Money Management

Eager to take a big trip this summer? Read on for tips on pulling it off. 

There are many benefits of traveling. For one thing, it’s always good to have new experiences. And for a lot of people, travel is an escape from the daily grind.

Recent data from IPX shows that 51% of Americans plan to travel more in 2023 than they did in 2022. And all told, 91% of Americans are planning travel this year.

Meanwhile, a good 24% of Americans are setting aside $4,000 or more for 2023 travel. If that seems like a lot of money to you, well, it is. But if you’re eager to free up more money to travel this summer, then there are some steps you can take in the coming months to make that happen.

1. Rethink your general spending

Would you rather spend $100 a month for the next two months on cable, or would you rather use that money for an excursion on a summer trip? There are probably different bills in your budget you can cut back on. Take a look at the various things you’re spending money on and make some choices. Eating at home for all of June and July could set you up to be able to enjoy delicious international cuisine on a trip in August.

2. Work a side hustle

The gig economy is booming these days, so there’s plenty of opportunity to earn an income on top of what your regular job pays you. Try your hand at driving for a ride-hailing service, or apply to bartend at a local pub that needs more hands on deck on weekends. If you’re willing to put in the time, you might manage to boost your travel budget quite nicely.

3. Bank the cash you get from your credit card

Many credit cards give you cash back or rewards on the purchases you’re making. If you bank those and redeem them for your upcoming trips, you’ll have that much more flexibility. At the same time, swipe your cards strategically. If one of your credit cards offers extra cash back at the pump, that’s the card you’ll want to use when you put gas in your car. IPX found that 43% of Americans intend to use credit card points to cover travel expenses this year.

4. Snag a sign-up bonus

Some credit cards offer a sign-up bonus for meeting a certain spending threshold shortly after opening your card. If you get a travel rewards credit card, for example, it might offer you 50,000 bonus points that are redeemable for air miles or hotel points (or cash back) for spending $3,000 within three months of opening your account. So if you’ll be spending that much on travel, you can charge your expenses on that new card, meet the requirement, and then help offset your costs with that bonus.

Travel has gotten expensive, but that doesn’t mean you can’t pull off your summertime plans. If you spend carefully these next few months, boost your income, and use credit card rewards and cash back to your advantage, you might be able to enjoy the vacation of your dreams.

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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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Humphrey Yang shared a video explaining a common way people miss out on free money. Find out what they do wrong and how you can avoid the same mistake. 

You might think that most people wouldn’t turn down free money, if the opportunity presented itself. If you could collect an extra $300, $400, or more each year with zero work required, that seems like an easy call.

Former certified financial planner Humphrey Yang recently pointed out that lots of people have this exact opportunity, and they turn it down. How exactly are so many missing out on free money? It’s all about the type of bank account you use to park your cash.

If you don’t have a high-yield savings account, you’re missing out

Yang says people lose out on free money by not using high-yield savings accounts. These work the same way as any other savings account, but they have much higher interest rates.

To give you an idea of how big the difference is, the average savings account currently offers a 0.39% annual percentage yield (APY), according to the FDIC. That means for every $10,000 you have in your account, you’d earn about $39 per year.

Many of the most popular high-yield savings accounts offer between a 4.00% and 4.50% APY. For every $10,000 you have, you’d earn about $400 to $450 per year.

Given the difference in interest rates, you may figure that high-yield accounts have some sort of catch or drawback compared to regular savings accounts. Fortunately, that’s not the case. Your money is just as safe. Just like other bank accounts, high-yield savings accounts have FDIC insurance. That kicks in if the bank fails, and it covers up to $250,000 per eligible account.

This type of account also isn’t going to cost you money. Most high-yield accounts don’t charge any monthly maintenance fees, and many have no minimum balance requirements, either.

The key difference is that high-yield accounts are typically offered through online banks. Because they don’t have the overhead costs of brick-and-mortar banks, online banks can pay higher interest rates.

How to set up a high-yield savings account

If you have your money in an average savings account with a low APY right now, switching to a high-yield account is well worth it. It’s easy, and you’ll start earning much more back on your savings.

Here’s how to do it:

Compare account options. The APY is the first thing to look at, since that determines how much interest you earn. However, it’s not the only important factor. Other items to check out include minimum deposit requirements, monthly fees (most don’t have these), and customer service ratings.Fill out an application for the account you want. You can do this online by choosing the “Open Account” option. The application will ask you for some personal information, including your name, address, date of birth, and Social Security number. Applications usually don’t take longer than 10 to 15 minutes.Fund the account. Once your new account is open, you can deposit money. The most common deposit methods are ACH transfers from another bank account, wire transfers, and check deposits via the bank’s mobile app.

After that, just make your new account your default option going forward. Move all your savings there so you can maximize your interest. You’ll need to manage this type of account online, but if you need to get cash, you can transfer money to a checking account.

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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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Small businesses are worried about the debt ceiling debate. Find out how a failure to raise the debt limit could impact your business. 

If the U.S. fails to raise the debt ceiling and defaults on its debt, it’s fair to say it would be catastrophic on a number of levels. Before we get into why, it’s worth pointing out that it is extremely unlikely. While the clock is ticking on the negotiations, ultimately, no politician wants the economy to crash. Most observers believe lawmakers will reach an agreement — partly because the alternative is too drastic to even consider.

A default would have serious consequences for every American. Not only would it mean people lose confidence in the U.S. and its ability to pay its bills, we could also see a stock market crash and delays in a host of federal payments. Read on to find out what it might mean for small business owners.

Why small business owners are concerned about the debt negotiations

Small businesses, who’ve already weathered the pandemic storm and survived the horrors of high inflation and dramatic interest rate increases, may wonder if they can take much more. A recent Goldman Sachs survey showed that 65% of small business owners said they would be negatively affected if Congress does not raise the debt ceiling. Here are some of the ways they’d be impacted.

1. It could trigger a recession

Mark Zandi, Chief Economist of Moody’s Analytics, presented the firm’s simulations of a default to the Senate in March. Not only would failure to increase the debt ceiling cause a recession, he said the U.S. would face an economic downturn comparable to the 2008 financial crisis. Zandi predicted GDP would fall by over 4% and more than 7 million jobs would be wiped out. “Stock prices would fall by almost a fifth at the worst of the selloff, wiping out $10 trillion in household wealth,” he warned.

He also highlighted the damage last minute negotiations could cause. “The brinkmanship is also unnerving for businesses, who will pull back on investment and hiring, and financial institutions, who will quickly turn more circumspect about extending credit to households and businesses,” he said.

2. It would make credit even harder to access

“The ability of households and businesses, especially small businesses, to borrow through the private sector to offset this economic pain would also be compromised,” said analysis from the White House. Loss of confidence in the U.S. economy could result in higher interest rates and tightening credit standards for individuals and businesses.

Small business owners already know that credit can be hard to access. It can take time to build a business credit history and meet the criteria for a small business loan. The Goldman Sachs survey showed that 77% of small business owners are worried about access to capital. This marks a dramatic turn around from a year ago, when 77% of owners were optimistic on this front.

According to biz2credit, big banks approved just 13.5% of small business loans in April 2023. If you’re struggling to get a loan approved, a business credit card might be an option to borrow, particularly if you have good personal credit. The ideal scenario is to pay off your balance every month as credit cards can be an expensive way to borrow. That said, they can be useful if you’re struggling with cash flow. Plus, if you pay your bills on time, they can also help you build a business credit history.

3. Many businesses could face cash flow problems

If the government runs out of ready cash, it would have to drastically cut spending. It would likely also have to prioritize which bills it pays and which it doesn’t. For small businesses that rely on government contracts, this could be disastrous. As The Washington Post points out, that might be a construction firm with deals to build government buildings, or a company with many customers on food benefits. The ramifications of missed federal payments and canceled contracts would quickly be felt throughout the economy.

Readying your business

There is no easy way to prepare for the unthinkable, particularly if you’re already feeling the strain of recent years. The most important thing is to know how you’ll handle any delayed payments, especially if you rely on federal contracts. For this and other reasons, the more cash you can put aside to tide you through, the better. If you don’t have a business emergency fund, make this a priority.

A laser focus on your cash flow will be essential in the coming weeks. Try to map out what might happen in a worst-case scenario and talk to your customers and clients about how you might handle any potential issues. We’re well into the world of “coulds” and “maybes” when we talk about the debt ceiling, because the situation is unprecedented. The U.S. has never defaulted on its debt and hopefully never will. However, right now, it isn’t impossible, so it’s worth having a plan in place.

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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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New graduates should start saving money ASAP. These tips will help you make smart choices about saving and investing for your future. 

If you just graduated, you may be overwhelmed with all of the different financial decisions you now have to make. You’ll have to decide everything from how to spend your new post-graduation salary to where to live and how much to spend on getting your new apartment or house set up.

As you focus on all the different money issues you must address, it’s important to make saving money a priority. This can feel difficult if you haven’t established saving as a habit yet, but these three tips can help.

1. Start saving now, even if it’s a small amount

If there is only one piece of financial advice you follow as a new grad, this one should be it. You should start saving some money now. Do not put it off until later and do not make excuses. Even if you have lots of debt or are just getting started out and have a lot of expenses, you should save something, even if it is a small amount.

Once you start saving and investing for your future, you start to benefit from the power of compound growth. And the more time you have for compound growth to work for you, the easier it is to build wealth.

Say you want to become a millionaire by the age of 65. If you start putting aside money beginning at age 21 when you’re a new college graduate, you would only have to save $127.68 per month, assuming you earned a 10% average annual return. That is not a huge sum of money.

But, if you waited until age 30 when you were more “settled,” the amount you’d need to save each month would go up to $307.47 per month. More than double. And the longer you wait, the more you’ll need to invest.

It’s not really going to get easier to come up with more money as you take on new responsibilities like homeownership or children. So, do what you can to save as much as you can now, even if it’s not a ton. It will really pay off for you.

2. Put your money in the right places

The next crucial thing to do as a new grad is to put your savings in the right places. If you are saving for retirement, you should choose a tax-advantaged account like a 401(k) or IRA as these accounts can provide you with tax breaks for savings and perhaps entitle you to a company match in the case of a 401(k).

When you get tax breaks, this makes it easier to invest. If you are in the 22% tax bracket and invest $1,000, you save up to $220 on your taxes so your investment may end up only reducing your take-home income by $780. And if your company matches your 401(k), that’s free money. If you have a 100% 401(k) match and you invest $1,000, you’ve effectively spent $780 of your own money and ended up with $2,000 in your investment account.

If you have a 401(k) at work, sign up for that first with HR and contribute enough to get your full employer match. After that, you can either continue investing at work or open an IRA with a brokerage firm so you get more investment choices than your 401(k) offers.

You should also have some savings for short-term goals and for emergencies in a high-yield savings account. Ideally, you’ll want to work up to having three to six months of living expenses in an emergency fund. And you can set your own short-term goals, such as buying a car or house, and decide how much to save for them based on your costs and timeline.

3. Make it automatic

Finally, once you have decided how much you can afford to save, automate the process. Set up a transfer of money to your brokerage account and savings account to come out of each paycheck before you get the cash. That way, you will make savings a consistent habit and won’t have to continually force yourself to be responsible.

By following these three tips, you can make sure you’re really prepared and ready to succeed post-college.

These savings accounts are FDIC insured and could earn you 12x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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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