Money Management

Extreme couponing could reduce your food costs, but only if you are doing it to buy things you actually need. Read on to learn how to approach it. 

Between 2021 and 2022, food prices increased 11%. This was a huge increase, considering the fact that prices usually go up about 2% per year. The Government Accountability Office actually indicated this was the biggest increase since the 1980s.

With such a big leap in prices, it’s probably not surprising that paying for groceries has put a big strain on the checking accounts of many Americans.

If you’re tired of giving your credit cards a workout at the grocery store, you may be wondering if extreme couponing could possibly bring down your bill. Here’s what you need to know to help you decide if this technique could work for you.

How does extreme couponing work?

Extreme couponing is a technique I used to use to help me keep my costs in check. Basically, the premise of it is that you don’t just use one or two coupons — you use a ton, and combine them in strategic ways.

For example, you might combine a manufacturer coupon for toothpaste with a promotion that a store is running that also gives you money off toothpaste and gives you a gift card for buying a certain amount of products made by the toothpaste manufacturer. By buying a whole bunch of toothpaste and using multiple coupons, you could pay almost nothing for the products and end up earning the gift card that you can then use to buy other things you need.

You need to be very strategic about when and how you shop for this technique to pay off, and you need to make sure you have lots of coupons — either by buying multiple copies of Sunday papers or printing as many as you’re allowed off manufacturer websites, or by buying coupons online directly off eBay or other dedicated sites.

Will it really help bring down your grocery bill?

Extreme couponing can definitely bring your grocery bill down.

After all, you can save money in a few ways. Take the above example — you might be able to get toothpaste for free by trying out that technique and you might be able to also earn a gift card at the same time that you can then use to buy other grocery items.

However, there are a few things to consider when deciding if extreme couponing is really going to make a meaningful difference in your spending.

First, you have to think about the value of your time. If you have to spend two hours a week cutting coupons, poring over sales flyers to put together deals, and going to different stores to get the items that are on sale, that’s a lot of time you can’t spend doing other things. Is the grocery savings you’re going to end up with really worth it, or would you be better off using those two hours to get a side job that actually pays you more money?

Second, you have to think about how much it costs to do extreme couponing. Take buying coupons. Extreme couponing really does require having multiples of different kinds of coupons to make deals work. If you’re spending even a few dollars to do that, then this eats into your savings. If you’re going to multiple stores, then you also have to think about how much gas you’re using and how much that costs you.

Third, you need to consider whether you’re really going to get items you’ll use. If you have to buy 15 tubes of toothpaste to make the deal work but you only use one or two tubes a year, then have you really saved money?

What if it doesn’t add up?

You may find that extreme couponing does make sense given your lifestyle. If you can’t get a job outside the house and have spare time — say, because you’re a caregiver who can cut coupons during your kids’ nap times — and if you can easily access stores and get good deals, then it might pay off.

But, if you could get a side gig during the time you’d spend extreme couponing or if you live out in the country and need to travel far to different drug stores and grocery stores, you may want to skip this money-saving technique and instead try things like using a cash back credit card that offers bonus grocery rewards.

That approach just may make more sense in this type of situation, so really take the time to think about whether extreme couponing is going to have a big enough payoff or if another method of saving may be better for you.

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Credit cards get a bad rap, but they could potentially be an ideal choice to finance big purchases. Find out how a 0% APR card can be a good tool. 

If you’re making a big purchase, ideally you will save up for it and pay the cost out of your checking account. Doing this enables you to avoid interest charges, which only add to the cost of whatever you’re buying. You can also avoid getting stuck with a monthly payment that eats up your future income.

But many people don’t live in an ideal world and they still have to finance big purchases. Both credit cards and personal loans are often used to do that, but credit cards have a bad reputation, and borrowers are often advised to steer clear of carrying a balance on them.

The big question, though, is whether using a card ever does make sense to finance something you’re buying. And the answer might surprise you.

Here’s the problem with using credit cards in most cases

In most cases, it really is a bad idea to use a credit card to buy something you aren’t going to pay off right away. The bad reputation cards have is deserved, as the vast majority of cards really do charge you an exorbitant rate if you pay off your balance over time.

In fact, according to the Federal Reserve Bank of St. Louis, the average credit card interest rate on all credit card plans was 20.09% as of February 2023. That’s a huge amount of interest. In fact, let’s say you borrowed $1,000 and committed to pay it off over the course of a year. At 20.08% APR, you’d still get stuck paying $93 in interest over the time you borrowed.

By contrast, if you were able to get a personal loan at just 6.00%, you would pay only $28 in interest, saving more than $65.

Credit cards also tend to require pretty low minimum payments, so if you didn’t commit to paying your balance off in full during a short period of time, you could get stuck paying a fortune in interest over time.

In the above example where you borrowed $1,000 at 20.08%, if you made a minimum payment equal to 2.00% of your balance and didn’t pay any extra, it would take you 197 months to repay the debt and you’d end up spending a total of $3,168.62 during that time — more than three times your initial purchase cost.

By contrast, a personal loan would usually come with a fixed pay-off schedule that is designed to pay off the loan in a reasonable period with steady monthly payments. If your personal loan had a one-year repayment timeline, then you’d only pay that $28 in interest mentioned above and would be debt-free by the end of the year as long as you paid as required.

Obviously under these circumstances, a credit card is clearly the wrong way to finance big purchases.

A 0% APR credit card could be the right choice in this situation

There is, however, one exception to the general rule that you shouldn’t use a card to buy something you can’t pay off immediately. That exception is if you have a 0% APR card.

Some card companies offer a 0% APR for new purchases when you become a cardmember. You may have this special introductory rate for a year or so. If you can sign up for a card with a 0% rate and pay off your balance before the promotion ends, you’d pay no interest at all. That would be a better deal than the personal loan.

You do need to make absolutely sure you can repay your balance before the promotional rate is done, though — which means paying more than the minimum. Calculate how much you must pay each month (which would be about $83 per month for a $1,000 purchase) and then set up automatic payments for that amount so you don’t end up missing payments and getting stuck with huge interest charges.

If you can find a good 0% APR card and you can take these steps to pay it off, that’s most likely the best option to finance a big purchase, other than withdrawing the money from your savings. If you can’t do that, a personal loan is a better bet. So be sure to research card options carefully, consider your ability to make monthly payments, and make an informed choice that’s right for you.

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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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Have you ever wondered how much the wealthy spend on dining out? The answer may surprise you. Read on to find out. 

Have you ever wondered how millionaires spend their money and live their daily lives? Do they waltz into the fanciest restaurants with gold-plated cutlery and indulge in multi-course meals from Michelin-starred chefs? You may be surprised to find out that the truth is quite different from what you might expect. Recently, The National Study of Millionaires by Ramsey Solutions revealed that millionaires do indeed eat out, but their monthly expenditure on restaurants is far less than you’d think.

Millionaires are careful with their spending

It may be hard for some to believe, but even millionaires are very careful with their spending habits. In fact, 94% of millionaires stick to a budget and live on less than they make. More importantly, almost three-quarters of those millionaires have never carried a credit card balance in their lives! It just goes to show that financial responsibility is key, no matter how much money you have in the bank.

The study found that millionaires spend $200 or less each month at restaurants. It’s a small amount of money when you think about it. You might spend that much in a single week! So, how do they manage to keep their restaurant spending so low? One key factor is that millionaires seem motivated to save money. In fact, the same study found that 93% of them regularly use coupons when they go shopping.

Millionaires tend to be more practical and money-savvy than we might think, with the majority following a budget and taking advantage of deals and coupons. It’s important to understand that these simple habits can help anyone improve their finances and build wealth over time.

Millionaires are made, not born

Becoming a millionaire doesn’t happen overnight. According to the survey, only 5% of the millionaires surveyed reached that feat in less than 10 years. It took most of them 28 years to become a millionaire, with 49 as the average age they reached the milestone.

The survey found that the key to financial success and becoming a millionaire was through disciplined investing. Eight out of 10 invested in their workplace 401(k), 403(b), or equivalent company retirement plan. Millionaires took advantage of the free matching from their employers and the tax benefits. In addition to their company investment plans, three out of four also invested in their brokerage accounts, Roth IRA, or a traditional IRA.

“Three out of four millionaires (75%) said that regular, consistent investing over a long period of time is the reason for their success,” the survey stated. “So, the story about the young computer genius who developed an app that earned millions overnight is the exception, not the rule.”

Even if you strike it rich one day, it’s important to remember to manage your personal finances wisely. You may be as surprised to learn that the millionaires in the study are not interested in flaunting their wealth with expensive dining experiences. Not only did they focus on saving and investing, but more importantly, they focused on their spending habits. So take a page out of the millionaire handbook and start living within your means. You never know what small change in your daily routine could make a substantial impact on your financial future.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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The collapse of Silicon Valley Bank triggered a wider banking crisis that toppled First Republic as well. Find out what we can learn from each bank failure. 

After several years with no bank failures, we’ve already seen three in 2023. It isn’t the first time several banks have failed in quick succession, and some years have seen many more bank collapses. Indeed, according to FDIC data, over 150 banks failed in 2010.

What’s worrying is that the combined total assets of the banks that collapsed this year is the highest since the turn of the century. The assets of Silicon Valley Bank, First Republic, and Signature Bank totaled almost $550 billion.

Size was one of several things SVB and First Republic had in common. Both had around $200 billion in assets and both failed after customers withdrew significant amounts of funds on the back of concerns over the banks’ balance sheets.

However, there are also several differences in how the failures of the two banks played out. It’s worth understanding these scenarios, because if more banks topple, the changing FDIC approach could impact how customer deposits are handled moving forward.

1. First Republic was acquired immediately by JPMorgan Chase

There are a few ways the FDIC can intervene when a bank fails. One, as we saw with SVB, is to create a bridge bank. This is essentially a way to bridge the gap between the bank failure and another solution, whether that’s acquisition or closure. In the case of SVB, it took a few weeks for First Citizens Bank & Trust Company to buy it after the FDIC intervened. Customer accounts stayed with the bridge bank before being transferred to First Citizens.

First Republic was a different story. The FDIC auctioned off the ailing bank over a weekend so it could announce the acquisition early on Monday morning. This means that customer accounts got transferred to JPMorgan Chase, which bought First Republic, without needing a bridge bank.

2. The FDIC guaranteed uninsured deposits with SVB

If you’re worried about the money in your bank account, there are several safeguards in place. Chief among them is FDIC insurance, which covers accounts for up to $250,000 per depositor, per person, per account type. Unfortunately, a large proportion of SVB’s deposits fell outside this threshold. According to S&P Global, 93.8% of SVB deposits were not FDIC insured. First Republic Bank also had a high proportion of uninsured deposits — 67.4% of the bank’s deposits were not insured.

When authorities stepped in and closed down SVB, it sparked fear throughout the industry. A lot of SVB’s customers were tech startups, venture capitalist firms, and life science companies, among others. Fearing runs at other banks and the knock-on effect on these businesses and their employees, authorities announced the FDIC would cover all deposits at SVB, even those above the $250,000 threshold.

This did not happen with First Republic. Instead, it was JPMorgan that took over all the accounts, including the ones with uninsured deposits. If you or your company has over $250,000 in deposits with a single bank, be aware that there are no guarantees that authorities will step up again to cover them if there’s another failure.

3. The SVB failure cost the FDIC more money

The FDIC insurance fund was designed to ensure Americans do not lose their deposits in the event that their bank fails. It did its job. It’s also interesting to note that the price tag for the First Republic failure was significantly lower than SVB. Here’s what the FDIC estimates the cost of each bank failure will be:

First Republic: $13 billion SVB: $20 billion

It’s also reassuring to know there’s still money left in the fund to cover any further issues with banks. The FDIC website says it had almost $120 billion in its insurance fund as of March, 2021. It plans to recoup the cost of the recent closures by charging banks, particularly big banks, through a special assessment spread across the next two years.

Bottom line

While the failures of the two banks panned out differently, what matters most is that no depositor has lost money in the recent bank failures. So far, the safeguards that are in place to protect your savings and checking accounts have worked.

As a consumer, the current banking crisis is unnerving to say the least, particularly as we don’t know whether more banks will fail. One step you can take is to make sure your account is FDIC insured. If you hold more than $250,000 with a single bank, it’s also worth taking steps to protect any additional funds. This might include opening a new bank account elsewhere, or creating a joint account to give yourself extra coverage.

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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. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Emma Newbery 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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