Money Management

Are these on your list, too? 

One of my goals this year is to add more money to my savings account. To that end, I’ve made some changes to the way I shop for groceries. And one of them is shopping at Aldi.

I discovered Aldi earlier this year and have already made a couple of trips over in conjunction with a Costco run. And on each occasion, I can say with confidence that my credit card tab was lower than what it would’ve been had I stuck to my regular grocery store.

On my last Aldi run, I loaded up on produce — even though that’s something I usually buy at Costco. But I also scooped up these three products I’m super eager to try.

1. Fit & Active Snack Packs

My days and evenings tend to be pretty busy between working and shuttling my kids all over town to their various after-school activities. As such, I need something easy I can grab on the go. These snack packs seem to fit the bill, so I picked up the chocolate chip wafer variety. I figure they’re something easy to stick in my purse in a pinch, and they can double as snacks for my kids when they need something to bring to school.

2. Millville crunchy peanut butter granola bars

In my house, we eat a lot of granola bars. They’re an easy breakfast (albeit not the most filling or healthy one), and they’re yet another easy thing to throw into my car or purse in a hurry. Now, I’ve never heard of Millville despite having been around the granola bar circuit plenty in my day. But these seem like a good addition to my rotation while I can get them — more on that in a bit.

3. Clancy’s dill pickle–flavored popcorn

Popcorn is one of those snacks that works in a pinch because it’s light and easy to digest. And I was drawn to this dill pickle popcorn because, well, it’s something different, to say the least. I can admit that this buy was a bit of a risk, because I’m not sure how strong the pickle flavor will be and whether my son, who’s a pickle fan like me, will like it or not. But since my local Aldi had this item for just $2.29, I figured it wasn’t such a huge gamble.

These products may be good, but I won’t get attached to them

I’m pretty excited about my recent Aldi snack haul. But one thing I’m not going to do is plan on purchasing and consuming these items regularly.

The reason? Aldi is known for rotating its product line constantly. So the items you see at the store one week may not be available the following week. Heck, in some cases, they may not even be available the following day.

That’s the risk you take when you shop at Aldi. The upside, though, is that Aldi makes it possible to load up on groceries for less money than your traditional grocery store.

I probably won’t start making special trips out to Aldi because it can be so hit or miss. But since I happen to have an Aldi right near my local Costco, and I visit the latter every week, it’s easy to pop into Aldi first and see what deals I can find.

If I end up liking these items as much as I expect to, I’ll certainly put them on my list for my next Aldi visit. But I also won’t be shocked to find them gone from the store completely.

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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.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.

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There’s still plenty of time to submit your return and get your refund. 

Filing a tax return is something most of us are supposed to do every year. But maybe life got in the way of you filing your 2021 tax return in 2022.

If that’s the case, worry not. There’s still time to submit that return to the IRS — and snag the tax refund that might go along with it.

There’s still time to file your 2021 taxes

Taxes are generally due on or around April 15, and each year, you’re filing taxes for the previous tax year. In other words, this year, you’re filing your 2022 taxes, and in 2022, people were filing their taxes for 2021.

One thing you should know is that the IRS gives you three years from when a given tax return is due to get it submitted. So let’s say you never submitted your 2021 tax return. That means you have three years from April 2022 to get that return in, leaving you with a final deadline of April of 2025. So in light of that, it’s definitely not too late to submit your 2021 taxes if you didn’t get around to filing them last year.

What happens when you’re late submitting your tax return?

The consequences of being late with a tax return depend on whether you owe money, or you’re owed money. If you’re due a refund, there’s no penalty. And why would there be?

By delaying your tax return filing, it means you’ve allowed the IRS to hang onto your money for a longer period of time. So why should the agency penalize you beyond that?

On the other hand, if you owe the IRS money, then there is a penalty for filing a tax return late. And unfortunately, it’s a steep one. The failure to file penalty is worth 5% of your unpaid tax bill for each month (or partial month) it goes unpaid, up to a total of 25% of what you owe.

On top of that, you’ll face interest and penalties for paying your actual tax bill late. The penalty there isn’t as steep as the failure to file penalty. But you will owe 0.5% of your unpaid tax bill per month or partial month your payment is late.

Get moving on that old tax return

Whether you owe the IRS money for 2021 or are due a refund, the sooner you get your old tax return done, the better. In fact, the average tax refund for 2021 tax returns was $3,121. That sum of cash could come in very handy if you’re struggling to cover your bills right now due to inflation, or if you owe money on credit cards that’s costing you a lot in interest.

But if you’re going to make an effort to get moving on your 2021 tax return, don’t neglect your 2022 return in the process. That return is due this April (April 18, to be precise). And if you’re due a refund for 2022, you’ll want to do what you can to snag that money as quickly as possible.

If you need help filing your taxes, the sooner you reach out, the better. Tax professionals tend to be busy during tax season in general, but they’re apt to be particularly swamped in late March and the first half of April as they find themselves up against the filing deadline. So the earlier on in the season you’re able to line up some help, the less difficulty you might encounter in finding someone to do your taxes for you.

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There are plenty of ways to redeem your points, but they don’t all offer equal value. 

Most travelers pay for their trips the old-fashioned way, but there’s also a sizable portion who pay with credit card points. A December 2022 survey by Destination Analysts found that nearly 31% of Americans had used credit card rewards for travel-related purchases in the previous 12 months.

That’s a smart move, as the right credit card can save you quite a bit of money on your travel costs. However, it can sometimes be challenging to know how to use your rewards. Many of the top travel credit cards give you several options, with some being a much better deal than others. Here are the most popular choices and what you should know to get the most value from your points.

The two most popular ways to redeem travel rewards

Destination Analysts asked respondents who had redeemed credit card rewards about the types of travel purchases they paid for this way. Here were the two most common types of purchases and the percentage of respondents that had used rewards for each one:

Airline tickets (52.7%)Hotel stays (50.8%)

Relatively few respondents had used rewards to cover upgrades. Only 13.3% used rewards to upgrade their hotel rooms, and 11.7% used rewards to upgrade their airline seats.

A likely reason for this difference is that reward upgrades can be hard to come by. Airlines don’t always let you upgrade your seat with miles. It depends on the flight and what type of availability there is in higher travel classes. If there are seats available, most will usually be made available for passengers who want to pay cash to upgrade.

Room upgrades at hotels are also subject to availability. While most hotels allow you to upgrade with points, some don’t. For example, Hilton says in its FAQs that points can’t be used to upgrade an existing reservation.

The good news is that most people appear to be using their rewards well. Airline tickets and hotel stays are two of the best ways to travel for free with credit card points. Upgrades can be a worthwhile option when available, but they’re not always available. That’s why you should never rely on being able to upgrade a booking with points later. You might, but it’s not guaranteed.

How to redeem credit card travel points

If you have a travel card, the way you can use your points will depend on the card. With airline credit cards, you’ll earn miles for your frequent flyer mile account. You can use your miles on the airline’s website. Hotel credit cards work the same way. Your points go to your account in the hotel’s loyalty program.

It’s different if you have a travel card that’s part of one of the major credit card rewards programs. Examples of these programs include:

Chase Ultimate RewardsAmerican Express Membership RewardsCapital One Venture MilesCiti ThankYou Rewards

With a card in any of these programs, you’ll need to go to the reward program’s website to use your points. You can also access this website through your online credit card account. The rewards program’s site will show you how you can redeem your points.

Getting the most value from your travel rewards

The way you redeem your travel rewards is extremely important. With some types of credit card points, you could get anything from a fraction of a cent to $0.03 or more per point, depending entirely on how you use them. That means 100,000 points could potentially be worth $500 to over $3,000.

Fortunately, it’s not difficult to get good value from your points. There are only a few things to keep in mind here:

Always use your travel rewards for travel. You may be able to redeem your points in other ways, such as cash back, gift cards, or Amazon purchases. These are almost always a bad idea, because you don’t get nearly as much as you could through travel redemptions.Higher-priced travel is usually a better deal. For example, it’s often possible to get $0.03 per point or more booking business-class airfare. On the other hand, economy bookings may fetch $0.01 to $0.015 per point.Take some time to learn about your redemption options. Read up on your travel card and its rewards program, and explore the ways you can use your points. It’s a lot easier to get the best deal when you know what all your options are.

The world of travel credit cards can be a bit intimidating at first, but it doesn’t take much time to learn how to use them. And there’s really nothing like using your points to cover airfare or a luxury hotel stay that would otherwise cost you thousands.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com, Fetch, and JPMorgan Chase. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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Ramsey’s advice could save you money, but it’s not without a catch. 

Car insurance is required by most states and is an important purchase for every driver because it provides vital protection for assets. But, while it is an essential buy, seeing those premium payments come out of a bank account or get charged on a credit card isn’t necessarily a fun thing for most people.

The good news is, there are a number of different ways to reduce auto insurance costs including shopping around for coverage and taking defensive driving courses.

Finance expert Dave Ramsey has also recommended one particular technique as being a very simple and effective way of reducing coverage costs. But, while his suggested approach would work, it’s not without its downsides.

Here’s how Ramsey said to reduce car insurance costs

Ramsey said reducing a car insurance deductible is a simple, straightforward way to lower the costs of an auto insurance policy.

“The quickest and easiest way to lower your car insurance premiums is to raise your deductible,” the Ramsey Solutions blog reads. “Almost always, higher deductibles = lower premiums.”

A deductible is an out-of-pocket payment a policyholder has to make for a covered loss. The policyholder has to meet the deductible, or pay out the pre-selected amount of money, before insurance pays for the remainder of covered expenses. For example, if a covered car incurs $5,000 in damage and the policyholder had a $1,000 deductible, the policyholder would pay for the first $1,000 of repair costs and the insurer would pay the other $4,000.

Deductibles have a direct impact on premiums because a higher deductible means an insurer stands less of a chance of paying out money.

“If your policy has a lower deductible, that means the insurance company takes on more risk,” Ramsey explained. “You’ll pay less for the repairs in the moment, but you’ll have higher premiums as a result.”

Should drivers try this technique?

Raising a car insurance deductible can absolutely work to cut premiums. In fact, there should be an immediate reduction in auto insurance costs as soon as a deductible is increased. And drivers have a wide range of choices for how big (or small) they want their deductible to be. For example, a motorist could choose to have a $250 deductible, $500 deductible, $1,000 deductible, and on up from there.

The downside, though, is that a higher deductible means the policyholder personally takes on more risk of having to make a bigger payout after something goes wrong. If a driver has a $2,000 deductible, they would need to make sure they actually had that much money to cover repairs or other costs after a collision, the theft of their car, or some other covered problem occurs.

This is why Ramsey says it’s best to raise a deductible only when an emergency fund is available to pay the repair or replacement costs if need be.

For drivers who have the funds to pay a reasonable amount out of pocket if something goes wrong, this technique is a good one that’s likely worth using to make auto insurance cheaper. But motorists who would be left worrying about where the cash for a deductible would come from should consider other ways to reduce insurance premiums so they don’t take on more risk than they can handle.

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While inflation could tick upward on a monthly basis, for the most part, we should expect a steady decline. 

Inflation has been a big problem for U.S. consumers for well over a year now. And at this point, those who have continuously racked up credit card debt because of it are no doubt tired of seeing their balances grow.

Unfortunately, inflation could be with us for quite some time still. But we’re very likely past the peak of inflation. And we’re also likely to see inflation largely cool down in the course of 2023.

What will inflation look like over the next 10 months?

In January, consumers got a bit of a shock as the Consumer Price Index (CPI), which measures changes in the cost of consumer goods and services, rose 0.5% from the previous month. But on an annual basis, January’s CPI reading was 6.4%. And that’s well below the CPI’s June 2022 reading, which showed the index up 9.1% on an annual basis.

In fact, since peaking in June, the CPI has been showing a lower level of annual basis consistently. So there’s reason to think that pattern will continue between now and the end of the year.

This isn’t to say that we won’t see some month over month increases for the CPI. But hopefully, it is fair to say that we’re past the peak of inflation, and that things will ideally get better from here.

Consumer spending is likely to slow

A big reason we should see inflation continue to cool in 2023 is that consumer spending is more likely than not to decline. For one thing, layoffs among large employers are unfortunately becoming more commonplace. And while that doesn’t necessarily spell immediate doom and gloom for the economy and job market as a whole, it does mean that consumers are more likely to be mindful of their spending in light of job loss-related fears.

Also, a big reason consumers were able to spend money so aggressively in 2022 was that many were still sitting on leftover COVID-19 stimulus funds. But the federal government did not send stimulus checks into Americans’ bank accounts in 2022 like it did in 2021. And so at this point, it’s fair to assume that a lot of that stimulus money is long gone.

Coping with inflation

Many signs point to decrease in inflation between now and the end of the year. But if you’re having trouble coping with higher living costs right now, you may want to look at the gig economy. Picking up a second job could give your income a nice boost and make your higher bills easier to manage.

Granted, you could also try cutting back on expenses if the idea of taking on a second job doesn’t appeal to you. But many people who are struggling with inflation are already living pretty frugally. So if you’re in that boat, growing your income may be the most effective way to cope with inflation until it cools off to a more notable degree.

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Deep recession, soft landing, or no recession at all? No one knows for sure. 

Despite record-low unemployment, a recent surge in consumer spending, and a slow decline in inflation, the Federal Reserve of New York has reservations about the health of the economy. Here, we explain why the Fed expects a recession sometime in the next 12 months and what you can do to protect your finances.

Recession-forecasting tool

Typically, analysts look at a small bundle of macroeconomic indicators to predict the likelihood of a recession. One of the most relied-upon indicators involves the Treasury bond yield curve. Here’s how it works.

It indicates a healthy economy

When the economy is healthy and humming, the Treasury yield curve slopes up and to the right. What this means for investors is higher yields on bonds with longer-dated maturities. For example, a 10-year bond will offer a higher yield than a two-year Treasury bond. The longer an investor keeps their money tied up in the bond, the more they can expect to receive when the maturity date arrives.

It indicates trouble on the horizon

When analysts notice that the Treasury yield curve flattens or becomes inverted, trouble could be brewing. Currently, the curve is inverted, meaning that investors can expect a higher yield on short-term Treasury bonds than on long-term ones. The fact that investors are so concerned about the U.S. economic outlook that they don’t want to tie up their money for long serves as a flashing red light.

Nearly perfect record

Since 1959, the Federal Reserve Bank has used the yield spread between the 10-year and three-month bond rates to calculate the odds of a recession occurring within 12 months.

What the Fed is looking for is a probability of recession greater than 40%.

To date, the probability has exceeded 40% eight times. The forecasting tool has not been wrong except for a probability of recession of 41.14% in October 1966. In December 2022, the likelihood of recession hit 47.31%. As far as the Fed is concerned, it indicates an economy poised to slow over the next 12 months.

Monetary policy

Historically, the Federal Reserve stepped in to rescue the economy when things got shaky. To steady the situation, the Fed conducted rate-easing cycles to bring down interest rates and spur economic activity.

With inflation coming down at a snail’s pace, the Fed announced plans to continue raising the interest rates until data provides confidence that inflation is on a sustained downward path to 2%. In the meantime, with borrowing costs at their highest since 2007, it’s difficult to imagine how the surge in consumer spending can continue or how long the wait for a 2% inflation rate will take.

How you can prepare

As challenging as it might be, take heart. If a recession does occur, it will be the 14th in the U.S. since the end of World War II. The average recession has lasted 10 months. On the other hand, periods of expansion have lasted an average of 57 months.

In the meantime, here are concrete steps you can take to prepare for whatever is around the next economic corner:

If you don’t have one already, focus on building an emergency fund. While you’ll want to aim for enough money in the fund to cover three to six months’ worth of bills, it could take years to get there. Let’s say you manage to squirrel away $1,500 over the next few months. That’s an extra $1,500 to cover things like a surprise tax bill or higher-than-average utility bill.Whittle away at high-interest debt. If you’re living paycheck to paycheck, paying down high-interest debt while building an emergency fund may seem impossible. This is where you can cut back on unnecessary expenditures, like expensive cable TV packages, and use the money to get a chunk of debt off your plate.Find creative ways to bring in extra cash. Have a garage sale, become a tutor, provide after-school care to neighborhood kids, or look for another way to earn money. If you have trouble coming up with an idea that appeals to you, there are apps available that can help.Buy and hold your investments. If you’re investing for the future, you may be tempted to sell off as the market drops. Ignore that urge. When the market dips, you can scoop up the best deals. Then, as the market invariably recovers, your portfolio grows.

Unknowns

No one can predict the future, including whether a recession will occur. And if a recession does hit, no one knows whether it will be severe. NPR spoke with Justin Wolfers, an economist at the University of Michigan, who says that all the recession talk seems absurd.

Wolfers predicts a soft landing, with demand for items dropping off just enough to encourage companies to lower prices. Not enough that they would lose money, but enough to reduce inflation.

Wolfers’ reason for optimism is unemployment at a 50-year low, a rate earlier generations of economists considered impossible.

A deep recession, soft landing, or no recession at all — it’s out of our control. What we can control is how prepared we are for whatever comes our way, and that starts with saving for a rainy day.

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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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