Money Management

Own a small business? Read on for a key list of moves to tackle this month. 

As a small business owner, your plate is no doubt perpetually overloaded. But there are certain essential tasks you definitely don’t want to overlook. Here are four important ones to focus on this month.

1. Hire an accountant to review your finances

Your business may be enjoying its fair share of sales and a steady stream of customers. But are you really managing your money as well as you think you are? If you’re not an accountant and don’t have that sort of background, it can be difficult to get a handle on how well (or not) your business is doing financially. So if you haven’t yet brought someone in to review your books this year, tackle that in June.

Have an accountant comb through your banking records and credit card statements to see if you’re spending at a reasonable rate. That way, you’ll know if changes need to be made.

2. Apply for a better small business credit card

The small business credit card you use now may be giving you cash back on a variety of purchases. That’s money you can reinvest in your business.

But there may be a credit card with an even better rewards program for you to enjoy. So take a little time to research your options and put in an application. If you can snag more cash back on your purchases than what you’re getting right now, that’s even more money you can use to grow your business and cover your many expenses.

3. Make sure your summer staffing needs are met

In 2021, almost half of U.S. small business owners were unable to fully fill their summer jobs ahead of the season. If you’re not fully staffed for the summer and it tends to be your busy period, then it’s absolutely imperative that you focus on hiring these next few weeks.

Post job listings online, in town, and on your business’s social media page. And also, tell your customers you’re looking to hire. You never know when a loyal patron might be eager to work for you on a seasonal basis — especially if you’re willing to throw in an employee discount to sweeten the deal.

4. Think about the summertime promotions you want to run

Some small businesses have a prime opportunity to drum up added revenue during the summer. Think about the sort of promotions you want to run to take advantage of the summertime boom. If you own a store that parents might bring their kids to in order to stay busy when school’s not in session, offer up some creative coupons, or host an event that’s likely to drive more foot traffic.

When you’re tasked with overseeing a small business, it’s sometimes inevitable that small details are glossed over. So if you can’t remember the last time your banking records got a thorough review, bring in an accountant. And if you haven’t shopped around for a new credit card in quite some time, do so now. Just as importantly, set your business up to have a successful summer, especially if you expect things to slow down come fall.

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Consumer savings rates are dropping. Read on to see why that is. 

It’s important to have savings for a variety of purposes, like emergencies and retirement. But data from the U.S. Bureau of Economic Analysis reveals that consumer savings rates are below their historical average.

In February, the average personal savings rate was 4.6%. That’s well below the average yearly rate of more than 8%, according to the data, which traces all the way back to 1959.

If you’re wondering why Americans are saving at a lower rate than usual these days, well, there may not be a single reason. Rather, that trend may be attributed to a number of factors, including the following.

1. Inflation has remained frustratingly high

Inflation levels have cooled steadily since peaking in mid-2022. But living costs are still higher than usual.

In April, annual inflation was measured at 4.9%, as recorded by that month’s Consumer Price Index. That’s well above the 2% level of inflation that’s considered a more normal or tolerable rate.

Now, imagine you’re spending more money on everything from groceries to utilities to rent. Wouldn’t it stand to reason that your savings might take a hit? Now multiply that by the broad U.S. population, and it’s no wonder savings rates are lower.

2. Borrowing costs have skyrocketed

The Federal Reserve has been pushing to cool inflation, and one tactic it’s employed to do so is to raise interest rates. The Fed doesn’t set consumer borrowing rates. Rather, it oversees the federal funds rate, which banks charge each other for short-term borrowing. But when the Fed raises its benchmark interest rate, the cost of consumer borrowing tends to follow suit.

These days, it costs more money to borrow via a personal loan, auto loan, and just about any type of loan. And when consumers have larger loan payments they’re on the hook for, it tends to lead to lower levels of savings.

3. The pandemic has changed a lot of mindsets

The pandemic changed the way a lot of people view money. Seeing as how many people lost loved ones fairly suddenly, more consumers these days may be of the mindset that they should spend freely and enjoy life while they can. And that, too, would explain why savings rates are on the decline.

How to boost your savings in 2023

Just because savings rates have dipped on a whole doesn’t mean you’re doomed to save less in 2023. If you want to pad your savings account nicely, first, aim to stick to a tight budget. Limit your spending in non-essential expense categories, and do your best to seek out savings on essentials like food by taking advantage of supermarket sales.

Next, try to avoid borrowing money this year if you can help it. If there’s a home improvement project you’ve been wanting to tackle and it needs to be financed, wait until next year. By then, borrowing costs may be lower.

Finally, spend money on the things you love, but within reason. If you have $200 left over each month after covering your essential bills, spend half, but put half in the bank.

It’s not at all shocking that savings rates are on a decline. But you can still take steps to meet the savings goals you set for yourself.

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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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Considering putting your home on the market? Read on to see why it pays to move quickly. 

The decision to sell a home isn’t one to take lightly. This especially holds true if you’ve grown attached to your home and have lived there a long time. As such, you don’t want to rush your decision. But you may not want to put it off much longer, either. Here’s why it could pay to sell your home before 2023 comes to a close.

1. Mortgages could get more expensive

Mortgage rates for 30-year loans have been hovering in the 6% range since the start of 2023. And as of May 11, the average interest rate on a 30-year mortgage was 6.35%, according to Freddie Mac.

Historically speaking, these rates aren’t so unreasonably high. But buyers have already been balking at them since they’re way higher than the rates we saw in 2021 and early 2022. And the last thing you want to do is delay your listing only to see mortgage rates climb from where they are today. If that happens, even more would-be buyers might exit the market.

Also, it may be that you’ll need to sign a mortgage on a new home once you sell your current one. If that’s the case, the longer you wait to sell, the more you risk getting stuck with a higher interest rate on a new loan you sign.

2. Housing inventory is low

As of the end of March, there was only a 2.6-month supply of homes nationwide, according to the National Association of Realtors. That’s well below the six-month supply that’s commonly needed to equalize the housing market.

If you sell your home in the near term, you’ll be selling at a time when there isn’t so much competition. But if you wait, you’ll run the risk of having more homes hit the market, thereby giving buyers more options — and giving you less negotiating power.

3. A recession could drive buyers out of the market

Many financial experts are cautioning consumers to brace for an economic recession during the latter half of 2023. Even the Federal Reserve is saying a recession is likely, albeit a mild one.

If broad economic conditions decline, it could drive more buyers out of the market, either because they’ve already lost their jobs or they’re afraid they’re going to. And if you don’t have as many willing buyers, you might struggle to sell your home. Or, you might end up with a lower sale price than you’d like.

Also, if a recession hits and you lose your job, you might struggle to get approved for a mortgage on a new home. That could make selling your current one quite difficult.

Although the housing market isn’t quite as red-hot as it was a year ago, it’s still a market that’s favorable to sellers. But we don’t know how long that will last. So if you’re serious about selling your home, it at least pays to get the ball rolling by talking to local real estate agents and seeing what your options are.

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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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Recessions can be scary, but read on to find out how to set yourself up for as little financial disruption as possible. 

Recessions can be frightening, but the reality is that they happen every so often, so it’s important to be prepared. With many experts predicting a recession later this year, here are five suggestions to help you get ready.

1. Bulk up your emergency fund

You may have heard that the big U.S. banking institutions have to submit to “stress tests” every year. The purpose of these is to see how the bank would fare financially in a hypothetical deep recession.

It’s wise for people like you and I to prepare for a recession in the same way. In other words, what would your financial situation look like if things got really bad? What if you lost your job? What if the stock market declined by 40%?

Clearly, your finances would likely get considerably worse in situations like this. But that’s where an emergency fund comes in. Experts suggest that you aim to have six months’ worth of living expenses in a readily accessible savings account.

You don’t need to get there right away. Six months’ worth of expenses sounds like a lot (and it is), but even a relatively small amount can help you get through a period of unemployment or other financial stress in much better shape than if you didn’t have the money set aside.

2. Pay down high-interest debt

The average American household has $7,951 in credit card debt, and with the national average interest rate about 24% on credit cards, this means that the typical household is spending (wasting) over $1,900 on interest charges per year.

Not only is paying down credit card debt a generally smart financial move, but not having as much interest flowing out the door can be extremely helpful if you find your cash flow disrupted.

3. Make sure your near-term financial needs are met

To be perfectly clear, a recession being expected is not a good reason to stop investing. Don’t cash out your brokerage accounts or 401(k)s because things might get worse. Trying to time the stock market is a losing battle, and the most certain way to wealth is to stay invested for the long haul.

Having said that, it’s also a good rule of thumb that any money you’ll need within the next few years shouldn’t be invested in the stock market in the first place.

For example, if you’re planning to sell stock to pay for your child’s tuition next fall, it could be a smart move to convert that amount of your portfolio to risk-free investments like short-term Treasuries. This prevents you from losing money right before you need it — after all, if you have $20,000 saved to pay for college, the last thing you want is for it to be worth $15,000 or less by the time you need it, which is completely possible in a bad recession. Besides, short-term Treasuries pay 4%-5% yields right now, so it’s not like you’re completely giving up investment growth.

4. Limit unnecessary spending and use credit cards sparingly (with one caveat)

This is a good financial principle for good times as well as bad, but with a potential recession on the horizon, it can be a smart idea to do a spending checkup. One good exercise to try is to gather your last couple months’ worth of bank statements. Go through each one and highlight everything you didn’t need to buy.

Now, the point isn’t to shame you for spending money on things you enjoy. But many people who actually look at how much they’re spending on unnecessary goods and services are surprised. How much are you spending on dining out each month? Did you find any recurring charges like magazine subscriptions you don’t read or gym memberships you don’t use?

On a similar note, while we already mentioned paying down credit cards, it’s also important to use them sparingly with a recession expected. But it’s also worth noting that banks have historically pulled back on lending during tough economies, and one way they do it is to close inactive accounts. So, if you don’t use your credit cards at all, don’t be shocked if you see your credit limit reduced or your card canceled. If you want to keep your current credit cards, it can help to use them occasionally for a small purchase and immediately pay it off, just to keep the account active.

5. Take a deep breath

As a final item on the to-do list, it’s important to take a step back and not panic. For one thing, panic in tough financial times and uncertain economies leads to knee-jerk decisions, such as moving your 401(k) to cash. There are many people who now regret doing that during the financial crisis of 2008 and the accompanying recession, as the stock market has roughly tripled since that era in the years since.

It’s also important to realize that while painful, recessions are a natural part of the economic cycle. If a recession comes in 2023, it certainly won’t be the last one. The best thing you can do is to be prepared for the next one, whether it arrives in 2023 or not, and use what you learn to prepare even better for the one after that.

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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.Matthew Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Want perfect credit? Read on to see why you may be struggling to get it. 

The average credit score for U.S. consumers is 714, reports Experian. But if you want perfect credit, you’ll need to get your FICO® Score (the most commonly used scoring method) up to 850.

Now, one thing you should know is that attaining a perfect credit score isn’t easy. And it also isn’t really necessary.

The reality is that once your credit score gets to around the 800 mark, you’re in a really good position to get approved for a credit card or personal loan, and at a pretty favorable rate. But still, perfect credit may be something you’re hoping to achieve. If that’s the case, though, then you’ll want to steer clear of these habits.

1. Paying bills late

Of the various factors that go into calculating your credit score, your payment history carries more weight than any other. So if you have a tendency to be late with bills, it’s almost guaranteed to stop you from having perfect credit. To avoid being late, set up as many bills as you can to get paid automatically.

2. Running up too high a credit card balance

Another factor that goes into calculating your credit score is your credit utilization ratio, which measures how much of your credit limit you’re using at once. If that ratio gets beyond 30%, it has the potential to damage your score. So if you want perfect credit, don’t run up a credit card tab equal to more than 30% of your total spending limit.

3. Closing credit cards you don’t use often

The length of your credit history is another component of your credit score. The longer your accounts are open, the more of a boost your credit score might get.

But if you tend to close credit cards once you no longer find them useful, you might fail to achieve the 850 score you’re hoping for. As such, make a point to hang onto old credit cards as long as they don’t charge you an annual fee.

4. Chasing too many sign-up bonuses

It’s somewhat common for credit cards to offer a sign-up bonus for new cardholders. Think of it as a marketing tool used to draw in more consumers.

With a sign-up bonus, you’ll commonly get a lump sum of reward points or cash back for meeting a specific spending threshold within a short period of time. For example, you might score $200 cash back if you spend $2,500 on a new credit card within three months of your account being opened.

The problem is that every time you apply for a new credit card, a hard inquiry is done on your credit report. Each hard inquiry might lower your credit score by a handful of points, so a single one isn’t so bad. But if you have a tendency to chase sign-up bonuses, it might easily prevent you from having perfect credit.

Perfect credit is definitely not something you need. But if it’s something you’re interested in having, then make sure to pay all of your bills on time, keep your credit card tab to a minimum, maintain older credit card accounts, and avoid applying for too many new credit cards in short order.

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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. Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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