Money Management

A personal loan may not be as affordable as you’d expect. 

There’s a reason personal loans have long been popular with consumers. With a personal loan, you can borrow money for any purpose, whether it’s to renovate your home, fix up an aging vehicle, or start a small business. Plus, the interest rate you’ll pay on a personal loan will generally be much lower than what a credit card will charge you.

But personal loan originations slowed down in 2022, according to recent data from VantageScore. In December 2021, the percentage of consumers with new personal loan accounts was 3.43%. In December 2022, it was just 2.8%.

Why the decline? Much of it might boil down to the higher cost of borrowing across the board.

Borrowing rates are way up

Last year, the Federal Reserve implemented several aggressive interest rate hikes in an effort to slow the pace of inflation. In doing so, it drove the cost of borrowing up across the board.

These days, consumers are looking at higher borrowing rates on everything from auto loans to personal loans to home equity loans. And that’s intentional.

The Fed wants to drive a slowdown in consumer spending to narrow the gap between supply and demand that’s been causing inflation to surge. And if it’s more expensive to borrow money, consumers are apt to want to borrow less — and spend less as a result. Since personal loan originations were lower in late 2022 than in late 2021, it’s fair to assume that higher borrowing rates played a role.

Recession fears could have made a difference, too

Last year, financial experts were quick to warn consumers about a potential recession in 2023. Some consumers may have taken those warnings to heart — and avoided taking on new debt as a result.

To be clear, that’s certainly a good thing, not a bad one. While personal loans can be easier and more affordable to keep up with than, say, credit card balances, at the end of the day, consumers who sign one still owe money on a regular basis. And making a monthly loan payment is difficult in the absence of a job. Since recessions tend to go hand in hand with layoffs, it makes sense that personal loan activity may have declined due to economic concerns.

Is it a bad time to take out a personal loan?

The fact that personal loans slowed down in 2022 isn’t that surprising. And it may be a sign that consumers are starting to borrow more conservatively on a whole.

That said, a personal loan could still be an affordable way to borrow, so consumers in need of money don’t have to rule them out in 2023. They just need to proceed with caution, especially since borrowing costs are still high and those recession warnings haven’t gone away.

Meanwhile, because borrowing rates are up right now, it’s important to shop around for a personal loan and compare interest rates on them. A little research could result in a lot of savings at a time when these loans are costing more.

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Homer, Marge, and the gang had it good — and on an income that wouldn’t go very far today. 

There’s a reason The Simpsons has managed to retain its popularity for more than 30 years. Many of us can relate to the antics and dynamics of Homer, Marge, Bart, Lisa, Maggie, and the many colorful characters that reside in Springfield.

But have you ever noticed that the Simpson family manage to enjoy a pretty cushy middle-class existence despite Homer’s relatively meager salary? Not only do the Simpsons own their own home, but they also have two cars and enough money to pay for extras, like Lisa’s saxophone and other music supplies which, even back in the early 1990s, couldn’t have been cheap.

In the 1996 episode “Much Apu About Nothing,” Homer’s paycheck is shown as grossing $479.60 per week, which translates to an annual income of about $25,000. And although that was not a particularly high income at the time, the Simpsons managed to make it work.

The Simpsons premiered on Dec. 17, 1989, and median income for U.S. households between 1987 and 1989 was $40,777, according to the U.S. Census Bureau. By 2021, the median household income had jumped to $70,784. But despite that increase, it’s become increasingly difficult to get by on a single middle-income salary. Here are some of the reasons why.

1. Housing costs have soared

In December 1989, the average home price was $76,498, as per the S&P Case-Shiller National Home Price Index. Today, it’s about $299,000. Clearly, home prices have risen at a considerably faster pace than wages. And since housing is typically the average American’s largest monthly expense, it’s easy to see why buying a home on a single middle class income has gotten so difficult.

Of course, these days, home buyers happen to be looking at higher mortgage rates and elevated home prices due to limited inventory. So today more so than ever, it’s extremely difficult to swing mortgage payments on a single income that’s average or slightly below average.

2. Higher education has become more of a necessity

Homer’s job didn’t require him to have a college degree. But many jobs today do. And since education costs have soared, that’s another expense many workers today have to bear — and pay off after the fact.

The average cost of tuition and fees at public in-state colleges is $10,423 for the 2022-2023 academic year, according to U.S. News & World Report. For public out-of-state schools and private ones, the average costs are $22,953 and $39,723, respectively. Since many people don’t pay for college upfront, but rather, pay off an education for many years post-graduation, it’s easy to see how that might put a strain on a middle-income wage — and make homeownership impossible.

3. Technology has strained budgets

When The Simpsons first premiered, many people did not have cable, and cell phones and internet service weren’t expenses workers had to bear. These days, it’s really hard to function without a cell phone or internet connection at home. And so today’s workers are looking at hundreds of dollars extra a month just to function in society, whereas The Simpsons, at least at the start, existed in an era where it was natural to frequently adjust the TV antenna to get a signal.

Clearly, we’ve come a long way since The Simpsons first aired. But in many ways, watching those earlier episodes of The Simpsons should make us long for a simpler time — a time when a college degree wasn’t such a necessity and it was possible to buy a home even if money wasn’t abundant. We can’t change the way technology and costs have evolved, though, so unfortunately, some of us might have to live vicariously through Homer and the gang — and find ways to stretch our income as much as we can.

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Keep these in mind as you add new credit cards to your personal collection. 

If you spent much of 2022 grappling with credit card debt, then you may be ready to swear off credit cards in 2023. But if your financial picture is brighter, a new credit card could actually give you more spending options and make your life more convenient. It could also open the door to more cash back and rewards.

But if you’ll be applying for a new credit card this year, keep these fees on your radar. They don’t apply to every card, but they might apply to one of yours.

1. Annual fees

Some credit card companies impose a yearly fee for the privilege of having a credit card. Now at first, annual fees might seem like something you should make every effort to avoid. But often, paying a modest annual fee might make it so you’re able to reap extra credit card rewards. It pays to run the numbers if you’re looking at a card with an annual fee to see if it makes sense.

Let’s say you’re charged an annual fee of $95 for a specific credit card. If that card’s rewards program is such that you’re able to rack up $150 more in rewards than you would on any of your other cards, then guess what? If you pay that $95, you’ll still come out $55 ahead. So don’t assume you should automatically skip those cards that come with a fee, because you might get your money back and then some.

2. Balance transfer fees

If you owe money on a few different credit cards, moving those balances onto a new card could pay off — especially if your balance transfer offer comes with a 0% introductory interest rate. But be careful, because balance transfer fees will often come into play with these offers, and you don’t want to get stuck with an overwhelmingly large one. Still, if you’re looking at a reasonable balance transfer fee, you might save yourself some money — and hassle — in the course of paying off your debt by only having one monthly payment to contend with.

3. Foreign transaction fees

Some credit card companies will charge a fee if you use your card overseas. This isn’t universal, though, so if you plan to do a lot of travel abroad, you may want to focus on a credit card where this fee doesn’t apply.

4. Late payment fees

Late payment fees are among the most avoidable when it comes to credit cards. The reason? If you pay on time, they won’t come into play. And to be clear, if you make your minimum payments on your credit cards, you’ll be considered to have paid on time.

Still, many credit cards charge late payment fees, so read the fine print to see what yours entails. In 2019, the average late fee amounted to $26, according to the Consumer Financial Protection Bureau.

Credit card fees have the potential to be costly — and they shouldn’t catch you off-guard. So be mindful of these specific fees if you’ll be adding new cards to your personal mix in 2023.

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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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If you’re struggling to land a job, you may want to explore new-to-you industries. 

If you’re without work or are looking to find a better job than your current one, you may be looking for job ideas. There are many jobs, but not every job is the perfect fit for everyone. If you’re willing to learn new skills, you may be able to transition into a different field by applying for a job in a new industry. Here are some sectors that have seen recent job growth.

These industries have seen significant job growth

The U.S. Bureau of Labor Statistics publishes reports highlighting employment stats in the United States. According to The Employment Situation report from December 2022, total nonfarm payroll employment increased by 223,000.

The report also highlighted other employment-related stats, including which industries have seen recent job growth. The following industries saw notable growth in December 2022:

Leisure and hospitalityHealthcareConstructionSocial assistance

A closer look at the types of jobs that saw growth

Are you considering applying for a job in one of these industries? Here’s a more detailed explanation of job growth based on The Employment Situation report from The Bureau of Labor Statistics.

Leisure and hospitality

In December, employment in this industry rose by 67,000. While employment in this field remains below pre-pandemic levels, food service and drinking places, amusements, gambling, and recreation, and accommodation jobs continued to trend upward.

Healthcare

Healthcare employment increased by 55,000 in December. The most notable job gains were in ambulatory healthcare services, hospitals, and nursing and residential care facilities.

Construction

In the construction industry, job growth increased by 28,000 in December. Specialty trade contractors added 17,000 jobs throughout the month.

Social assistance

The social assistance industry also saw significant job growth in December, with an additional 20,000 jobs during the month. Most notably, individual and family services jobs continued to trend upward.

Consider industries that are new to you

For job seekers struggling to land employment, exploring job opportunities in one of the industries mentioned above may be worthwhile. While it may feel easier to focus on jobs in familiar fields, expanding your job search to other industries can help you increase your employment prospects.

If you’re going to explore jobs in other fields, take some time to consider which of your existing skills match up nicely with the jobs that you see advertised. You’ll want to highlight those skills on your resume and in your cover letter and show how you can use those skills to help the company. You may be surprised how many skills carry over to other roles.

Learn new skills to make yourself more marketable

Don’t be afraid to learn new skills outside your everyday work experience. Expanding your skillset is an excellent way to make yourself more marketable to employers. Workers who take on new skills may be able to land better-paying work which can help them boost their checking account balance and help them afford a more comfortable life.

Do you want to boost your skills? You might consider taking classes in your free time or taking on a side hustle to learn more. Another option is to apply for lower-level roles in a different industry to work up to a more desirable position after you master the basics.

Life is expensive right now. With rising living costs due to inflation, we’re all looking for ways to stretch our money further. If you’re looking for money-saving tips, review these personal finance resources.

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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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