Money Management

You’d better load up your savings just in case. 

When the COVID-19 pandemic first hit U.S. soil, millions of jobs were lost within weeks. That left impacted workers scrambling to file for unemployment benefits. And it left states scrambling to keep up with jobless claims.

Things are very different today — namely because unemployment levels are fairly low. In spite of that, it’s taking longer for new jobless claims to be processed today than it was during the early stages of the pandemic. And that’s a serious problem.

A major lag in unemployment benefits

Workers who lose a job through no fault of their own are generally entitled to unemployment benefits, provided they’re not self-employed and meet certain criteria. Now the federal government considers payment of unemployment benefits within 21 days of an initial claim to be timely.

In March 2020, when jobs were being shed in short order due to nationwide shutdowns, 97% of unemployment benefit payments were considered timely. Today, that share has dropped to just 78%, according to Department of Labor data as reported by CNBC.

Of course, a delay in jobless benefits has the potential to result in severe consequences. For someone without money in savings, it could mean racking up credit card debt or falling behind on bills in the absence of that money. Neither is a good thing at all.

Protect yourself with an emergency fund

When economic conditions are generally sour, it’s easy to anticipate an uptick in unemployment. But that doesn’t mean workers can’t get laid off out of the blue.

That’s a situation you should do your best to prepare for. And the best is to build yourself an emergency fund.

Ideally, you should aim to have enough money in a savings account to cover a full three months of living costs. That might come in very handy if you file a claim for unemployment benefits and it’s delayed.

For even better protection, you may want to aim for more like six months’ worth of bills in the bank. Filing a claim for unemployment benefits doesn’t guarantee approval of that claim. And if you have to go through an appeals process, it could take even longer to get your money — if you even get it at all. So your best bet is to put yourself in a solid position to keep up with your bills in the absence of a paycheck.

Now is an especially good time to give your savings a boost given the recession warnings we’ve been hearing, because a broad economic decline could lead to an uptick in jobless claims. And frankly, many state unemployment systems aren’t well-equipped to handle that. Some of these systems are built on archaic coding, and as such, they’re prone to crashes during periods of high volume.

But even during periods of low unemployment, which is the case today, it can still take time to process jobless claims. Many state offices are sorely understaffed, and until that issue is more broadly addressed, lags in unemployment benefits could persist. So your best bet is to gear up for that by socking away more money in the bank so you have cash reserves to tap if you end up having to wait on jobless benefits you’re entitled to.

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Take these steps now to avoid impacting your credit with late payments. 

Banks are adjusting their behaviors amidst growing fears that this year could bring higher delinquency rates and economic difficulties. This could mean consumers find it harder to qualify for personal loans and new credit cards. Big lenders and credit card issuers are already setting aside more money to cover potential loan losses.

For example, according to the Wall Street Journal, Capital One Financial set aside around $1 billion to cover potential losses in the fourth quarter — up 33% on the quarter before. Other banks are also upping their loan loss funds.

Why loan delinquencies may increase in 2023

The last few years have put huge pressure on many Americans’ bank accounts. The uncertainty of the pandemic was followed by sky-high inflation, swiftly followed by dramatic interest rate hikes. Now people are concerned about a potential recession and the impact it might have on their jobs.

High inflation and recession fears are just two reasons that credit reporting agency TransUnion predicts delinquency rates for credit card and personal loans will increase this year. “It’s not surprising then to see pronounced increases in delinquency rates for credit card and personal loans, two of the more popular credit products,” said Michele Raneri, TransUnion’s vice president of U.S. research and consulting.

Stimulus and other pandemic payments meant many people put more cash into their savings accounts in 2020 and 2021. However, according to Federal Reserve data, those balances are starting to fall. Indeed, some people have taken on debt to cover higher living costs. The latest U.S. census data showed that a third of Americans used credit cards to cover essential costs in the initial weeks of January.

Sadly, these are all signs that people are struggling and that there could be more trouble on the horizon. Using savings or debt to cover expenses is understandable, but it’s only a temporary solution — at some point that money will run out. When that happens, people could start to fall behind with their payments. TransUnion predicts delinquencies will rise to levels not seen since 2010.

What increased loan delinquencies mean for your money

It’s one thing to know that banks are getting ready for more delinquencies, but what does that mean for you? One big impact is that it could become harder to borrow money if you need extra cash. Lenders often tighten their requirements when the economy is struggling.

There are several factors lenders take into account when considering a loan or credit card application, but your credit score is an important one. Staying on top of your bills, paying down debt, and checking your credit report for errors can all help increase your credit score. It’s also worth being strategic in applying for new credit as well, as each application can ding your score.

Another way to handle the banks’ delinquency preparations is to avoid falling behind on your payments. Even one late payment can have a big impact on your credit score and potentially cost you money in fees. When you take on debt, make sure you understand what you’re going to owe each month and how that will fit in your monthly budget.

Given the pressures on household budgets these days, it isn’t hard to see why people are borrowing more. But try not to borrow more than necessary. If there are ways you can cut your spending or save up for purchases rather than taking on debt, in the long run it could cost you less and lower your risk of missing payments.

An emergency fund can also help you avoid loan delinquency. The idea is to have money stashed away in a savings account to deal with emergencies such as a job loss or other unexpected crisis. Not only can this help you to avoid taking on debt to cover an emergency, it can also help you stay on top of payments when life throws you a curveball.

If you do run into trouble making loan payments, talk to your bank or lender as soon as possible. It’s tempting to ignore the problem, but if you explain your situation, you might be able to work together to find a solution.

Bottom line

Times are tough for many Americans right now and this year could bring more economic difficulties. If you find you need to take on debt to cover everyday costs, look for ways to reduce your expenses or increase your income. It isn’t easy, but it could save you money and hassle further down the road.

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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.Emma Newbery 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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Can you really look stylish in items from the Dollar Tree? 

Keeping up with the latest fashion trends can come at a big cost. If you don’t want to run up a big credit card bill to look your best, it pays to find bargains on clothing and accessories wherever you can.

Fortunately, the Dollar Tree provides many opportunities to buy stylish items at a bargain price while still keeping plenty of money in your bank account. While a dollar store may not be the first place you would think to look for wearable goods, there are a few must-have fashion accessories you can pick up at the Dollar Tree that you should be sure to check out.

1. Scarves

Whether you want a fashion scarf to dress up an outfit or a winter scarf to keep you warm, Dollar Tree has you covered. In fact, many of the Dollar Tree scarves are seasonal items so you can get a festive Valentine’s scarf for February or enjoy a fall-themed scarf when the weather starts to get cold.

The material and style of the Dollar Tree’s scarves are surprisingly good for only $1.25, so you can build up a full collection of these accessories. This makes it much easier to change your wardrobe during the different seasons without spending a fortune on new clothes.

2. Stylish socks

Socks can do more than just keep your feet warm. They can add a fun touch to any outfit and complete your look. They can also come from the Dollar Tree rather than a fancy hosiery shop.

The Dollar Tree sells socks for men, women, and children. Its options range from designer-brands like Gold Toe to warm cozy winter socks to festive holiday footwear for St. Patrick’s Day or Christmas.

Some of its socks are better quality than others, so be sure to look at the material if you plan to wear them for a long time. Of course, with the low price of $1.25, if you get even a few wears out of a fun pair of socks, it may be worth it.

3. Winter gloves

Keeping warm for winter is a top priority in many parts of the country, and the Dollar Tree allows you to look fashionable while you do it. There are gloves available for men, women, and kids (and mittens for children as well, so you don’t have to worry about getting all those fingers lined up).

Dollar Tree gloves come in a range of colors and styles, so you can also match them to your winter clothing and ensure you look as stylish as possible even when you’re freezing your butt off.

4. Sunglasses

You don’t have to pay designer prices to get sunglasses that look great and shield your eyes from solar rays. The Dollar Tree has a huge selection with racks of sunglasses coming in at a great price. Children’s sunglasses are available too, so even the younger members of your family can pick the perfect pair.

These are just a small sampling of the great fashion items you can find at the Dollar Tree. Next time you’re near your local dollar store, stop in and check out all they have. You may just end up surprised at the great additions to your wardrobe.

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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.
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It’s a bold statement — and there’s truth to it. 

There’s a message that renters tend to be on the receiving end of, and it’s not exactly a positive one. Statements like “renting is a waste of money” and “you’ll never build wealth if you don’t own a home” tend to monopolize the media, driving renters to bemoan their choices and push themselves to buy homes of their own.

But while homeownership has long been hailed as the American Dream, the reality is that it’s not right for everyone. And to be clear, this isn’t only a matter of income. You could earn a $500,000 annual salary and have $2 million in your savings account, and you can still make the argument that renting instead of owning is the right choice for you.

There’s perhaps no one who agrees with this sentiment more than financial guru Ramit Sethi. In a recent tweet, he tried to explain that he’s not “anti real estate” as some might accuse him of being. Rather, he believes in running the numbers before you buy a home and seeing through pro-homeownership propaganda. And while the latter may be a bold statement, it’s an easy one to back it up.

Consumers are often pushed to buy

There’s a lot of pressure out there to buy a home due to the financial benefits, which is why Sethi feels that pro-homeownership propaganda is so prevalent in the U.S. But the reality is that homeownership isn’t right for everyone. And it’s very important to recognize that renting a home is not akin to throwing money away.

When you rent a home, you don’t build equity in it — this much is true. But you do get something in return, and it’s a place to live.

When you own a home, you get a place to live and the chance to potentially make money when you sell your property down the line. But you’re not guaranteed to make money by any means. And even if you’re able to sell your home for a higher price than what you paid for it initially, that doesn’t mean you’re going to end up coming out ahead financially.

Let’s say you buy a $300,000 home that you eventually sell for $600,000 in 20 years’ time. At first, it might seem like you’re making a $300,000 profit.

But how much will you have spent during those 20 years on mortgage loan interest, property taxes, homeowners insurance, maintenance, and repairs? When you add it all up, you may not end up profiting at all.

Plus, when you own a home, you tie up lots of money in a single asset. That could limit your ability to invest and profit elsewhere.

Buy a home because you want to, not because you’re pressured to

There’s a lot of work and financial commitment that goes into owning a home. So if you’re going to buy one, do so because you want to — not because you feel compelled to. There are plenty of successful people who rent their homes rather than own them. And if you feel that homeownership isn’t for you, there’s nothing wrong with being a lifelong renter.

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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 closed account can lead to a financial headache or two.  

Imagine you’re about to pay for groceries. You pull out your debit card only to be told the charge was declined by your bank. You wonder what gives. You’ve never had so much as an overdraft, and know that there’s plenty in your checking account to cover the cost of groceries. Only later do you learn that the bank has closed your account.

Why would a bank close an account?

There are a number of reasons a bank may close an account. They include:

The account is inactiveThe account has a negative balanceThe bank suspects you of committing fraudYou have an excess of overdraft feesYou break a bank policy

Must the bank notify you?

No. It may come as a surprise that banks can close an account for any reason and are not required to provide notice. Let’s say you have several bank accounts and rarely use one of them. It’s possible you won’t know that the account is closed until you attempt to access funds.

What happens to the money?

If you have money in the account at the time it’s closed, the bank is required to return it to you minus any outstanding fees. If an automatic deposit is made into that account after it’s closed, those funds must also be returned. Typically, the bank will send a check.

If your account has been inactive for years and the bank doesn’t know where to find you, the money may have been sent to the unclaimed property office in your state. Retrieving the funds is as easy as contacting the appropriate office and providing pieces of information that prove your identity.

Why does it matter?

Having a bank account involuntarily closed can be a hassle for years to come. Here’s how:

When a bank closes an account because of an unpaid balance or suspected fraud, it’s reported to a company called ChexSystems. Banks routinely request a report from ChexSystems before allowing a new customer to open an account, making it difficult for you to open a new account with another bank.

If an account is closed due to an unpaid bank balance, that debt could be forwarded to a collection agency. Once it’s forwarded, that action is reported to the credit bureaus and can affect your credit score for up to seven years.

There are several pieces of good news here, though. The first is that you’re entitled to a free copy of your ChexSystems report once a year. Look it over, and if you find any mistakes, dispute them with ChexSystems. Also, as soon as you pay off any outstanding balances with your old bank, you can request to have the record removed from your ChexSystems report. Finally, there are banks that do not rely on ChexSystems to screen new customers.

If you want to stay with your bank

Changing banks can be time-consuming. If you decide that you want to stay with your bank after an account is involuntarily closed, here are three steps you can take:

Find out why the account was closed. Call your bank and ask it to explain why they chose to close the account.Pay the balance. If the reason the account was closed was due to an unpaid balance, find out how much it is and pay it off.Ask to reopen the account. Once your account balance is settled, the bank may be willing to reopen it. If it’s unable to do that, you can explore opening a new account with the same bank. If the bank won’t allow you to open a new account, it’s time to look for a new financial institution.

If you have any reason to believe your account was wrongfully closed, contact the Office of the Comptroller’s (OCC) Customer Assistance Group.

Ideally, you’ll never experience an involuntary bank account closure. However, if it happens, you have options.

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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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