Money Management

It could end up costing you a lot of money. 

There are plenty of good reasons to pay for an Amazon Prime membership. For one thing, that membership gives you access to free two-day shipping on purchases of any amount. Normally, you need to spend $25 on Amazon to qualify for free shipping, and you could end up waiting a week or longer for your items to arrive.

Prime members also get to enjoy free TV, movies, and music streaming, as well as free monthly book downloads. And as a Prime member, you might also have the option to turn Amazon into your own personal dressing room.

Amazon has a Try Before You Buy program that’s limited to Prime members. Under this program, you can have items like clothing and shoes shipped to your door without having to pay for them upfront.

From there, you get a seven-day window to try on your items and decide if you want to keep them. If you do, you’ll check out as you would for any other Amazon order. And if you don’t want your items, you can simply return them and avoid having your credit card charged.

The Try Before You Buy program clearly offers Prime members a world of flexibility. But there’s one trap you’ll want to avoid if you’re going to take advantage of it.

Don’t get charged for items you don’t want

Clothing and shoes can be some of the trickiest items to purchase online. That’s because you don’t know how a given item is going to feel or fit until it’s actually on your body.

Try Before You Buy helps remove the financial risk associated with not being sure of what size you need. Rather than pay for an item only to have to return it and sit tight for a refund, you can avoid paying a dime until you’re certain the item is a keeper.

But if you’re going to use the Try Before You Buy program, make sure to pay close attention to when each seven-day try-on period ends. If you don’t send your items back to Amazon on time, you’ll end up being charged for them.

A good way to use the Try Before You Buy program

It’s easy to let an errand like an Amazon return fall by the wayside. So if you’re going to use the Try Before You Buy program, pay attention to when your items ship out so you know when to expect them (Amazon should give a delivery estimate). Then, schedule a task on your calendar to try on your items and potentially return them once they’re set to arrive.

For example, if your anticipated delivery date is a Monday, schedule an hour from 6 p.m. to 7 p.m. on Wednesday to try on your items and head over to a UPS store or other location to return them that night if they don’t work for you. Having that task scheduled ahead of time will make it less likely that you’ll forget to get it done as life gets busy — and that you’ll end up with an unwanted credit card charge in the process.

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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. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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I bonds thrive in a high inflation environment, so what does the future hold? 

Everyone knows the saying “high risk, high reward,” the rule that is almost a law of investing. However, in 2022 some investors seemed to invert the rule. Typically-high-yielding stocks had an abysmal year. But some bond holders got a great return on their investment while putting their money in one of the safest bonds available. How is that possible, and can investors still take advantage of I bonds?

What are I bonds?

In the case of a series I savings bond, or I bond for short, the name informs the meaning. At its core, an I bond is simply a bond whose interest rate is adjusted for “I,” or inflation. And in a high-inflation environment, an I bond can give investors the best of both worlds, yielding high returns without exposing the underlying principal to much risk.

I bonds are some of the least-risky investments available on the market, thanks largely to the issuer: the United States Treasury. The Treasury, which has never defaulted in its two-century history, is fully backed by the credit of the federal government and widely considered to be one of the most creditworthy institutions in the world. Barring an extended debt ceiling crisis this year, the Treasury is expected to honor its debt obligations for the foreseeable future.

Typically, low-risk investments like I bonds yield low returns, but just the opposite happened in 2022. While most bonds make payments according to a fixed rate, I bonds are subject to a variable rate which increases when inflation rises and decreases when inflation falls. For a year with rapid runaway inflation like 2022, the rates offered on I bonds quickly rose to nearly 10%, a previously unimaginable return for one of the safest bets on Wall Street.

Consider this…

For the average investor, I bonds may seem like an incredible buying opportunity. However, like any other investment, I bonds come with some limitations. Before you buy, consider two things: holding periods and investment maximums.

While I bonds may be easy enough to buy, they can be trickier to sell if you don’t pay attention to the fine print. Once you buy an I bond, you’re locked in for a year before you can sell it again. And after that first year, you still need to hold on for another four years in order to avoid the heavy surrender charge of three months of interest. So, if you buy an I bond today, you could be stuck with that investment until 2028, regardless of how inflation, and the bond’s interest rate, change over those five years.

Another drawback of I bonds is the relatively small amount you can buy. At first glance, you might be tempted to put all of your savings into a low-risk, high-return investment like I bonds. But unless your savings amount to under $10,000, you’ll hit the buying ceiling. The Treasury only allows consumers to buy up to $10,000 of I bonds each year, so while I bonds might make up part of your portfolio, they aren’t likely to make or break your personal finances.

The future of I bonds

In 2022, buying an investment indexed to inflation sounded like a great idea, and even more so when that investment was backed by the full faith and credit of one of the world’s largest governments. However, with inflation now being reigned in, investors might have second thoughts.

The interest rates offered on I bonds are recalculated every six months based on inflation rates. So while you might buy an I bond yielding 6.89% annual interest today, that rate is far from guaranteed. The Fed appears to be succeeding in its fight against inflation, which is good for the economy but bad for I bond holders. Should the Fed succeed in reducing inflation to a more typical 2% interest rate, I bond holders could see their returns halved.

I bonds grabbed headlines throughout 2022 as a low-risk, high-return investment for the average American. However, variable rates coupled with downward trending inflation and restrictive holding periods may be enough to dissuade potential investors.

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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 change in classification of gun purchases promoted the change. 

An uptick in gun violence in recent years has made gun control a major issue on a national scale. But in spite of that, the Constitution does give consumers the right to bear arms. And now, some Florida lawmakers have banded together to prevent credit card companies from tracking those purchases under a new categorization system.

Lawmakers seek to protect gun owners

Florida officials have proposed legislation that prevents the tracking of firearm and ammunition purchases. State Senator Danny Burgess and Representative John Snyder, both Republicans, are introducing the “Florida Arms and Ammo Act” with the backing of Agriculture Commissioner Wilton Simpson.

This bill was spurred by an announcement made last year after the world’s largest payment processors said they will adopt the International Organization for Standardization’s new merchant code for gun shop sales. Prior to this change, firearm and ammunition purchases were categorized as general merchandise. The fear is that once this change is implemented, those seeking to purchase firearms and ammunition may have their right to do so violated, or encounter difficulties in completing the purchases they have the right to make.

It’s also unclear as to how credit card companies might use this information. Some lawmakers may be concerned that credit card issuers might treat consumers with a history of gun purchases differently, such as extending lower purchase limits.

Of course, gun control advocates have argued that having a separate merchant code for firearm and ammo purchases could help address the problem of gun violence. And also, it’s common practice for credit card purchases to be bucketed into different categories in the first place, so categorizing gun and ammo purchases isn’t such a stretch. After all, if credit card companies can have a special code for airlines and supermarkets, why can’t they have one for gun merchants?

An ongoing matter of debate

Ultimately, lawmakers fighting this recent change are making the argument that categorizing gun and ammo purchases might in some way limit consumers’ ability to make these purchases, or otherwise negatively impact them in a different way. And so we may see bills similar to the one Florida lawmakers have proposed come down the pike.

Ultimately, it’s hard to know what will come of the new Florida bill, since the matter at hand is complicated. But the reality is that categorizing credit card purchases has long been standard, so it almost raises the question of why firearm purchases haven’t been similarly tracked in the first place.

At this point, consumers will have to wait and see how this situation plays out. In the meantime, those who are worried about being impacted by this change can contact their state representatives to share their concerns.

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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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You need to read this if you’re a parent buying a new home. 

Many people opt to purchase a home when they’re first starting a family. After all, having kids makes you think about the future and may prompt you to decide to set down roots so your kids can grow up in a family home throughout their childhood.

Unfortunately, with so many life changes going on at one time, it’s easy for parents to make mistakes during the home-buying process. You don’t want this to happen to you, so be sure to avoid these three common errors.

1. Ignoring the school district

As a new parent, it may seem like the day your child starts school is light-years in the future. But, the reality is, this milestone will creep up on you faster than you can imagine. And when your child is ready to get an education, you want to make sure you’re in a school district you feel comfortable with.

Unfortunately, some parents assume they can purchase a starter home and not worry about the school district, then move when their kids get old enough to attend school. This won’t always work out, though. You may fall in love with the neighborhood or not be able to move for financial reasons and then find yourself facing a serious problem if you aren’t comfortable with your kids attending school where you live.

You also want to be sure you’re in a good school district because many people look at this as a key criteria when shopping for a home. You’ll limit your pool of potential buyers down the road if you don’t consider this issue.

2. Thinking short term

When you have little kids, it’s easy to imagine they’ll be small forever. But, as mentioned above, they grow up faster than you think. So you don’t just want to find a house that works well for babies and toddlers — you want a property that will be a good fit for teens too.

If all the bedrooms are very close together, for example, that might be great when you’re running into your toddler’s room three times a night. But will you still be OK with the arrangement when they have their friends over until all hours as they move into high school?

Be sure to think about how the home will work both now and in the future in case you end up staying there for your kids’ entire childhood.

3. Spending too much on a property

Between birth and age 18, you’ll spend around $310,605 on raising your child. That’s a huge sum of money. You absolutely cannot afford to overcommit yourself to a home when you’re also taking on the costs of raising a human into adulthood.

While you may try to justify the purchase of a too-expensive house if it seems like the perfect family home, you will regret your decision if you stretch to buy a property and then cannot afford to cover both your mortgage and all of the other costs of parenthood.

Be sure to keep your housing costs to around 25% of your take-home pay, or less so you can accomplish other financial goals and buy all that stuff your growing kids need.

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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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