Money Management

Could my process help you decide how much belongs in savings? 

Contrary to what you might think, you don’t want too much money in your savings account. There are a few reasons why that’s the case. Most notably, savings accounts don’t provide a very high return on investment, and there are better places to put money if you want it to grow and help you build wealth.

You absolutely do need some money in savings, though — both for a rainy day and because chances are good there will come a time when you need to make purchases you can’t pay for all at once.

The big question is, how can you decide just how much to put in savings? This is my process for figuring that out — and it could potentially help you come up with your own system.

Start with your emergency fund

The very first thing I did was decide how large my emergency fund should be. Some experts recommend keeping three to six months of living expenses in savings, while others go so far as to suggest having enough cash to cover eight to 12 months of costs.

My husband and I are self-employed with varied income sources, two kids, and several homes. So, we decided that we’re most comfortable having enough cash to cover six months of expenses. This doesn’t mean we have enough to replace six months of income — just enough to pay for our bills for six months if our paychecks were to stop coming.

We added up the amount we’d need to spend on the essentials, including groceries, housing, utilities, and other basic costs, and we have that much in savings. We keep this cash in a high-yield savings account because we need it accessible and don’t want to worry about losing some of it in a downturn or having to sell investments at an undesirable time just to access it.

Consider other funds you may need

My husband and I also have a fund for home repairs because we don’t want to rely on our emergency fund to cover these costs. Each year, we contribute 1% of our home’s value into a separate savings account so we’ll be prepared if we face big or small home expenses. We don’t use the money every year, but if something major goes wrong — like we need a new roof — we’ll have it.

You may also want a car repair fund in savings or a savings account earmarked to help you pay for a car in cash so you don’t have to take out a car loan when your existing vehicle gets too old. You can estimate how much you’d need to replace your vehicle and how long the likely remaining life of your car is to decide how much to put into this savings account each year.

Again, having this money in savings is a good idea because it needs to be accessible, and it can prevent you from having to take out a loan or rely on a credit card.

Figure out how much you’ll need for short-term purchases

Finally, I put money into savings if I am going to need it to purchase something within the next two or three years. I’ve made a list of big purchases I’m saving up for along with my projected timelines to buy them. Based on this, I’ve decided how much to transfer into savings each month.

For example, if I planned to buy a new sofa for $1,000 in one year’s time, I’d put $83 per month into a savings account for that purpose. Since the money will be needed soon, I don’t want to invest it and risk losing it when I may need it.

By adding up the amount of my emergency funds, my other funds, and my accounts to save for big purchases, I can decide exactly how much I should have in savings — and the rest of my extra money goes right to my brokerage firm where it can do me more good for the future.

These savings accounts are FDIC insured and could earn you more than 17x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 17x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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 

You don’t want to get stuck with a surprising charge. 

There’s a reason so many people like to shop on Amazon — both during the holidays and in general. Not only does Amazon tend to offer low prices, but there’s something to be said for not having to drag yourself out to the store and pay for gas to get there. Instead, you can order stuff on Amazon and have it shipped to your door for free. And if you change your mind about something you’ve purchased, you can always just send it back for free.

Or can you? While Amazon usually offers customers free returns, in some cases, you might get stuck paying a fee to send an item back. And that’s something you should be aware of before you make your next Amazon purchase.

Repeat returns can result in fees

Often, when you buy something from Amazon, you’ll see that it comes with free shipping and returns. But if you get into the habit of returning purchases too frequently, Amazon might start to penalize you.

Such was the case recently for a customer who was charged a 50% restocking fee to return an item that wasn’t of good use to her. Amazon told this customer that because she’d returned too many items in the past, she’d potentially face restocking fees for future returns.

So how many returns does it take to get on Amazon’s naughty list? It’s hard to know. Amazon claims it has different processes in place to determine which customers are taking advantage of its return policy. But it won’t commit to a specific number.

For the most part, if you return one item per 15 or 20 Amazon orders, you probably won’t get pegged as a serial returner. But if you return every other item you buy, it could raise a red flag.

How to avoid getting charged for Amazon returns

Although many of the items Amazon sells are eligible for free returns, you’ll need to make sure the items you’re buying fall into that category if you don’t want to be charged to send them back. Some third-party sellers on Amazon may have their own individual return policies, so make sure to read the fine print before buying. You should also know that certain types of items, like food, beauty products, and oversized or bulky items, may be more likely to incur a fee for making a return.

If you want to reduce the likelihood of getting slammed with restocking fees, try to purchase products on Amazon judiciously. And also, take advantage of programs like Try Before You Buy, which allows you to order apparel and footwear to try on at home at no cost. If you like the items in question, you can simply check out on Amazon as you usually would. And if you don’t like the items, you just send them back within seven days to avoid having your credit card charged.

The whole point of the Try Before You Buy program is to allow consumers to try out products without committing to them. And it’s also a good way to help ensure you won’t be charged to return items that aren’t a good fit. But otherwise, be careful when shopping on Amazon, and consider erring on the side of skipping those items you just aren’t sure about.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

 Read More 

Talk about a surprising piece of data. 

What does it mean to feel wealthy? For some, it could mean having a certain amount of money in the bank. For others, it could mean having the ability to spend freely without worry, or to meet a specific financial goal, like buying a large home.

But while there are certainly a lot of different ways to define wealth, it’s pretty fair to categorize people with a net worth of $1 million or more as wealthy. Yet recent data from Edelman Financial Engines reveals that only 29% of actual millionaires put themselves in that category.

At first, that might seem really surprising. But actually, there are a few different reasons that could explain why even those with $1 million or more to their name may not feel like they’re rolling in dough.

When lifestyle creep rears its ugly head

People who have or make a lot of money tend to spend a lot of money. And to a large degree, that makes sense. If you earn $300,000 a year and can afford a larger house and a nicer vehicle, why shouldn’t you have those things if you can keep up with a higher mortgage and car payment?

But there’s a difference between treating yourself to a nicer lifestyle and consistently upgrading your lifestyle as your income rises. The latter is a trap a lot of higher earners fall into.

And that’s why we’re constantly hearing stories about people who earn hundreds of thousands of dollars a year but remain saddled with credit card debt and have little to no money in savings. It’s a concept known as lifestyle creep, and it could help explain why so many millionaires don’t consider themselves wealthy despite having a large amount of financial resources at their disposal.

There’s also inflation to think about. Granted, it’s less likely to be a factor in millionaires thinking they aren’t wealthy, but it’s also been impacting consumers across a range of incomes for well over a year. And while we can argue that higher earners are better equipped to deal with rising living costs, let’s also remember that proportionally speaking, they’re probably taking the same hit.

Let’s say your vehicle maintenance used to cost you $300 a year, only this year, you’ve spent $400 due to inflation. You might think that a person earning $300,000 a year can easily cope with a $100 increase. But chances are, that person was spending $900 a year on vehicle maintenance due to having a fancier car, not $300. And so their costs might’ve risen by $300, not $100.

An odd but persistent phenomenon

Though it may seem odd to hear that so many millionaires don’t regard themselves as wealthy, it’s also not really a new concept. Inflation and lifestyle creep aside, some people define wealthy as being financially secure. And it’s possible to have $1 million or more in assets and not feel secure.

At the end of the day, wealth is very much a matter of mindset. And sometimes, more money can’t change the way a person thinks and feels about their finances.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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 

Your career has a huge impact on how much money you make. 

According to data from the U.S. Bureau of Labor Statistics, the average U.S. income was $97,962 in 2021. High-earning outliers bring that number up, as the median income was $69,717. But averages vary heavily depending on the job. Some positions make more than double the average, whereas others earn only a fraction of it.

If you’re making a career change or deciding on a career path for the first time, you may want to go where the money is. To give you ideas of occupations that do and don’t lead to big earnings, here are the highest- and lowest-paying jobs in the United States.

The 10 highest-paying jobs in the United States

Here are the 10 highest-paying jobs in the United States and their average salaries as of 2021:

Chief executives: $213,020Nurse anesthetists: $202,470Pediatricians (general): $198,420Airline pilots/copilots/flight engineers: $198,190Dentists (specialists): $179,400Dentists (general): $167,160Computer and information systems managers: $162,930Architectural and engineering managers: $158,970Podiatrists: $158,380Natural sciences managers: $156,110

Unsurprisingly, chief executives come in at the top of the list. Half of the jobs on the list are in the medical field, but there is still some variety among the highest-earning occupations. Airline pilots and flight engineers earn large salaries, as do managers in several fields.

All these jobs require a college degree and/or specialized training. That’s something that most high-paying jobs have in common, and studies have shown that people with more education earn more. If you want an above-average salary, look for a field you’re interested in studying with quality job opportunities.

The 10 lowest-paying jobs in the United States

Here are the 10 lowest-paying jobs in the United States and their average salaries as of 2021:

Shampooers: $25,160Fast food cooks: $25,490Hosts and hostesses (restaurant/lounge/coffee shop): $26,000Fast food and counter workers: $26,060Amusement and recreation attendants: $26,110Ushers, lobby attendants, and ticket takers: $26,390Cashiers: $26,770Lifeguards, ski patrol, and other recreational protective service workers: $27,320Dishwashers: $27,350Childcare workers: $27,860

As you can see, these are entry-level jobs that don’t require much or any specialized training. That’s not to say these jobs are unimportant, or the pay is fair. But because there are so many people who can perform these jobs, employers pay low wages for them.

How to increase your pay

If you’re in a low-paying job that makes it hard to get ahead financially, the best goal you can set for yourself is increasing your pay. Personal finance advice often focuses on saving more, but this only gets you so far. When you aren’t making a livable wage, earning more money is the only real fix.

This is easier said than done, but it’s possible for those who put in the work. Here are a few options to consider:

Get the training required for a high-paying job. You could pursue a college degree or complete a certification program. Look for a career you like first, and then see what kind of education you need for it. There are plenty of six-figure jobs you could land with the right training.Become a freelancer. If you have an in-demand skill, you could make money from it by freelancing. In fact, the average freelancer makes $93 per hour.Start a side hustle. If your issue is that you aren’t getting enough hours, there are side hustles that could earn you $10,000 or more.

There are lots of options out there to increase your earnings — and thereby your savings account balance. Take some time to think about your income goals and what you want to do so you can find the option that works best for you.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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 

It’s the one type of card I’m missing. 

There’s a reason consumers are often advised not to open too many new credit cards at once. First of all, any time you apply for a new loan or credit card, a hard inquiry is done on your credit report. A single hard inquiry will usually result in a five- to 10-point drop in your credit score, which isn’t usually such a big deal — especially if you have great credit to begin with.

But if you start applying for multiple credit cards in short order, you’ll have multiple hard inquiries and multiple instances of seeing your credit score drop a few points here and there. And those drops can add up.

Don’t open too many credit cards at once

Another factor that goes into your credit score is your credit mix. It speaks to the different types of credit accounts you have. If your personal credit mix consists of nine credit cards and maybe one installment loan, like an auto or personal loan, it doesn’t necessarily paint the best picture of you as a borrower.

Applying for too many new credit cards in a limited period of time can also serve as a red flag to lenders. They might think, “Hmm, why does this person need so much credit all of a sudden?” And if you’re gearing up to apply for a larger loan, like a mortgage, that could be a problem.

Credit score impact aside, the more credit cards you have, the more tempted you might be to spend. And that could lead you into debt. So all, it’s good to be judicious about opening credit cards.

I like to limit myself to one new credit card per year. And I’ll usually try to chase a sign-up bonus in the course of getting a new card. But I won’t just apply for a credit card at random. Rather, I’ll make sure the credit card in question will serve me well.

I hope to stick to my “one card a year” rule in 2023. And there’s one specific type of card I’d like to focus on.

A card I could really use

I used to have a travel rewards credit card, but since it came with a small annual fee, I made the decision to cancel it during the height of the COVID-19 pandemic. I found that in 2020 and 2021, I wasn’t getting any use out of that card since I wasn’t flying anywhere.

But at this point, I know I stand to benefit from a travel rewards card. What I like about these cards is that they commonly come loaded with perks that can make travel less expensive. For example, travel reward cards often entitle you to a free checked bag on a flight. That’s a nice way to save money if you’re traveling often.

And these cards often give you discounts on in-flight purchases. Granted, I don’t tend to spend a lot of money during flights, but you never know when you might need a snack or light meal.

I’ll be looking out for fees

One potential drawback of getting a travel rewards credit card is that these cards often charge an annual fee. In fact, the whole reason I canceled my last travel card was that I didn’t see the point in paying a fee for a card I wasn’t using.

I’m not necessarily opposed to paying an annual fee for a travel rewards card. Often, the savings you’ll reap by using one of these cards will more than pay for that fee. But I do intend to compare my options and see if there’s a no-fee travel card that will meet my needs. And if I do pursue a card with a fee, I’ll need to crunch the numbers to make certain that fee is worth paying.

All told, being careful with credit card applications and spreading mine out helps me keep my credit score in decent shape. And that’s a practice I hope to uphold in the new year. But since I could really use a travel rewards credit card to replace the one I no longer have, that’s the card I’m putting on my radar.

Top credit card wipes out interest until 2024

If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR for up to 21 months! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read our full review for free and apply in just 2 minutes.

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 

You’ll regret passing up this option. 

Costco offers lots of features that members should take advantage of. But there’s one service that can be especially valuable for those who have memberships to the warehouse club. This feature could save you both time and money if you use it wisely.

Make sure you’re using this Costco feature

The must-use Costco feature you need to take advantage of is the warehouse club’s food and grocery delivery service.

Costco actually offers multiple different options for delivery including:

Same-day deliveryTwo-day deliveryCold and frozen delivery

While same-day delivery comes with higher prices for delivered items and a delivery fee, both two-day delivery and cold and frozen delivery are free provided that you meet minimum spending requirements ($75 for two-day, and $100 for cold and frozen).

Each of the two free options offer many different products that can be brought to your home, including meats, poultry, seafood, deli, cheese and dairy, and beverage products for cold and frozen delivery. Two-day delivery includes snacks, breakfast items, bakery and desserts, candy, pet supplies, and pantry staples. You can order these items from the comfort of your own home after logging into your Costco account and you won’t have to go into the store to make your purchases.

Why is this Costco feature such a great one?

Costco’s free grocery delivery options rival those offered by competitors, such as Amazon Fresh. These no-cost shipping services through Costco give you the chance to take advantage of the warehouse club’s bargain prices on food staples for your pantry or freezer so you can pay less for groceries and keep more money in your bank account.

Being able to get your grocery items delivered from Costco also means you don’t have to physically go into the store to buy the items on your list. And that can be a money-saver too. You can avoid using gas to drive to the store, which makes a difference at a time when prices remain high at the pump. But, more importantly, you can reduce the chance of impulse buys.

When you visit your local Costco store, there are tons of products set up to entice you to purchase things that were not on your list. This is especially true if the store is offering free samples of food products at a time when you are visiting.

While it may be fun to try these tasty morsels or to take a look at new products, you’re also going to be much more tempted to spend money when you’re walking around the warehouse club than if you’re just searching for items and adding them to your cart online. If you can cut out these impulse buys, you can reduce your unplanned spending and better stick to your budget.

Because of the high shipping minimums, though, you should use this Costco service only when you have a large order in mind. You don’t want to buy unnecessary things just to get up to the minimum required to avoid delivery fees, so make up a big list and order every few weeks or every few months to make the most of the grocery delivery services Costco offers.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com and Costco Wholesale. The Motley Fool has a disclosure policy.

 Read More