Money Management

Ready to close a bank account? Read on to see if that will impact your credit. 

There may come a point when you decide you’d like to close a bank account. Maybe you’re tired of the fees your bank charges. Or maybe you’re not satisfied with your bank’s customer service. It may even be that your bank account is one of several you have open, and you’re looking for a way to consolidate your money so you can better keep track of it.

Generally speaking, closing a bank account will not harm your credit score. But there is an exception to that rule you should know about.

Why closing a bank account usually won’t impact your credit score

Your credit score consists of several different factors:

Your payment history, which is how timely you are with billsYour credit utilization, which speaks to how much revolving credit you use at onceThe length of your credit history, with long-standing accounts helping your scoreYour credit mix, which represents the types of credit accounts you haveYour new credit accounts, which indicates how many new loans or credit cards you’ve opened recently

As you can see, closing a bank account — or opening one, for that matter — won’t impact your credit score because it doesn’t fall into any of the above categories. When you close a bank account, you’re not closing a credit account. You’re just taking your own cash out of a specific institution.

That doesn’t speak to how risky a borrower you are. On the other hand, the factors above are designed to give lenders a sense of how much risk they’re taking on by loaning you money. If you’ve applied for too many new credit cards recently, for example, it’s a sign that you may be more likely to struggle to keep up with your various payments.

When a bank account closure affects your credit

While closing a bank account usually won’t have an impact on your credit score, the one exception may be if you closed that account with a negative balance. Let’s say your account was overdrawn at the time you closed it. In that case, you might owe your bank money.

If you don’t pay what you owe, your bank might send that debt into collections. From there, you’re likely to be reported as delinquent on a debt, which could hurt your credit score in a very big way.

Worse yet, Experian says that a delinquent account will generally remain on your credit report for seven years. This holds true whether you pay off that debt or not. So before you close a bank account, make sure you’re not looking at a negative balance. And if you are, wait to settle that balance before severing your relationship with your bank.

For the most part, banking activity does not directly affect your credit score. Your bank account balance could get down to $0 and it wouldn’t drag down your score (though not having any money could indirectly hurt your credit if you’re unable to pay your bills). But be mindful of the one situation where closing a bank account could get you into trouble from a credit score perspective.

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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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Early retirement is a popular goal among young adults. Find out if it’s still possible to retire early if you’re 30 and don’t have much money saved yet. 

When it comes to saving for retirement, the earlier you start, the better. If you invest while you’re young, it gives your money more time to grow. And if you want to retire early, it’s even more important to get that early start. After all, if you want to retire 20 years earlier than average, that’s 20 years you won’t have to build wealth.

If you’re 30 with little or no savings, it’s normal to wonder if you missed the boat on early retirement. Fortunately, you’re still young, so you have time to get your savings in order. Can you get it on track to retire early, though? That’s going to depend on a few factors.

Setting your early retirement goals

There are a few key parts to any early retirement plan:

Your current ageYour target retirement ageYour retirement savings goalYour incomeYour savings rate (the percentage of your income that you save/invest)

The age range for early retirement is pretty broad. The average retirement age in the United States is 61, so you could retire early at 50 or 55. At 30, even with almost no savings, that still gives you plenty of time to invest.

On the other hand, if your idea of early retirement is 40 or 45, that’s going to be much harder. It’s still doable, but it will require a very high income and/or savings rate to build enough wealth in such a short time period. You might find that it’s more realistic to postpone your early retirement.

How much money do you need to retire early?

A popular rule of thumb for early retirement is to save 25 times your estimated yearly expenses. For example, if you expect to spend $40,000 per year in retirement, you need $1 million. The idea behind this is the 4% rule. It estimates 4% to be a safe withdrawal rate, because if you have your money invested, your portfolio can grow enough each year to sustain itself.

There’s debate about the accuracy of the 4% rule, especially for early retirement. But it works well enough as a general guide to how much you’ll need to save. Here’s how much you’d need to save based on different yearly spending totals:

If you expect to spend $30,000 per year, you need $750,000.If you expect to spend $40,000 per year, you need $1 million.If you expect to spend $60,000 per year, you need $1.5 million.If you expect to spend $100,000 per year, you need $2.5 million.

Estimating how much you can save

The best way to see how realistic your early retirement goals are is by running the numbers. You can do this with a compound interest calculator. This will show you how much your money can grow over time.

Here’s how to do it:

Set an annual return on investment. Estimate the amount you expect your portfolio to grow per year. Many people use 8% to be safe, because it’s a bit lower than the average stock market return of 10% before inflation per year.Enter the number of years you have. Subtract your age from your target retirement age to figure this out. If you’re 30 and you want to retire at 50, your timeline would be 20 years.Set your contribution amount. Decide on the amount you plan to put toward retirement.

Once you’ve provided that information, the calculator will show you how much money you’ll accumulate in your retirement accounts. For example, if you save $2,000 per month for 20 years and get an 8% annual return, you’ll end up with $1,186,150.

It’s a good idea to experiment with contribution amounts and timelines. This can help you determine when you’ll be able to save enough to retire, based on how much you can contribute.

How to get on track for early retirement

With a solid income and a high savings rate, you can retire early, even if you’re 30 with little saved. Here are a few things to focus on to help get there:

Start now. Figure out an amount you can put toward retirement every month, and start doing it. It’s important to make this a habit right away.Increase your income as much as possible. A big salary helps you build wealth much more quickly. Go after promotions, job hunt, and consider building other streams of income, such as freelancing or starting your own business.Be strict about your spending. A high savings rate is a must to retire early. You’ll likely need to save at least 30% of your income, and possibly 40% to 50%.Invest in stocks. While the stock market has good years and bad, on average, it has grown 10% before inflation per year for the last century. Stick to stock investing for most or all of your retirement savings to maximize growth. Once you’re within five to 10 years of retirement, you can move some money to bonds for more stability.

It’s no easy feat to retire early, and you shouldn’t let that goal affect your quality of life in the present. But if you can save enough, the payoff is definitely worth it.

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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.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Moving into a house means needing lots of stuff. Read on to see how a Costco membership can come in handy. 

Moving to your first house is a big deal. You may be going from a small apartment to suddenly having lots of square footage at your disposal.

Having a larger living space can be a good thing. But it can also pose a challenge. If you suddenly have three bathrooms instead of one, you’ll need more towels and items like soap dispensers and trash cans. And the more space you have, the more cleaning you’ll have to do, which means you’ll need more products and supplies for it.

Plus, you might have to purchase certain appliances or furniture pieces for your first house. And if you’re looking to cover all of these costs without racking up a massive credit card tab, then you may want to sign up for a Costco membership as you’re in the process of getting settled into your new abode.

A host of Costco items to choose from

It’s easy to think of Costco as a place to buy things like toilet paper and cereal in bulk. But actually, Costco stocks a world of items that you might need when you’re first moving into a house, from furniture to lamps to the kitchen gadgets you finally have room for.

Plus, when you first move into a house, there tends to be a lot of cleaning that needs to get done. You can turn to Costco for everything from a new vacuum cleaner to actual cleaning products.

Now, you may be hesitant to take on too many extra expenses when you’re moving into a house — especially if you just bought your own place and made a large down payment on a sizable mortgage loan. But the good news is that a Costco membership won’t cost a lot.

A basic membership is just $60 a year, while an executive membership costs $120. That upgraded membership comes with the benefit of earning 2% back on all Costco purchases you make, so it may be worth it if you have a house to fill with stuff and expect to do a lot of shopping as you’re settling into your new home.

Take advantage of that extra storage

Another benefit of moving into a house — aside from having more living space — is getting additional storage space. Your house might come with a basement, garage, shed, or other areas that are prime spots for storage. And that might enable you to better take advantage of a Costco membership.

As an example, right now, Costco has Bounty Select-A-Size paper towels on sale for $21.49 for a 12-pack. Amazon has an 8-pack of those paper towels for $23.74. With a house full of storage space, you might have room for the extra rolls — which means you can potentially enjoy the extra savings.

All told, a Costco membership might help you fill and clean your new home affordably. Consider signing up for one and seeing how it goes. You can always cancel at any time if you feel you’re not getting good use out of your membership and Costco will refund your membership fee.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com and Costco Wholesale. The Motley Fool has a disclosure policy.

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