Money Management

It pays to listen to what he has to say. 

It’s an unfortunate fact that financial literacy isn’t something that’s taught broadly in the U.S. (though lawmakers are fighting to change that). Often, those who want to be financially informed have to take matters into their own hands. And they can do so by reading books like Robert Kiyosaki’s Rich Dad Poor Dad.

But being financially literate won’t necessarily spare you from investment losses when the stock market has a tough year. Such is the case for many investors right now.

A lot of brokerage account, IRA, and 401(k) plan balances are down these days due to the volatile market we’ve experienced over the past 12 months. And it’s hard to say when the market will recover.

But in a recent tweet, Kiyosaki said that those sitting on investment losses shouldn’t sweat it. He also made a point to say, “It is times like this the smart and informed will grow richer.” And his advice is pretty spot-on.

Don’t stress over investment losses

If you’re looking at a brokerage account, IRA, or 401(k) balance that’s lower now than it was 12 months ago, you’re in good company. But also, it doesn’t mean your portfolio is doomed.

One thing every investor should know is that you don’t actually lose money in the stock market unless you actively sell investments at a price that’s lower than what you paid for them. So, let’s say your IRA was worth $40,000 in January 2022, and now it’s only worth $32,000. That’s an upsetting thing to see.

But it doesn’t mean you’ve lost $8,000. It just means that right now, at this very moment, you’d only get $32,000 for your assets. But if you wait another year, you may find that your IRA balance comes up to $42,000.

So in a nutshell, the only thing you really have to do to avoid permanent investment losses is do nothing. And that’s pretty easy, right?

It’s a good time to invest

You might think that investing during a down market is a risky move. But actually, it’s a savvy one.

Right now, it’s possible to buy stocks and other assets at a lower price than what they’d normally trade at. And if you add stocks to your portfolio and their value increases down the line, you stand to make money.

Now, if you’re unsure about buying individual stocks at a time like this, a better bet may be exchange-traded funds, or ETFs. That way, you’re not putting money into specific companies, but rather, you’re effectively buying up a bunch of different stocks with a single investment.

But either way, there’s no need to break into a sweat because your portfolio has lost value. All you’re looking at is a snapshot of this moment in time.

The amount you see on screen today isn’t the amount you’re going to be looking at by the time you’re ready to cash out your investments or withdraw from your IRA or 401(k) in retirement. And the more you keep that in mind, the less stress you’re apt to suffer from.

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The worst part? It’s an unavoidable one. 

You’ll often hear that owning a home leads to more financial stability than renting. And a big reason is that when you rent, your housing situation isn’t always as secure.

You never know when your landlord might decide not to renew your lease. Or, they could renew your lease at a much higher rate, thereby effectively forcing you to move to another home — and bear the cost of hauling your belongings from one place to another.

When you own a home, you get to keep living there as long as you continue to pay your mortgage and property taxes. And if you sign a fixed-rate mortgage, you don’t have to worry about your monthly home loan payments increasing over time.

Now, I happen to live in a part of the country where housing is expensive. In spite of that, my monthly mortgage payments are pretty easy for me to manage.

The reason? My husband and I specifically bought a house that was under budget for us, and we made a 50% down payment on our home when we bought it. That, combined with a low mortgage rate we refinanced into in 2020, has left us with monthly home loan payments that fit pretty seamlessly into our budget.

But while we don’t tend to struggle with our mortgage payments, there’s another homeowner expense that trips us up year after year. And it’s an expense we can’t shed.

When home repairs rear their ugly head

When you own a home, it’s not just your mortgage and property taxes you have to worry about paying. You also have to maintain your home and fix things that go wrong.

My husband and I budget regularly for maintenance, since there are different aspects of upkeep we know to expect. But we can’t predict when our air conditioning system might fail or when another appliance might stop working. And we can’t predict when a storm will cause damage to our exterior. As such, even though we do our best to keep our housing costs low, sometimes, we have no choice but to raid our savings when larger repairs come up.

Make sure you’re ready for homeownership

Over the past few years, my husband and I have easily spent around $20,000 on various repairs. Thankfully, we had money in our savings account to tap, and we make a point to maintain a larger emergency fund specifically for the purpose of covering household repairs.

But many people don’t have thousands of dollars in savings. And people in that boat risk racking up scores of debt when home repairs pop up.

That’s why if you’re going to buy a home, it’s important to go in with a pretty robust savings account. And also, it’s important to budget continuously for home repairs, which is something we do in my household.

You may run the numbers and decide you can pretty easily afford the monthly mortgage payment on your home. But if you don’t leave yourself a decent amount of wiggle room to tackle upkeep and repairs, you might end up in a really unpleasant financial situation.

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There are ways to tackle your debt while in this situation. 

Living paycheck to paycheck can be highly stressful. Unfortunately, many Americans find themselves in this situation. If you’re working hard to pay down debt, you may wonder how to achieve your goals while in your current financial situation. The following tips may help you pay off debt faster while living paycheck to paycheck.

1. Don’t wait to start

Many people delay addressing their debt problems because they assume they’re too broke to make changes. But ignoring your debt and missing payments entirely will cost you additional fees and interest. Plus, it can also negatively impact your credit and worsen your current financial situation. Don’t wait to tackle your debt, even if money is tight. Every little bit helps.

2. Prioritize tackling higher-interest debt

When you have limited extra funds to pay off debt, it can be beneficial to focus on paying off higher-interest debt first. This debt payoff strategy is known as the debt avalanche method. When you prioritize paying off higher-interest debt, you’ll pay less in interest and can get out of debt sooner.

3. Follow a budget

Many people are scared of the word budget, but budgeting doesn’t have to be complicated. Low-cost and free budgeting apps can help you set spending limits and easily follow a budget. You may be able to free up a few extra dollars each month by monitoring your spending and rethinking your purchase decisions.

4. Increase your income

It can be beneficial to increase your income while paying down debt. Your current paycheck-to-paycheck job may only allow you to put a small portion of your income into debt. But if you have extra time in your schedule and can work more, you could bring in additional income to put more money towards debt and pay off your debt faster. Getting a part-time gig or a side hustle could help you boost your income. Here are four high-paying side hustles to consider in 2023.

5. Negotiate your bills

If you’re living paycheck to paycheck, it’s worthwhile to see if you can reduce some of your monthly expenses to free up extra cash. Many people successfully negotiate some of their bills like their home internet bill, cell phone service bill, or cable package. While there’s no guarantee that you can get a lower rate, it’s always worth asking.

6. Consider alternative living arrangements

If you have minimal extra funds to work with, you may want to consider alternative living arrangements. If you’re paying expensive rental costs on your own, you’ll have less money to put toward debt payoff. Getting a roommate or moving in with a friend or family member could help you significantly reduce your monthly expenses.

Your current situation doesn’t have to be forever

If you’re living paycheck to paycheck, you’re likely feeling a lot of added stress. Don’t let your anxiety keep you from making changes. Even small changes can make a difference. While you may be in a difficult financial situation now, it doesn’t have to be forever. Hold onto the hope that your future can look much different as you make changes and learn more. If you want to boost your financial knowledge, check out our personal finance resources.

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The quick answer? Absolutely. 

Having kids is a big commitment. You’re effectively signing up to care for and worry about another living being for the rest of your life. And you’re also signing up to bear the cost of raising children, which, these days, is far from inexpensive.

Now, many people make the decision to put life insurance in place once they have kids. The logic is that they want to make sure their children are protected financially in the event that they’re no longer around.

But what if you don’t have kids and know for certain that you won’t be bringing any into the world? Does that mean you should give life insurance a hard pass?

It’s not just kids who can benefit from life insurance payouts

It’s easy to see why having kids might be a catalyst for buying life insurance. But let’s be very clear — there are still many other use cases for purchasing life insurance, even without kids in the mix.

In fact, if you’re not sure if you should buy life insurance or not, the big question to ask yourself is if anyone in your life might get hurt financially in the event you’re no longer around. If the answer is “yes,” then life insurance could make a lot of sense even if children aren’t in the picture.

Let’s say you’re in a child-free marriage, and you and your spouse both work. You might think you don’t need to buy life insurance to cover your spouse, because they have a means of earning money in your absence.

But what if you and your spouse own a home together that your spouse couldn’t pay for on a single salary? If you were to leave your spouse money in the form of a life insurance payout, that could make it so your spouse is able to swing that mortgage solo without having to sell your home and move.

Perhaps you’re not married. But maybe you help your aging parents by shuttling them around town because they’re not able to drive themselves. If you were to pass away, the cost of hiring someone for transportation could be prohibitive for your parents. But if you were to buy life insurance and designate your folks as your beneficiaries, you could potentially eliminate that burden.

Kids aren’t the only factor to consider

It’s true that many people who buy life insurance do so to protect their children. But there are plenty of good reasons to obtain coverage even if you don’t have kids now and have no plans to have kids in the future.

You never know when your untimely passing might negatively impact a beloved adult in your life. And those people are worth protecting just as kids are.

The good news about buying life insurance is that it doesn’t have to cost a fortune. If you purchase a term life policy with a modest benefit attached to it, you may find that your premium costs fit pretty seamlessly into your budget. And that way, you’ll be buying yourself and the adult loved ones in your life some peace of mind.

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Filing too soon could hurt you. 

At this point of the year, you may not really have filing taxes on the brain. But a lot of people aim to file their taxes in January for one big reason — they want their refunds sooner.

The IRS will begin accepting tax returns on Jan. 23 this year. And you may be inclined to submit your return at the end of the month rather than wait.

But while filing your taxes early is definitely a good idea, you could be better off pushing your filing off to February, or even some point in March. Here’s why.

Do you really have all of the paperwork you need?

There are many different tax forms you’ll need to get your return completed. Some of those forms may have been sent to you already, or they might already be available online.

For example, if you earned money in your savings account last year, you’ll need to report that income. But you may be able to log into your bank account right now and download the form you need to get your return done. The same might hold true for your brokerage account.

But if you earned income on a freelance basis last year, you may not have the documents needed to complete your return just yet. Any company that paid you $600 or more in 2022 must issue you a 1099 form. But the deadline for companies to send out 1099s is Jan. 31. And sometimes companies are notoriously late with 1099s.

So either way, those forms may not show up for you until February. If you file your taxes in January without that information, you might end up with errors on your return, which could result in you having to amend it. And that can be a hassle. It could also lead to a higher bill if you use a tax preparer.

Similarly, certain types of private investments issue a K-1 form that needs to be factored into your tax return as well. But K-1 forms tend to get held up even more so than 1099s. In fact, it’s not uncommon to receive a K-1 form in mid- or late March. So if you know you own investments that are subject to this type of reporting, you might as well sit tight on submitting your tax return.

You can get started while you’re waiting to file

It could work to your benefit to hold off on submitting your tax return until February. But that doesn’t mean you can’t get the ball rolling in January.

This month is a good one to gather the receipts and documents you’re already in possession of, and reach out to your accountant or tax preparer to see what additional information they might need from you this year. You can also try to set up an appointment to meet with your tax professional so you have your pick of options. Wait a few more weeks, and you may have to take an appointment that’s not as convenient.

An early tax filing could be your ticket to an early refund, and that’s a good thing. But waiting another few weeks to submit your taxes could work to your advantage.

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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 may take you longer to earn your favorite Starbucks drink for free.  

Like many other restaurant loyalty programs, the Starbucks Rewards program is about to get updated. Starbucks regulars should be aware of these changes to know what to expect this year. When redeeming rewards, some drinks will now cost more. Find out more.

The Starbucks Rewards program is going through changes

Starbucks recently sent an email to customers alerting them of upcoming terms of service to the Starbucks Rewards program. Beginning on Feb. 13, loyalty program members can expect these changes to start. Here are the redemption options changing:

100 stars: Redeem for a free hot brewed coffee, hot tea, iced coffee, iced brewed tea, an eligible bakery item or packaged snack, a cold Siren Logo plastic to-go cup (24 oz.), or a Siren Logo plastic hot cup (16 oz.)200 stars: Redeem for a free handcrafted beverage (such as a latte or Frappuccino) or any hot breakfast item (such as a breakfast sandwich or oatmeal) 300 stars: Redeem for one packaged salad or lunch sandwich, one packaged protein box, or one packaged coffee item (such as whole bean coffee)

These three drinks will now cost more

You may wonder how many extra stars you’ll need to earn before redeeming them for your favorite drink. Three beverages will increase in redemption price on Feb. 13:

Hot coffee: A cup of hot coffee will now cost 100 stars instead of 50 starsHot tea: A cup of hot tea will now cost 100 stars instead of 50 stars Handcrafted drinks: Handcrafted drinks will now cost 200 stars instead of 150 stars

It’s not all bad news

If you’re feeling down about this news, you’re not alone. But the good news is some aspects of the Starbucks Rewards program will remain unchanged. Here’s what you need to know:

You can continue to modify your drinks for 25 stars: Members can customize their drinks with a free modification (extra express shot, syrup or sauces, or substitute for a dairy alternative) for 25 stars. This current redemption price will remain unchanged.Some redemptions now cost less: The upcoming changes allow members to redeem their stars for a free iced coffee or iced tea for fewer points. Currently, these beverages cost 150 stars. Members can get these drinks for only 100 stars when the changes start. Additionally, bagged coffee will cost 300 stars instead of 400. How members earn stars will stay the same: When paying with cash, credit cards, or debit cards, members will learn 1 star per $1 spent. When paying with digital or physical gift cards, members earn two stars per $1 spent. Free birthday drinks aren’t going away: Starbucks will continue to send out a free birthday reward to members to use on their birthday. Free refills are staying: The coffee shop will continue offering free refills on hot or iced brewed coffee and tea to members when they get a refill on the same store visit.

What these changes mean for your wallet

It’ll now cost you more stars for some beverages and food items. Keep this in mind to figure out the best strategy for future redemptions. If you have stars you need to use, it’s beneficial to redeem them before Feb. 13 to maximize the value you get.

To maximize your earning potential when ordering at Starbucks, consider using Starbucks gift cards as your payment method to earn more stars. You can load virtual gift cards in the mobile app, load as little as $10 at a time, and continue refilling your card when needed.

It’s disappointing that Starbucks is making these changes. But rewards programs like this offer a way for loyal customers to score freebies. You can keep more money in your checking account by earning a few freebies through these programs each year. For additional money tips and guidance, check out our 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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends the following options: short January 2023 $92.50 puts on Starbucks. The Motley Fool has a disclosure policy.

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