Money Management

Costco shoppers seem to be pulling away from one product. Read on to see what it is, and what this might indicate about the economy. 

The upside of shopping at Costco is getting to save money on a host of products, from groceries to household essentials. In fact, for people who shop at Costco frequently, the cost of an annual membership can easily end up paying for itself.

But on Costco’s most recent earnings call, CFO Richard Galanti confirmed that members have been purchasing less beef and instead buying more poultry and pork, which are typically cheaper meats to purchase. And there’s a big reason for that.

Consumers are feeling the strain

Inflation has been battering consumers for a good two years now. And so it’s not shocking to see that Costco members are cutting back on expensive meat like beef and replacing it with lower-cost alternatives.

Many consumers have seen their credit card balances soar since inflation began to surge. Buying fewer expensive products is a good way to stop the bleeding and potentially avoid adding to those balances.

Consumers may be eager to conserve cash

Many financial experts spent much of 2022 warning about a 2023 recession. At this point, it’s questionable as to whether we’ll see economic conditions take a notable turn for the worse before the year comes to an end. After all, we’re already in June, and things are generally pretty positive. The jobless rate in May was just 3.7%, and 339,000 new jobs were added to the economy last month.

But still, those recession warnings keep coming. Even the Federal Reserve itself said a few months ago that consumers should anticipate a 2023 recession, albeit a mild one.

Another reason consumers may be shifting away from expensive meats and replacing them with cheaper ones is to conserve cash ahead of a potential economic downturn. In fact, Galanti said that some consumers are even switching to canned products, like chicken and tuna, because that’s an even less expensive option for adding protein to a diet.

Should you cut back on beef purchases?

If you enjoy eating beef and can afford to keep buying it, then by all means, don’t stop — especially if you’re able to find it at a relatively affordable price point at Costco. But if money has gotten tight in your world, or you’re worried about a recession, then you may want to consider substituting beef with less expensive proteins for the time being.

Of course, that’s only one of several changes you can potentially make. Take a look at your total spending and see if there are other expenses you can cut back on. You may decide to cancel a streaming service or subscription and use your savings to pay off an existing credit card balance or give your emergency fund a boost in case economic conditions really do worsen at some point this year.

It also pays to be judicious with your Costco shopping outside of meat purchases. Although Costco is known for its low prices, there may be certain items you can find for less at discount grocers or dollar stores. Do your research to stretch your limited funds at a time when groceries are still very expensive across the board.

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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 and Gala. The Motley Fool has a disclosure policy.

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The Fed has been on a mission to cool inflation. Read on to learn the impact of inflation on the economy. 

If you’ve noticed that it now costs more money to take out a personal loan or borrow money via a credit card balance, there’s a reason for that. The Federal Reserve has been hiking up interest rates since early 2022 in an effort to cool inflation. As a result, the general cost of borrowing has risen.

But why does the Fed care so much about inflation anyway? And why is it willing to potentially drive the economy into a recession just to cool inflation down?

There are good intentions at play

The role of the Federal Reserve is to control monetary policy in the U.S. and promote a thriving, stable economy. And the Fed feels strongly that 2% inflation is most conducive to that goal.

At 2% inflation, the Fed feels that consumers can spend confidently. The central bank also feels that 2% inflation tends to contribute to healthy levels of employment.

Meanwhile, in April, annual inflation was measured at 4.9%, according to that month’s Consumer Price Index. So clearly, we’re not where the Fed wants us to be with regard to inflation. And that’s why the Fed has been so insistent about raising interest rates.

It’s not as if the Fed wants to punish consumers by making the cost of borrowing so expensive. And the Fed’s goal certainly isn’t to fuel a recession and drive unemployment levels upward.

Rather, the Fed feels strongly that in the long run, 2% inflation is best to target. And so it’s trying to do what it can to get us back there.

Let’s remember that right now, because of rampant inflation, many Americans are struggling to pay their basic bills. Some are having trouble keeping up with their mortgage payments. Others are having a hard time putting food on the table. Lower inflation could ease that strain for a lot of people.

Will interest rate hikes lead to a recession?

Unfortunately, there is that potential. If consumers grow tired of sky-high interest rates, their spending might decline until borrowing costs come down. If consumer spending drops to a notable degree, it could be enough to fuel a recession.

Of course, the Fed’s hope is that consumers will pull back on spending just enough to ease inflation, but not so much as to drive the economy into a recession. Whether that happens is yet to be determined.

But to be clear, not every economic recession is horrendously painful and drawn-out. There is such a thing as a mild recession — and that’s what the Fed is telling American consumers to expect in the near term.

Now, this doesn’t mean that a mild recession won’t lead to an uptick in unemployment and bring about other unfavorable consequences. But it’s also fair to say that at this point, consumers have been duly warned.

Boosting your savings account balance, in fact, would be a smart thing to do right about now. We don’t know what the Fed’s policy will be for the remainder of 2023 with regard to interest rate hikes. But if the Fed opts to raise rates again this year, it could lead us closer to the economic slowdown nobody wants.

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Do you have a Priority Pass membership? Soon you’ll have more available airport lounge options. Here’s what you need to know before you take your next trip. 

For frequent travelers, airport lounges can provide an idyllic escape from the busier areas of the airport before their flight departs. Priority Pass is one of the more popular airport lounge networks. Members can access 1,300 lounges across the globe. In June 2023, more lounges will join the Priority Pass network. Here’s what you need to know about this news.

63 lounges are being added to the Priority Pass Network

Plaza Premium Group and Collision, which operates Priority Pass, have recently renewed their partnership. As a result, Priority Pass members will be able to access more than 60 additional airport lounges as 63 Plaza Premium Lounge locations join the Priority Pass network.

On June 6, 2023, 39 lounges will join the Priority Pass network. On June 20, 24 more lounges will be added. This news is welcome as more people will be traveling throughout the summer.

If you have a Priority Pass membership, you can review all of the available airport lounges on the Priority Pass website or mobile app. You can use your virtual membership card in the mobile app when visiting participating lounges that accept virtual cards.

Here are a few airports that will have additional lounge options for Priority Pass members:

Toronto Lester B. Pearson International AirportVancouver International AirportOrlando International AirportLondon Gatwick AirportEdinburgh International AirportSydney Kingsford Smith AirportBeijing Daxing International AirportSingapore Changi International AirportDubai International AirportHelsinki Vantaa AirportBudapest Liszt Ferenc International Airport

Are airport lounges worth visiting?

If you like to travel, you may wonder whether airport lounges are worth it. Keep in mind that airport lounge access does cost money. But if you value having a quiet space to rest and relax before flying, an airport lounge membership like Priority Pass may be worthwhile. Comfortable chairs, free wifi, and complimentary drinks and snacks could be a win for your wallet.

However, it’s worth noting that airport lounges are becoming more well-known, so they’re no longer a hidden oasis. There may be times when you visit a lounge that is noisy and packed with other travelers. Sometimes, you may be denied entry if a lounge has reached full capacity. This is something to consider if you’re thinking of investing in lounge access benefits.

How to visit airport lounges for free

Are you dreaming of taking your travel experience to the next level? If you want to visit Priority Pass lounges, one option is to pay for a membership. Yearly membership costs range from $99 to $469. Before spending your hard-earned money, consider your personal finance situation.

Another option exists, though. You can enjoy free access to airport lounges if you have the right credit card, as some of the best travel credit cards include airport lounge access as a cardholder perk. If you already have this perk, don’t let it go to waste.

Are you thinking of applying for a new credit card? Check out our list of the best credit cards to learn more about the benefits you can enjoy as a cardholder.

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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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Politicians frequently violate laws designed to discourage insider trading. A new bipartisan bill could put a stop to this. Find out how. 

A bill is in the works that could restore faith in American politicians. Members across the aisle have proposed a bill that would place common-sense restrictions on members of Congress. It’s a simple bill that supports the interests of ordinary Americans.

It’s called the Bipartisan Restoring Faith in Government Act. If passed — and there’s a good chance it will be — the bill would ban Congresspeople from trading stocks. Here’s why that’s important.

The bill could prevent insider trading

Members of Congress are well connected (for good reason). They sometimes have special access to information that could sway the stock market, such as the state of a pandemic or the likelihood of a bill passing. This gives them an unfair advantage over everyday investors.

For example, a member may hear through a congressional committee that Company A is about to release a promising RNA vaccine. They could purchase stock in Company A before the public becomes aware. That’s considered insider trading.

Laws like the STOCK Act ban insider trading. But according to Insider data, Democrats and Republicans alike have repeatedly broken transparency laws.

The Bipartisan Restoring Faith in Government Act would make insider trading much more difficult. Here are some changes the bill proposes in its current state:

Congress members would be banned from trading individual stocks. Members who own individual stocks would have 90 days to place those within a blind trust.The same restrictions would apply to spouses and dependents of Congress members, closing large loopholes in the bill.Members may be required to submit proof of compliance to an ethics committee. Failure to follow the law would result in fines of up to $50,000.

Potential downsides do exist. Congress members may think the restrictions are too severe. Even if the bill passes, it may be ineffective. And the bill would need to pass both chambers to become law. But because it has bipartisan support from lawmakers like Matt Gaetz (R) and Alexandria Ocasio-Cortez (D), the bill just might pass.

Here’s how insider trading works

Currently, Congress members face conflicts of interest. On the one hand, they want to make money from their stock trades. On the other hand, Congress members may be called upon to pass or block bills that would affect their investments.

For example, a Congress member with a stake in Company B, an oil and gas company, might want to pass a bill that funds an oil pipeline, despite a majority opposition from constituents. That’s a conflict of interest, and it’s not good for the American public.

If passed, the Bipartisan Restoring Faith in Government Act could reduce conflicts of interest by forcing Congress members to place investments in a blind trust (or another broad-basket holding, like a mutual fund). It would also set trading limits on close family members.

Does insider trading actually happen?

Many current legislators were accused of insider trading in 2020. None were convicted, though the DOJ-led investigation probably shook some Americans’ faith in politicians across the aisle.

Right now, the STOCK Act allows Congress members to own shares of individual companies, which could lead Congress members to prioritize private over public welfare. Plus, penalties for disclosure violations are often small or end up being dismissed by House or Senate ethics officials.

The new bill could make legal violations more visible, and therefore punishable in court.

Though insider trading is hard to prove, it’s evident that some Congress members do make unusually good trades. The popular Twitter account @Unusual_Whales tracks these.

Should the bill pass, it could restore a measure of trust in politicians and lead to better laws. Note that the bill does not affect the stock trades of investors outside of Congress. If you’re curious, you can see the trades of your favorite politicians in office via sites like Capitol Trades.

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Some financial experts recommend using a cash-only budget to spend less. Here are all the pros and cons of paying for everything in cash. 

Cash-only budgets are popular among consumers who are trying to spend less. Instead of using credit cards and even debit cards, you pay for everything in cash. One of the most popular ways to do this is the envelope method, where you divide your cash into envelopes labeled for specific expenses.

While switching to a cash-only lifestyle is said to help with managing your finances, it also has some big disadvantages. If you’ve been thinking about giving it a try, here’s what you can expect when paying for everything in cash.

You may spend less

The main argument for only using cash is that it could help you spend less money. Multiple studies have found that people are willing to spend more when paying with credit cards than with cash. That includes research by MIT, the American Psychological Association, and Dun & Bradstreet.

It’s not guaranteed, and you can certainly stick to a budget while using credit cards. But the research shows that people find it easier to spend money with a credit card than to actually part with cold, hard cash. When we pay for purchases with cash, we’re more aware of what we’re spending.

You miss out on the opportunity to earn rewards

One of the benefits of paying by credit card is that you can earn rewards. There are plenty of rewards credit cards that earn 1% to 2% back, or sometimes more, on eligible purchases. And while rewards cards may seem complex, most of them are easy to use. If you want to keep it simple, any of the top cash back cards are good options. These let you apply your cash back as a statement credit on your credit card bill.

When you pay with cash, you don’t get anything back. Over time, that adds up. Let’s say that you spend $25,000 per year on purchases you could make with a credit card. If you use a card that earns 2% back, that will earn you $500 in cash back per year. That’s $500 you won’t get by paying with cash.

You need to carry more cash around

Something that doesn’t always get brought up about cash-only budgets is how inconvenient they are. You need to keep enough cash on hand to cover all your bills. That likely means doing either of the following:

Keep enough cash at home for the next month’s expenses. This is how the envelope method works. You take the money you need from your envelopes as you need it.Make frequent visits to the ATM. If you do this, you’ll need to watch out for ATM fees or stick to ATMs in your bank’s network.

Paying with a credit or debit card is much easier, because you only need enough cash for emergencies. There’s also far less risk involved. You can’t get your cash back if your wallet is lost or stolen, but you can get a replacement credit card and be no worse off.

You aren’t able to dispute transactions

An underrated benefit of credit and debit cards is the option to dispute transactions. If you’re not satisfied with a purchase, and you can’t work things out with the merchant, you can dispute it with your card issuer. Your card’s payment network (Visa, Mastercard, American Express, or Discover) will then get information from you and the merchant to investigate. If it determines that you’re in the right, you get a refund.

This is a helpful option to have if there are issues with a purchase you made. Sometimes just the threat of a dispute makes merchants more willing to work with you.

If you paid with cash, your options are much more limited. The merchant would need to agree to refund you, because it’s not an electronic payment that can be reversed. Your only other option would be to go the legal route.

Because of the benefits they offer, credit cards are generally the best way to pay for purchases. If you often find yourself overspending, you may want to switch to cash. But in the long run, it’s better to figure out how to spend responsibly while paying with credit cards.

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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.American Express 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. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard. The Motley Fool recommends Discover Financial Services and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

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