Money Management

Sometimes, it makes sense to splurge — but there are certain situations where I always opt for the cheapest items available. Take a look at four of them. 

When it comes to the purchases I make on a regular basis, there are some things I don’t mind splurging on. In fact, I’m perfectly willing to break out the credit cards and buy more expensive items when quality matters. This includes purchases like safety equipment for my kids such as car seats and high chairs. And it also includes healthy foods.

But while I’m fine with spending more when it matters, there are four situations where I aim to spend the least amount possible and buy the cheapest item available so I can keep more money in my bank account. Here’s what they are.

1. Investment funds

The No. 1 situation where I’m a cheapskate is when I’m buying investment funds. Specifically, I look for the absolute cheapest exchange-traded funds that track the performance of the market.

I do this because I believe that actively managed investments — which cost more — are almost never worth the price since they rarely outperform the market (and I can essentially invest in the market as a whole by buying an S&P 500 index fund or a total market fund). I also do this because I know investment fees can add up to tens of thousands of dollars over the years.

To me, it’s a no-brainer to pick the cheaper investments that I think will make me more money in the long run.

2. Items that wear out quickly

Whenever there are items that are going to wear out quickly or be used for a short period of time, I opt for cheaper options. This includes things like play clothing for my children, which is very likely to be outgrown or stained after just a few months.

While I opt for more expensive clothing for myself so I can avoid having to replace it after a short period of time, my kids simply do not wear clothing long enough or keep it clean enough to justify buying the “better” models.

3. Tech gadgets

Other than computers and cellphones, I’ve found that most tech gadgets like headphones or smart TVs simply are not worth paying more for. The $400 TV from Walmart performs just as well for my purposes as the $1,500 TV from a fancy electronics store. And for my basic podcast listening, I don’t really need the absolute best earphones to take my dog for a walk. I’d rather spend money on other things since I know the technology is changing so fast that my tech gear will be outdated days after I get it.

4. Consumables

Finally, for consumables that are used up quickly, like zip-top plastic bags or paper towels or aluminum foil, I’ve noticed very little difference between the cheap and expensive brands. I don’t feel the need to be loyal to any particular products. Instead, I buy the cheapest items I can find that are on sale.

By being smart about when I splurge and when I cheap out, I can make sure that I don’t overspend on things that won’t really add any value if I opt for pricier versions.

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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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.

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Interested in a HELOC? Read on to see why you’ll need to be very careful when getting one. 

If you’ve been thinking about taking out a HELOC, you’re not alone. As of the third quarter of 2022, HELOC originations amounted to 405,646, according to data from TransUnion. And we could see that number grow this year as more and more homeowners seek to tap the equity they have in their homes before property values start to decline.

The upside of taking out a HELOC is that it can be fairly easy to qualify for one when the equity in your home is there. When you take out a personal loan, by contrast, your lender is apt to place a lot of emphasis on your credit score, since that type of loan is unsecured.

HELOCs are secured by the properties whose equity is being tapped. This isn’t to say you’ll qualify for a HELOC if your credit score is terrible. But a lender may be more forgiving if your credit score isn’t the best.

But while HELOCs can be a convenient and seemingly affordable way to borrow money, there’s a big risk involved in taking one out. And it’s important to understand that risk before moving forward.

Don’t assume your payments will remain affordable

Some people sign up for a HELOC and think they’ll swing their payments just fine. But what you may not realize about taking out a HELOC is that these lines of credit generally come with variable interest rates. That means your debt has the potential to get more expensive over time if interest rates climb.

Existing HELOC borrowers face that danger right now. The Federal Reserve has been implementing interest rate hikes since early 2022 in an effort to slow the pace of inflation. That’s made it more expensive to borrow money across the board, whether in the form of a personal loan, auto loan, or home equity loan.

Meanwhile, those who have HELOCs already may see the interest rate on their debt climb due to recent hikes. And if you sign a HELOC, you’ll be taking a similar risk.

A fixed-rate loan may be a better choice

One benefit HELOCs have over home equity loans is that you get access to a line of credit you can tap at different intervals. When you sign a home equity loan, you’re borrowing a lump sum of money at once.

But one major benefit of signing a home equity loan over a HELOC is that you’ll lock in a fixed interest rate on the sum you borrow. That means you’ll be looking at predictable payments as you work to shed that debt. With a HELOC, you don’t get that same guarantee.

Remember, a HELOC that becomes more expensive over time may do more than just wreak havoc on your finances and budget. It might also put you at risk of losing your home.

If your payments get so expensive that you can’t keep up with them, you might eventually lose your home if that’s the only way for your HELOC lender to get repaid. That’s clearly not a scenario you’d ever want. So while you may decide that borrowing against the equity you have in your home is your best option for accessing money, you may want to opt for a loan whose payments can’t get more expensive over time.

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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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The amount depends on how old you are when you start investing as well as your investment returns. Find out here what you need to save each month. 

Have you ever dreamed of becoming a millionaire? While you may think having a seven-figure net worth is just a fantasy (or a lottery ticket away), the reality is that many people can achieve this worthy goal and get the financial security that comes with it.

If you want a chance at becoming a millionaire, you’ll need to decide how much to save each month, though. And that can be a little tricky.

Here’s how much you need to save to become a millionaire

The exact amount that you are going to need to put away to become a millionaire is going to depend primarily on two factors:

How much time you have until you want to become a millionaireWhat returns you earn on your investments

Obviously, if you’re putting money into a savings account and getting a 2% return, you’re going to need to save a lot more than if you’re making solid investments in an account with a brokerage firm and earning a 12% return on investment (ROI).

So, just how much would you need under different circumstances? The table below shows the required monthly savings to hit millionaire status in a few different scenarios.

Can you make a seven-figure net worth happen?

As you can see above, it is entirely possible to put a reasonable amount of money into a brokerage firm each month and still become a millionaire. The trick is that you need to start early if you don’t want to have to save a lot of money each month. If you have a long timeline, almost anyone can eventually become a millionaire even if you don’t have a ton of spare cash.

If you are getting a later start, though, it may still be possible to amass seven figures. The key is saving a lot more each month and being more aggressive with your investments. You can do that by taking on a side gig to help you earn more money to invest or by trying to increase your earnings — and then by developing an investment strategy that you’re comfortable with.

The good news is, you can increase the amount you save over time so if you feel like you’re behind, you can get started today in working toward becoming a millionaire. Investor.gov has some calculators to help you figure out your necessary monthly savings based on your age and projected returns, so check it out and start saving. The sooner you start, the more likely you’ll be to hit your target.

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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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Have the potential to pay off your personal loan ahead of schedule? Read on to see what to do. 

If you’re carrying a balance on a personal loan, you’re in good company. Personal loan balances across U.S. borrowers totaled $222 billion by the end of 2022, according to data from TransUnion.

If you signed a personal loan recently, you may have gotten stuck with a higher interest rate than you wanted. That’s because consumer borrowing rates have been up across the board in the wake of a series of interest rate hikes on the part of the Federal Reserve. So right now, you might pay a higher rate of interest whether you take out a personal loan, auto loan, or home equity loan.

But if you signed your personal loan a couple of years ago, you may be looking at a pretty low interest rate on the sum you owe. And that might put you in a tough spot if you’ve come into money recently, whether by saving it or getting a raise.

If you’re facing a high interest rate on a personal loan, then paying it off early is generally a no-brainer. And the good thing about personal loans is that they generally will not charge you a prepayment penalty (though it’s always a good idea to check the terms of your loan agreement to make sure).

But what if your personal loan interest rate is nice and low? Does it make sense to pay off that debt early, or should you use your money for other things?

A tough call to pay off a personal loan

Because personal loans are unsecured, often, the interest rate you’re eligible for will hinge on your credit score. But if you had great credit at the time of your application and you also signed your loan before interest rates went up, then you might be sitting on a rate that’s apt to make today’s borrowers jealous.

In that case, it could still pay to knock out your personal loan ahead of schedule to save money on the interest you might otherwise face, even if it’s not a huge amount. However, you’ll also want to compare the amount of interest you’re paying on your personal loan to the amount of interest you can get from, say, a certificate of deposit (CD), or from investments in a brokerage account. If you’re confident you can snag a higher return on your money by putting it into a certificate of deposit or investing it, then that might be a better choice.

There’s a mental component, too

You may come to the decision that paying off your personal loan early is not the best choice from a financial perspective. But from a mental standpoint, it might be.

Some people are really bothered by the idea of owing money. If that’s how you feel, you may want to pay off your personal loan ahead of schedule simply for the benefit of being able to shed those payments and not have debt hanging over your head. And there’s absolutely nothing wrong with going that route if it makes you feel better about your financial situation.

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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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