Money Management

And she’s right, too. 

If you’re worried about the state of the economy lately, you’re certainly not alone. So many big names in the economics and finance space have predicted a 2023 recession. So far, though, employment is holding steady and inflation was still over 6% as of the most recent Consumer Price Index Summary report, suggesting that recession worries may not be strongly warranted, at least at this point.

Nevertheless, your personal finances are separate from the economy as a whole, so it’s important to keep your own situation in mind at all times and let it inform your money management. For example, we need not be in a recession for your car to need an expensive repair that you’ll have to pay for.

To that end, finance guru Suze Orman recently took to Twitter to advocate for “the biggest favor you will do for yourself right now.” What’s the favor? Making emergency savings a priority for you, immediately. Here’s why she’s right about emergency funds.

What can an emergency fund do for you?

As someone who lived paycheck to paycheck for years, and was often forced to resort to credit cards to cover unplanned expenses, I am a big fan of emergency funds. It’s a tremendous relief to be able to fix a problem using money from savings and knowing that you won’t be paying interest on what you spend. Suze Orman likes emergency funds too, and in fact, recently upgraded her recommendation for how much you should keep in one. Orman used to advocate for three to six months’ worth of living expenses, but now recommends saving enough for at least eight months or even up to a year.

While this may seem excessive, think about all an emergency fund can do for you. Ideally, it’s money you only use when you can’t cover an expense from your regular paycheck. So sure, this could be an expensive car or home repair (or even your auto insurance or homeowners insurance deductible, if your insurer will pick up the bulk of the cost). But this might also be a medical expense or unexpected necessary purchase, like a home appliance.

Most importantly, your emergency fund could come to your rescue if you get laid off from your job. There have been a few rounds of layoffs from big tech companies recently, and you might be worried about your own employment situation. Sometimes, we don’t get much of a warning that a job loss is looming — think about the many thousands of Americans who found themselves out of work almost three years ago as a result of COVID-19.

How can you prioritize saving?

If your emergency fund isn’t quite where you’d like it, you might be having trouble saving due to not having much excess income. This is a boat many people are in, and while every little bit helps, it’s certainly frustrating to have an emergency savings goal of $10,000 and only be able to put aside $100 a month in your savings account. At this rate, it would take you 100 months (or more than eight years) to reach that goal.

If you have space to cut some nonessential spending, that’s always a good move. But note that if you remove every fun thing from your life, you will quickly come to resent it. I recommend increasing your income, if possible, and making any extra money you bring home the cornerstone of your emergency fund. That money isn’t already dedicated to your bills, so use it to its full advantage.

You can try an emergency fund calculator to see what a good personal savings goal might be based on your monthly bills. And consider setting up automatic transfers from your checking account to your savings, perhaps to coincide with when you get paid. That way, the money moves over before you have a chance to spend it (or forget that you intended to save it).

Do this favor for future you

Even if you can only save a little at a time, you’re still doing something great for your future self. Suze Orman is absolutely right to say that prioritizing saving for an emergency is the biggest favor you can do for yourself.

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You should read Graham Stephan’s advice when deciding where to invest your money. 

Graham Stephan is a YouTube personality and he provides ample financial advice both on this platform and on other social networks. Recently, he tweeted out what he described as a “controversial take” regarding investing. He said, “You don’t have to be original to be a good investor.”

Here’s why Stephan believes originality isn’t necessary to make a profit in your brokerage account — along with some tips on why you should follow his advice and how you can do it.

There’s a simple reason copying other people is a good idea

Stephan explained in his tweet why he doesn’t believe originality is important to successful investing.

He advised that you, “Stand on the shoulders of giants. Copy their best ideas.” He also included a link to another tweet embedded in his own, which explained that being an innovator is challenging and that it is “way better to copy what works than to create something new.”

This is sound advice because many very smart people have been investing for a long time and there’s no bonus points for coming up with new ways of doing things. The goal of investing isn’t to be as creative as possible, but to make as much money as possible while minimizing your risks. And, the many very smart people who have been investing for decades have already figured out strategies for doing that.

In short, rather than trying to reinvent the wheel and find your own untested approach that could come with a far greater risk, why not adopt proven investing strategies that have already been shown to work and implement them with your own money management?

You don’t want to take money out of your savings account and put it into riskier investments without having a solid plan for how to approach your asset purchases. As Stephan makes clear, copying others is likely the best and easiest way to develop this plan.

How can you implement Stephan’s advice?

If you want to listen to Stephan’s advice, you can do so easily by looking at the advice and approaches taken by investors you admire. This could be people like Warren Buffett or George Soros or Peter Lynch or others whose approaches you find to best match your goals and desires when it comes to your investment portfolio.

You can also research different accepted investment strategies, such as dollar-cost averaging into index funds that track financial markets. If you don’t know a lot about investing and you don’t want to take the time to research what past successful investors have done and how you can implement their ideas, this can be the easiest approach. It simply involves regularly purchasing funds that track the S&P 500 or the stock market as a whole.

Adopting a proven strategy is far more likely to enable you to make money — without spending an unreasonable amount of time or taking on a lot of unnecessary risk — and there’s no real downside to doing so. So, unless there’s a very good reason to, don’t try to get creative with your investing. Just do what Stephan says and copy what works so you can grow your wealth.

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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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A one-two punch to take down airport stress. 

A good travel rewards credit card is a must for rewards collectors who like to travel. They make it easy to earn free travel with points, ideally without having to go above and beyond your regular spending.

But the best travel cards do so much more. Like cards that come with complimentary airport lounge access or elite hotel status.

Not all of the perks are quite so flashy, though. For example, my new favorite card perks: CLEAR and TSA PreCheck.

Getting to the front of the line

While TSA PreCheck has been around for a while, CLEAR is a bit newer. But new or not, it’s still well worth consideration — especially when you have a card that gives you access for free.

So, what’s CLEAR? Well, it’s part one of my two-part airport security hack.

Airport security is a multistage process.The first stage is identity verification. This is the part in which you stand in that super long line to get to the person who verifies you are who your ticket says you should be. This usually requires showing your boarding pass and driver’s license or passport.

With CLEAR, you skip this part.

Instead, you simply go to a handy kiosk and scan your boarding pass. Then the kiosk checks your biometrics. Once you’re cleared — pun intended — you’re escorted to the front of the line by a helpful CLEAR representative.

In my latest flight, having CLEAR shaved a solid 20 minutes off my airport security wait. Considering my flight was set to board about fifteen minutes after I hit security, that was a very important time savings. And since my credit card covered the cost of membership, it was absolutely free.

Leaving it all in your bags

The second part of the security process is the screening. This is the fun part where you get to basically empty your bags, take off half your clothes, and wander barefoot through the full body scanner.

This is where the rest of the card hack comes into play via TSA PreCheck.

In case you haven’t heard of it, TSA PreCheck is a program run by, you guessed it, the Transport Security Administration (TSA). Basically, you go through a background check and brief interview, then get some fingerprints taken.

So long as you pass, you’re given a Known Traveler Number to add to your boarding passes. This lets you use the PreCheck line at most airports.

In the PreCheck line, you don’t need to remove shoes, belts, or light jackets. You can also leave your electronics and liquids safely in your luggage. Oh, and you tend to get through screening in about half the time.

The vast majority of premium travel rewards cards include a credit for TSA PreCheck, making this airport fast pass effectively free.

A two-part time-saving hack

Getting through airport security can be an utter nightmare, especially during the busier times of year. I’ve personally sat in security lines that took nearly an hour to get through. Even if you leave plenty of time before your flight, an hour in an airport security queue can be stressful.

But it doesn’t have to be that way.

With the right travel cards in your pocket, you can take advantage of this two-part airport security hack that gets you through in minutes, not hours. And besides the credit cards’ annual fees — which I’d be paying anyway — it’s completely free. This means you can save time and money, which is pretty much as good as it gets.

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

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A lot of people could be missing out on strong returns. 

Buying stocks is something it pays to do from a young age, despite the risks involved. That’s because stocks have historically been able to generate much higher returns than more conservative assets, like bonds. And you might snag a much higher return on stock investments than on the money you have in a savings account or CD.

But in a recent Motley Fool research study, an estimated 42% of Americans do not own stocks. And if you’re part of that statistic, you might struggle to meet your financial goals down the line.

Why stocks are so important

An estimated 150 million Americans have money invested in stocks. But if you’re not one of them, you could be losing out. It’s important to invest in stocks because you have the potential to generate strong returns. And you’ll need those returns to outpace inflation in the context of saving for long-term goals, like retirement.

Now, you may be scared to load up on stocks in your brokerage account or IRA for fear of losing money, since the stock market tends to be quite volatile. But there are steps you can take to mitigate that risk.

First, adopt a buy-and-hold strategy. Don’t plan to cash out your stocks shortly after acquiring them. Rather, plan to hold them for many years or decades. Stock values can fluctuate a lot — and drop — from one year to the next. But in the long run, the stock market tends to reward investors who stick with it.

Also, focus on quality stocks over those that are buzzy and get a lot of press, like meme stocks. Look at companies that have been around for a long time and have continuously found ways to offer value to customers.

And always, always do your research before adding a stock to your portfolio. You’ll want to look at factors like how well a company manages its cash and debt, among others, to see if it’s a good buy.

You’ll also want to look at growth potential. Does the company have a lot of new products in its pipeline? Is it constantly trying to innovate? These are other key factors that indicate whether a stock is worth investing in or passing over.

You can buy stocks in buckets instead of individually

The idea of hand-picking stocks on an individual basis may seem daunting to you. If that’s the case, ETFs, or exchange-traded funds, may be a better bet.

When you buy ETFs, you’re buying a whole basket of stocks, so to speak, with a single investment. That means you get the benefit of instant diversification in your portfolio without having to research dozens of companies at a time.

There are different types of ETFs you can look at, from those that effectively encompass the entire stock market to those that track a specific sector of it. Think about what’s best for your portfolio when making your choice.

It’s easy to see why stocks might seem overly risky to some investors. But if you don’t buy stocks, you’ll take on another risk: not generating a high enough return to meet your personal financial goals. Keep that in mind if you’ve shied away from stocks thus far and aren’t particularly inclined to change your ways. And look at ETFs if that makes you more comfortable diving into stocks.

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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.

 Read More