Money Management

These are expensive times we’re living through. 

2022 was a year rife with higher prices for just about everything we buy, and as we start off 2023, there’s not much relief in sight. The most recent Consumer Price Index Summary (released Dec. 13, 2022) found that prices overall were up by an average of 7.1% from December 2021. Inflation is down a little from highs during the summer of 2022, but still too high for comfort. Many ordinary consumers are struggling with paying more, and many are desperate for relief. If you’re among them, you may already have a tool that can help you offset higher prices: a credit card.

The best credit cards don’t just offer a safer and more convenient way to pay for purchases. Many of them can save you money in sometimes surprising ways. Read on to see how different credit card perks and features can help offset the higher living costs we’re all dealing with.

Cash back and points

This is perhaps the most direct way credit cards can fight inflation. The best rewards and cash back credit cards will pay you back a percentage on your spending. It can be in the form of a statement credit on your account, money redeemed in your bank account, or even a check mailed to you. It could also be points you earn on spending that you can either cash out or use to make other purchases.

Earning a percentage on certain purchases

Some cards offer a higher percentage back (or more points) on some purchases. For example, you can use a grocery rewards credit card to get more back for buying groceries (a particularly expensive purchase these days; the CPI summary notes a 12% rate of inflation for “food at home”).

Welcome bonus

You can get free money to offset your higher costs if you choose a credit card with a sign-up bonus. You’ll be required to spend a certain amount within a predetermined time frame after signing up for the card. If you do, you’ll get a chunk of money or points added to your account. Just be careful not to spend more than you normally would to get that bonus, as that will defeat your attempt to defray added costs from inflation.

Special offers

Don’t forget about special offers and deals through your credit card issuer. This could look like a certain percentage or dollar amount back on a purchase made with a certain retailer during a set period of time. Note that you likely have to manually add these offers to your account via the card issuer’s website or mobile app to redeem them.

Travel perks

Another major category that consumers use credit cards for is travel spending. If you use a travel credit card, you can make future travel less expensive. Your vacation budget is likely tight enough already thanks to inflation — why not give it a hand?

Air travel savings

You can earn free airline miles, offsetting or entirely paying for your flights. Your card might also get you a free checked bag, giving you both convenience and more savings. Some travel credit cards offer free airport lounge access, which can ease your stress levels while you travel.

Hotel stays

Some credit cards offer free nights in posh hotels, or significant savings on them. You might also get a travel credit from your card that can be used for a hotel stay, making it free or less costly.

Travel insurance

Some credit cards come with travel insurance perks. We’re not over COVID-19 and if you end up needing to cancel booked travel because you’re sick, or you get sick while away from home, this feature can definitely save you money. Just make sure you’re booking your travel with the card that offers this coverage, or you’ll be out of luck if your vacation goes sideways.

Other cost offsets

Here are a few more inflation-busting and cost-saving benefits your credit cards might offer. Take advantage of these perks if they’re available to you:

Cellphone protection: If you pay your credit card bill with a credit card that offers this and your phone suffers a tragic mishap, your card issuer could cover the cost of a replacement.Rideshare app credits: Some credit card companies have a deal with rideshare apps like Uber and Lyft to offer cardholders a monthly credit for these services.Dining credits: Your credit card may offer you a set amount of money per month to cover dining purchases. Free food!Delivery memberships: You might score a free membership for a food delivery app (like DoorDash or Grubhub) thanks to your credit card.Money back on streaming services: There are credit cards that really shine when it comes to offsetting the cost of streaming services. If you have one of these, it’s worth it to see how you can benefit by using it to pay for streaming entertainment.Balance transfers: Finally, credit cards can benefit you in inflationary times by lowering the cost of paying off debt. If you have debt to pay off, consider using a balance transfer card to consolidate it. You’ll receive a period of time with 0% APR, so you can get ahead of your debt without having to pay extra interest on it.

Be cautious about your spending

As you can see, there are so many ways that credit cards can be your ally in the fight against rising costs. However, you want to avoid carrying debt on credit cards if at all possible, especially now. The average credit card APR was 19.04% in November 2022. Paying that on top of a credit balance will definitely cost more than any savings you see by using credit cards. If you can keep your balances in check (and ideally, pay them off every month), you’ll be well positioned to take advantage of all the inflation help credit cards can offer.

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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 positions in and recommends DoorDash and Uber Technologies. The Motley Fool has a disclosure policy.

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There’s no shame in saving money where you can. 

Rents are high, buying a home is darn near impossible, and inflation remains a concern. It’s no wonder that so many young adults remain on their parents’ phone plans. After all, every dollar saved is a dollar that remains in the checking account and can help a young adult launch into a life of their own.

According to a survey conducted by WhistleOut, a comparison website that helps people shop for cell phone plans, 34% of adult children — and over 50% of all Generation X and millennials — share a phone plan with their parents.

However…

Sharing a phone plan doesn’t necessarily mean that an adult child needs or wants their parents to foot the bill. Some of the sharing is likely a matter of convenience, and part may be the discount associated with bundling multiple lines.

72% of those who responded to the WhistleOut survey say they pay all or part of the bill each month.

The inside scoop

Everyone’s situation is unique, but here are some of the things survey respondents shared:

74% say they know how much their current phone plan costs each month.73% consider themselves financially independent for most of their expenses.68% live with their parents.

And finally, this contradictory response:

74% say they have plans to move off their parents’ phone plan at some point. However,62% say they will stay on their parents’ plan forever.

We’re not quite sure why some people claimed that they plan to get off while also saying they plan to stay on Mom and Dad’s plan. There are clearly some mixed feelings there.

What feels right?

When it comes to the question of how long an adult should remain on their parent’s phone plan, the answers were as follows:

30% say they’ll remain on their parents’ plan as long as their parents allow them to.22% say they’ll stay on their parents’ plan as long as they live at home.21% believe adults should get their own cell plan as soon as they become adults.15% say they’ll be on their parents’ plan until they become financially independent.11% answered “none of the above.”

It’s not just cell phones

As it turns out, adult children share more than just a cell phone plan with their families. The WhistleOut survey found that they also share these tech expenses:

9% share digital news subscriptions.18% share the cable television bill.28% share the cost of internet service.11% share the cost of music or podcast streaming services.22% share the expense of TV and movie streaming services.10% share the cost of gaming subscriptions.

What about you?

The average price for a cell phone plan is $70 per month. However, for four lines, the average monthly cost is $140. Having your own plan means shelling out $70 a month, but sharing a plan with your family only costs you $35 per month. That equals a savings of $35 monthly, or $420 a year.

$35 per month may seem like nothing, but consider this. If you were to invest that $35 each month into an IRA or other investment vehicle averaging an annual return of 7%, it would be worth more than $5,800 in 10 years.

You’d have several options once the money grew. For example, you could withdraw it and add it to your emergency savings account, or you could leave it where it is, continue to add $35 per month, and allow it to grow. In 20 years, you’re looking at a value of more than $22,000 — all because you shared a phone plan.

Any way you slice it, having extra funds like this available can help cover living expenses today and allow you to plan for your future.

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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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That’s not exactly great news. 

Since mid-2022, financial experts have been warning consumers about an impending recession. And the big fear tends to largely center on job loss.

During periods of economic decline, layoffs can be rampant. And if you’re forced out of a job, it could result in a world of financial upheaval.

Meanwhile, despite a low unemployment rate, the topic of layoffs has been in the news quite a bit over the past few months. That’s largely due to a number of big names in the tech space announcing plans to lower their headcount.

But on Jan. 9, investment banking giant Goldman Sachs announced plans to lay off up to 3,200 workers this week. And that’s pretty unsettling news to absorb.

It’s not just a tech problem

Tech companies went on a hiring spree in 2021 due to the COVID-19 pandemic. Many consumers adopted habits that drove revenue to giants like Amazon and Netflix. But as people have returned to their pre-pandemic habits, tech companies have taken a hit — and have taken to reducing their headcount as a result. What’s jarring about the Goldman Sachs announcement is that we’re hearing about layoffs outside of the tech industry.

Of course, it’s hardly a secret that the stock market did terribly in 2022, and that many investors are looking at losses in their retirement plans and brokerage accounts. So it’s not totally surprising that financial firms would want to cut costs.

But still, if Goldman is making plans to cut staff, it’s hard to know which major company will be next. And it’s also hard to know whether downsizing staff will become a trend among medium and small businesses as well. That’s why now’s a good time for working Americans to make an effort to shore up their savings — and protect themselves financially in the event of a layoff.

Are you prepared to cope with a period of joblessness?

The reality is that even if a full-blown recession doesn’t strike the U.S. economy, some jobs may be on the chopping block in the near term. And it’s a good idea to prepare for that possibility by growing your savings account balance.

At a minimum, you should aim for enough money in the bank to cover three full months of essential living expenses. But the more months of income you can cover, the more financial protection you’ll buy yourself. So if, for example, your savings right now could pay the bills for three months, it’s a great idea to save enough so you can cover four months of living costs.

Of course, there are steps you can take outside of bolstering your savings to gear up for a layoff. Those include updating your resume, growing your job skills, and developing more professional connections within your industry.

But the single most important thing to do right now in light of layoff-related news and recession warnings is to give your savings account a solid lift. And so it’s a good idea to make that your priority in the coming weeks.

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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 Goldman Sachs Group. The Motley Fool has a disclosure policy.

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If you’re willing to work with your creditors in good faith, there’s no need to hire a company to settle your bills. 

Settling your bills with creditors is also referred to as debt settlement. And to be clear, debt settlement is not for everybody. If you can make payments in full and on time, you’re not a good candidate. Settling your debts plays havoc with your credit score. If you regularly miss payments and your credit score has taken a tumble, debt settlement can help you crawl out of the financial hole in which you find yourself.

What does it mean to settle a debt?

Successfully settling debt involves an agreement between you and a creditor. Let’s say you owe $10,000 on a credit card, are out of work, and have not been able to make a full payment in months. Your credit score is in the basement, and you’re looking for options.

The goal is to work with the credit card company in the hope it will eliminate part of your outstanding balance. In return, you either make a lump-sum payment or regular, on-time payments.

Three important factors to keep in mind

Creditors make a report to the “Big 3” credit reporting agencies each month — Experian, TransUnion, and Equifax. Debt settlement will likely appear on your report as “settled for less than owed” or as a partial payment each month. In either case, your credit score will drop before it begins to recover.Debt settlement agencies tend to advertise heavily and promise to settle your debt for a fee. Unless you absolutely don’t trust yourself to take care of the matter, settling debt is something you can do yourself by having a direct conversation with your creditor.Once you realize you have a serious problem, approach the creditor. The longer you wait, the more likely it is that the creditor will sell the debt to a collection agency. Collection agencies are far less pleasant to deal with than an original creditor.

Step One: Be prepared

If you’ve missed monthly payments, you may be surprised by how willing a creditor is to work with you. After all, they would rather receive some portion of the amount owed than none. Before you call, though, ask yourself the following questions:

Do I have cash on hand that will allow me to make a one-time payment, or do I need a long-term payment plan?If I enroll in a long-term payment plan, what’s the most I can afford to pay each month? Go over your current budget carefully. Decide what you must keep and which expenses can be jettisoned until your debt is paid off.What will my next step need to be if debt settlement doesn’t work? For example, will you continue to miss payments or be forced to file for bankruptcy? It’s important to have a clear picture of your potential next step to share with the creditor.

Step Two: Prepare your story

Ideally, you can tell your creditors what’s going on in one or two sentences. If it helps, write down what you want to say. For example:

I’ve been sick and unable to work. I’m currently living on disability payments.My spouse unexpectedly walked out, and I’m now responsible for paying the bills we once shared.I’ve been out of work for months and can’t keep up with my financial obligations.

The easiest (fairest) thing to do is to be completely honest. That way, you never have to keep your story straight.

Step Three: Be prepared to take notes

Have a pen and paper (or your computer) in front of you. Make a list of each creditor you need to contact, and as you’re having a conversation, make notes of what they say.

Step Four: Call your first creditor

Once you’re on the line with a real person, briefly outline why you’re calling. It’s possible they will transfer you to another department that deals with debt settlement.

Step Five: Ask about options

Once you’ve explained your current situation, make it clear that you want to honor your debt but can only afford to repay a portion of it. They will undoubtedly ask how much you can pay today. Creditors tend to settle for less if you can make a single lump sum payment. However, if you’re unable to do so, let them know. Ask if it would be possible to set up monthly payments.

One way to let a creditor know you’re serious about making payments is to suggest they automatically withdraw the agreed-upon payment from your checking account each month. Now, most creditors will want (or require) auto-withdrawals anyway, but if you’re the first one to make the suggestion, it lets them know you’re serious.

Step Six: Get it in writing

Once you conclude negotiations, get the settlement or repayment plan in writing. Do not make a payment until you have a copy of the agreement letter in hand. Making a payment before you receive confirmation can cause you a great deal of trouble down the line.

Step Seven: Make all payments as promised

You might not think that missing a payment here or there will hurt. Nothing could be further from the truth. If you fail to live up to your bargain, the creditor has a right to rescind the agreement, and you’re back on the hook for the original balance, plus interest.

Perhaps the most important thing you can do is to be sincere, polite, and patient. It may take many months to pay off your reduced portion of the balance and many more months for your credit score to recover. However, keep your eyes on the prize. If you stick with the payment plan and refrain from taking on any new debt, your credit score will one day look better than new.

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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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