough returns on my investments to even cover these fees, much less make money after paying them.

Since getting cash from my cards is off the table, investing with them simply wouldn’t be possible with most brokers. And, when an investment can be purchased with a credit card, that immediately makes me suspicious that it might be a scam since this usually isn’t permitted.

I won’t borrow money to buy something that carries risk

Even if I was able to purchase stocks with a card from a reputable broker, I would be very unlikely to do so.

Even “safe” investments carry some level of risk — especially in the short term. I would want to make my credit card payments before I’d owe interest, which would only give me until my statement balance came due at the end of 30 days. Investing on such a short timeline increases the risk I would lose money that I put into the market because stocks are more likely to go down in the short term.

If I lost money, I would have to come up with cash out of my bank account to pay back the cards — or get stuck paying interest on my balance. With the average credit card interest rate at 20.09%, I would again find myself in a situation where I’m paying more in interest on my cards than my investments could reasonably be expected to earn.

Since I won’t invest using my credit cards, but I do want to get money into the market, I make sure to budget to put cash into the stock market every month. In fact, I have automated transfers to my brokerage firm on payday so I’m investing regularly every single month. I’ll use my cards for all the purchases I make, but I make certain to get this cash into the market first so I can grow my wealth without the added risk of borrowing to do so.

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The time you fly has an impact on ticket prices and the likelihood of delays. Reduce the odds of any issues by learning about the best time of day to fly. 

Everyone may have different travel plans when they’re on solid ground, but during air travel, most passengers want the same thing: No delays or cancellations. A smooth flight, hopefully without too much turbulence. And if you got a good deal on the airfare, whether you paid in cash or miles from your credit cards, all the better.

The departure time of your flight plays an important role in all three of those things. If you book a flight at the right departure time, you could increase your odds of an easy travel day at an affordable cost.

Here’s the best time of day to fly

Sorry, fellow night owls. The best time of day to fly is the morning, ideally before 8 a.m. Your odds of experiencing flight delays increase throughout the day. Analytics site FiveThirtyEight calculated average flight delays based on 2013 data from the Bureau of Transportation Statistics. Here’s what it found:

Flights that departed between 6 a.m. and 7 a.m. were 8.6 minutes late, on average, which was the lowest of any time frame.Flights that departed before 6 a.m. and from 7 a.m. to 8 a.m. were nearly as good.Delay times increase from there. After 8 a.m., for every hour later you depart, the average delay time increases by about one minute.The average delay time peaks at 20.7 minutes from 6 p.m. to 7 p.m.

There are a few reasons why morning flights are less likely to suffer long delays. Late aircraft are one of the main causes of delays, and they’re not an issue in the morning. The planes arrived the night before, so they’re ready to go. Since the planes are at the airport overnight, there’s also ample time to fix any technical issues.

As the day goes on, flight delays push back departure times, and these delays can cause a domino effect. Each delay not only affects that flight, but the next flight using that plane.

Airports are also less busy in the early morning hours. There are fewer departures and arrivals, so personnel can focus on getting the first flights of the day out on time. It’s much busier the rest of the day, making it more likely that takeoffs and landings will be delayed.

More benefits of early morning flights

A smaller chance of delays is reason enough for many travelers to opt for morning flights. Even if you’re prepared with travel insurance, it’s nice when you don’t need to use it. There are also quite a few other advantages of booking early morning flights:

They tend to be cheaper. There’s not nearly as much demand for these flights, since you need to get up extra early for them.If there are any issues, you’re more likely to have other flight options that same day. There’s probably a good chance you can find an alternative if your 7 a.m. flight is canceled. You’ll have far fewer backup options if it’s a 7 p.m. flight.You might have a better commute. If your flight is early enough to avoid rush hour, you won’t need to deal with much traffic.The flight is less likely to experience turbulence. While thunderstorms can occur at any time, they occur most often during the afternoon and evening, according to the National Severe Storms Laboratory.The flight and the airport may not be as busy. The lower demand for early morning flights could also mean fewer people on your plane and at the airport. This isn’t always the case, though. Some airports are busy at all hours of the day.

Pick the time that works best with your travel plans

Flying in the morning has its benefits, but there can also be advantages to flying later. For example, if you’re returning home, you may prefer a later flight so you can have one more day of activities and enjoying your vacation.

It’s also much easier to get a good night’s sleep when you don’t need to wake up at the crack of dawn. And in some cases, there aren’t even morning flights available.

If you don’t mind early morning flights, they’re definitely worth taking when you can. But if they don’t work for you, there are other ways to improve your air travel experience.

Checking airline reliability statistics can give you an idea of which ones are the likeliest to get you to your destination on time. And you can save money on airfare by using travel rewards credit cards. These tips can help you pick the right airline, and spend less on airfare, no matter what time you fly.

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Many people love Trader Joe’s. But here are a few reasons you may not want to shop there. 

There’s a reason Trader Joe’s has so many fans. Not only does the store offer customer service with a smile, but you’ll often find that the prices at Trader Joe’s are wildly competitive. The result? More savings for you.

But while plenty of people absolutely love Trader Joe’s, it’s not necessarily the best store for everyone. Here are a few reasons why you may want to do your shopping elsewhere.

1. You have a hard time saying no to new products

Trader Joe’s is known for its rotating product lineup. If you visit Trader Joe’s in the fall, you’re apt to find a host of pumpkin-flavored items that are perfect for the season. And in late November and December, you’ll find holiday treats galore.

But that’s not necessarily a good thing if you’re grappling with credit card debt and don’t want to add to it. It’s easy to get tempted to buy new things when you visit a store like Trader Joe’s and see delicious offerings you’ve never laid eyes on before. So if you’re someone who has a hard time saying no to enticing new products, you may want to stick to a more run-of-the-mill grocery store — at least until your financial situation improves.

2. You’re very particular about the brands you bring home

Some shoppers are very loyal to specific brands, whether it’s due to having picky eaters at home or having dietary restrictions (for example, having a nut allergy in their household). One pitfall you might encounter at Trader Joe’s is that most of the store’s products are store-branded.

In other words, if you’re looking for classic Cheerios, you won’t find it at Trader Joe’s. Instead, you’ll find Joe’s O’s Cereal, which is a comparable product but different nonetheless. In fact, Cheerios is a great breakfast choice for people who want a cereal that’s gluten-free. The Trader Joe’s version, however, contains wheat, so it may be off the table for shoppers who need to be mindful of gluten allergies.

3. You have less expensive sources for buying groceries

Trader Joe’s is known for its competitive prices. And one nice thing about shopping there is that you don’t need to clip coupons or swipe a store card to snag a discount. If you see a given price on the shelf at Trader Joe’s, that’s the price you’re getting no matter what.

But that doesn’t mean there aren’t more cost-effective options for buying groceries. Buying certain items in bulk at a store like Costco or Sam’s Club could save you money — even when you factor in the cost of a warehouse club membership. And also, if you have a discount grocer like Aldi nearby, that may be a lower-cost source of groceries for you.

Now one hiccup some Aldi shoppers tend to experience is a lack of familiar brands. But the same might apply if you’re new to Trader Joe’s, since, as mentioned, most of its products are store-branded. Only at Aldi, you might spend less.

All told, Trader Joe’s can be a great place to shop. But if these signs apply to you, then you may want to limit the extent to which you shop there — or avoid Trader Joe’s altogether.

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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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