Money Management

Forgoing these is something you might regret. 

The U.S. tax code is fairly complex, but one thing you should know is that it’s loaded with tax breaks. There’s just one problem — a number of those tax breaks require you to file an itemized tax return in order to snag them.

Meanwhile, the tax code got an overhaul a few years ago that raised the standard deduction substantially. So these days, there’s even less incentive for tax-filers to submit an itemized tax return.

But here’s some good news. Not every tax break hinges on filing an itemized tax return. And if you’re looking to lower your tax burden in 2023, here are two specific tax breaks to snag that fall into that boat.

1. A deduction for IRA contributions

Saving in an IRA account is a great way to help ensure you’ll have enough money to cover your living costs as a senior. IRAs come in two main varieties — traditional and Roth. If you put money into a Roth IRA, it won’t serve as an upfront tax break (though there are many other benefits you’ll enjoy with a Roth IRA). But traditional IRA contributions can serve as a tax deduction and exempt some of your earnings from taxes.

In 2023, you can contribute up to $6,500 to an IRA (traditional or Roth) if you’re under the age of 50. If you’re 50 or older, that limit is $7,500.

2. A deduction for HSA contributions

Not every health insurance plan is compatible with a health savings account, or HSA. But if yours is, then it pays to fund an HSA and enjoy not just the benefit of having money available for healthcare costs, but also, a nice tax break.

HSA contributions work just like IRA contributions. You can take a deduction for HSA contributions, and the amount you fund your account with will not count as taxable income for the year.

Now, the amount you can put into an HSA will depend on the health insurance coverage you have as well as your age. If you’re the only person covered on your health insurance plan, you’re limited to a contribution of $3,850 in 2023 if you’re under age 55, or $4,850 if you’re 55 or older. If you have your family covered by your health plan with you, you can contribute up to $7,750 in 2023 if you’re under 50, or $8,750 if you’re 50 or older.

And as a point of clarification, an HSA is different from an FSA, or flexible spending account. HSA funds never expire, so you can carry a balance forward for many years and invest any money you don’t need for medical bills. FSAs make you deplete your plan balance year after year, and there’s no option to invest your money.

Don’t let these tax breaks slip away

Funding a traditional IRA and/or HSA could be a great way to pay the IRS less in 2023. And you can snag a tax break regardless of the approach you take to filing your tax return.

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Should you adopt Mr. Wonderful’s financial fundamentals in 2023? 

Shark Tank’s “Mr. Wonderful” has some straightforward advice for his followers this holiday season. He tweeted, “Three guiding principles about money: keep money and emotions separate; eliminate debt; and be grateful for what you have.”

Breaking down Kevin O’Leary’s three principles

The successful entrepreneur and TV personality has some common sense advice on money management. The trouble is that his words of wisdom may not be that easy to implement in real life. Let’s dive in to understand why.

1. Keep money and emotions separate

Unfortunately, many people spend money because they’re happy, sad, angry, scared, excited, insecure, or driven by a host of other emotional triggers. If we could draw a line between how we feel and how we manage our finances, it might mean we’re less likely to hit the shops when we’re stressed or upset. We might not blow a wage increase on a celebratory purchase. We might not let a fear of missing out drive our investment decisions, or panic sell solid long-term investments purely because the price has dropped. We might not take on credit card debt to buy things we don’t actually need.

Is he right?

O’Leary is right to say many of us would be better off if we could keep emotions out of our finances. But the question is, how? Personal finance is, well, personal. It impacts our relationships, where we live, how we work, and how we spend our time. As a result, it’s extremely difficult to draw a line between finances and feelings.

A better route is to try to understand the role that emotions play in your financial decisions, particularly the things that trigger unnecessary spending. For example, many of us understand the rationale behind saving or investing a portion of our income every month. But we don’t always do it, sometimes because our emotions get in the way.

The trick is crossing the gulf between what we should do and what we actually do. Rather than ignoring your emotions, look for ways to manage them. If you’re struggling to save money and yet find yourself splurging on things you don’t necessarily need, think about what’s driving your spending. You can use that knowledge to help you build different habits.

2. Eliminate debt

Paying down debt, particularly the high interest variety, makes a lot of financial sense. Debt payments can eat into your monthly budget and make it more difficult to achieve other financial goals. In addition, the interest you pay on the money you owe can add up over time and make it more difficult for you to build wealth long term.

Is he right?

On paper, eliminating debt is a good financial decision. Instead of spending money on interest and debt repayments, there’ll be more in your bank account for other things. But the reality isn’t so simple.

First, there are many scenarios that can push people into debt, including divorce, medical emergencies, job loss, or other financial crises. In an ideal world, we’d all have an emergency fund to help us through a financial crisis. But we don’t live in an ideal world, and many Americans don’t have money saved. Sometimes borrowing is the least worst option.

Second, once you owe money, particularly on credit cards, paying it down can be a challenge. People can get stuck in a cycle of debt in which so much of their income goes toward debt payments that they may have to borrow more to keep up. Telling people to eliminate debt is like telling us to get fit — most people know they need to do it, but need support in making a repayment plan and sticking to it.

3. Be grateful for what you have

There will always be people who earn more than you do, as well as those who earn less. Developing gratitude can make us appreciate our own situations and avoid unhelpful drivers such as envy. You may not earn as much as your neighbor or take as many vacations as a colleague. But perhaps you bring in enough money to live comfortably, have good health, and a loving family. When you focus on the things you do have and appreciate them, you’re less likely to keep chasing unrealistic desires.

Is he right?

Being grateful for what you have is a great way to live within your means and avoid trying to keep up with the Joneses. If you always want what other people have, you’ll never be satisfied — it’s a never-ending and costly cycle. Not only that, but you never know whether the fancy vacations or amazing houses you see on your friends’ social media feeds have been purchased with borrowed funds.

O’Leary’s financial principles make sense in theory

In theory, these are all sound ideas. It makes sense to be debt free, cut out emotions from your finances, and appreciate what you have rather than chasing what you don’t. And as we approach the new year, it’s good to get a reminder of some of those guiding principles. However, the real challenge is in moving from theory to practice and that can be easier said than done.

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Overlooking important details can cost you. 

Buying a home is a big decision. Even though my husband and I have bought and sold multiple properties during our lifetimes, we’ve still made mistakes during the process. In fact, we’ve learned something new with almost every transaction, starting from not opting for an adjustable-rate mortgage again after our first property purchase.

RELATED: Best Mortgage Lenders

One of our biggest home-buying mistakes, however, was not looking into the details when a survey revealed that part of our property was on wetlands.

The house had a lake behind it, and parts of that lake and the yard leading up to it were revealed to be in wetlands when our pre-purchase survey was conducted. The surveyor and our realtor didn’t specifically mention this fact, and not being from the area originally, we didn’t know enough to ask about the details.

Unfortunately, this became a huge problem over time.

Our property was subject to tons of restrictions

When a property is on wetlands, it means you are extremely limited in what you can do with the space. You are not allowed to make changes to it without getting special permits and, in some cases, paying for mitigation fees if you are disturbing protected land.

Since the wetland area was behind the house and not in an area where we would be building anything, we didn’t think much of it. The problems, however, became apparent when we started to realize just how severely restricted you are. For example, when grasses started growing up that impacted our view of the lake, we couldn’t just cut them down (at least not without breaking the rules). There were special requirements we had to follow and additional costs we had to incur.

We also couldn’t do things like construct a dock to enjoy the water, or even put up a swing set in the area near where the wetlands were located. We didn’t realize any of this until after we had bought the property when we moved in, and it affected our enjoyment of it for the entire time that we lived there.

It also made it harder for us to sell the property later on, because many potential buyers who had lived in Florida and who knew about wetland impact issues were aware of the downsides and didn’t want to deal with them.

Always do your due diligence

Our experience making this big home-buying mistake reinforced the importance of asking questions and always doing your due diligence. Had we taken time to learn more about what the survey showed — and what it meant for us — we might have done something differently.

It also showed me that no matter how experienced you think you are, you can face unexpected surprises and cost. In fact, even after this bad experience, we had another wetlands issue later with a plot of land we bought when we didn’t realize that our driveway would cross a small area of wetlands if we built on the lot. So, it helps to have an emergency fund so you’re prepared to deal with unexpected costs that inevitably arise after moving in.

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If these are your favorites, you may want to stock up now. 

Costco is well-known for its famous $1.50 hot dog and soda combo, its Kirkland-brand products, and the great deals the store offers on bulk items. The warehouse club has a devoted fan base, and almost everyone who shops at Costco has a favorite product or two that they never hesitate to get out the credit cards for.

Unfortunately, Costco doesn’t necessarily continue selling products forever. The store varies its lineup and some items inevitably end up getting discontinued — either for a period of time, or forever.

Costco usually indicates a product is on its way out by putting an asterisk on the price tag, and Eat This Not That reports that the following 10 items have been found with the so-called “death star” and may not be available next year.

Will these ten Costco products disappear off your store shelves?

Costco favorites that you may have to say goodbye to next year include the following 10 items:

Clif Builder’s Variety Protein Bars: Bars with a great taste, tons of protein, and limited sugar and carbs sound like a great purchase. So, it may come as a surprise these items are being discontinued. They’re currently available at a bargain price of $25.99 for 18 bars and the price is expected to potentially fall further before the bars are gone from the shelves for good.Eli’s S’mores Squares: These are one of many tasty treats on this list, and those who enjoy recreating the classic camping-favorite at home will be sad to see them disappear. A box of a dozen retailed for just $12.99 before they were discounted for clearance — but soon you’ll no longer be able to pick up the mini-marshmallow and ganache concoction wrapped in a scrumptious graham cracker crust.Hershey’s Simply 5 Syrup: Whether you enjoy this syrup on your ice cream or for a classic glass of chocolate milk, you probably appreciate that it’s made with just five ingredients (cocoa, sugar, water, natural flavors, and organic invert syrup). Sadly, you’ll need to look elsewhere for your healthier Hershey’s fix soon. You can at least pick up a two pack for $10.69 before they disappear forever though.Kellogg’s Frosted Mini Wheats: Although this time-tested cereal may continue to be found elsewhere, Costco is likely not going to have it on its shelves any more. The large 70-ounce boxes can be found on sale for $8.99 though, so stock up while you can.Kinder Bueno Chocolate Bars: Chocolate lovers won’t like this addition to the list. These European treats go for $18.99 for 20 bars and delight the taste buds with a chocolate-covered wafer and whipped hazelnut cream. They’re currently discounted at many Costco locations, though, and will soon be gone.Kirkland Signature Strawberry Margarita Made With Gold Tequila: Real lime juice, 100% agave, and cane sugar give this margarita mix a clean, delicious taste — and make your favorite drink even healthier. Sadly, the under-$10 mix bottles will likely not be on Costco shelves in 2023.Kohana Organic Coffee Cold Brew Concentrate: You may have to shift to the Kirkland Brand cold brew if you’re an iced-coffee fan, because the Kohana brand product is on the way out.Log Cabin Original Syrup: These 64-ounce jugs were on discount for only $7.49, but pancake and waffle fans who keep this big syrup jug on their breakfast table are likely to have to find an alternative next year.Pescanova White Shrimp With Citrus Herb Sauce: This product has disappeared from Costco online already, although you can still find the shrimp dish at other retailers.Schwartz Brothers Everything Organic Bagel Chips: Snack lovers who enjoy the delicious crunch of bagel chips and the zesty taste of Everything Bagels will want to pick up these 15-ounce packages at their current bargain price of $9.99 before the products disappear from Costco.

Be on the lookout for new Costco delights

Although these items will likely no longer be able to grace your table in 2023, you can still find plenty of wonderful products at Costco. Check out these Reddit Costco favorites to find new items you’ll enjoy to help get over the disappointment if these are some of your staples.

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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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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It’s always better to learn from other people’s money mistakes than to experience them firsthand. 

Reddit has several forums devoted to financial topics, where users can get advice and share stories. Not only is it interesting to learn about how other people manage their money, you can also get an idea of what not to do based on the decisions they regret. After reviewing all kinds of personal finance stories on Reddit, here are the worst decisions we found and why you should avoid them.

1. Getting a payday loan

Multiple Redditors called payday loans their worst financial decision, and one even said they had to file bankruptcy because of payday loan debt. What makes this type of loan so dangerous is extremely high interest rates, which can be upwards of 400%. These loans are so predatory that they’re actually illegal in many states.

They also have short terms, normally of two weeks. Most borrowers can’t pay in full, so their only option is to refinance the loan. That means paying the interest charges and renewing the loan for another two weeks. This often becomes a vicious cycle where borrowers need to keep refinancing and paying costly interest charges, without ever making progress on what they owe.

Trying to pay off one of these loans? Check out The Ascent’s guide to getting out of payday loan debt.

2. Buying a timeshare

Name any item that people quickly regret buying, and there’s someone on Reddit who has bought it. Boats. Backyard hot tubs. A four-foot plush alligator pillow (seriously). But the one purchase you just about always want to avoid, even if it seems like a good idea at the time, is a timeshare.

It’s a tempting proposition. You pay for a place, often in a luxurious resort, that you can use once per year. However, there are normally restrictions on when you can use it. You’re also on the hook for maintenance fees, and one Redditor said that these alone can cost as much as a nice vacation. Timeshare owners hardly ever get their money’s worth, and to top it off, it’s also hard to sell your timeshare if you want to get out of it.

3. Not realizing you need to choose investments for retirement accounts

Sending monthly contributions to retirement accounts is one of the best financial decisions you can make. These accounts have tax advantages and allow you to build a nest egg you can rely on when you’re older. Unfortunately, several Redditors mentioned making a critical mistake with these accounts — not realizing they needed to select investments, too.

To grow your money with retirement accounts, you need to invest that money. These accounts usually have a variety of investment products to choose from, such as:

Exchange-traded funds (ETFs)Mutual fundsTarget-date fundsBondsTreasury bills

If you don’t choose any investments, then you’ll just have cash sitting around. It won’t grow, so you won’t be able to take full advantage of your retirement plan.

4. Maxing out credit cards

This is a common mistake among young adults and anyone who is new to credit cards. Maxing out a card is when you use its full credit limit. For example, if your card has a $1,000 limit and you make $1,000 in purchases, then you’ve maxed out that credit card.

There are a few reasons maxing out credit cards can be so dangerous. If you can’t pay off the full balances by the due date, you’ll be charged interest. Most credit cards have high interest rates, so this can be expensive. And once you’re in credit card debt, it’s often hard to get out of it.

Another issue is that using up your entire credit limit can be bad for your credit score. There are several consequences to having a lower credit score, including getting charged higher interest rates on any loans you need.

5. Going into debt for college without having a plan

One of the more interesting financial mistakes found on Reddit was college-related. Some Redditors regretted rushing into college and taking on large amounts of debt, only to end up without a solid career path. Despite wanting to take a gap year, they felt pressured by their families to continue their education right away.

Of course, college itself isn’t a bad financial decision. People with higher levels of education make more money on average. But it’s not something to force yourself into, especially if it’s going to put you into debt and you’re not sure what you want to study yet.

6. Risking it all on longshot investments

We’ve saved the worst for last, and it doesn’t get much worse than losing your life savings on a risky investment. Unless you decide to invest on margin and lose your life savings, plus money you’ve borrowed.

This isn’t a rarity for Reddit, either. It happens all the time on r/WallStreetBets, a subreddit revolving around ultra-aggressive stock trading strategies and a whole lot of memes. Members love to go all in on investments with big payouts and small odds of success.

While a select few luck out, the vast majority don’t. r/WallStreetBets never fails to entertain, but the YOLO approach isn’t one to copy with your portfolio.

All the financial decisions listed above can be costly and often don’t work out well for people. Now that you know about them and why they’re so risky, you can avoid making them yourself.

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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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While they may be finance experts, their advice isn’t always correct. 

Turning to finance professionals and investing experts for advice can often give you good ideas about how best to manage your money. But it’s important not to listen unquestioningly to everything you hear.

In fact, both Mark Cuban and Dave Ramsey have given advice about credit cards that the majority of people should ignore, because following it could hurt them in the end.

This credit card advice could be very bad for your finances

So, what’s the bad credit card advice offered by both billionaire entrepreneur and Shark Tank star Mark Cuban and Dave Ramsey, finance guru, author, and creator of Financial Peace University?

Both have suggested you should steer clear of using credit cards entirely in virtually all situations.

Cuban has said repeatedly that “if you use a credit card, you don’t want to be rich.” He’s suggested either cutting up or burning your cards after paying them off in order to avoid the high interest rates that come with carrying a credit card balance.

Ramsey has also said the number of credit cards you should have is zero. He’s also suggested that if you have cards, you’re in a “toxic relationship” with your creditors. He doesn’t believe credit card rewards are worth earning and finds no reason to use a card. Ramsey suggests you can use a debit card to enjoy similar fraud protections and that you don’t need to earn a good credit score since you can get along fine in life without good credit.

Here’s why you shouldn’t listen to Ramsey and Cuban

There are two big problems with both Ramsey and Cuban’s advice.

First, both experts don’t seem to be aware that it is actually possible to use credit cards responsibly. While some people don’t, and can’t, do that, that’s not the case for everyone or even necessarily for most people.

If you can use credit cards to charge everyday purchases and then pay the bills on time before you owe interest, there’s no downside and lots of upsides to them. They can allow you to earn rewards that effectively reduce the price of purchases and take advantage of cardmember benefits, like extended warranties, that save you money in the long run.

Cards can also sometimes be the cheapest way to borrow. If you have a big purchase you must make now and don’t have the cash, a 0% APR card is most likely the only way to do it without owing interest.

And your card can also be instrumental in helping you build credit — which is actually far more important than Ramsey suggests it is since your credit isn’t only used for borrowing but also for many other things including setting auto insurance rates and determining how large your deposit must be when you sign up for utilities.

If you listen to Ramsey and Cuban, you could be entirely giving up on a valuable financial tool. Instead of doing that, focus on living on a budget and developing responsible spending behavior that allows you to use cards to your benefit rather than to your detriment. You’ll be a lot better off in the end if you do that.

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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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