Money Management

It takes a cool head to prosper during a market crash.  

The U.S. has weathered several big stock market crashes. Although the market has rebounded each time, a crash leaves plenty of people in its wake. For example, many investors lost everything on Oct. 29, 1929, when the New York Stock Exchange crashed.

In the shadow of that crash, the U.S. and the rest of the industrialized world fell into the Great Depression. People feared for their jobs and wondered where they would find the money to pay bills. Consumers cut back on big-ticket items typically bought on credit. Due to the cutbacks in spending, large companies slowed production and furloughed workers. Suddenly, those fears of job loss became a reality.

And yet, through each market crash, there have been those who have prospered. While others panic, they remember that the market has historically roared back after each crash. In anticipation of a time when the market feels bullish again, they take the opportunity to fatten their portfolios.

Getting rich when others lose hope

The oil baron J. Paul Getty received an inheritance of $500,000 in 1930, shortly after the crash. Rather than sit on the money, Getty got busy. Seeing that the price of oil stocks had hit rock bottom, he snatched them up at a bargain basement price. The result? When the market rebounded, Getty was a rich man, thanks to his action when the economy appeared to be at its worst.

The same thing happened to people like Warren Buffett, Jamie Dimon, and Carl Icahn during the Great Recession of 2008. Each zigged when the rest of the world zagged. Rather than run around like their hair was on fire, they each made a conscious decision to buy while prices were low.

The thing about those who get rich when the market crashes is this: There’s nothing magical about the steps they take to position themselves. The next time the market crashes — or even takes a dramatic dip – you, too, can take advantage of the situation.

Characteristics of money-makers

While those who become rich by investing money each have their own story to tell, they share specific characteristics.

They pay attention

Crashes rarely come out of left field for those who watch the market. It was no surprise to those in the know when the dot-com bubble burst in the early 2000s. The value of tech stock climbed so dramatically in such a short period of time that some recognized it for what it was — an unsustainable bubble.

That’s not to say that anyone has the gift of predicting what the market will do with 100% accuracy, but those who pay attention learn to spot patterns. It’s okay to be suspicious of anything that seems too good to be true.

Once the bubble burst, they took advantage of low prices to buy stock in companies they believed would recover.

They hold tight

Many investors will panic and sell during a financial crisis, ultimately regretting the decision when the value of their previous holdings rebounds. To find an example, we need only look back to spring 2020. Over a short period, the S&P 500 dropped by over 30%. By early summer, it was already clear that the market losses associated with COVID-19 were just a blip on the radar screen. By the end of 2020, those who sold had missed out on 65% gains from the bottom of the crash.

If you believe in your investment strategy and have faith in your choices, you must be willing to ride out the crashes. Trying to time the market is likely to cost you money.

They’re picky buyers

Looking back at the Great Recession of 2008, we can see that the investors who wound up with the fattest portfolios were picky about the bargains they bought. It’s all about quality over quantity.

The goal is not to buy the cheapest stocks or the stocks that fall the most. The goal is to buy the highest-quality stocks you can find at the best prices available.

They plan ahead

Bear markets do not tend to last long. The average length of a bear market is approximately 9.6 months. However, the average bull market lasts for 2.7 years. While that’s good news for the economy, it also means you have less time to enhance your portfolio by scooping up low-price quality stocks.

Let’s say you spend 50 years of your life investing. You can expect to experience approximately 14 bear markets. You want to be ready for the next bear market or market crash by having enough money put away to take advantage of low prices.

Since there are no guarantees in life, the best any of us can do is learn from history, and history shows there is a certain type of investor who is determined to come out ahead, no matter what befalls the stock market.

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You don’t have to spend a lot to have fun and be social. 

If you’ve been forced to cut back on spending due to inflation, you’re not alone. A good 76% of middle-income earners are spending less than usual on things like restaurant meals and entertainment, according to a recent survey by Primerica. And the reason is that money has gotten tight, and their paychecks just aren’t going as far.

Of course, if given the choice between dining out and attending social outings versus racking up credit card debt, you may be inclined to stay home and avoid digging yourself into a financial hole. But just because you’re short on funds for leisure purposes doesn’t mean you’re doomed to weeks of microwavable meals and solitude. Here are five ways you can eat well, stay busy, and socialize without spending a fortune.

1. Host potluck dinners

Dining at restaurants isn’t just about filling your stomach with great food. It’s also a great way to socialize. But you don’t have to give up on the latter aspect. Instead, invite friends to your place for a potluck meal where everyone contributes something. You’ll get to sample different dishes and catch up with your inner circle without having to worry about leaving an overworked waiter a tip.

2. Do a recipe challenge with your friends

Maybe there’s a recipe you’ve been wanting to try, only you’re intimidated by the different techniques and longer list of ingredients. In that case, why go it alone? Invite friends over for a recipe challenge. Tackle that meal together and enjoy it together. And if you so choose, take pictures or videos along the way to document the experience and have something fun to look back on.

3. Have a movie marathon

Going to the movies has become unbelievably expensive — especially if you have the gall to want popcorn and a soda, too. A better bet? Host a movie marathon. Microwave some popcorn, have friends bring candy and beverages to share, pick a theme, and indulge in several hours of cinematic thrills.

4. Get outdoors

Spending time in nature can be good for the soul — and it doesn’t have to cost a penny. Find a new park and meet for a picnic, or round up some active friends and go for a hike. You might appreciate the change of scenery more than you anticipate.

5. Start a book club

If you have a form of ID and a pulse, you can generally qualify to get a library card. From there, you’ll have access to tons of books you can read when you want to escape reality. Better yet, turn your love of reading into a social activity by starting a book club with friends. It’ll give you yet another recurring activity to look forward to that doesn’t have to cost money.

Cutting back on leisure spending isn’t easy. But just because you’re looking to conserve funds doesn’t mean you’re doomed to a miserable existence. There are plenty of ways you can stay busy and enjoy your life without busting your budget or adding to a pile of debt you’re trying to make go away.

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It’s that time of year when folks get cabin fever — get a head start on finding vacation rentals. 

Now that the kiddos are back in school, parents and family have time to breathe and relax. Big holiday gatherings can be exhausting. Sometimes, a trip away from the hustle and bustle is just what you need to recharge your social batteries.

Many folks are making financial New Year’s resolutions (spoiler: most worry about inflation). Spend less, save more. Vacations are great, but it’s essential not to break the bank with a trip to the Bahamas.

That said, financial burdens like debt have psychological costs. How we relieve those debts varies. Some folks meditate. Others travel. Beautiful vistas, gorgeous views, and exciting cities can ease stress. Lighten the load. And that’s reasonable, so long as you can afford to do so.

Thanks to apps like Airbnb, traveling on a budget is easier than ever. (And stricter Airbnb laws might bring down rents in 2023.) Here are three beautiful Airbnb getaways that cost less than $100 per night.

Three affordable getaways

Check out these three stays, each with different scenery and activities:

Fantasy fans and hiking enthusiasts might enjoy the Hobbit Cottage, a Lord of the Ring-inspired cottage for two. Located in Ohio, near Zion Park, the cottage offers guests a one-of-a-kind experience and proximity to a gorgeous national park ($428 for five nights).Looking for a place to get away from it all? Consider the large studio of the castle Château de Salamon, located in Requista, France. It’s quiet and surrounded by greenery. Guests have the option to swim or canoe along the bordering Tarn river ($356 for five nights).Folks who enjoy the salty smell of sea breezes might fall in love with a suite at Playa Arcangel II, located in Playas de Rosarito, Mexico. Residents access a private beachside community and a great view. It boasts 180+ reviews and a 4.74 stars rating ($428 for five nights).

There are thousands of options to choose from. It can get overwhelming, but a wide selection means it’s a good idea to decide what kind of vacation you want before you dive into Airbnb listings.

So you’ve got options and the means to explore them. But first, you need to save up for the trip.

Automate your savings

Saving money, aka shaving dollars off your paycheck, is easiest when you don’t have to think about it. The temptation to spend it is strong. Consider following this simple strategy to save up enough money to pay for your next vacation:

Set up a vacation fund. Consider a high-yield savings account.Automate saving money.Track savings with one of the best budgeting apps out there.

Many banks allow users to set up auto-deposits. It’s a steady, predictable way to build savings. Track them with a budgeting tracking app to stay motivated.

My housemate has separate savings accounts for home expenses, family vacations, and emergencies. It’s an intuitive way to track savings. Opening separate accounts might motivate you to save even if you cannot automate deposits.

Prioritize affordable activities

Last month, I returned from a three-day trip to Joshua Tree National Park. Four friends and I could keep costs around $100 per night by sticking to low-cost activities like swimming, hiking, and photography. Plus, we made home-cooking our meals part of the Airbnb experience.

The vacation was a much-needed break from family holiday shenanigans. Rather than stretch ourselves thin by immediately returning to our day jobs (or post-graduate studies), we took a short holiday. My side hustles remained when I returned — and my energy spiked.

If you can afford to save for a beautiful Airbnb getaway, don’t rule it out right away. It might be just the thing you need to perk you up for the rest of the winter season.

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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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuit. The Motley Fool has a disclosure policy.

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What if your gardening hobby could pay for itself? 

As someone who aspires to become a homeowner in the next few years, I spend a lot of time looking at houses in my city and dreaming. It’s my plan to buy a fairly small single-family home in my area, but a home with extra space could be a boon to the owner’s savings account. How so?

If you’re looking to buy a home, buying one with extra space could offer some money-making opportunities. Depending on where you live, you might be able to find a good deal on an older, larger home (especially if it needs some work), possibly with a piece of land or some outbuildings like a detached garage. Keep reading for ways to make some dough off your extra space.

Extra space inside

This could consist of a spare room, an empty basement, or even a whole home next to your own, as in a duplex. It could also be that you live on the top floor and have no use for the bottom floor, or vice versa. Here are two thoughts.

1. Office space

In some areas, you’ll find a lot of businesses operating out of residential homes, perhaps on the first floor (while there is a living space upstairs for either the business owner or a residential renter). If you have the perfect welcoming space for an accounting firm, a hairdresser, or another small business, consider putting it up for rent, if residential area businesses are allowed in your city.

2. Short-term rental

Vacation rental companies like Airbnb have unfortunately made life more difficult and long-term rentals more expensive in many cities, so I am reluctant to suggest this option. Nevertheless, if done sensibly and sustainably (meaning, you’re renting out a piece of your own home, rather than buying up blocks of cheap rental properties and holding them as vacation rentals to make money while local renters are priced out of the market), this is an option for you.

Extra space outside

Got an acre of land? Or even a nice fenced-in backyard that you rarely use? Here are two more ideas.

3. Garden space

If you enjoy gardening, and live in an area where the weather makes it a feasible and popular hobby, but you have no desire to fill your entire yard with your own plants, maybe some neighbors would want to garden in your yard for a small monthly plot rental fee. This could make your own garden hobby more affordable, and create a little community garden to boot.

4. A mini dog park

A lot of dog owners are lacking fenced backyards of their own, so you might consider advertising your space as a rental dog park. Charge a small fee, maybe $5 an hour, and provide a bucket of tennis balls if you feel like it. I highly recommend also providing a trash can and bags so visitors can clean up after their dogs!

Extra space in outbuildings

If you’ve bought an older home, it might come with some outbuildings. Maybe you’ve got a big detached two-car garage or even a small barn. Consider these additional two opportunities.

5. Garage space for rent

If your neighbors need a place to retune an engine or perform an oil change, rent out spaces in your garage for a nominal fee ($25-$50 a day, perhaps).

6. Recreation storage in the offseason

If you only want to rent out your outbuilding space some of the time, consider offering off-season storage for vehicles like boats (kayaks, canoes, and beyond), campers, and small RVs. You could research storage fees in your area and find a fair price to generate some interest in your space.

Ultimately, having a larger home or yard than you can use could help you make some extra cash and maybe even help you get to know your neighbors. Think creatively to pick the right idea for your home.

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You’re taking a risk, no matter how you look at it. 

You might reach a point where you need to borrow money, and soon. If your car needs a $3,000 repair, for example, and it won’t run without it, then you can’t exactly afford to spend months without a vehicle while you do your best to save up that cash.

Now, you may have different options in that sort of scenario. One is to charge the repair on a credit card and pay off the balance over time. Doing so, however, will mean accruing interest on the balance you carry forward, thereby making it a lot more expensive.

Also, too high a credit card balance could cause damage to your credit score. That’s not something you want either.

But you may not necessarily need to resort to credit card debt to address an immediate need for money. If you have funds in a Roth IRA, that account could serve as a source of emergency cash.

If you take a withdrawal from a traditional IRA prior to age 59 1/2, you’ll risk a 10% penalty for accessing your money early. But the reason that penalty applies is because you get a tax break on the money you put into a traditional IRA.

Roth IRAs work differently. With a Roth IRA, your account is funded with after-tax dollars, so there’s no immediate tax break on your contributions. Because of this, if you need money in a pinch, you can take an early withdrawal from a Roth IRA and avoid that 10% penalty, provided you only touch the principal contribution portion of your account, and not the gains portion.

But while tapping your Roth IRA to access money in an emergency might seem like a better route than racking up credit card debt, there’s a danger to raiding your retirement savings. So in this case, withdrawing from your Roth IRA isn’t necessarily the better call.

You don’t want to leave yourself short

Any time you take money out of a Roth IRA, you’ll leave yourself with less savings for retirement. So while you can access some of your Roth IRA funds penalty free, doing so could mean facing a financial shortfall later in life, when you don’t have the option to keep working to make up for it.

Not only that, but any time you take money out of a Roth IRA, you lose out on the chance to invest it in a tax-free manner. So let’s say you take a $3,000 withdrawal to cover a car repair. Leaving that money invested for several more decades could turn it into $12,000. So all told, you’re losing far more than the original amount you remove.

Meanwhile, if you carry a credit card balance of $3,000 forward for a period of time, you might accrue, say, $600 of interest on it. That’s not a small amount. But taking an early $3,000 Roth IRA withdrawal might cost you $9,000 in gains as per our example. In that case, you’re really not benefiting financially by tapping your retirement account.

A tough call to make

Racking up credit card debt can be dangerous. But so can raiding a retirement plan ahead of schedule.

Your best bet is to build yourself an emergency fund so you have cash reserves to tap when unplanned expenses arise. But in the absence of that, you may actually find that carrying a credit card balance makes more financial sense than raiding your retirement savings.

If you end up going the credit card route, though, do your best to shed your debt as quickly as possible. That could help minimize the amount of interest you rack up, and also, help minimize any potential damage to your credit score.

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Are your kids begging for one, too? 

When I was a kid, everyone seemed to want to get their hands on Beanie Babies. I had friends who collected them obsessively. And many of my friends still have those Beanie Babies — either to pass along to their children or potentially convert to cash.

But while kids today may not be clamoring for Beanie Babies, there’s another hot toy that seems to have lured them in — Squishmallows. If you’re not familiar with Squishmallows, imagine a squishy toy that’s sort of a hybrid of a pillow and doll. Squishmallows come in different shapes and sizes, and they can really serve as the ultimate comfort toy due to their squeezable nature.

Heck, I even know some adults who love Squishmallows. A friend of mine uses one as a body pillow to help her sleep at night.

Meanwhile, you can find Squishmallows at a host of retailers. But you may want to keep an eye for them the next time you visit your local Costco.

A toy that can put a smile on any child’s face

When my 8-year-old daughters were gifted Squishmallows this past holiday season, they pretty much squealed with delight. So if you have a special event, like a birthday, coming up, you may want to add Squishmallows to your shopping list.

Now, you can find Squishmallows online at Costco, and there’s a nice variety to choose from. But if you want to keep your credit card tab to a minimum, you may want to see what prices your local store has to offer.

Right now, for example, Costco is selling a 16-inch Squishmallow online for $14.99 — and that’s if you buy two. But the last time I saw these at my local Costco, which was in late 2022, they were just $13.99.

Clearly, the extra $1 isn’t going to make or break your savings account. But you might as well do what you can to spend less.

Is Costco the best place to buy Squishmallows?

It might be, but it’s always good to do your research, especially if you’re looking to buy Squishmallows for multiple kids in your life (or adults — no one’s judging). Right now, Amazon, for example, has different 16-inch Squishmallows available for almost $28 or more. So clearly, Costco has the much better deal.

Target’s prices, meanwhile, are a little more competitive. There, the price point seems to be $19.99 and up for 16-inch Squishmallows. But that’s still not quite as low as Costco’s offer.

That said, Costco’s Squishmallow stock may be more limited. So if you’re seeking out a particular Squishmallow, you may need to look outside of Costco.

Will the Squishmallow fad fizzle out?

Probably. That’s just how fads work. But remember, you’re probably not buying a Squishmallow as a collector’s item that will one day make you rich. Rather, you’re buying it as a gift for someone to make them happy. So whether Squishmallows retain their popularity or not, you have a prime opportunity to put a smile on someone’s face — and give them a gift they’re likely to really get excited about.

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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 and Target. The Motley Fool has positions in and recommends Amazon.com, Costco Wholesale, and Target. The Motley Fool has a disclosure policy.

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