Money Management

Dave Ramsey has simple financial advice for people having trouble managing money. Learn what he recommends that can help you turn your situation around. 

Some of Dave Ramsey’s advice can be hit or miss. To his credit, one area where he excels is helping people who are struggling and in need of serious financial changes. If you have no money saved or you’re struggling with debt, Ramsey provides simple, actionable advice that can improve your situation.

Ramsey recently shared a video about a common personal finance mistake that “broke people” make, and it’s something that holds lots of people back. Here’s what it is and how you can fix it.

Stop buying things just because you can afford the payments

According to Ramsey, broke people think they can afford purchases if they’re able to make the payments. He also says that “if you don’t want to be broke people anymore, you get out of the land of payments.” Instead of taking on more monthly payments, focus on increasing your income and decreasing your expenses, which also means not financing any more purchases.

Ramsey is right on the money about this one. One of the financial mistakes people make all the time is looking at monthly payment amounts instead of the total cost of the purchase.

Of course, retailers encourage this as much as possible. Online stores will show you how much you could pay for a product per month if you finance it. Car salespeople will make the entire conversation about the car payment, not the actual price of the car.

There are a few reasons making purchases this way is problematic:

It can cause you to spend more money. You might balk at spending $1,500 on a new TV, which is why the merchant also conveniently offers it for six monthly payments of $250.Every time you commit to a monthly payment, it ties up more of your income. That’s less money you can save, invest, or use to pay off debt.Smaller monthly payments keep you in debt longer and can lead to more interest charges. Let’s say you get a long car loan so you can pay less per month. The loan will cost you considerably more overall because you’re getting charged interest for a longer amount of time.

There are more ways than ever to pay for purchases in monthly increments. Credit cards and loans are the traditional options, but buy now, pay later (BNPL) plans have also become popular. In fact, research on household debt by The Ascent found that 50% of Americans have used BNPL.

Don’t fall into the trap of financing purchases just because you can. For your long-term financial health, it’s better to consider borrowing money a last resort, not your first option.

The best way to pay is in full

If you want to manage your money better, a good place to start is by paying for everything upfront and in full. Instead of taking on payment plans for big expenses, save up the money you need in a savings account before you make the purchase.

There are a small number of exceptions, the most understandable being buying a home. It would take a long time to save up enough money, and mortgages have some of the lowest interest rates of any type of loan. Because of that, getting a mortgage can be a smart financial decision.

A car is another type of purchase that can make sense to pay off over time. Just be careful how much you borrow. With a long enough loan, it’s easy to buy a more expensive car than you can really afford.

With everything else, say no to payment plans. Pay in full to stay out of debt. And if you can’t pay for it in full, wait until you can to buy it.

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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.The Motley Fool has a disclosure policy.

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When you own a car, you need money in savings in case repairs arise. Read on to find out what happens when you don’t have those cash reserves. 

For some people, owning a car is a luxury. For others, it’s an absolute necessity. And if you live in an area that lacks public transportation, owning a car might spell the difference between being able to hold down a job and function or not.

But owning a car is an expensive prospect. Not only do you have to cover the cost of car payments and auto insurance, but you also have to pay to maintain your vehicle regularly.

And then there are car repairs to worry about. Those could be quite substantial, depending on the issue at hand and the type of vehicle you own.

But recent data from Jerry found that 26% of Americans don’t have enough money in the bank to cover a $500 car repair bill. And seeing as how some repairs could cost a lot more than that, this doesn’t bode well.

You need to be prepared for larger repairs

The cost of replacing a transmission on a Honda Accord is about $3,000, says Jerry. Yet 58% of the people it surveyed say they don’t have enough money in their savings account to cover a repair that large. And clearly, many people couldn’t even cover a much smaller repair to the tune of $500 without risking debt.

In fact, 29% of car owners actually did take on debt over the past two years in the course of paying for a car repair. And 6% of vehicle owners said a car repair bill caused them to default on an auto loan over the past three years.

Racking up debt to cover car repairs could cost you a boatload of money in interest. And defaulting on an auto loan could not only damage your credit score, but put you at risk of having your vehicle repossessed.

That’s why it’s so important to maintain an emergency fund for your vehicle — or to pad your regular emergency fund so there’s money to tap when a car repair expense arises. Now it can be difficult to estimate the cost of a car repair until you’re in that situation. So you may just decide to build a car repair emergency fund that contains $1,000, $2,000, $3,000, or whatever it is you can afford.

Another option is to focus on maintaining a general emergency fund with enough money to cover three full months of essential living costs or more. That way, you’ll have enough cash reserves to pay your bills during a shorter period of unemployment. But also, that sum of money would most likely be enough to cover a range of vehicle repairs.

Make sure all of your costs are covered

When you buy a car, you take on a lot of expenses. So make sure you’re accounting for possible repairs as well as monthly auto loan payments, insurance, and maintenance. Otherwise, you might suffer some pretty nasty financial repercussions if your car stops running and you don’t have the money in savings to address the issue at hand.

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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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What’s up with Zelle? It doesn’t work with all popular banking apps. Find out how to accept payments from Zelle users. 

I like my digital banking app, Chime. It’s simple and convenient. But it’s incompatible with Zelle, a money-transfer service some banks and credit unions offer.

Here’s how Zelle is supposed to work:

You open your banking app or Zelle app.You send money to an email address or phone number.The receiver gets a direct deposit OR a link that prompts them to sign up for Zelle.

If both are traditional bank users, this works like a dream. All you need to do is follow Zelle’s instructions, which may include downloading the Zelle app.

However, if you exclusively use Venmo, Cash App, and/or Chime, you’re fresh out of luck. Zelle is not compatible with digital-first banking apps. This could be because traditional banks created Zelle, and digital banking services are competitors. Whatever the reason, they’re incompatible.

I use Chime, a popular banking app. Friends try to Zelle me, but it never works out. Here’s what happens when your banking app doesn’t accept Zelle.

You can’t send or receive payments through Zelle

Short answer: Venmo, Cash App, and Chime users cannot send or accept Zelle payments. Period. Do not pass go. Do not collect $200.

This you? Say a friend sends you cash via Zelle. You’ll get a link via text or email prompting you to sign up for Zelle. You can try, but Zelle will reject your debit card and say your bank is unavailable.

You might be tempted to create a new Zelle-approved checking account to accept a pending transfer. Hold up — some banks require new account holders to wait three months before you’re allowed to receive Zelle payments. (I’m looking at you, Discover Bank.)

You probably don’t want to wait that long. Alternative: Swap hard cash with your friend. But if you’re like me, you only carry cards and digital wallets. Fortunately, there’s another option.

How to accept payments from Zelle users

Have both parties manage transfers through a free payment app. The most popular of these are Venmo and Cash App. Here’s how to get an account set up fast:

Download Venmo or Cash App from the App Store.Connect your bank account to the app.Send funds or request money from a friend’s account.

It’s quick and easy to set up a Venmo account, taking five minutes or so. Alternatives include exchanging cash or services (have your friend pay for your next meal together).

Zelle vs. payment apps

Zelle only works with banks and credit unions. But it’s free, and Zelle typically settles money within minutes.

Payment apps work with digital banking services, but they charge users for instant settlement. If you want to send $10 from Venmo to Chase instantly, you must pay a fast-transfer fee. Free users must wait two to three business days for that $10 to hit their savings account.

I’ve never had an issue with Venmo or PayPal. Nor do I mind waiting for transfers to hit my account, though I do sometimes pay for instant settlements. Zelle, on the other hand, simply doesn’t work for my needs. My banking apps aren’t compatible.

TL;DR: Zelle is fast but only works with more traditional banks. Other payment apps charge for instant settlements, but work with any bank account. Zelle users should use cash or free payment apps to send money to Venmo, Cash App, and Chime users.

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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.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and PayPal. The Motley Fool recommends Discover Financial Services and recommends the following options: short September 2023 $67.50 puts on PayPal. The Motley Fool has a disclosure policy.

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Most cardholders have gotten close to, or gone over, their card limit at one point or another. Find out what to expect when that happens. 

Every credit card you own represents a line of credit you have with a bank. Your credit limit is the maximum credit line the bank wants to extend to you. In other words, it’s how much money they feel you can reasonably borrow and repay.

For normal everyday purchases, you probably don’t need to think about your credit limit. Even low-limit cards shouldn’t balk at a trip to the grocery store, for instance. But many of us have had occasions where our card’s limit simply isn’t enough. In fact, one survey found that as many as 60% of U.S. cardholders have hit the limit on a credit card before.

While there can be some potentially negative consequences to going over your card’s credit limit, many of them are reversible if you can pay it down quickly. Here’s what to expect.

Transactions will likely be rejected

In general, transactions that would put you over your credit limit should be denied, meaning you won’t be able to make the purchase at all. This can be embarrassing if it happens in a store or — worse — at a restaurant. Having the transaction denied may actually be for the best, however, as it could help you avoid a fee.

That said, not all issuers will automatically reject over-limit transactions. You can typically control how your card reacts in this case by adjusting your card settings through your online account. (I strongly recommend setting your card to deny over-limit transactions.)

You might get hit with a fee

If your card isn’t set to deny the transaction and you end up over your limit, you could now be stuck with an over-limit fee. The amount — or existence — of the fee can vary by issuer and even by card, so be sure to check your card’s Schumer Box to see if there’s an over-the-limit fee.

Your credit score will probably drop

Arguably the worst consequence of going over your credit limit — or even just getting close to it — is the potential damage to your credit score. That’s because a full 30% of your FICO® Score is based on your Amounts Owed.

This credit score factor looks at two things:

The credit utilization of each card you ownYour overall credit utilization

Credit utilization, usually expressed as a utilization rate, is the ratio of your credit card balance over your total credit line. For example, if you have a $1,000 balance and a $5,000 credit limit, your utilization rate is: $1,000 / $5,000 = 0.2 = 20%.

It’s generally recommended that you keep your utilization ratio below 30%. Folks with the highest credit scores tend to keep their utilization below 10%.

Maxing out a credit card means your utilization will skyrocket up to 100%, which can seriously hurt your credit score. On the bright side, paying down your balance will reverse this damage, but it could cause an issue if you need to apply for other credit or can’t pay down the balance quickly.

Cards without limits

The majority of credit cards have hard credit limits. (You can generally find them in your account, either online or in the mobile app.) Some cards, however, aren’t quite so strict.

For example, you may end up with a charge card. On the day to day, charge cards operate just like regular credit cards. The main difference is that charge cards don’t let you carry a balance from month to month; you have to pay in full every billing period.

The other difference? Most charge cards don’t have hard credit limits. Instead, they have a variable limit that shifts depending on your spending and payment habits. Most charge cards offer a quick tool in your online account that lets you see if a particular purchase amount will be approved at any given time.

Going over your credit limit is never a good thing. But it’s not typically the end of the world, either. While you might get hit with a fee and deal with some temporary credit damage, a lot of the consequences can be reversed so long as you pay your balance in full.

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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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Electric vehicles have their pros and cons. If you’re not sure that’s the right car for you, this could be a good compromise. Learn more. 

Electric vehicles have become increasingly popular given the cost of gas. But these vehicles also have their drawbacks.

For one thing, you have to make sure your car is nice and charged before you head out somewhere, because you’re not guaranteed to find a charging station at or near your destination. And also, if you’re taking a longer trip, an electric vehicle might end up being a pain.

It’s one thing to stop on a 10-hour road trip and spend a few minutes here and there putting gas in your car. It’s another to have to sit for 30 minutes at a charging station each time your battery runs low.

If you’re not sure an electric car is right for you but you like the idea of not having to fill up your gas tank all the time, there’s an option you can explore that may be a nice compromise.

Consider a plug-in hybrid

With a plug-in hybrid, your vehicle’s main source of power is its electric battery. However, the car also has a gas-powered engine so that if the vehicle’s electric battery runs out of charge, the car can run on gas.

The downside of a plug-in hybrid car is that you’ll generally only be able to drive short distances on an electric charge alone. But that might work out well for you if you tend to do a lot of local driving.

Also, remember that even if your car runs out of charge, unlike a full electric vehicle, a plug-in hybrid has a gas engine, so you won’t be stranded. And you may not have to fill your tank nearly as much as you would with a regular car.

What are the costs of a plug-in hybrid?

Just as full electric vehicles range in cost, so too do plug-in hybrids. The Audi Q5 55 TFSI e, for example, has a base price of $58,595 and has an estimated driving range of 23 miles. The Toyota RAV4 Prime has a base price of $43,675 and an estimated driving range of 42 miles.

If you’re interested in a plug-in hybrid, you’ll need to shop around for different options and see how they fit into your budget. You’ll also need to account for other costs and savings.

For example, you might think you can only afford a vehicle that comes with a monthly $500 car payment, and a plug-in hybrid might leave you paying $600. But if you’re saving $100 a month on gas (not to mention saving time on all those trips to the pump), then you might be able to swing that higher payment.

As far as auto insurance goes, you might pay more for a plug-in hybrid by virtue of it being a more expensive car to purchase. But shopping around could leave you with a pretty competitive rate.

Is a plug-in hybrid right for you?

If you’re not quite ready to own an electric vehicle, then a plug-in hybrid may be a good choice. Just keep in mind that as is the case with many vehicles these days, you may have to wait a while for your plug-in hybrid of choice to become available. But if you can afford to sit tight, you may find that a plug-in hybrid is a great solution for 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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The process of checking out at Costco can be frustrating — even if you’re doing it yourself. Read on to learn more. 

Shopping at Costco has the potential to be a very positive experience. Not only might you reap a ton of savings in the course of buying groceries and household essentials, but you might also come across new, interesting products that enhance your life. And it’s hard to argue the fact that free food samples make for a more pleasant shopping trip.

But if there’s one aspect of the Costco shopping experience that may be less than ideal, it’s the process of checking out. If you go to Costco at a time when the store isn’t crowded, you may be able to walk up to a checkout aisle, hand over your cash or credit card, and be on your way fairly quickly. But if you’re shopping at Costco on a weekend or during periods when the store tends to be busy (say, the day before Thanksgiving or Christmas), you risk ending up in a massive checkout line that takes a long time to get through.

To address this issue, Costco has introduced self-checkout lanes in some of its warehouse club stores. The goal is to move the checkout process along and prevent major bottlenecks.

But Costco members seem to have mixed reviews about the self-checkout lanes. And a big reason for their discontent boils down to the fact that these self-checkout aisles seem to lack one key feature.

Where are all of the hand scanners?

Costco members are used to buying bulk, heavy items that are hard to lift. And the good news is that when you’re checking out at a regular aisle, you can just leave those heavy items in your shopping cart. A Costco employee will walk over with a hand scanner to record their price.

But Cheapism recently reported that Costco members are getting annoyed with the self-checkout process. And one big reason is that many of the chain’s self-checkout lanes do not have hand scanners for customers to use. That could make the process of checking out solo quite difficult.

Even if your local Costco store does have hand scanners at the self-checkout lanes, there’s no guarantee you’ll be able to use them without a hassle. There have been reports of Costco employees telling customers they can’t use the hand scanners for different items, or that the hand scanners at the self-checkout lanes are only for employees to use.

The latter seems really counterintuitive. What’s the point of self-checkout if it requires the help of an employee?

Should you go the self-checkout route at Costco?

You may find that self-checkout gets you in and out of Costco more quickly. But if your local store doesn’t have hand scanners in those lanes, then you may be wasting your time.

As such, if your goal is to minimize the amount of time you spend checking out at Costco, you may want to commit to shopping during off hours. If your work schedule is flexible, go first thing in the morning when the store opens, or go later in the evening when most people are probably relaxing in front of the TV.

And also, avoid weekend shopping trips at all costs. That way, if you have to wait in a line for a Costco employee to ring you up, your wait should at least be pretty minimal.

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

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