Money Management

When everyone else is falling apart, it’s time to be brave. 

Warren Buffett has said this of the stock market: “Be fearful when others are greedy and greedy when others are fearful.” Time and again, Buffett’s advice has paid off for the so-called Oracle of Omaha. Here’s how it can benefit you the next time a financial crisis hits.

Ignore the noise

Not every drop in the market is worthy of the title “crisis.” The first stock exchange opened in the U.S. in 1790, and since that time, there’s been some level of hand-wringing each time the market has dipped. When the market is performing well, it’s called a bull market. When it’s practically asleep, it’s a bear market. To give you a better idea of how common bull and bear markets are, consider the following:

Bear markets are not reason for panic. In the S&P 500 index, there have been 26 bear markets since 1928 (an average of one every 3.6 years). For reference, there have also been 27 bull markets. Over the long term, stock values have risen significantly.On average, stocks lose 36% of their value during a bear market. However, stocks gain an average of 114% during a bull market.Despite emotionally-driven panic, a bear market does not necessarily mean we’re in an economic recession. Since 1929, there have been 26 bear markets, but only 15 of those led to recessions. While recessions are never easy, they’re also a time of opportunity for a smart investor.Let’s say you spend 50 years of your life investing. You could live through approximately 14 bear markets. While it may be painful to watch your portfolio dip, downturns are a temporary part of the economic cycle.

Buffett’s advice is to ignore those who are sure the end is near every time their portfolios take a hit. It’s not only hysterical behavior, but it robs them of the opportunity to use a bear market to their advantage.

Buy at a bargain price

Imagine the next new “big thing.” Perhaps it’s a hybrid vehicle that runs more than 100 miles on a single gallon of gas, or a brilliant new medical device. The company goes public and everyone wants a piece of the action.

It seems like everyone you know is buying and the stock price soars. All your friends picture themselves making millions and you’re starting to feel left out. According to Buffett, this is when you should be wary.

The reasoning is this: You don’t know if the stock is performing well because the company is legitimately groundbreaking or if the stock is performing well because everyone and their brother has jumped on the bandwagon.

Now, if you’ve done your research and believe there’s a legitimate reason to hitch your wagon to this company, the time to buy is when others become fearful, call their broker to sell, and you can scoop up shares at a reduced price.

Keep your eye off the ball

As mentioned, the market will rise and fall regularly throughout your lifetime. Watching it like a hawk and selling any time your portfolio takes a hit may feel like the right thing to do, but it’s unlikely to benefit your long-term goals. That’s because you still want to be holding that asset when values begin to rise.

As Warren Buffett has said, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

Do your homework before purchasing any asset, buy it, and leave it alone to suffer through bear markets and soar through bull markets. When everyone else is selling off, remind yourself that what goes down, frequently goes way, way up.

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Small steps can help you fight inflation. 

It’s been a little over two months since Newsweek hired Redfield & Wilton Strategies to survey 1,500 eligible U.S. voters about the state of the economy. While we’re sure the survey received more than one spicy response, the takeaway was this: 63% of respondents support the idea of the federal government sending new stimulus checks to help combat inflation.

COVID-19 not only introduced the world to a scary virus but also ushered in a painful period of inflation that the Federal Reserve is still working on getting under control. In 2021, one year into the U.S. shutdown, the inflation rate hit 4.70%.

By June 2022, as we lingered in our second year of the pandemic, the inflation rate hit an agonizing 9.1%. Thanks partly to interest rate hikes, the rate fell by 2% to 7.1% by November.

If there’s a silver lining, history shows that rates work their way back down, even after hitting excruciating highs. For example, inflation hit 13.55% in 1980, slowly cooling back down to under 2% in 1986. In other words, what goes up does come down, albeit painfully.

In the meantime, it’s little surprise that 63% of people surveyed would like the federal government to deposit a new stimulus check into their bank accounts to help them battle current high prices.

The reality

Shortly after being sworn into office, President Joe Biden proposed what would be the first of two stimulus checks to the American people. Not a single Republican in either chamber of Congress voted for it.

Now that Republicans have taken a majority in the House of Representatives, the odds of them voting in favor of another check are nil. It’s not going to happen.

That said, you’re in control. No matter how tough things are right now, there are steps you can take to ease the pain of inflation, giving it time to drop to a more manageable level.

Here are eight things you can do today to free up money, allowing you to meet your monthly obligations without going into the red.

1. Switch car insurance

Stick with us here. Switching car insurance is easier than it sounds and can put extra money in your pocket this month. Consider this: Studies show that auto insurance companies offer their loyal customers an average discount of 1% to 2.7%. However, consumers who shop rates and switch carriers can shave 19% off their auto insurance.

That means if you’re making a monthly payment of $100, it could drop to $81. Ask for a complete list of potential discounts to learn if you can save even more.

2. Make a balance transfer

We do not know how long it will take for inflation to drop to a more manageable level. In the meantime, consider transferring credit card balances to a new card with a 0% promotional rate. Typically, 0% balance transfer offers last from 12 to 18 months. That means you have 12 to 18 months to pay the debt down (or off entirely) before the promotion expires. If you haven’t paid it off by then, the interest rate reverts to the card’s standard rate.

Tip: To qualify for a 0% promotional rate card, you’ll need a good to excellent credit score. While the exact score depends on the credit card issuer, a score below 670 will make it tough to qualify. Fortunately, there are steps you can take to raise your credit score.

3. Store other people’s belongings

If you have spare space in your garage, basement, or attic, consider making extra cash each month by renting it to someone who needs to store their stuff. It’s as easy as taking a photo of the area and posting it to a site like Neighbor.com. There, people in your city can determine if your space is suitable for them.

If you don’t have any inside space, that’s okay. You can also advertise a driveway or unpaved lot for someone to store a boat or car. You determine the rental rate.

4. Ditch your bank

If your bank is nickel and diming you with monthly fees, it’s time to bid it farewell. Given the number of banks and credit unions available, paying unnecessary bank fees is ridiculous.

5. Download apps

If you’re not a couponer, it’s okay. The easiest way to save money on everything you need, from gasoline to groceries, is by using an app to find the best deals in your area. For example, GasBuddy locates the cheapest gas near you while Flipp browses the sales ads of grocery stores in your area and tells you where to find the best deals.

6. Declutter

One of the most satisfying things to do is declutter your home, jettisoning anything you no longer need or use. Have a garage sale, or easier yet, advertise them on a neighborhood website. Chances are, someone else will pay you for anything you’re getting rid of.

7. Adopt autopay

This one is a breeze. Look through your bills and determine which companies or creditors offer discounts when you set up automatic payments. It’s common for utility companies to give you a break if you sign up.

8. Check those subscriptions one more time

It’s easy for subscriptions to sneak up on you. A new streaming channel here, a razor delivery box there. Go through your bank account or credit card statement looking specifically for any subscriptions you may have forgotten you’re paying for.

Inflation soars, and inflation settles. In the meantime, it makes most of us pretty uncomfortable. While there’s nothing you can do to hurry the process, there are steps you can take to provide your own stimulus by saving money each month.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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You can spend less in the course of maintaining and fixing your home. 

I don’t think I ever set foot in a Home Depot store until I actually became a homeowner. But since buying a house, I’ve taken many a trip to my local Home Depot for a variety of reasons, from picking out paint colors to helping my husband round up supplies for a repair job.

Now in the course of the past 13 years or so, I’ve racked up a pretty hefty credit card tab on Home Depot purchases. But whether you’re a new homeowner or a seasoned one, there are steps you can take to spend less money at Home Depot — and reap more savings. Here are a few tactics to employ.

1. Rent tools you only expect to use once

In our house, we have a room in our basement that’s dedicated to my husband’s tools. Some of those are things he uses regularly. Others have probably not been touched in several years.

As such, a few years ago, I made a rule — we would only buy tools from Home Depot (or any store, for that matter) after crunching the numbers and making sure that was the most economical route. And you may want to do the same.

Generally speaking, you can save money at Home Depot by renting tools you only expect to use for a single project. Not only might you spend less, but you also won’t have to worry about finding space for yet another tool.

That said, in some cases, the opposite can be true — it can be more cost-effective to purchase a tool rather than rent it repeatedly. You’ll need to think carefully about your needs and anticipated usage when making that call.

2. See if your purchase is eligible for a rebate

Some of the things you buy at Home Depot may render you eligible for a rebate. And there’s an easy way to know.

Home Depot has a rebate center you can access that will tell you whether you’re due money back. As a general rule, though, make sure to keep your receipts in case you need to submit them for rebate purposes.

3. Research your home improvements and repairs so you get the right materials from the start

It’s a running joke (and not such a funny one) that every time my husband goes to Home Depot, it ultimately results in at least one follow-up trip due to buying the wrong items. If you want to save money at Home Depot, take a little time to figure out exactly what you need for your upcoming home improvement or repair job so you buy the right things from the start.

While you can sometimes return an item to Home Depot that turns out to be the wrong one, that’s not always the case. And getting your list right from the start could be a huge money-saver. Plus, not having to make a second (or third, fourth, or fifth) trip to Home Depot could save you money on gas costs.

When you own a home, you may find that Home Depot becomes a regular shopping destination. Use these tips to slash your Home Depot spending and free up more money for the many other costs that come along with being a homeowner.

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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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Ready to see some $0 balances? 

Being in debt is extremely common and also extremely personal. Thankfully, there are plenty of options when it comes to paying off debt. If you owe just one creditor, your debt payoff will be a lot less complicated than someone who owes several. In this instance, there are a few strategies to consider.

Debt payoff options

The debt snowball method will have you focus on your smallest debt amount first, and as you pay off debts in order of size (by sending the largest amount of money to that one, while making minimum payments on the rest), the amount you’re paying on your debt grows over time as you roll more money in. Finally, you’re making huge payments on your last remaining and largest debt. I went through this myself in 2022, and was kind of amazed at how well it worked for me.

You can also try the debt avalanche method, which also takes a one-at-a-time approach, but going in order of debts with the highest interest rates. This method will save you money, as you’ll knock out the more expensive debts first. It can be a little frustrating if you’re the kind of person who likes to see early progress, though.

Another option is debt consolidation. This can be achieved via paying off all your debts with a debt consolidation loan or a balance transfer credit card, then paying that off. Doing this will give you just one debt payment every month. If this sounds interesting to you, read on for five ways to tell if consolidating your debts will be a good fit for you.

1. You have decent credit

Debt consolidation via either personal loan or balance transfer card is tied to your credit score, so if your score isn’t good, you might not qualify for a low enough interest rate to make it worth your while. The best balance transfer credit cards come with an introductory 0% APR period, lasting as long as 21 months. This gives you nearly two years to pay off your debts transferred to the card before interest is charged. However, they require higher credit scores to qualify.

The same goes for the best personal loans available; if you want a lower interest rate, your credit must be in good shape. There are personal loans for folks with poor or fair credit, but the interest rates will be higher and may not ultimately save you much on interest when paying off your debt. Hence, having a higher credit score will help if you want to pursue debt consolidation.

2. You like simplicity

Debt consolidation is all about simplicity and ease of use. If you go this route, you’ll end up with just one payment, and that can be very nice indeed. Having to manage multiple debt payments can be extremely stressful, and if you’re not good with scheduling, you might find yourself falling behind on all those payments. And hey, as a bonus, you can even set up your debt consolidation loan or credit card with auto pay, so you don’t have to risk forgetting to make that payment every month. So if you want to simplify your debt payoff, debt consolidation could be great for you.

3. You want to avoid accruing more interest

Done right, debt consolidation will save you money on interest. This is especially true if you’re paying off credit cards (which have variable interest rates that can be extremely high; in November 2022, the average credit card APR hit 19.04%). If you get a personal loan, you will have to pay interest, but it will likely be less than that if you have decent credit. And if you go with a balance transfer credit card, you’ll have that nice, long interest-free period to pay off your balance.

4. You’re confident you won’t charge your cards up again

Finally, the last way to tell if debt consolidation could work for you is to honestly assess your spending habits. If you move your existing credit card debt to a loan or balance transfer credit card, you will find yourself with $0 balances on those cards. This can be a dangerous temptation for some people, and you definitely don’t want to find yourself charging up those cards again, as you’ll end up in an even deeper hole. So if you can avoid that temptation and get a better handle on your spending with credit cards going forward, debt consolidation is a solid bet to deal with your debt.

Not all methods of debt payoff will work for everyone, so it’s great we have options. If you’re thinking about consolidating your debts, consider the above points and make the best decision for you and your finances.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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There are protections in place in the event of brokerage failure. 

You’re working with a brokerage firm, sailing along with your investments, and you receive word that the firm has gone belly up. Here, we’ll outline what you can expect and how much protection you will have available.

Historical perspective

In the past, brokerage firms that have been unable to meet their financial obligations have dealt with it in one of two ways.

Find a buyer: For example, in 2008, when Bear Stearns crashed, it was purchased by J.P. Morgan.Self-liquidate: As Drexel Burnham Lambert was forced to do in 1990, firms who don’t find buyers must liquidate.

Will anyone step in?

Yes, if a firm self-liquidates, securities regulators like the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) step in. The agencies work with the failed firm to ensure that your accounts are protected, and your assets are transferred to a SIPC-protected brokerage firm.

What is SIPC?

The Security Investor Protection Corporation (SIPC) is a federally mandated, non-profit corporation created under the Securities Investor Protection Act (SIPA) of 1970. That act mandates that U.S.-registered brokerage firms be members of the SIPC. It’s their membership fees that fund the organization.

While the SIPC is not a government agency, its purpose is to speed the recovery and return of missing customer assets during the liquidation of a failed investment firm.

How much money is protected?

SIPC protection is limited, covering the replacement of missing stocks and securities up to $500,000. This amount includes cash claims up to $250,000. SIPC only comes into play when a firm shuts down, and customer assets are missing.

Why the term “legal customer” matters

SIPC coverage of $500,000 applies to each legal customer. Let’s say that you have three accounts at the failed firm. One is in your name only, another is a joint account with your spouse, and the third is an IRA account in your name.

Each of these separate accounts is considered a legal customer, meaning that each is eligible for the full $500,000 coverage.

What’s not covered

There are some losses that SIPC does not cover, including:

Drop in value due to ordinary market losses.Investments in currency, fixed annuities, hedge funds, commodity futures, or investment contracts that are not registered with the SEC.Accounts of the brokerage firm’s directors, partners, officers, or anyone else involved with the firm’s failure.

What you should do if your brokerage firm is liquidated

In the rare event that your brokerage firm goes bust, you’ll receive a notification letter. Here are the steps you should take:

Gather brokerage account records, statements, trade confirmations, canceled checks, and correspondence with the firm.Check account statements to ensure they are accurate and reflect all cash deposits sent to the firm. Make sure there are no transactions you did not authorize.Follow the instructions provided by SIPC in filling out necessary forms. Make sure to complete your claim by the date set forth by SIPC. Any claims filed late cannot be satisfied.Be aware that you may be unable to execute trades or transfer your accounts during the liquidation process.

Due to security measures, brokerage failures are exceedingly rare. However, if you’re concerned, ask your brokerage firm if it carries additional insurance coverage beyond SIPC-provided limits.

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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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