Money Management

It could be a golden opportunity. 

Based on what the experts are saying, there’s a strong likelihood that we’re heading toward a recession. According to a recent Bloomberg News survey, about 4 out of 5 economists expect a recession in 2023 or 2024.

Although recessions are stressful, they’re also an opportunity to build wealth. You may have heard that rich people make even more money off these economic downturns. But it isn’t just the 1% who can come out ahead. If you’re in a good financial position and you play your cards right, it’s possible to do very well for yourself.

1. Invest as much as you can

The easiest way to get rich during a recession is to invest as much money into the stock market as you can. When there’s a recession, stock market performance declines. Consumers spend less and companies earn less, causing investors to worry. Some investors sell off part of their portfolio out of fear or because they need the money.

For those who have money to invest, this is an amazing opportunity. Stock prices could drop by 20% to 30%, or possibly even more. Even though it may seem risky, the market has always bounced back after recessions. If you invest more when prices are low, you can effectively buy at a discount and earn big returns when the market recovers.

If you’re new to investing, you may be wondering how exactly you should invest your money. You have a few options here. The first is to invest through tax-advantaged retirement accounts. You save on taxes with these, with the catch being that you need to wait until you’re age 59 1/2 to withdraw money penalty-free. Here are the most popular retirement account options:

401(k)sTraditional IRAsRoth IRAs

Another option is opening an individual brokerage account with any of the top stock brokers. There won’t be any early withdrawal penalties, but this doesn’t come with the tax savings of retirement accounts.

As far as what to invest in, most people go with investment funds to keep it simple. Index funds that track the S&P 500 are a popular choice, as they get you exposure to the 500 largest publicly traded companies on U.S. stock exchanges.

2. Protect your income

Stable income is a key part of personal finance success, including building wealth. If you lose your job, you’re probably not going to be able to invest much money in the stock market. To make matters worse, if your savings runs out, then you may need to sell low on your stocks to pay your bills.

This is why it’s so important to protect your income, which means ensuring you always have a way to make money. Here are a few ideas on how to do this:

Focus on being a top performer at work. Assuming you’re happy with your current job, the best-case scenario is you hang on to that. The more valuable you are to your employer, the more likely it is that they keep you on even if they need to cut staff.Build new income streams. You could start a side hustle or a freelance business, even if it’s only something you do for a few hours per week. If your employer needs to reduce your hours or lay you off, you’ll at least have backup sources of income to fall back on.Make yourself more marketable. Consider learning new skills and polishing up your resume. If you need to look for a new job, this could help you find one more quickly.

3. Cut back on expenses

People often spend less during a recession because of financial insecurity. If you completed the step above and you’re confident in your ability to make money, this may not be a huge concern. However, it’s still a good idea to see if you can trim your spending, for a couple of reasons.

Most important is that if you’re spending less, you’ll have more money available to put into the stock market. And trust me, no one ever says “I wish I hadn’t invested so much back when stock prices were really low.”

By reducing your expenses, you also give yourself more breathing room if your income decreases. Perhaps your employer needs to cut your hours by 30% over the summer. That’s going to be easier to manage if you normally only spend 50% of your income, anyway.

You don’t need to deprive yourself of everything and take your spending as low as possible. But it’s worth looking for ways to cut back on expenses without affecting your quality of life. For example, you could:

Shop around for lower rates on auto and homeowners insuranceGet rid of subscription services you don’t use oftenDownload coupon apps to save on groceries and household essentials

As you can see, getting rich during a recession isn’t that complicated. Keep your expenses low, make sure you have steady income, and invest as much as possible. If you’re able to do that, you’ll come out ahead.

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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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Let’s uncover the hidden benefits of life insurance. 

Most people think of life insurance as a way to financially protect their families in the event of their death. While this is certainly one of the most important services life insurance provides, it’s not the only thing that it can cover. In fact, life insurance policies can provide coverage for a variety of different situations and unexpected events. Let’s take a look at some of these lesser-known benefits of life insurance.

1. Accidental death benefits

Many life insurance policies offer an additional benefit if your death is caused by an accident. While this type of coverage is usually limited to a certain amount, it can be invaluable. It’s especially useful if your job has a higher risk of accidents. This includes first responders, pilots, and construction workers. It may also provide additional funds if you suffer from injuries or disabilities caused by an accident.

2. Long-term care coverage

Many life insurance policies now offer long-term care coverage as an add-on option. This type of coverage provides benefits that help pay for assisted living, home healthcare, nursing home costs, and more if you become disabled or ill due to old age or injury. This coverage can help protect your assets from being depleted due to long-term care costs, while also ensuring that you receive high quality care when you need it most.

3. Living benefits

Most people don’t realize that many life insurance policies offer living benefits in addition to death benefits. For example, if you are diagnosed with certain terminal illnesses, your policy may pay out a portion of its face value so you can use the money for medical expenses before you pass away. This can be incredibly helpful for those who are facing expensive medical bills due to serious illnesses or conditions.

4. Retirement income supplementation

Another great benefit of life insurance is the ability to supplement retirement income by taking out loans against your life insurance policy’s cash value component. You can also use the cash value as collateral for annuities or other investments to help generate income during retirement years. These options allow you to use your life insurance policy as a source of income when needed without having to surrender the policy or its death benefit protection.

Life insurance is often thought of as a way to protect your family financially in the event of your death, but there are many other ways it can provide financial assistance during difficult times. Accidental death benefits, long-term care coverage, and living benefits are all potential features offered by life insurance policies that could make all the difference when a policyholder is faced with unexpected events or expenses. When looking into purchasing a policy, make sure you understand what type of coverage is included so you have peace of mind knowing that you and your loved ones will be protected no matter what happens.

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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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Those who spent a lot during the holidays might start off the new year loaded with debt. 

For pretty much all of 2022, consumers grappled with rampant inflation. Many people, in fact, were forced to raid or even deplete their savings accounts just to cover basic expenses, like food and rent.

It’s not surprising, then, to learn that consumers increased their spending in the course of the 2022 holiday season. U.S. retail sales rose 7.6% between Nov. 1 and Dec. 24, 2022 compared to that same time frame in 2021, as per data from Mastercard. And a big reason likely has to do with inflation. But while a healthy level of consumer spending during the holidays is no doubt good news for the economy, it could have consequences at the individual level.

A less than ideal way to start off the new year

Not everyone who spent a lot of money during the 2022 holidays is staring at a pile of debt to start off 2023. But many consumers are no doubt in that boat. And that’s bad news.

First of all, carrying too much credit card debt can cause credit score damage. It can also cost you a lot of money in interest. That’s because some credit cards compound interest on a daily basis. And also, credit cards tend to charge a lot of interest in the first place. So all told, a lingering holiday balance can cause a lot of financial damage.

How to pay off holiday debt quickly

If you spent a fair amount of money during the 2022 holiday season and are now sitting on a pile of debt, you may be eager to shed it quickly so it doesn’t cost you extra and hang over your head. And your first step in starting that process is to assess your different debts.

It may be that you owe money on several credit cards with varying interest rates attached to them. In that case, your best bet is generally to tackle the balance with the highest interest rate first, and then work your way downward. This is also known as the debt avalanche method.

Another option worth looking at is debt consolidation. You can do so via a balance transfer or personal loan. The goal, either way, should be to lower the interest rate you’re paying on your debt. So if you owe money on credit cards with interest rates ranging from 16% to 22%, and you’re able to qualify for a personal loan with an 8% interest rate, it means you’ll pay less interest in the course of knocking out your debt.

If you decide to go the balance transfer route, try to find a card with a 0% introductory APR. That will give you a break from racking up interest for a while as you work to chip away at your debt.

Inflation is making just about everything cost more money these days, so it’s not shocking to see that impact on holiday spending and debt. But if you’re now starting off the new year owing a bunch of money, it’s important to do your best to get rid of it as quickly and efficiently as possible.

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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 positions in and recommends Mastercard. The Motley Fool has a disclosure policy.

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Give your loved ones everything they’ll need in the event of your death. 

The beginning of a new year is a good time to sit down with your budget, banking information, and all the facets of your financial life. If you don’t already have “review life insurance coverage” on your list, it pays to add it. After all, life insurance is essential if you have anyone depending on your income or services you provide (like childcare, if you’re a stay-at-home parent).

If your old life insurance plan isn’t cutting it anymore (say, because you’ve recently become a parent, or will be soon, or have started a new business venture and have a business partner depending on you), it’s time to check out your options and sign up for a new one. Part of signing up for life insurance is naming a beneficiary (or beneficiaries).

Your beneficiaries are the recipients of the death benefit for your policy. It’s important to note that your will doesn’t override life insurance beneficiary designations, so it’s vitally important that your insurance is set up to benefit the right people. Your insurance company may not find out that you’ve passed away, and so it’ll be up to your beneficiaries to notify the company. Read on for the essential information they’ll need before they make that phone call.

Death certificate

First and foremost, your beneficiaries will need a death certificate so they can show the insurer that you’ve passed on. This isn’t something you’ll be able to provide for them directly, of course, so it’s a good idea to talk to them ahead of time or leave written instructions (or do both, ideally) so they know what to do. The easiest way to get a death certificate will be from the funeral director overseeing your memorial service, if you have one. Otherwise, your loved ones will need to file a request with your county’s department of vital statistics.

A copy of your policy

Your loved ones will need to know which insurance company holds your policy, as well as details about the policy itself, so leaving a copy of it for them is necessary. And if you’ll be leaving it in a place that may not be so obvious, make sure you tell your beneficiaries where to look. Consider leaving login information to manage the policy online as well.

The policy information will tell your beneficiaries who exactly is named, what they’re entitled to, and details on how the policy will be paid out. This is often in the form of a lump sum, but not always; some insurers offer the option for monthly installment payments, or even a retained asset account, which will earn interest and allow beneficiaries to withdraw money. Life insurance payouts themselves are not taxable, but any interest earned on them is.

Your beneficiaries will have to submit a claim form (available from your insurer) to get their payout, and leaving them as much information as possible will make an already difficult time less trying. Remember, the purpose of life insurance is to provide for those who depend on you after your death, so don’t make it any harder than it has to be.

Other considerations

If you’re going to go to the trouble and cost of setting up a life insurance policy, make sure you’re updating it as necessary. If you get divorced, have a child, or have other changes in your life circumstances, review your coverage. And if something changes (like, you cancel a policy with one insurer and get a new one), ensure your beneficiaries know of the changes as well. Life insurance is there to protect them and give you peace of mind, so definitely keep on top of these tasks.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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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Why spend more than you have to? 

Life just keeps on getting more expensive. We’ve seen record inflation in the wake of the COVID-19 pandemic, with the most recent report from the Consumer Price Index showing average prices up 7.1% between November 2021 and November 2022. We’ve all watched our grocery and utility bills spike over this period, and if you’re struggling with money, you are certainly not alone.

The good news is that there’s a way to save money on purchases that you may not have considered too deeply: buying some items used. There are some things you should only buy new, for health and safety reasons. These items, however? Look for used versions to keep more money in your checking account and help keep more items out of landfills.

1. Books

Used bookstores are magical. The smell of the books, the feeling that you’ll discover something amazing on every shelf — it’s just wonderful. One of the best parts of the experience is walking up to the cash register with an armload of treasure and walking out with a much lower credit card tab than you might be fearing. The price for a new hardcover book might be $30, but you can likely find that same book for $5-$10 (maybe less) at your local used bookstore or even a yard sale.

If you’re a student or financially supporting a student, don’t overlook used textbooks, either. If you can get a book list ahead of the semester starting, you’ll have plenty of time to order them from online retailers and can save yourself a bundle on books.

2. Kids’ clothes and toys

While kids’ furniture and safety gear like car seats should only be bought new, when it comes to clothing and toys, buying used is definitely the financially smarter choice. Kids outgrow clothes so fast, and let’s face it: Your toddler doesn’t have any fashion sense yet. And I have many parent friends who lament the number of toys their kids have and yet have stopped playing with. Raising a child is expensive, so it’s a good idea to try and save where you can. Try looking at used toys and clothes to cut your costs.

3. Bicycles

Buying a used bike is an excellent idea. That is not to say you should hop right on and ride away if you find a good deal at a yard sale. You can find bikes that have already been vetted and repaired by checking a local bike maintenance shop. Or, if you find a diamond in the rough in a local buy-sell-trade group, take it to that same maintenance shop. Chances are, they’ll have a basic tune-up package for around $100, and can check the bike over and advise you of what it might need (like a new chain, for example). You can also spend a little on customizing it (new seat, new bell), and still come out ahead financially.

4. Some furniture

While I surely wouldn’t buy a used couch or other used upholstered furniture (unless I knew the former owners incredibly well and trusted them), buying other used pieces can be a great move. Look to your local thrift shop for sturdy pieces like dining tables, chairs, and dressers.

5. Cars

Cars are the used purchase most people have experience with. New cars lose a ton of value when they’re purchased, and the average monthly payment for one spiked in 2022 thanks to chip shortages and supply chain issues. A car is a major purchase, though, so you’ll want to avoid certain mistakes when you’re shopping for a used car. You may find that in addition to costing less initially, a used car may result in saving money on auto insurance too.

6. Electronics

You can save big on consumer electronics if you buy them used. This is another instance where it pays to do your homework and not just buy any old TV you spot at a yard sale. At the very least, you should ensure it works and comes with all its parts. Another route to finding the best pre-loved electronics is to buy a certified refurbished model from the manufacturer. I bought my desktop computer this way, and the money I saved by not buying new meant that I could buy an even nicer model than I could have gotten otherwise.

While physical possessions cost money and take up space in our homes, they can often make life easier, more comfortable, or more productive. If you need to buy books for school, a dining room table, or a new computer, looking at used versions of these things can really save you a lot of money, and also help you do your part for the planet. What’s not to like?

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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.

 Read More