Money Management

Americans are struggling with credit card debt, and it’s a common source of financial anxiety. 

Credit card debt is a widespread financial problem. Since credit cards make it easy to borrow money, some people spend more than they can afford. Inflation has made things even worse, as many consumers have had to put more on their credit cards just to pay for their normal living expenses.

In total, Americans have $925 billion in credit card debt, according to Federal Reserve data from the third quarter of 2022. But how high are those balances? A recent survey has the answer.

How much credit card debt Americans have

In early December, U.S. News & World Report conducted a survey of people who have credit card debt. When it asked them how much debt they had, here were the responses:

$1,999 or less: 35.3%$2,000 to $3,999: 20.3%$4,000 to $5,999: 13.6%$6,000 to $7,999: 9%$8,000 to $9,999: 6.7%$10,000 or more: 15.1%

The good news is that among Americans with credit card debt, the majority have balances of under $4,000. More than one-third have under $2,000. While those aren’t small amounts, they’re at least more manageable than larger balances.

On the other hand, 30.8% have at least $6,000 to pay back, and 15.1% are dealing with $10,000 or more in balances. That’s problematic, as is the fact that 51.2% saw an increase in credit card debt in 2022. This was most often attributed to increased costs and insufficient income, or unexpected expenses.

The survey also found that most respondents were dealing with stress from their financial situation. In fact, 81.6% reported that they felt anywhere from a little bit to a lot of stress due to their credit card debt.

What to do about credit card debt

If you have any amount of credit card debt, make paying it off a priority. It might not seem like a big deal if you’re on the lower end of those debt ranges. However, this type of debt can grow quickly and cost you a lot of money. Credit cards have high interest rates, which have only gotten higher in recent months, along with relatively small minimum payments.

How can you pay off credit card debt? Start by cutting unnecessary spending and putting as much as possible toward your credit cards. If you don’t have much money left over each month, you’ll need to see what expenses you can reduce or eliminate. Otherwise, you’ll have a hard time making progress on your debt.

One method that could also help, if you have a solid credit score, is refinancing your credit card debt. There are two popular ways to do this:

Balance transfer credit cards: Many of these credit cards offer a 0% intro APR on balance transfers. That means you can transfer over your current card balances and pay them down at a 0% APR during the intro period.Debt consolidation loans: These are personal loans you can use to pay off debt. A debt consolidation loan will typically have a lower interest rate than your credit cards, and this also gets you a fixed payment schedule.

Either method can help you save money on interest. You’ll also only have a single monthly payment going forward. If you’re currently making multiple credit card payments, trimming it down to one is much more convenient.

While debt repayment methods like these can help, remember that paying off your credit cards ultimately depends on your financial habits. If you were spending too much, you’ll need to come up with a stricter budget. And if you’ve only been paying the minimum, you’ll need to put more of your disposable income toward your credit cards until they’re paid off.

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An ambitious goal requires an equally ambitious savings plan. 

If you want to have plenty of money throughout retirement, $5 million in savings will most likely do the trick. Based on the 4% rule, you’d be able to safely withdraw $200,000 per year. This is definitely a big goal that few people reach, but how much saving does it actually take? Let’s look at the numbers to find out.

Here’s how much you need to save per month to retire with $5 million

The amount you need to save for a nest egg of $5 million will depend on your age and the return you’re getting. As far as returns go, 10% is a good number to go by. That’s the average stock market return per year over the past 50 years.

We’ll assume you get that return of 10% per year, and that you want to retire at 65 with $5 million. Here’s how much you’d need to save depending on your age:

If you start at 20 years old, you need to save $580 per month.If you start at 30 years old, you need to save $1,537 per month.If you start at 40 years old, you need to save $4,237 per month.If you start at 50 years old, you need to save $13,114 per month.

Time and compound interest are powerful things. If you start young, you have much more time to build your savings. Compound interest will also have a significant impact on your returns. These factors are why people who start earlier don’t need to save nearly as much per month. It still takes a lot of saving, but beginning to invest while you’re young is a huge help.

How to save $5 million by retirement

Getting to $5 million is no small feat. You’re almost certainly going to need an above-average income and a high savings rate. However, you don’t necessarily need to make CEO pay.

Let’s say you’re 30 years old and have worked your way up to a salary of $90,000 per year. After taxes, you take home about $6,000 per month. You’d need to invest a little over 25% of your income to be on track for $5 million.

It’s still clearly a challenging goal, but it’s far from impossible. If $5 million is your target number for retirement, here are some smart wealth-building strategies to use:

Be aggressive about increasing your income. Seek out higher-paying job opportunities, ask your current employer how you can get promoted, or try starting a side business. It’s much easier to save with a high income.Put all or most of your investment portfolio in stocks. It’s more volatile, but you maximize growth this way. Mutual funds and index funds that invest in the S&P 500 are both good ways to do this.Contribute to a 401(k) plan. If your employer offers this type of retirement plan, it can help you save on taxes. Many employers will also match your contributions up to a certain amount.Open an individual retirement account (IRA). This type of retirement account also helps you save on taxes. Traditional IRAs let you deduct contributions from your income, and Roth IRAs offer tax-free withdrawals.

401(k)s and IRAs have annual contribution limits you may run into. To invest even more, you can open an individual brokerage account with an online stock broker. This type of account doesn’t offer tax savings, but unlike 401(k)s and IRAs, it also doesn’t have early withdrawal penalties for taking out money before you’re 59 1/2.

Is $5 million a good goal?

At first, $5 million might seem like an unnecessary or unrealistic amount to save. While it’s certainly a large amount, that doesn’t necessarily mean it’s a bad goal. It’s also important to remember that a person’s retirement savings target should depend in part on their age.

For younger adults, retirement needs are only going to get more expensive with time. According to Wealthcare Financial, Generation Z and millennials should save $3 million for retirement. Those who want to be even more secure may want to aim higher. On the other hand, people who are closer to retirement probably don’t need to save so much.

Regardless of whether your goal is $5 million or another amount, an ambitious target is a good thing. It motivates you to save aggressively for retirement. You might later decide you don’t need as much as you thought, and you could even possibly retire early because of how much you’ve saved. How much you save is up to you, but it’s better to aim high than low.

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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.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Get two for the price of one on fruits and vegetables with your food benefits. 

If you’re a Supplemental Nutrition Assistance Program (SNAP) recipient, you’ll know that it isn’t easy to feed a family on food benefits. It’s true that the total benefit amount has increased in recent years. However, the skyrocketing price of food combined with the end of the COVID-19 pandemic emergency provisions mean that some families will actually receive less money in 2023.

One of the ways you can stretch your SNAP dollars is a program called Double Up Food Bucks. It only applies to fruit and vegetables, and means you can get double the value for every dollar you spend in participating farmers markets and stores. It’s like a two-for-one offer on all your produce, and makes it more affordable to buy healthy food for your family. This can make a huge difference to your bottom line and, ultimately, mean more money in your bank account.

Double Up Food Bucks

In participating states, Double Up Food Bucks teams up with certain stores and farmers markets to give SNAP recipients access to lower cost produce. Every dollar you spend is worth two — or, as the New York Double Up website puts it, you can, “Turn an apple a day into two apples a day.”

You can’t use the program at any old farmers market, you’ll need to check on your state’s website for participating locations. You’ll find the project is more established in some states than others. For example, in Michigan (where it was founded), there are over 250 participating locations, whereas Nebraska only has 12. There’s also a limit on how much you can buy each day, usually around $20 worth.

You can double your fruit and vegetable money in these states

The Double Up program has spread quickly through the U.S. since its creation in 2009. It doesn’t operate in every state, though other states do have similar projects. Here are the Double Up Food Bucks states, as well as the daily spending limit:

Alabama: Match spending on your EBT card for up to $20 free per day.Arizona: Match spending on your SNAP Quest Card for up to $20 per day.California: Match spending of CalFresh EBT dollars for up to $10 per day.Colorado: Match spending on your Quest Card for up to $20 a day.Hawaii: SNAP payments at DA BUX Double Up Food Bucks get 50% discounts on local fruits and veg, restricted to one transaction per day per SNAP card.Idaho: Match spending on your Quest Card at participating markets and stores.Indiana: Match SNAP spending of up to $20 per day with the St. Joseph Community Health Foundation.Iowa: Match ETB Card payments for up to $10 on every visit.Kansas: Match SNAP/EBT Card payments for up to $25 per day.Massachusetts: Get 50% off fruit and veg with your EBT card, up to $5 or $10 depending on the location.Michigan: Match Bridge card payments for up to $20 a day.Mississippi: Match SNAP/EBT card payments for up to $20 a day.Missouri: Match SNAP/EBT card payments for up to $25 per day.Nebraska: Match SNAP/EBT card payments for up to $20 a day.Nevada: Match SNAP/EBT card payments for up to $20 per day.New Hampshire: Get 50% off on EBT payments for up to $20 in discounts a day.New Jersey: Good Food Bucks program matches SNAP/EBT card payments.New Mexico: Matches SNAP/EBT card payments in participating locations.New York: Matches SNAP/EBT card payments for up to $20 a day.North Carolina: Matches SNAP/EBT card payments for up to $20 per day.North Dakota: Matches SNAP/EBT card payments for up to $10 per trip. Programs vary between markets and stores.Oklahoma: Double Up Oklahoma (DUO) matches SNAP/EBT card payments up to $20 per day.Oregon: Matches SNAP/EBT card payments for up to $20 a day.South Dakota: Matches SNAP/EBT card payments up to $20 per visit.Tennessee: Matches SNAP/EBT card payments for up to $20 a day.Texas: Matches Lone Star SNAP card payments for up to $30 per day (some markets may have different limits).Utah: Matches SNAP/EBT Horizon card for up to $30 per day.

If your state doesn’t offer Double Up Food Bucks

Even if the Double Up program isn’t available in your state, it’s worth checking to see if there’s anything else available locally. For example, Washington has something called SNAP Market Match, which works in a similar way. Louisiana has a similar Market Match program. It doesn’t really matter who operates the program. What’s important is whether it helps you buy low-cost fruit and vegetables.

If you can’t find any type of produce discounts, you could contact Double Up Food Bucks directly and find out how to get something started in your area. It may take time, but kicking things off could help your household as well as benefiting your community.

These price match programs aren’t the only way to make your food budget go further. Another is to use cash back apps to get money back on all your grocery spending and to shop around to find the best discounts on expensive items. Coupon apps can help here, as can sites like the Krazy Coupon Lady that pull together the best deals each week.

If you’re really struggling to put food on the table, you may need more immediate assistance. Contact United Way on 2-1-1 to find out about food pantries and soup kitchens in your area. It’s a toll-free number and you’ll speak to someone with access to all kinds of information, including assistance programs you might be able to qualify for.

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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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Prepare for uncertainty before retirement. 

New year, new savings. You’re one of the lucky Americans who owns a home that appreciates. That means you’ll have plenty of home equity to cash out for retirement — huzzah!

Hang on. You may be making a mistake. Should you really be counting your house as part of your retirement income? After all, you’ll need somewhere to live in retirement. And your family may be depending on you to keep the house.

Financial advisors typically don’t count house value as part of retirement income. Here are three reasons you shouldn’t, either.

1. You’ll need somewhere to live in retirement

My friend, a 40-something-year-old mother of two, shuffled into the dining room, dejected. Her financial advisor just told her she has less money saved than she thought — that she shouldn’t count her house as part of her retirement income.

The reason: Even in retirement, she’ll need to live somewhere. The future is uncertain. She may plan on moving in with family members, but plans change. By the time my friend retires, her family may be living somewhere undesirable. She might also be unwilling to part with the memories she’s created over the years raising her kids at home.

By holding onto her house — and her invested equity — my friend controls her future. However, there’s another option for folks who want to sell their home: They can downsize. That way, homeowners get to withdraw some cash and maintain a stable housing situation.

A third option is switching to renting. But rent can be expensive, especially if a homeowner has paid off their mortgage. Plus, homeowners lose access to an asset that grows more valuable over time — one they can pass on to their kids.

2. You may be living with dependents

Keeping dependents is more common than you’d think. One in three adults now lives with older family members, often to save money. Chances are, you won’t be selling your house if that means kicking out everyone who relies on you and your home to stay ahead of payments.

If you live with dependents, you may be unable to sell and cash out the home equity needed for retirement. At the very least, it could delay your retirement, forcing you to reconsider your retirement budget.

3. You may be unable to find buyers

Homes are notoriously illiquid investments. When the housing market cools, few are willing to purchase a home. You may be unable to find a buyer come retirement.

There’s a caveat

You can often take out a home equity loan against your mortgage. That way, you can tap into the value of your home without selling. However, like all loans, you’ll have to pay interest on any money withdrawn. Taking out a loan is typically more expensive than not.

What should you include in your retirement income?

Plenty of investment vehicles count toward your retirement.

Here are three:

Savings. The best savings accounts offer high rates and keep your money safe.An IRA. The best retirement accounts offer low fees and other juicy bonuses.Stock market investments. These can be volatile and may delay your retirement.

If you’re unsure whether to include your house as part of your retirement savings, ask yourself whether you’ll be willing to sell your home come retirement. Plan appropriately so you’re prepared for senior living. A strong retirement plan is a wonderful way to kick off the new year!

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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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This top strategist thinks falling prices could eat into companies’ profits. 

A lot of investors were happy to wave goodbye to 2022, Wall Street’s worst year since 2008. The S&P finished down 19.4%, while the tech-centered Nasdaq shed 33.1%. The blue-chip focused Dow Jones did better, losing just 8.8% across the year.

Unfortunately, a number of senior investment bankers predict 2023 could bring more stock market woes. Most recently, Morgan Stanley Chief U.S. Equity Strategist & Chief Investment Officer, Michael Wilson, said he thought the S&P 500 could drop by another 22% in 2023.

Why Morgan Stanley warns stocks could fall more

Wilson wrote in a note this week that next year’s losses could be more significant than many are expecting. According to Bloomberg, Wilson thinks a peak in inflation would be “very negative for profitability.” He added, “The consensus could be right directionally, but wrong in terms of magnitude.”

Some analysts think that when inflation peaks, the Federal Reserve will ease up on its aggressive rate hikes and the stock market will recover. But Wilson argues this is only part of the picture. He thinks falling prices would have a knock-on effect on company profits, and the subsequent drop in margins would outweigh any benefit from a change in the Fed’s stance.

Wilson also alerted clients to the risk that companies would be caught “off guard” by a combination of falling demand and a catch up in supply. Supply chain issues, caused by a mix of COVID-19 lockdowns, labor shortages, and other factors, have contributed to price increases and had a negative impact on production. If the supply chain starts to recover at the same time as recession-induced drops in consumption levels, he thinks the stock market could fall further.

How to invest during a recession

It isn’t easy to invest during a recession, and warnings from top investment bankers of further drops don’t help. There’s an understandable temptation to keep your money on the sidelines and wait for things to bottom out. The trouble is that it’s almost impossible to time the market and Wilson’s forecast of a 22% drop may or may not be accurate.

At the same time, there’s an argument that recessions can provide an opportunity to buy quality stocks at lower prices. But there are a few caveats to this. Firstly, you need to be prepared for the possibility that the value of your investments drop even further. Historically, the stock market has always rebounded, but without a crystal ball it’s difficult to know when or what additional volatility might unfold first.

Here are some ways to manage an uncertain year ahead.

Invest for the long term

Thinking long term is a crucial part of investing. There are no guarantees, but historically, buying assets you believe in and holding them for a decent amount of time is a proven way to build wealth. It’s one thing to fine tune your portfolio, which we’ll touch on below. But don’t panic and change everything based on recession fears. Trust in your original research. If you bought quality assets you believe will perform well in the long term, you might decide to wait for the recession to pass.

Consider dollar-cost averaging

If you’re nervous about investing a lump sum only for it to drop in the following months, you could try dollar-cost averaging. This involves investing a set amount with your brokerage at regular intervals, such as $500 on the first day of every month. It takes some of the emotion out of your stock buying and evens out some of the risk of volatility in a bear market.

Diversify your portfolio

Another way to manage the risks is to diversify your portfolio. Look at your investments and consider whether you’re comfortable with the level of risk you’re taking. Might you want to increase the proportion of bonds you hold? In general, people who are approaching retirement will shift the balance of their portfolio toward bonds which carry less risk and pay a regular income. This becomes even more appealing during economic downturns.

Other investment options during a recession include real estate or precious metals such as gold. If a large proportion of your portfolio is in higher-risk equities, you might switch to some more recession-proof stocks. That said, as a long-term investor, you’ve likely already built a portfolio of stocks that will stand the test of time.

Make sure your emergency is in good shape

Finally, you’ll need a solid emergency fund. If you lose your job or face another financial crisis, you don’t want to be forced to sell your stocks to cover it. Particularly if their value has fallen. It’s important to have enough cash in a savings account to tide you over for at least three to six months. Some financial advisors suggest socking away enough for a year given the high levels of uncertainty and inflation we’re experiencing.

Don’t panic

It’s never easy to see the value of your portfolio drop dramatically, particularly if you’re nearing retirement. However, recessions are part of economic cycles and even if the market drops another 20% or more, this too shall pass.

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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 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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Key-life insurance can protect your small business partnerships. 

If you run a small business with one or more partners, what should be your priority? Making sure your operating agreement is set? Your budget? Your business plan? While these are all important, many business partners don’t realize that key-life insurance should be at the top of your priority list. This type of insurance is designed to protect your business in case one of your partners passes away, and it can provide a financial safety net that can keep your business from going under in difficult times. Let’s take a look at how key-life insurance works and why it is so important for small businesses.

What is key-life insurance?

Key-life insurance is a life insurance policy that a business purchases on the life of an owner, a top executive, or another critical employee. Key-life insurance provides protection in the event of death, disability, or critical illness of a business partner — without which your small business could be left vulnerable.

The money from this policy can be used to buy out the deceased partner’s share in the business. This way, the surviving partners can continue running it without having to worry about dealing with their late partner’s estate or family members contesting ownership rights. In addition, it can also be used to help the business replace lost revenue as they search for a replacement staff member.

Why is it important for small businesses?

For small businesses, key-life insurance can be a lifesaver if one of its owners suddenly passes away. Without this coverage, surviving partners may have to scramble to come up with funds to replace their lost partner’s share or the revenue lost in order to keep their company afloat. This could mean taking out loans or selling off assets, which could further jeopardize their financial health. Key-life insurance ensures that surviving partners don’t have to worry about these issues and can focus on keeping their business successful instead.

Key-life insurance can provide peace of mind knowing that if something were to happen to you or your partner, the remaining owner would be financially secure and have the resources necessary to sustain operations and cover financial obligations. This type of policy also offers a buy/sell agreement that allows for one partner’s shares in the business to be sold or transferred in case of death, disability, or critical illness. Additionally, key-life insurance policies offer tax benefits and can help with succession planning.

How do you get a policy?

The process for obtaining key-life insurance is relatively straightforward. First, you’ll need to assess how much coverage will be necessary for your particular situation. This will depend on factors such as how much equity each partner holds in the company, what assets would need to be bought out, or how much revenue needs to be replaced. Once you’ve determined this amount, you’ll need to shop around for an insurer who provides coverage up to this limit. Finally, you’ll need to complete any paperwork required by your chosen insurer and pay any premiums due before you’re fully covered by your new policy.

No matter what size or type of business you run with a partner or partners, making sure you are all protected should something happen is paramount. Key-life insurance can provide peace of mind knowing that if something were ever to happen, there would be a financial safety net available. It also allows business owners time and resources needed to grieve properly without having additional stressors added during such a difficult time. Make sure key-life insurance is part of your business protection plan today.

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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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