Money Management

You might manage to shed that debt sooner than expected. 

Many people run into a dilemma during the holidays: They want to make the season as special as they can for their families, but they don’t have the money in savings to do so. That’s where borrowing tends to come in.

It’s common for consumers to rack up debt on their credit cards during the holiday season in particular. But credit card interest can be very costly, and credit card interest rates can also rise over time, leaving borrowers in a bad spot.

Personal loans, on the other hand, can be a more affordable option for borrowing money. They tend to come with lower interest rates than credit cards do, and just as importantly, those rates are fixed. When you take out a personal loan, you can anticipate predictable monthly payments.

If you took out a personal loan this past holiday season to pay for gifts and other expenses that were important to you, you may have several years to pay that loan back. Personal loans, by nature, aren’t short-term loans that get paid back in 12 months or less.

But there’s generally no penalty to paying off a personal loan ahead of schedule. And doing so could save you a lot of money on interest. So if you’re sitting on a pretty fresh personal loan you want to shed quickly, here’s how to do it.

1. Get on a solid budget

Following a budget might make it easier to cut your spending across the board. And the less money you spend, the more you might have available for loan payoff purposes.

If you’ve never stuck to a budget before, don’t panic. Setting up a budget is easy, because all you really need to do is open a spreadsheet, list your various bills, and total them up. You’ll then want to make sure you’re spending less than what you bring home each month in your paycheck.

There are also various budgeting apps you can use to make budgeting easier. Many of them can even sync up with your credit cards and checking account to help you track your spending seamlessly.

2. Cut back on a non-essential expense

If your rent costs $1,200 a month and moving isn’t feasible, then spending less on rent probably isn’t an option (and getting a roommate for your one-bedroom home may not be a reasonable route to pursue). But if you’re willing to cut back on a non-essential expense in your budget, like social outings or restaurant meals, you might free up a nice amount of money to pay off your personal loan.

Will giving up something fun for a short while be difficult? Sure. But the upside is that you’ll get to shed your personal loan debt sooner — and benefit from unloading that burden.

3. Get a side hustle to boost your income

If cutting back on spending isn’t feasible or desirable to you, there’s another way to free up more money for debt payoff purposes: boosting your income with a second job. The gig economy is loaded with opportunities these days, so figure out how much time you’re able to carve out for a side hustle and find a gig that works for you.

Better yet, find a side job you might actually enjoy. It’s not easy to give up hours of downtime each week. If you’re going to do that, you might as well try to find a job you look forward to, like walking dogs or teaching young kids to play your favorite instrument.

Many people land in debt during the holidays. But if you’re now sitting on a personal loan balance you want to get rid of, you can follow these tips to close out the year debt-free.

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Is your emergency fund adequate, or is it looking sluggish? 

You never know when an unexpected expense might come your way, whether it’s needing to fix your car so you can actually get it out of your driveway or having to cover a surprise ER bill for an accident your child sustained during a regular weekend sports matchup. That’s why it’s so important to have money in your savings account for these types of bills — large unanticipated expenses.

You also never know when things might go south at your place of work, leading to layoffs. A solid emergency fund could be just the thing to get you through an extended period of unemployment.

But in a recent Transamerica survey, as of late 2021, the median emergency savings amount recorded was a mere $5,000. And 34% of those surveyed said they have less than $5,000 in savings for emergency expenses.

If your emergency fund needs work, boosting it should be your top priority. And now’s an especially important time to give your emergency savings your full attention.

Do you have enough cash saved for emergencies?

Is a $5,000 emergency fund enough? For some people, maybe. But your emergency fund should contain enough money to cover a full three months’ worth of essential bills. And in a more ideal world, you’d have enough cash in the bank to pay for six months of essential expenses.

Now, let’s say you live very frugally and only spend about $1,700 a month on essentials. In that case, you’re certainly in decent shape if you have a $5,000 emergency fund. But if you tend to spend $3,500 on essentials each month, then a $5,000 emergency fund just won’t cut it.

To be clear, any amount of savings you have is a positive thing. Even as little as $500 in the bank buys you some protection. But if your savings won’t suffice in paying for three full months of essential bills, then it’s time to focus on giving them a boost.

How to grow your emergency fund

For months on end, financial experts have been sounding warnings about a 2023 recession. Remember, a downturn isn’t guaranteed to happen this year. But it’s still a possibility everyone should prepare for. And if your emergency fund lacks money, you’ll want to address that issue before economic conditions worsen.

One good way to grow your emergency fund is to get yourself a side hustle. Sure, you could pledge to cut back on spending, too. But unless you’re willing to make big changes, working a second job is probably the fastest way to bump up your savings balance by several thousand dollars.

That said, if you’re really sitting on little to no money in savings, making a short-term but drastic change to your lifestyle could help you build up cash reserves. Giving up your apartment when your lease runs out and moving back home for six months, for example, could give you a solid opportunity to bank some serious cash.

It’s good to see that workers are saving for emergencies. But many people with $5,000 in the bank or less may not be adequately protected. If that’s the boat you’re in, the sooner you push yourself to grow your cash reserves, the more peace of mind you might enjoy — especially if economic conditions worsen this year.

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Moving quickly could work to your benefit. 

There are certain tasks in life that many of us tend to procrastinate on — things like cleaning out the garage, putting away the laundry, and, for some people, filing a tax return.

Taxes are due on April 18 this year. Normally, the filing deadline is April 15, but since that date falls on a weekend, and the next Monday is Emancipation Day, a holiday observed in Washington, D.C., filers get an extra few days this year to submit a return.

But just because you have until mid-April to file your taxes doesn’t mean you should wait that long. Here’s why it pays to submit your return well ahead of the April deadline.

1. You can get your refund sooner

Most people who file a tax return wind up being eligible for a refund. And so the sooner you submit your taxes, the sooner you can get the money you’re entitled to.

A lot of people these days are sitting on costly credit card debt, whether due to having racked some up during the holidays or due to covering expenses in a year of rampant inflation. If you’re sitting on a balance, for each day you carry it, it might cost you more in interest. The sooner you get your refund, the sooner you can start to chip away at that debt.

2. You can make a plan for paying your tax bill sooner

Many people’s tax situations changed in 2022 for different reasons. For one thing, the boosted Child Tax Credit filers enjoyed in 2021 didn’t get an enhancement in 2022, so that could lead to smaller refunds — or in some cases, owing the IRS money.

If you’re used to getting a check from the IRS during tax season and you’re now in a position where you have to pay, that could constitute a big strain. And the sooner you file your taxes, the sooner you’ll know how much you owe. From there, you can make a plan to get your tax bill paid by April 18 to avoid interest and penalties on it.

To be clear, you do not need to pay your tax bill the day you file your return. For example, you can submit a return on Feb. 18 and pay the associated bill two months later.

3. You can potentially avoid fraud

Scammers have a host of tactics up their sleeves to steal people’s money. One common scam is to get a hold of a Social Security number, file a tax return in someone’s name, and then divert their refund to a bank account only they can access.

But if you file your tax return early this year, you might manage to avoid falling victim to that sort of fraud. The reason? The IRS will only accept one tax return per Social Security number. If you file a legitimate return and then a scammer tries to file one a few weeks later, theirs will get bounced back as duplicate.

Many people find it difficult to motivate themselves to do their taxes early. But getting started sooner rather than later could really benefit you in more ways than one.

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Image source: Getty Images
What happenedHackers used the social media accounts of online stock and crypto broker Robinhood to promote a scam token on Wednesday. Fraudsters used a now-deleted post to promote a supposedly new Robinhood token. They offered Robinhood followers the opportunity to be among the first to buy its RBH token at a starting price of $0.0005.So whatAccording to Decrypt, the hackers made off with around $8,000 worth of Binance Coin (BNB) tokens. People who bought the token found they could not sell or transfer it afterwards, meaning that money is now likely lost. That said, the CEO of Binance tweeted that its team had locked the wallet that benefited from the scam, which was hosted on the popular crypto exchange.
Discover: Best places to buy bitcoinMore: Check out our updated list of best crypto apps including one offer with a $100 crypto bonus
In a statement, Robinhood said it’s investigating the unauthorized posts on its Twitter, Instagram, and Facebook profiles, which “were all removed within minutes.” While only a limited number of people fell victim to the scam, it highlights the danger of buying crypto based on social media posts.Now whatUnfortunately, the cryptocurrency world is rife with scams and there’s not a lot of regulation in place to protect investors. According to the FTC, crypto scammers made off with over $1 billion in assets between January 2021 and the end of March 2022.Fake tokens that promise investors a chance to get in early are one of several ways criminals rip off investors. Don’t trust crypto or other investment information you read on social media — even if it seems to be from a trusted source. Not only can accounts get hacked, fraudsters sometimes also imitate the accounts of major personalities to trick unsuspecting fans.It’s also important to always do your own research. In the case of the fake Robinhood token, a look at the company website would tell you the company wasn’t planning to launch its own crypto. Plus, know that if a token is only available from a decentralized exchange like PancakeSwap as RBH was, there’s more risk involved. While top crypto exchanges don’t necessarily endorse the cryptos they list, there is a vetting process involved.Other red flags to watch out for when buying a new crypto? Check to see if it has a reputable management team, whitepaper, and consider what utility the project has. If the project’s leadership is anonymous or inexperienced, that’s a reason to be cautious. Similarly, if it doesn’t have a website or whitepaper, don’t rush to buy it.Cryptocurrency investments are already risky in terms of the extreme volatility and uncertainty about the industry’s future. One way to mitigate that risk is to only invest money you can afford to lose. Another is to tread carefully in terms of the cryptocurrencies you buy and the platforms you use.
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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 positions in Binance Coin and PancakeSwap. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. 

What happened

Hackers used the social media accounts of online stock and crypto broker Robinhood to promote a scam token on Wednesday. Fraudsters used a now-deleted post to promote a supposedly new Robinhood token. They offered Robinhood followers the opportunity to be among the first to buy its RBH token at a starting price of $0.0005.

So what

According to Decrypt, the hackers made off with around $8,000 worth of Binance Coin (BNB) tokens. People who bought the token found they could not sell or transfer it afterwards, meaning that money is now likely lost. That said, the CEO of Binance tweeted that its team had locked the wallet that benefited from the scam, which was hosted on the popular crypto exchange.

In a statement, Robinhood said it’s investigating the unauthorized posts on its Twitter, Instagram, and Facebook profiles, which “were all removed within minutes.” While only a limited number of people fell victim to the scam, it highlights the danger of buying crypto based on social media posts.

Now what

Unfortunately, the cryptocurrency world is rife with scams and there’s not a lot of regulation in place to protect investors. According to the FTC, crypto scammers made off with over $1 billion in assets between January 2021 and the end of March 2022.

Fake tokens that promise investors a chance to get in early are one of several ways criminals rip off investors. Don’t trust crypto or other investment information you read on social media — even if it seems to be from a trusted source. Not only can accounts get hacked, fraudsters sometimes also imitate the accounts of major personalities to trick unsuspecting fans.

It’s also important to always do your own research. In the case of the fake Robinhood token, a look at the company website would tell you the company wasn’t planning to launch its own crypto. Plus, know that if a token is only available from a decentralized exchange like PancakeSwap as RBH was, there’s more risk involved. While top crypto exchanges don’t necessarily endorse the cryptos they list, there is a vetting process involved.

Other red flags to watch out for when buying a new crypto? Check to see if it has a reputable management team, whitepaper, and consider what utility the project has. If the project’s leadership is anonymous or inexperienced, that’s a reason to be cautious. Similarly, if it doesn’t have a website or whitepaper, don’t rush to buy it.

Cryptocurrency investments are already risky in terms of the extreme volatility and uncertainty about the industry’s future. One way to mitigate that risk is to only invest money you can afford to lose. Another is to tread carefully in terms of the cryptocurrencies you buy and the platforms you use.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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 positions in Binance Coin and PancakeSwap. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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You might end up regretting all of these. 

Some people are just plain frugal by nature — they refuse to spend more money than necessary, and they’re always looking for ways to save a few dollars. There’s absolutely nothing wrong with being frugal. In fact, making an effort to cut costs could bring you closer to meeting your financial goals, whether it’s saving for retirement, buying a home, or paying for college. A frugal lifestyle might also make it so you never have to carry a credit card balance forward — and pay interest as a result.

But in some cases, being frugal has the potential to backfire on you. Here are a few scenarios where frugal actions on your part might lead to not only wasted money, but also, added stress.

1. Doing your own home maintenance — and causing damage in the process

There are certain home maintenance tasks that aren’t all that difficult to complete — things like mowing your lawn and trimming your bushes. But if you’re looking at a more complicated type of maintenance, like cleaning out your gutters or dryer vent, you may want to outsource the work to a professional. If you attempt to tackle it yourself, you might end up causing damage to your home and costing yourself more than the fee to bring in an outsider who knows what they’re doing.

2. Addressing home repairs yourself — and getting hurt along the way

Doing your own home repairs is a great way to cut costs — if you really know what you’re doing. If you don’t, or if the work at hand requires special tools and skills you don’t have, you could end up not only causing further damage, but also, hurting yourself. And if you wind up with a $500 emergency room bill because you wanted to save yourself a $200 plumber fee, you’ll only end up kicking yourself.

3. Buying in bulk — but letting food spoil and go to waste

Buying groceries in bulk is a great way to keep your costs down. But bulk buying only works in certain situations. And if you buy in bulk under the wrong circumstances, you could easily end up having to throw spoiled food away.

It’s one thing to buy large quantities of produce, meat, and dairy products if you’re feeding a family and you’re confident you’ll be able to consume everything before it goes bad. But if you live solo, you may want to think twice before purchasing five pounds of fresh salmon or 32 servings of fresh broccoli in a single shopping trip. If you wind up throwing out a large chunk of your haul, you won’t end up with any savings whatsoever.

Being frugal is certainly not a bad way to live. And often, people who make a point to keep their living costs down tend to be appreciative of what they have, which is a great quality. But in some cases, frugal habits could end up causing more harm than good. It’s important to be mindful of that when making your spending decisions.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Use this time to shore up your financial bases and still have money available for fun. 

Whether it’s a result of soaring prices, debt, the high cost of rent, school expenses, or a desire to save, more and more people are living with their parents. It can make a lot of sense financially, but other aspects of the situation can put a strain on everyone involved. If you’re a young adult living with your folks, taking these steps may help.

1. Make a plan

Everybody’s circumstances are different. But a plan will help you and your family know that this isn’t going to be forever. Try to be clear on why you’re at home and set some financial goals, including what moving out will look like. That way, you have a clear end point and it will feel less like you’re going backward.

For example, if you’re trying to save for a down payment on your own place, think about how much you can put aside each month and when you will have enough. If you’re trying to get a job or complete your education, some of those goals might not be financial. That’s OK — the idea is to be clear on why you’re doing what you’re doing and be able to measure how you’re progressing.

Another aspect of planning is to set yourself a budget. Work out how much comes into your bank account each month versus how much you spend. Use that to estimate how much you can contribute toward rent, how much you might be able to save, and how much you might be able to spend on fun things.

The idea of creating a budget can sound both scary and restrictive. Instead, try to see budgeting as a tool that can help you live the life you want to lead. Budgets aren’t there to tell you you can’t buy the things you enjoy. They are there so you know how much you can spend on those things and still meet your other obligations.

2. Contribute to the bills

You may be living at home to save money on rent and utilities, but it’s still a good idea to contribute toward the cost of running the home. Not only will this better prepare you to cover the costs of your own place one day, but it may also ease some of the stresses of being under the same roof. Talk to your parents and try to agree on what would be a reasonable contribution to food, rent, and other household expenses.

3. Build your financial foundations

The current economic climate is not easy to navigate — on top of soaring prices, many young people are struggling work-wise, and economists warn that we may enter a recession this year. Given that your living costs are probably as low as they’ll ever be right now, it’s a good time to shore up your financial bases by taking these steps.

Build an emergency fund

An emergency fund is a stash of three to six months’ worth of living expenses that cushions you against the unexpected. If you lose your job or you (or one of your parents) face a medical emergency, having that cash in a savings account could make a huge difference.

Pay down debt

Debt is one of the main reasons that a lot of young adults move back home. It’s a wise move to cut your costs in this way, as debt can make it difficult to build financial stability. Check out our guide to paying down debt for tips on how to become debt free.

Build credit

A good credit score can make it easier to borrow money and qualify for the best credit cards. Even if you don’t plan to borrow, it still matters. Your credit rating can also impact your insurance costs, job prospects, and ability to rent an apartment. There are a few tricks to building your credit for the first time. A lot comes down to opening a starter credit card and paying down your balance each month.

Open a brokerage account

Investing for the future may be the last thing on your mind, but the earlier you put money aside, the longer it has to work for you. Let’s say you invest $5,000 when you’re 25 years old. The power of compound interest means it could be worth over $100,000 by the time you’re 65 if it earns 8% a year. If you invested that same $5,000 when you’re 45, it would be worth almost $25,000 when you hit 65. Open a brokerage account and try to invest even a small amount now.

4. Talk openly with your parents about money

Living at home as an adult can be tough for everybody involved. It’s hard to undo the habits that started when you were younger and develop new ones. One good way to redraw the lines is to talk to your folks about your money plans. Be open with them about your goals, your budget, and your financial situation. That way, you’re less likely to find them criticizing your online shopping habits or complaining when you want to go on vacation.

There’s another side to checking in financially. If your parents are sacrificing their retirement goals to help you out, it could lead to trouble. They may be unable to stop working when they want to, or struggle to cover the costs of the care they need. It’s one thing for you to live with them so you can save money, but if they’re skimping on saving for their old age to help you, it’s a different story. It isn’t easy, but try to open the conversation and see if there are ways you can help.

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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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