Money Management

Are any of these on your list? 

It’s natural to worry about money from time to time. You might, for example, be less than thrilled about the savings account withdrawal you took this year to cover an unexpected home repair. And you may be anxious about the fact that you’re not really making great progress in funding your IRA account.

Meanwhile, a recent Fidelity study reveals that Americans have a number of financial matters on their minds going into the new year. Here are the top concerns cited — and what to do about them.

1. Inflation

Surprise, surprise — inflation tops the list of Americans’ big worries going into 2023. Given the way living costs skyrocketed this year, that’s understandable.

The good news is that recent data tells us that inflation has been easing. That doesn’t mean we’re back to where we were before mid-2021, but there are positive signs. But if you’re worried about inflation wreaking havoc on your finances in the new year, one important thing to do is start following a budget. That could help you better manage your expenses and conserve cash at a time when costs are still elevated.

Another option? Shed some unnecessary expenses. You don’t have to give up everything you love, but it wouldn’t hurt to spend more carefully on items that aren’t needs, but rather, wants.

2. A recession

Given that financial experts have been sounding recession warnings for much of 2022, it’s easy to see why this is such a big concern for people going into 2023. But first, know that despite what you’ve been hearing, the economy is by no means guaranteed to take a turn for the worse in the next 12 months. Right now, the labor market is holding strong and consumers are continuing to spend. So we may find that all of those recent warnings are largely overblown.

That said, it’s a good idea to boost your savings so you have money in the bank to get you through a recession that results in job loss. In fact, your emergency fund should have enough cash to cover three months’ worth of essential bills at a minimum. If you’re not there yet, bump up your savings rate as best as you can.

3. Unexpected expenses

An unplanned bill can land in your lap at any time. And it’s easy to see why so many people are worried about facing unexpected costs given that their paychecks are disappearing so quickly due to inflation.

But you know that emergency fund we just talked about? That’s what’s going to bail you out of a jam the next time you’re hit with an expense you weren’t anticipating. So the more money you put into your savings, the less you’ll have to worry about.

It’s natural to be worried about certain financial matters, whether they relate to the broad economy, like inflation and a recession, or whether they relate to you, like unplanned bills. But all of these concerns are events you can prepare for. And if you take those steps, you might manage to ease your fears and sleep better at night.

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All of these really help. 

The fact that my closest Trader Joe’s supermarket is about 30 minutes away is both a good thing and bad. It’s bad because I love Trader Joe’s and wish I had one closer. But it’s a good thing because my love of Trader Joe’s could easily lead me to overspend and rack up a hefty credit card tab.

In fact, in the past, I’ve really busted my budget in the course of my Trader Joe’s shopping. Now, when I do my monthly Trader Joe’s run, I manage to spend less by employing these four tricks.

1. I read the Fearless Flyer before I go

When I walk the aisles of Trader Joe’s, I’m often lured in by new products I’ve never seen before. And that sometimes leads me to scoop them up without fully reading the description.

Now as much as it pains me to ever say anything remotely bad about Trader Joe’s, I have, in the past, purchased items on a whim that I haven’t really loved. So now, I make a point to read the Trader Joe’s Fearless Flyer before hitting the store. It includes full product descriptions so I know exactly what I’m getting — and which items I should skip.

2. I make a list

There are certain Trader Joe’s staple items I like to buy every time I visit the store. For example, Trader Joe’s makes a veggie burger I could eat multiple times a week in a pinch, so that’s something I like to stock up on.

I find that it helps me to make a shopping list before hitting the store so I can focus on the things I need, and spend less on the things I simply decide I want on the spot. Also, while Trader Joe’s isn’t my usual store for things like fruits and vegetables, if I’m running low on those items and happen to be going there, I’ll grab some to avoid a second trip to my nearby supermarket. That’s a way to save on gas.

3. I take inventory at home first

Those veggie burgers I like so much? While I try to maintain a decent supply, I don’t need 20 boxes at once. And so I make a point to take inventory at home before heading to Trader Joe’s to avoid purchasing items I already have plenty of.

4. I budget for impulse buys

Because Trader Joe’s tends to introduce new, seasonal, and limited-time products, I pretty much always buy something there that I hadn’t planned on initially. Rather than fight that, what I do is budget a certain amount of money for what I call “Trader Joe’s temptations.” That actually helps me spend less, because instead of just recklessly throwing 17 new items into my shopping cart, I’ll limit myself to the four or five my budget allows for.

It’s easy enough for a person like me to spend way too much money at Trader Joe’s. But these tips have actually helped me curb my spending while shopping there, and they might help you as well.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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How much extra cash will you have? 

President Joe Biden had some good news for people across America on Dec. 19, 2022.

The president sent out a series of tweets during the holiday season, detailing what his administration has accomplished for average Americans. And one of those tweets directly related to a big change that could mean an extra $200 in the typical household’s budget.

Here’s what it is.

Will you end up with some extra cash in your bank account?

President Biden’s Dec. 19 tweet explained exactly why he believes the typical American will have more money in their bank account this year.

“Right now, families with two cars driving home for the holidays are saving $200 a month on gas compared to mid-June’s peak,” the tweet explained.

High gas prices have been wreaking havoc on Americans’ budgets for a very long time, but prices have started to fall dramatically in recent months. And while a drop in prices isn’t exactly the same as the government making an extra direct payment into peoples’ accounts, it can have an equivalent effect.

If you were spending $200 more per month on gas during the summer and you now get to keep that money for other things thanks to falling prices, these reclaimed funds can allow you to do other important things with your money — like spending it on more fun purchases or saving it.

Because of falling gas prices, and a general decline in inflation that the president also touted in his tweets, demand could increase for goods and services because people are no longer feeling the pain at the pump. And this could have the effect of stimulating the economy as a whole, leading to increased job growth and more prosperity for everyone.

What should you do with your extra $200?

If you’re among the many Americans who will save around $200 per month on gas, this is a great opportunity to redirect that money to accomplishing things that matter to you.

If you acquired some debt during the time when prices were high, you can funnel that cash you’re now saving on gas towards paying it off. If you didn’t go into debt but you instead cut other expenses to afford higher prices at the pump, consider whether you can keep those cuts in effect so you can use the extra $200 to bulk up your retirement savings, save for a home down payment, or save for other big purchases.

The good news is, with prices down, you may find yourself with a lot more wiggle room in your monthly budget and the $200 you were devoting to filling up your tank is money that’s yours again to make the most of.

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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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It’s an important decision, so make it wisely. 

Whether you’re opening up a bank account for the first time or are looking to make a move from your current bank to a new one, it’s not a decision to just jump into. Sure, you might have dozens of options when it comes to opening a bank account. But that doesn’t mean you have dozens of good options.

While it’s always possible to close a bank account you’re not happy with, even if you’ve only had it open a handful of months, generally speaking, when you open up one of these accounts, you want to be able to stick with it for a while. With that in mind, if you’re going to be choosing a new bank account in 2023, here are three key moves to make along the way.

1. Compare interest rates

Even if you don’t have a whole lot of money to put into a savings account right now, you never know if you might come into extra money at some point in the future. You might snag a raise at work, or start working a side hustle that boosts your income. And if you end up in the fortunate position of having extra money to stick into a savings account, then you’ll want a bank whose interest rates on savings are generous.

Before you open a bank account in 2023, compare interest rates across different physical and online banks. Of course, for the most part, you can expect a higher interest rate with the latter option. Online banks don’t have the same overhead as brick-and-mortar banks. Because of this, they’re commonly able to offer higher interest rates on savings accounts as well as certificates of deposit.

But you may want a physical bank to take advantage of certain services and amenities, like ATM access, notaries, and a safe deposit box to store important documents. And so in that case, you’ll want to research interest rates to make sure you’re looking at a generous payday on your cash.

2. Consider location

You might find a bank that offers a slightly more competitive interest rate on savings accounts than another. But if that bank isn’t located in a convenient spot, then you may want to forgo that slightly higher interest in favor of a bank that’s more accessible to you. This especially holds true if you tend to visit the bank often.

3. Look carefully at fees

Depending on the type of bank account you’re opening, you may be looking at different fees. With a checking account, for example, you could get hit with a fee for letting your balance fall below a certain threshold. Be mindful of fees as you compare your choices and do your best to keep them to a minimum. In fact, ideally, you should aim to find a bank that makes it possible to avoid fees altogether, since that’s money you’re effectively just tossing away.

Choosing a new bank account is a big deal. Employ these tips so you wind up happy with your decision.

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In your 40s, you can reflect on how you’ve done so far and make sure your future is secure. 

Reaching your 40s is often a pivotal point financially. It’s close to the middle of your career, as you’re about halfway between early adulthood and retirement age. If things are going well, you’ll want to keep that momentum going. And if you’re not quite where you want to be, now is the time to make changes.

This is the decade of your life where it’s more important than ever to have good financial goals. Here are four that will help you navigate your 40s.

1. Make sure you’re on track for retirement

Retirement should be your No. 1 personal finance consideration at this age. If you have enough in your retirement accounts, you’ll be able to stop working when you want without worrying about running out of money. But it’s much harder to build your retirement fund if you wait too long.

The first thing to do is figure out how much money you need to retire. A popular rule of thumb is to multiply your expected annual expenses by 25. For example, if you think you’ll need $60,000 per year in retirement, you should have $1.5 million in retirement savings.

Next, review your current retirement accounts and monthly contributions. You can plug these into a compound interest calculator, along with an estimated annual return, to see how much your money will grow over time.

If you’re on track to retire at the age you want, keep doing what you’re doing. If not, look for ways to increase your retirement contributions to make up the gap.

2. Save three times your yearly salary

Conventional wisdom says you should have three times your yearly salary saved at 40 years old. For example, if you earn $70,000 per year, then it’s recommended you have $210,000 saved.

You can include money from all your financial accounts for this. You don’t need to reach this mark with only the money in your savings accounts, and in fact, it’s probably better not to have so much in your savings accounts. Money in retirement accounts and brokerage accounts also qualifies.

Saving this much money is typically a sign you’re in a good financial position, with enough for emergencies and to retire on schedule. However, plenty of people haven’t saved this much, so don’t feel discouraged if you aren’t there yet. If necessary, try to increase your savings rate so you can reach this target during your 40s.

3. Pay off all non-mortgage debt

Debt isn’t always a bad thing, but it is generally better to cut down on your debts as you get older. You’ll save on interest charges and have fewer monthly payments to manage. Getting rid of monthly debt payments also frees up more money to use for other financial goals.

In most cases, it makes sense to pay off debts with higher interest rates first. For many consumers, this means starting with paying off credit card debt, since credit cards tend to have hefty APRs. Next up will likely be personal loans, if you have any, and then you can focus on auto loan debt.

The one exception here is mortgage debt. Since mortgages tend to have low interest rates, there’s nothing wrong with paying yours off over time on a normal payment schedule. Or, if you want, you can pay extra and get it paid off more quickly. It is a good idea to have your home paid off by the time you retire so you have lower expenses in retirement.

4. Secure your family’s financial future

Family is another important consideration for 40-year-olds who are doing financial planning. If you have a spouse and children, you’ll want to ensure they’re taken care of, no matter what.

One of the best ways to do this is by making sure you have the insurance coverage you need. Home, health, and auto insurance usually aren’t enough for people with families. Here are some other types of insurance to consider:

Life insurance to support your family if anything happens to youLong-term disability insurance (also available as a life insurance rider) that provides coverage if you become disabled and are unable to workLong-term care insurance so that your loved ones aren’t financially strained if you require this type of care

If you’re a parent, you may also want to look into ways you can save money for your children. Lots of parents set up college funds, like a 529 plan, and there are even some who start retirement funds for their children to give them a head start.

The main focus for 40-year-olds is getting ready to retire when they want. That means reviewing your retirement plan, having plenty of money saved, and cutting down on debt. And if you’ve started a family, it’s also important to make sure they’re taken care of and you’ve prepared for any worst-case scenarios.

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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.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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