Money Management

Concerned about your portfolio tanking during a recession? Read on to see how you can alleviate that concern. 

If you’re starting to grow increasingly concerned about the potential for a near-term recession, you’re no doubt in good company. Although the economy seems strong, with unemployment sitting at just 3.4% on a national level, interest rate hikes and the banking industry crisis have the potential to lead to a downturn at some point in 2023.

A recession could have a number of unfavorable consequences. First, it could lead to an uptick in job losses. It could also result in a stock market tumble and drive brokerage account values downward.

An economic downturn might similarly impact IRAs, which is a problem since these are accounts retirees routinely draw from to pay their bills. But if you’re not yet retired, but rather, are in the process of investing and growing wealth for retirement, then you don’t necessarily have to lose sleep over a near-term recession. You just have to stick to this key piece of Warren Buffett advice.

Stay the course to avoid a financial hit

Warren Buffett is one of the most successful investors of all time. And a big reason is that he’s managed to assemble a portfolio of quality assets that have performed well over time.

In fact, Buffett has long touted the importance of choosing quality investments rather than stocks that happen to go on sale. He’s also a firm believer in the buy and hold strategy — load up on good investments and hold them for as long as possible.

In fact, Buffett has been quoted as saying, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” And if you take his advice to heart, a recession doesn’t have to negatively impact you in the long run.

If a recession hits in 2023, you might see the value of your portfolio take a dive. But guess what? If you hang onto your investments rather than rush to sell them at a loss, you won’t actually lose any money.

What might then happen is that the economy and stock market recover, and before you know it, your portfolio is back up to its pre-recession balance. And from there, your portfolio might grow even more through the years because you didn’t unload any of the quality stocks or assets you put there in the first place.

Look at the big picture

It’s definitely important to gear up for a recession by boosting your emergency fund to ensure you’ll have money to pay your bills should your job go away. But the best way to prepare your portfolio for a recession is to make sure it’s nice and diversified across a range of assets and market sectors, and to make sure every asset you own is a high quality one.

If you have doubts about specific stocks you own, by all means, unload the ones you think are performing poorly and are unlikely to recover. But generally, it’s best to think long term in the course of your investing career. And once you remind yourself that you’re not investing for a three-year window, but rather, a 40-year window, the idea of a recession becomes a lot less scary.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.

 Read More 

It’s important to pad your savings once you purchase a home. Read on to learn how much you may want to stash for surprise expenses. 

Buying a home is a huge financial undertaking. Not only do you have to raid your savings account to scrounge up your down payment, but you also have to keep up with your ongoing costs. These include your mortgage payments, property taxes, maintenance, and repairs.

That’s why it’s so important to have an emergency fund as a homeowner. And at a minimum, that emergency fund should contain enough cash to cover three months of essential bills. But you may want to pad your savings once you buy a home. If you don’t, you might easily land in debt when home repairs come up out of the blue.

Don’t get caught off-guard

One of the trickiest things about owning a home is not knowing how much you’ll spend in a given year on your housing expenses. Sure, you can do your best to estimate your maintenance costs. And if you sign a fixed-rate mortgage, you’re guaranteed to have the same payments for as long as you’re repaying your loan.

But you could have a year when your roof gives out on you or when your air conditioning system dies and needs to be replaced completely. These costs could be enormous. So it’s wise to add money to your emergency savings so you don’t have to resort to going into debt when major home repairs pop up.

How much savings do you need?

So how much money should you add to your savings? It’s a little hard to pinpoint an exact amount. You could put an additional $5,000 into your emergency fund, and if you’re faced with a sudden $2,000 repair your paycheck can’t cover, you’ll be all set. On the other hand, you might encounter a repair that costs $10,000. In that situation, your extra $5,000 would fall short.

As such, you may want to research the cost of some of the more expensive home repairs you might face and use that information to determine how much more money your emergency fund should have. The cost of replacing a roof, for example, is $9,092 on average, according to Angi. Now, your cost may be higher or lower depending on your roof and your property, but it’s good to have an estimate to work with.

Meanwhile, Angi says that it costs $5,867 on average to install a new air conditioning unit. Again, your costs might come in lower or higher, depending on factors such as the size of your home. But this way, you have a general idea of the cost you might face.

This doesn’t mean that you should pad your emergency fund to have enough money to cover a replacement roof and a new air conditioner and a new water heater, and so forth. It’s reasonable to be optimistic and assume you won’t face such a major repair every year, but rather, every few. But you may want to take one of these numbers and use it to determine how much money to add to your savings initially.

Expect repairs to come up eventually

Even if you’re buying a fairly new home or one in good shape, at some point, repairs are likely to be necessary. Adding money to your emergency fund could help you avoid debt when things break and you can’t afford to wait to get them fixed.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More 

A Costco executive membership could put a lot of money back in your pocket. Read on to see if it’s worth getting one if you’re single and live alone. 

When I first joined Costco many years ago, it was just me, my husband, and our little dog sharing a household. Back then, a basic Costco membership was more than enough for us. Sure, we shopped at Costco occasionally. But did we buy the majority of our food in bulk? No. Back then, it just didn’t make sense.

But ever since having kids, I’ve paid for an upgrade to a Costco executive membership. Although the cost is higher, it’s more than worth it to me because that executive membership gives me 2% back on all Costco purchases. And based on what I spend, that’s a lot of cash back on a yearly basis.

But what if you don’t have kids — or even a partner, for that matter? In many cases, a Costco executive membership could make sense if you’re single. But you’ll need to assess your personal Costco spending and run the numbers to find out.

$3,000 is the magic number

The primary benefit of upgrading to a Costco executive membership is getting 2% back on your purchases both in stores and online. But if you’re single, you may not spend enough at Costco to make the extra cost of an executive membership worth it.

See, a basic Costco membership only costs $60 a year. The cost of an executive membership is double that — $120. So to see if an executive membership makes sense, you need to figure out if you expect to spend $3,000 or more at Costco per year.

Why is $3,000 the magic number? It’s simple. At 2% back, $3,000 in spending allows you to break even on the extra $60 you’re paying for an executive membership. So if you spend even a $1 more than that at Costco on a yearly basis, you come out ahead financially.

Many single people do not spend $3,000 a year on Costco purchases. But before you make your choice, comb through your credit card statements from the past year and see how much Costco spending you did. If you racked up $3,000 or more in charges, then the upgrade could make sense.

You need to buy in bulk carefully when you’re single

Single people who live alone can still benefit from shopping at Costco and buying items in bulk. Toilet paper, for example, is not the sort of thing that goes bad. So if you have a home with a lot of storage space, that’s an item it could pay to buy at Costco in bulk.

Similarly, let’s say you eat a protein bar for breakfast every morning. Buying protein bars in bulk at Costco could save you money compared to what you’d spend at a regular grocery store. And since protein bars might easily have a shelf life of two months, three months, or longer, if you eat one every day, then a bulk pack of 30 is probably a pretty safe bet.

Rather, it’s perishable items you need to be careful about when buying in bulk. If you don’t have anyone to help you consume your haul, you might end up throwing a lot of that food away — and throwing your money away as a result.

All told, being single does not automatically mean you shouldn’t upgrade to a Costco executive membership. Just make sure to run the numbers before shelling out the extra cash.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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. The Motley Fool has a disclosure policy.

 Read More