Money Management

It could pay to use some of your savings to chip away at credit card debt — but only if you really have extra. Read on to learn more. 

As of the first quarter of 2023, Americans owed a whopping $917 billion in credit card balances, according to data from TransUnion. If you owe money on your credit cards, you may be eager to pay off your balances as quickly as possible to avoid racking up scores of interest — and throwing your money away.

Now if you don’t have money in your savings account, you may have to ride out those balances for a while and do your best to cut your spending to chip away at them. But what if you have extra money in your emergency fund? At that point, it can be tempting to take a withdrawal to chip away at your credit card debt. But is that a smart move?

Remember what that money is there for

The money in your emergency fund should be earmarked for unplanned expenses or a period of unemployment during which you’re not getting paid. So if you dip into your emergency fund to pay off your credit cards, you’ll have that much less cash available when another financial crisis arises.

In fact, as a general rule, you really shouldn’t tap your emergency fund for a non-emergency expense. A credit card balance hanging over your head isn’t a great thing, but it also doesn’t qualify as an out-of-the-blue expense.

That said, there’s an exception, and it’s if you really have a lot of extra cash in your emergency fund. In that case, it could pay to use that money to whittle down your credit card balance.

But what constitutes extra emergency fund money? You should generally aim for a minimum of three months’ worth of living costs in your emergency savings. But some financial experts will tell you that it’s appropriate to save up to a year’s worth of expenses in case something terrible happens or you’re faced with an extended period of unemployment.

So before you make the decision to take an emergency fund withdrawal to pay off a credit card balance, ask yourself whether you really do, indeed, have extra money in that account. If you have enough cash to cover 13 months’ worth of expenses, you’re probably okay to remove a month’s worth and apply that sum to your credit card debt. In fact, that could actually be a very wise thing to do.

But otherwise, be careful about tapping your emergency fund. You don’t want to leave yourself short on cash to cover your next personal crisis.

You need that protection

The whole purpose of having an emergency fund is to stay out of debt when unplanned bills arise. But if you raid your emergency fund too much to pay off existing debt, you might simply push yourself into new debt in the future.

So instead, strike a balance by only withdrawing extra cash in your emergency fund to pay off a credit card balance. There are other steps you can take to whittle that debt down sooner, like picking up a side hustle and using your extra earnings to make your balance disappear.

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If you’re a Lyft Pink subscriber, you should be aware of an upcoming benefit change. Find out what perk is being eliminated and what you can do about it. 

Lyft is a rideshare company many people use for transportation. The company’s paid subscription service, Lyft Pink, provides valuable perks to frequent riders. If you subscribe to this service, you’ll want to know about upcoming program changes that impact your membership to decide if it’s worth hanging on to.

The following Lyft Pink benefit will be no more after June 30

Currently, Lyft Pink members get roadside assistance as a subscription benefit. Users can use this coverage for services like towing, jump-starting, fuel delivery, and car lockout. Subscribers can also get reimbursed for a single-day car rental, home lockout services costing up to $150, and a battery replacement credit of up to $25 once per year.

However, this coverage will no longer be available to subscribers after June 30, 2023. If you’ve been using Lyft’s roadside assistance, you’ll want to be aware of this benefit change. While a Lyft Pink subscription still offers plenty of benefits, your subscription is now less valuable, so you’ll want to determine if the $9.99 monthly or $99 yearly cost is still worthwhile.

But subscribers still get this notable perk: Lyft Pink gives riders a 5% discount on Standard Lyft rides. This discount can be stacked with ride credits and coupons for greater savings. For frequent riders, a discount like this can be a win for their personal finances.

It’s worth mentioning this because Uber One subscribers recently lost their 5% ride discount. Now Uber One members can earn 6% Uber Cash on eligible rides instead. Uber Cash can be used for Uber and Uber Eats expenses. Since Lyft still provides a 5% discount on Standard Lyft rides, some rideshare users may prefer a Lyft Pink membership over an Uber One subscription.

You can get affordable roadside assistance elsewhere

If you like having roadside assistance coverage for those unexpected moments on the road, there are other ways to get affordable coverage. Here are a few options to consider:

Add coverage to your car insurance policy: Many car insurance companies allow customers to add roadside assistance coverage to their insurance policy. Check with your insurer to see what’s included and how much it costs to add coverage.Purchase an AAA membership: AAA offers roadside assistance coverage for a yearly cost. Members can also get discounts at restaurants, hotels, amusement parks, movie theaters, and more. These extra benefits may be worthwhile if you’re looking for additional ways to save money to keep more cash in your checking account.Get coverage from your credit card company: Some of the best credit cards include roadside assistance as a cardholder benefit. Review your credit card benefits guide to see if this valuable perk is included with your card.

Stay on top of your subscription benefits

This is a reminder of the importance of regularly reviewing all membership and subscription benefits that you pay for to ensure you’re getting good value for your money. It’s also worthwhile to be aware of benefit changes to decide if the membership is an expense you want to continue paying for or if it’s time to eliminate it to free up room in your budget for other costs.

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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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.

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A writer aims to steer clear of having a Venmo balance. Read on to see why you should do the same. 

These days, I find that having a Venmo account is pretty much a necessity. Not only do I use it to reimburse friends when they pick up things for me at the store, but I also use it to pay for some of my kids’ after-school activities. And as the class mom who tends to organize teacher gifts for the holidays and at the end of the school year, it’s much easier for me to get paid by parents via Venmo than to have to sort through envelopes of cash.

But while I definitely acknowledge the importance of having a Venmo account, one thing I don’t like to do is keep money in there. Here’s why.

1. I like earning interest

If you want to earn a high return on your money, then investing it is a good way to go. The stock market has delivered a rather impressive average annual 10% return before inflation over the past 50 years, as measured by the S&P 500, and that’s a nice way to grow your money into a larger sum.

However, investing carries risk, and I don’t always want to take it on. At the same time, I don’t want to earn nothing on my money. And that’s what happens when you keep cash in Venmo.

The money in my Venmo account doesn’t earn interest, whereas these days, you can earn around a 4% APY by putting your cash into a high-yield savings account. So whenever I get paid via Venmo, I try to make a point to transfer that cash first into my linked checking account, and from there, into my savings account. That way, I’m earning something on it.

2. I tend to treat Venmo money as “not real money”

The money in my checking and savings accounts tends to come from my earnings, whereas often, my Venmo balance comes in the form of people reimbursing me for things or chipping in for teacher gifts I’m organizing. As such, I tend to treat my Venmo balance as “not real money” and have been known, in the past, to spend it carelessly.

That’s clearly a mistake. And while I could of course try to change my mentality when it comes to my Venmo balance, I also know that certain habits can be hard to break. So I’d rather just move that money out of Venmo right away so I’m not tempted to spend it.

Venmo definitely makes several aspects of my life more convenient. And I’m grateful the option to pay for things electronically exists. But I still don’t think it’s a good idea to keep money in my Venmo account, so I try to check my balance every few days and make transfers.

This isn’t to say that keeping a few dollars in Venmo is the worst thing in the world. But once my balance reaches $100 or more, I almost always move it over to savings immediately. And if you tend to treat your Venmo balance the same way I treat mine, I would encourage you to do the same.

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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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Dynasty trusts are a powerful wealth transfer tool for the wealthy. Read on to find out how they work. 

We all want to leave a lasting legacy that extends beyond our lifetimes. For the rich, this means not only passing on their wealth but also ensuring it lasts for generations. Passing down wealth and giving assets, however, may result in owing hefty federal estate or gift taxes.

This is where dynasty trusts come in handy.

A dynasty trust helps a person maintain control and ownership of their assets while providing tax advantages for their beneficiaries. Here’s a closer look at how dynasty trusts work and how the rich are taking advantage of this opportunity to pass on their wealth to their loved ones.

What is a dynasty trust?

A dynasty trust allows you to transfer your wealth to multiple generations without having to pay taxes, such as estate and gift taxes. The trust is designed to last for multiple generations — up to 1,000 years in some cases. Any assets you put into this trust, like stocks or bonds, are taxed only once.

A family can pass on their wealth without their beneficiaries having to worry about paying significant estate taxes or creditors seizing assets. It also allows families to control the distribution of their wealth for generations.

How do dynasty trusts work?

Dynasty trusts work by placing a family’s assets in a trust that is controlled by a trustee. The trust can be set up to last for multiple generations, with each generation receiving a portion of the trust’s assets.

Since these trusts are created to last for an extended period, many appoint a financial institution like a bank or investment firm to be a corporate trustee and oversee its management.

The trust can be structured in many ways, limiting the beneficiary’s access to principal and interest, which keeps the trust’s assets safe and secure from financial risk. The trust could also be set up to allow for distributions to be made to beneficiaries for specific purposes, such as education or health care.

What are the benefits of dynasty trusts?

The benefits of dynasty trusts are extensive. They provide families with a way to control their assets for generations, keep wealth within the family, and minimize estate taxes. Moreover, they can be structured in many ways to meet the unique needs of a family.

Dynasty trusts can be an effective way to shield assets from creditor claims, and the flexibility and tax benefits associated with a dynasty trust make them ideal for preserving wealth for generations.

Previously, the duration of trusts was typically limited to 21 years following the passing of a beneficiary who was living at the time the trust was established. However, within the last 40 years, more than half of states have done away with this law or expanded trust limits considerably.

In particular, states such as Florida and Wyoming allow dynasty trusts to endure for up to 1,000 years. Delaware even allows trusts to persist indefinitely, though time limits exist for real estate held in trusts.

Why are the wealthy using dynasty trusts?

The wealthy are taking advantage of dynasty trusts because they provide a tax-efficient way to transfer vast sums of wealth without having to pay significant estate taxes or risk losing those assets to creditors.

Currently, those who own assets worth more than $12.92 million for individuals and $25.84 million for married couples could face up to 40% tax rates for 2023. This exemption amount is temporary and the thresholds will decrease to nearly $6 million per person after 2025 if Congress doesn’t make it permanent. As a result, many wealthy families are establishing dynasty trusts before the exemption period ends.

Dynasty trusts are a powerful wealth transfer tool for the ultra-wealthy. They allow families to pass on their wealth for generations without the burden of significant taxes or financial risks. Given the ever-changing legal and economic environment, establishing this kind of trust can help protect your assets while simultaneously benefiting future generations. Ultimately, dynasty trusts provide an excellent way to ensure wealth remains within the family for generations to come.

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The median U.S. household can barely earn enough income to meet its monthly expenses. Learn more about wage growth and inflation. 

The latest inflation data might be a sigh of relief for American families living under the twin pressures of rising living costs and stagnant wages. For many, a 4.0% rise in the Consumer Price Index, down from 4.9% in April, is a promising sign of price growth deceleration, even if the rate is still above the Fed’s targeted range of 0% to 2%.

But for many households, the damage is already done. The highest inflationary period since the 1980s has left families struggling to make ends meet, even if on paper they appear to be earning a decent amount of income.

A look at the numbers

According to research compiled by The Ascent, the median U.S. household income in 2021 was $69,717. While the national average U.S. household income was $97,962, the median is a better measure of Americans as a whole, as it’s not skewed by extremely large or small incomes.

A median household income of $69,717 isn’t exceptional, but it’s also not below the poverty threshold either. However, when compared with how much the typical American household spends, its inadequacy is glaring.

According to another report by The Ascent’s research team, the average household’s monthly expenses were $5,577 in 2021, or $66,928 per year. That’s only $2,789 less than the median household income of $69,717.

Housing was by far the biggest budget item for the year ($22,624 annually), followed by transportation ($10,961), food ($8,289), and personal insurance and pensions ($7,873). Healthcare was also a big expense ($5,452), as was entertainment ($3,568).

While some of these expenses could be budgeted down (entertainment, for instance), most are firm and cannot be adjusted significantly, even with a frugal lifestyle. That leaves many Americans, even those earning a decent income, feeling cash-strapped and unable to save for important financial goals, like buying a house, saving for their kids’ education, investing for retirement, and paying down debt. Having $2,789 leftover is better than nothing, but it isn’t enough to make significant progress for these goals, especially if you have an unexpected bill thrown at you midway through the year.

Inflation has exacerbated the problem

Worse is the fact that rising prices for food and gas have made it more difficult for Americans to save. While wage growth and inflation rates have finally crossed paths and reversed directions, inflation was well above wage growth for almost two years.

For reference, here’s how both rates have danced around each other year over year:

How you can boost your income

If you can’t earn more income with a side hustle or by changing jobs, here are a few income-boosting tips that could help your personal income exceed your expenses:

Use a 0% APR credit card to pay down debt. The best 0% APR credit cards give you a chance to consolidate or transfer credit card balances to a card that doesn’t charge interest. Of course, you’ll want a plan: Most 0% APR cards have zero interest for a period, after which you’ll pay interest at a regular APR. But if you can plan ahead, they can help you pay down debt and save money on interest.Sign up for cash back credit cards. The best cash back cards reward your everyday spending, without encouraging you to spend extra. Many of the best cards come with hefty welcome bonuses, too, which could give your personal finances a boost.Buy in bulk at discount warehouses to save money on groceries. Costco and Sam’s Club memberships come with annual costs, but their low prices could help you save more on food.

Finally, the fact that wage growth has once again outpaced inflation is a good sign. Of course, part of the reason the Fed has increased interest rates is to discourage employers from raising wages, which, in its eyes, only contributes to inflation. But if you’re not making enough income, don’t be afraid to ask your employer for a raise, or better yet — start looking for a job that will pay you more.

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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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Goals are a great way to measure your progress and tell you if your small business is in good shape. Find out what other signs show you’re on track. 

Running a small business can be tough, especially in the current uncertain economic climate. It’s healthy to take a step back every so often and think about whether you’re on the right track. But how can you know for sure? Making money is important. So are your relationships with your customers and employees.

Here are five signs your business is in good shape.

1. You have clear goals and know how you’ll reach them

The only real way to know if your business is heading in the right direction is to know where you’re hoping to go. If you create and sell funky t-shirts online, your goals might be different from your local cat cafe. Goals are specific actions that will take you toward making your vision a reality.

The trick to setting goals is to make sure they’re measurable and as specific as possible. So, rather than saying “I want more customers,” you might say “My goal is to get 100 (or 10,000) more customers by the end of September.” Track your progress along the way, and don’t be afraid to break a big goal into smaller milestones. It’s also good to share goals with your team so you’re all on the same page.

2. Your cash flow is healthy

Cash may no longer be king, but cash flow can make or break your small business. If you can’t pay your suppliers or cover this month’s payroll, things can get sticky quickly. Perhaps you’ve made a lot of sales and are waiting for clients to pay their invoices. But until that money is in your business bank account, it isn’t going to help you pay your rent or buy the supplies you need.

Negative cash flow — when your expenses are greater than your revenue — happens sometimes, particularly when you’re starting out. A business credit card can sometimes help to cover short-term cash flow problems. But if you regularly find your cash flow is negative, it could be a sign of trouble. Perhaps you’re not generating as much as you’d hoped or your costs have crept upward. Or maybe there are some big unpaid invoices you need to chase down.

Cash flow isn’t the only financial indicator to watch. More widely, you also need to look at your balance sheet and income statement. Together these will show you whether your revenue is growing and whether you’re in a good position financially.

3. Your employees want to work for you

Good employee morale is the oil to your business engine. If your staff want to work for you, they’ll be more likely to go the extra mile, be more creative in solving problems, and be more productive. They are also less likely to quit, meaning you don’t have to spend as much time recruiting and training more people. Plus, it makes the hours you spend working more pleasant for everybody.

The real question is how you can create a positive environment, particularly when time and money are tight. As a small business, you may not be able to pay for endless snacks and install bean bag chairs and ping pong tables. You’d be surprised at how far good communication can go.

For a lot of people, it’s more important to know that their contributions are useful and valued than it is to play ping pong at lunch time. Make sure your staff both understand and buy into your vision. Talk to them about how the company is doing and celebrate with them when you meet goals.

Listening also helps. If you don’t already have systems that allow staff to tell you what they’re thinking, consider introducing them. That might involve formal feedback processes or simply setting aside time to talk more with your team. The earlier you hear about potential problems, the less time they have to fester.

4. Your customers keep coming back

Repeat customers are a surefire sign you’re doing something right. It’s also much more cost effective. According to a report by Forrester, it costs five times more to acquire a new customer than it does to retain an existing one. If someone’s already bought from you once, they’re more likely to do it again — in some ways, you’re pushing on an open door.

If you find that you’re spending lots of time and money chasing new customers but only a few of them come back, take steps to reduce customer churn. That might involve using your website and social media presence to build a community that people want to be part of. Or using customer relationship management (CRM) software to track and improve the way you interact with your clients.

5. You are able to borrow money if you need

The double whammy of high interest rates and economic uncertainty mean it’s harder than ever for small businesses to access credit. A recent Goldman Sachs survey found that over three-quarters of small businesses are concerned about accessing capital. Of the 17% of business owners who’ve applied for credit in the past three months, 61% have found it difficult.

If you wait until you actually need to borrow money to make your company more creditworthy, it could be too late. Like your personal credit score, it takes time to build a credit history that shows your company is likely to pay back a loan. Take steps, such as registering your business, to improve your business credit score.

Bottom line

There are lots of factors that show whether your business is heading in the right direction. While it’s important to look at the figures and evidence in front of you, it’s also good to trust your gut. If you’re happy and feel that you’re on track, that in itself is a powerful sign.

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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.Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.

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