Money Management

Some life insurance policies accumulate a cash value. Read on to see if that can take the place of having money in savings. 

It’s important to have money in your savings account for a variety of reasons. First, you never know when an unplanned bill might pop up that your paycheck can’t cover, like a home or car repair that can’t be put off. Also, you might lose your job for a period of time. Without savings, you might struggle to cover your expenses — or rack up costly debt in the course of getting your rent paid.

A recent SecureSave survey found that 67% of Americans couldn’t cover a $400 emergency expense with money in savings. So if you’re in a similar boat, you might consider it a wake-up call to start building some cash reserves.

But what if you have a life insurance policy that builds up a cash value? Can that policy take the place of actual savings? Or do you still need separate money in the bank?

Life insurance shouldn’t double as savings

It’s true that if you have a whole life insurance policy, it will generally, in time, accumulate a cash value. That cash value is a sum you can borrow against or even cash out if you need to.

But even if you have whole life insurance, it’s still not a good idea to neglect your actual savings. For one thing, it can take time for your policy to accrue that cash value, and you might face a financial emergency before that happens.

Secondly, the purpose of life insurance isn’t to serve as your emergency fund. Rather, the purpose of life insurance is to provide your loved ones with a financial benefit in the event of your untimely passing.

So, let’s say your life insurance policy has built up a cash value, and you withdraw it to cover an expense like home repairs. What happens if you pass away shortly afterward? In that case, you’ll be leaving your loved ones with that much less money.

Build your own emergency fund

Putting life insurance in place is a smart thing to do, and it’s an act of kindness for your family. But having life insurance should not take the place of having cash savings.

In fact, as a general rule, you should make a point to have enough money in the bank to cover at least three full months of essential bills. The logic there is that if you were to lose your job, it might easily take you three months to find a new one and begin receiving a paycheck again.

Incidentally, if you’re thinking of signing up for a new life insurance policy, you may want to opt for one that doesn’t accumulate a cash value. While whole life insurance has its benefits, including the fact that it covers you indefinitely, it can be very, very expensive — so expensive that you might struggle to carve out money for near-term savings if you’re paying those premiums. Term life insurance may end up being a far more cost-effective option, even if you won’t get a cash value buildup as part of your policy.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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 

Down to $0 in your checking account? Read on to see what happens from there. 

Whether you’re signed up for direct deposit at work or you prefer to manually deposit your paychecks, ideally, your checking account will have a steady stream of money flowing into it. But you might also have a steady stream of money flowing out of it.

After all, your checking account is no doubt the account you use to pay your bills, whether it’s your latest credit card statement balance or your mortgage. And if you lose track of your spending or have a month with too many surprise bills, it’s easy to see how your account balance might get whittled all the way down to $0.

Clearly, having $0 in your checking account is problematic. But there may be additional consequences beyond the simple fact of not having money to pay bills with.

You might end up facing costly fees

Not every bank charges a fee once your balance dips below a certain threshold. But many do.

Wells Fargo, for example, charges a $10 monthly service fee that can be avoided if you maintain a $500 minimum daily balance. But if your balance dips down to $0, you risk being charged that fee.

Worse yet, you may not realize your checking account balance has gotten down to $0, and you might swipe your debit card to pay for a purchase. At that point, your bank might allow the transaction to go through. But you might then get hit with an overdraft fee that could be costly. (The good news is that some banks are doing away with overdraft fees, but that’s not universal.)

How to avoid a $0 checking account balance

One of the easiest ways to avoid a scenario where your checking account balance gets down to $0 is to simply track your transactions and look at your balance every week, or even every few days. If you hit the ATM, look at your balance before walking away with your cash to see how much money is left in your account. And if you’re writing out a check, review your balance first to make sure you can cover it.

Another good way to avoid a $0 checking account balance? Stick to a budget. Map out your monthly expenses and make sure you’re sticking to the amount of money you have allocated to each spending category. If, for example, you have $200 a month allocated to leisure spending, and it’s the 15th and you’ve already spent $180 in that category, you’ll need to be very careful during the second half of the month.

Meanwhile, if you find that you keep teetering dangerously close to the $0 mark month after month, consider it a wake-up call to make adjustments to your spending. That could mean canceling some services you pay for or getting a roommate so your rent costs aren’t nearly as high.

A $0 checking account balance is clearly not ideal. But if you’re vigilant, you might manage to avoid landing in that situation — and risking the fees that could come with it.

These savings accounts are FDIC insured and could earn you 13x 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 13x 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.

 Read More 

Inflation has been really hard on consumers. Read on to see how it’s driven more people into debt. 

For well over a year now, inflation has been soaring. And it’s been putting a strain on a lot of consumers.

Let’s remember that inflation began to surge in 2021 just as the U.S. economy was starting to recover from the pandemic. But at that point, a lot of people hadn’t yet recovered individually.

In other words, living costs started rising at a time when many workers hadn’t had a chance to replenish the savings they depleted in 2020. And given that rampant inflation has been dragging on since then, it’s put a lot of people at a huge disadvantage.

A recent survey from COUNTRY Financial found that 19% of Americans are taking on more credit card debt to cope with inflation. But that’s a move that could hurt them in the long run.

Credit card debt is bad news

The problem with credit card debt is multifold. First, the longer you carry a balance, the more it’s likely to cost you. And you may reach a point where you end up trapped in a cycle of debt you can’t bust out of.

Also, too much credit card debt relative to your total credit limit could hurt your credit score. That becomes a problem when you decide to apply for a loan to stay afloat.

Also, a poor credit score could make it more difficult to adjust your expenses for inflation. Let’s say you decide to rent a cheaper apartment to save on costs. Well, if your credit score takes a dive, you might struggle to get a landlord’s approval, leaving you trapped in your current rental that’s more expensive.

So all told, relying on credit cards to get through this period of inflation really isn’t the best move. And the sooner you make changes to ease up on your credit card usage, the better.

A more optimal way to cope with inflation

If you’ve been struggling to cover your bills, you’re not alone. But rather than keep turning to credit cards, you may instead want to look at reducing some of your spending.

This may not be an easy thing to do if you’re already living frugally. But it does pay to get creative, whether by forming a carpool to work to save on commuting costs or bartering with local businesses to save on expenses (for example, if you’re good at web design, you might offer to update your daycare center’s website in exchange for a reduced rate for your kids’ childcare).

Another option? Pick up a side hustle. The U.S. economy is in a pretty good place from a jobs standpoint, so you may have plenty of options for doing side work and boosting your income.

We don’t know how long rampant inflation will be with us. The Federal Reserve is doing its best to cool inflation by raising interest rates, but that, in turn, is making credit card borrowing even more expensive. So the sooner you’re able to stop falling back on your credit cards, the better off you’ll be financially.

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.The Motley Fool has a disclosure policy.

 Read More 

Are you a Trader Joe’s newbie looking for the best deals? Keep reading to find out what Trader Joe’s items Reddit users think are a win for your wallet. 

Trader Joe’s has a cult-like following, and it’s easy to see why! The staff is friendly, the shelves are full of fun products, and the prices are reasonable. If you’ve never shopped at Trader Joe’s and plan to visit soon, you may wonder which buys are worth your money. We took to Reddit to find the best bargain buys so you know which items to put in your cart.

Cheese

Calling all cheese lovers! Trader Joe’s sells plenty of cheeses, including seasonal finds, and the prices are affordable. Trader Joe’s sells its cheeses in different weights, so it can be easier to stay on budget as you shop for your next charcuterie night. Reddit user whohootwhohoot noted, “the cheeses are decently priced, and sometimes you can get a smaller chunk of something that otherwise might be too much per pound.”

2. Coconut milk

It’s a good idea to have extra coconut milk on hand for those nights when you’re craving delicious curry. Trader Joe’s sells coconut milk at an affordable price. Reddit user mvorih3 noted that the retailer’s coconut milk had the “lowest price I’ve seen and far superior quality.”

3. Tofu

Vegetarians may want to check the price of tofu at their local grocery store and compare pricing at Trader Joe’s. Several Redditors said that Trader Joe’s tofu is a win for your wallet. User seekingseratonin commented, “It’s the only place I buy tofu because it’s cheaper!”

4. Frozen fruit

Another winning find at Trader Joe’s is frozen fruit. Reddiot babytigertooth005 noted, “Their organic or regular frozen fruit is priced better than most other stores.” Whether you like to add frozen fruit to your yogurt or cereal or use it to make smoothies, you may be able to keep more money in your checking account by buying frozen fruit at Trader Joe’s.

5. Nuts

Nuts are also an excellent buy for shoppers on a budget. Redditor umamifiend had the following to say about shopping at Trader Joe’s while on a budget, “It’s always been my go-to for nuts! I’ve never found a place with a better cost on raw cashews or many other nuts.”

6. Coffee

Reddit users also raved about the price and quality of the retailer’s coffee. If you’re a daily coffee drinker, you may want to try Trader Joe’s coffee. Redditor Truly_Bologna said, “I’m an absolute advocate for their basic (cheap!) TJ dark roast. We buy it by the case!!”

How to maximize your savings at Trader Joe’s

By shopping at Trader Joe’s, you could save money on grocery costs. The following tips may help you maximize your savings while shopping at the popular retailer:

Shop with a list: Without a list to guide you, it can be easy to overspend. Before you step foot in Trader Joe’s, outline a list of your must-have buys so you don’t fill your cart with unnecessary purchases.Use the website to browse prices: The Trader Joe’s website is full of useful information, including detailed product information and prices. You can select your local store and browse available products. Seeing what each item costs before stepping in the door can help you budget accordingly. Plan your meals. In addition to planning out what you want to buy, it can be beneficial to plan the meals that you will make for the week. Having a plan for each product that you buy can help you save time during the week and minimize food waste.

If you have yet to shop at Trader Joe’s, you may want to give the retailer a try soon. Shopping at affordable grocery stores can make it easier for you to honor your personal finance goals.

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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Best Buy. The Motley Fool has a disclosure policy.

 Read More 

Audit rates are fairly low across all tax-filers. But read on to see which group of filers has a greater chance of getting audited. 

Have you ever seen a tax audit play out in the movies or on TV? If so, the scene probably involved a scary-looking IRS agent with a backup team of goons storming someone’s office, confiscating their files, and flashing a pair of handcuffs.

The good news is that the typical audit is nothing like that. The majority of tax audits are conducted by mail, and they usually involve having to respond to a letter from the IRS asking for more information or asking you to agree to an adjustment to a tax return.

Even if the IRS wanted to barge into individual tax-filers’ homes and demand to see copies of paperwork, the agency does not have the manpower to conduct those types of audits on a large scale. And if the agency is trying to recover, say, $500 from a given tax-filer, it’s not worth the effort of sending someone to their door. So you can generally rest assured that if your taxes get audited, the process won’t be as frightening as you might think.

Meanwhile, the U.S. Government Accountability Office did an analysis of audit rates for the 2019 tax year. Not shockingly, it found that filers earning $5 million or more had the highest likelihood of getting audited, with filers earnings between $1 million and $5 million being the next most likely group to be audited.

But you may find it surprising to learn that audit rates among tax-filers earning under $25,000 were more than twice as high than audit rates for filers earning between $25,000 and $499,999.

A lower income might increase your audit risk

You might find it hard to believe that having a lower income would increase your chances of getting audited. After all, when you don’t earn that much, how much income could be hiding?

But the reality is that if you’re not reporting a lot of income, the IRS might start to ask why. And your chances of getting audited might also be higher if you claim the Earned Income Tax Credit, which is unique in that it’s fully refundable — meaning, you can receive the full value of it even if you don’t owe the IRS any tax.

You may also get pegged for an audit if you report a low income, but you claim high deductions relative to your income. Granted, this holds for everyone — if your deductions look disproportionate, it could raise a flag.

But let’s say you’re reporting an income of $24,000 and you’re also claiming $4,000 as a deduction for mortgage loan interest. At that point, the IRS might question how it is that you’re able to pay $4,000 in mortgage interest alone (keeping in mind that interest is just a portion of your total mortgage payment) when that’s almost 17% of your income right there.

What to do if you’re a lower earner wanting to avoid an audit

If you’re a lower earner, there may only be so much you can do to limit your audit risk. You shouldn’t pass up the Earned Income Tax Credit if you’re entitled to it, for example. That credit could put a lot of money in your pocket, and you deserve to have that money to cover your bills.

That’s why the only thing you can really do to lower your audit risk is to be completely honest on your tax return. Report every penny you make and only claim tax breaks you know are legitimate. If you stick to that plan, you might manage to stay off of the IRS audit list, despite not earning a very high wage.

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.The Motley Fool has a disclosure policy.

 Read More