Money Management

It’s a move that could really work to your benefit. 

Inflation has been wreaking havoc on consumers for well over a year now. And in the course of 2022, many people have been forced to take on credit card debt or dip into their savings accounts just to do things like put food on the table and keep the heat running.

But while inflation has made life difficult for a lot of people this year, it’s had one nice silver lining. It prompted the IRS to raise the annual contribution limits for retirement plans like IRA accounts.

IRAs are retirement plans you can open independently of an employer. Because there are tax breaks involved in contributing to these plans, the IRS limits the sum you can put in each year.

Right now, IRAs max out at $6,000 for savers under the age of 50 and $7,000 for those 50 and over. Next year, IRA contribution limits are rising by $500, so those under 50 will be able to contribute up to $6,500, while those 50 and over will be able to put in $7,500.

Maxing out an IRA is something a lot of people don’t manage to do. But if you make that a goal and stick to it, you’ll make financial guru Suze Orman really happy.

A move worth making

In a recent blog post, Orman wrote, “I would be thrilled if you gave serious thought to how you might be able to make a maximum contribution in 2023. If you’re under 50 that works out to $542 a month, or $125 a week. If you are at least 50, that works out to $625 a month, or $144 a week.”

When you think about it that way, maxing out an IRA seems doable. But it can also be a challenge. That’s why a good bet may be to put the process on autopilot.

Most IRAs let you set up an automatic transfer so that money moves out of your checking account and into your retirement savings each month off the bat. That way, you won’t be tempted to spend the money you’re supposed to be using to fund your IRA.

Why maxing out makes sense

IRAs come with tax breaks that regular brokerage accounts don’t offer. And so the more money you contribute, the more tax savings you can reap.

If you put money into a traditional IRA, you’ll exempt a portion of your earnings from taxes that year. If you fund a Roth IRA, you won’t get an immediate tax break, but your money can be invested on a tax-free basis, and withdrawals you take from your savings during retirement will be tax-free.

Plus, the more money you pump into your retirement savings, the more you stand to have later in life. That could come in very handy if your senior living costs wind up being higher than anticipated, or if you end up with a lot of health issues that are expensive to keep up with.

Which IRA should you choose?

Many people like the upfront tax break that comes with a traditional IRA. But if you don’t need that tax break to max out the account, then you may want to favor a Roth IRA. Doing so means not running the risk that tax rates will rise over time, leaving you with a greater IRS burden as a retiree.

Roth IRAs are also the only tax-advantaged retirement plan that doesn’t force savers to spend down their balances later in life. So if you want more flexibility with your money — say, the option to leave some of it behind to your heirs — then a Roth IRA is a good choice.

If you earn too much money to fund a Roth IRA directly, you can always contribute to a traditional IRA, convert your contribution to a Roth, and pay taxes on the money you move over. You can make a full Roth IRA contribution in 2023 if your income is under $138,000, or under $218,000 for couples.

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Credit cards are a great tool, but it takes time to learn how to use them well. 

Many people use credit cards in their daily lives because they’re convenient. But if you’re not cautious, your credit card habits could get you in trouble — you could accumulate credit card debt or hurt your credit score. If you’re struggling to manage your spending, you may want to reduce your credit card usage, so you don’t put yourself at risk for financial troubles. Here are some signs that you should use your credit cards less frequently in 2023.

1. You continue to carry a balance

If you’re using credit cards but aren’t paying your entire credit card balance off every month, that can be dangerous. The longer you carry a balance each month, the more debt you will have to pay off because interest grows on unpaid debt. Eventually, it could become a stressful situation that negatively impacts other areas of your life beyond your finances.

The best practice is to use your credit card to charge what you can pay off monthly. Doing this will let you avoid credit card interest charges and make your credit card bills more manageable.

If you have existing credit card debt, it’s worthwhile to stop using credit cards until you tackle your debt. You might explore opening one of the best balance transfer credit cards and transferring existing card balances to your new card.

You’d then get to take advantage of 0% interest on your transferred balance during the promotional period, which could help you pay down your debt faster and save on interest charges.

2. You’re tempted to spend more than you can afford

It’s best to consider what you can afford before charging your card. If you’re tempted to overspend, you could quickly get into debt. While it’s possible to pay off debt, it takes time and effort and could take longer to crawl out of if you have a lot of debt.

If you struggle with overspending, it’s a good idea to put your credit cards away for some time until you develop new spending habits. If you need help managing your spending, creating a budget may help better guide your purchase decisions.

READ MORE: Best Budgeting Apps

3. You’re missing payments

Missing credit card payments or paying them very late is not ideal. For starters, your credit card issuer will likely charge you late fees — and those extra expenses can add up fast.

If you continue to miss payments or pay your credit card bills late, you might also harm your credit. Your payment history, which includes whether you pay bills promptly, is an important factor that goes into your credit score.

If you’re missing payments regularly, it’s probably not a good idea to continue using your credit card until you get into a better bill payment routine. Setting up automatic payments through your credit card issuer could help you stay on track and avoid paying your bill late. But make sure you have plenty of money in your checking account if you plan to do this.

4. Your financial situation has changed or will change soon

If your financial situation has recently changed or is about to, you may want to consider using credit cards less. It can be a big lifestyle adjustment when you experience significant financial changes, such as a job loss or a reduction in hours or pay. To avoid spending more than you can afford and avoid the risk of going into debt, it’s good practice to reduce your credit card usage habits as you adjust to your new lifestyle.

Credit cards are essential personal finance tools for many people. But you want to make sure your credit card habits aren’t doing a disservice to your finances and your credit. The good news is you can make small changes that make a big difference, and once you feel more confident, you can use credit cards to your advantage.

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Is this tech device really necessary or just a costly hassle?  

Some technology I don’t mind breaking out the credit cards for. In fact, I’ve been willing to spend a small fortune to buy an expensive computer and software I need to increase my productivity.

I also don’t mind paying for the cost of a nice phone since I use my cell all the time, and even buying a high-quality TV for the rare times when I actually get a moment to watch a movie so I can enjoy the experience.

There is, however, one tech device that’s found in many homes (and offices) which I will absolutely not be buying any more.

I’ll never buy a printer again

A printer is the one tech device that will absolutely never have a place in my home again. And there are a few key reasons for that.

First, I’m not sure if I’ve just had bad luck or not, but it seems like printers are very prone to not working properly. Over the past few years, I’ve purchased numerous printers — all of which have developed problems that were time consuming to fix if they could be fixed at all.

One of my printers inexplicably stopped printing any black ink at all, just a few short months after we bought it. A phone call to customer service was no help, and they said we could send it in for warranty replacement but that became a huge hassle of disconnecting and shipping.

Other printers have had various issues of their own, from failing to stay connected to the wifi to not recognizing our computers when plugged in with a cable to constantly falling victim to paper jams with masses of paper getting stuck. Every time I wanted to print anything, I would end up with a half-hour battle of trying to get the device working, if I was able to do it at all.

Aside from this hassle, and wasted time and money trying to fix problems or set up new printers, the ink is also astronomically expensive for every printer I’ve ever come across. Worse, many of the newer printers have chips that tell the printer you’re out of ink after a certain number of pages are printed even when there is actually ink left in them. It’s a huge waste of money and a racket on the part of the printer companies.

I decided to opt out of the entire system, and I absolutely will never own a printer again.

How I get by without a printer at home

Getting by without a printer is much easier than I thought. For one thing, just about everything can be printed to PDF and stored digitally or can be downloaded to a phone instead of printed. We use my phone for printable coupons, for example, and for boarding passes.

On the rare occasions I need to print something, it’s cheaper and easier to just go to a copy store or the library and ask them to print it for me. This has saved me money, and ironically, a lot of time since it can actually take me less time to pop into one of these stores when I’m out and about than it would take to get a printer working.

If you’re like me and have had a bad experience with printers — or if buying costly ink leaves a bad taste in your mouth — you may want to decide to opt out of printers as well. It’s been fine for me, so give it a try and see if it works for you.

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The less interest you’re charged on your debt, the less you’ll have to spend. 

If you’re closing out the 2022 holiday season with a pile of credit card debt, try not to beat yourself up. This was a very hard year to cover extra expenses due to inflation. And so if your holiday purchases put you over the edge and forced you to take on some credit card debt, rather than feel guilty about it, instead focus on paying that debt off as easily as possible. And in that regard, a personal loan is an option worth considering.

A solution that might work out well for you

A personal loan allows you to borrow money for any purpose, whether it’s fixing up your home, taking a vacation, or even starting a business. It’s also not uncommon for people to use personal loans as a means of consolidating debt.

In fact, what makes personal loans such a great option for credit card debt consolidation is that they tend to come with competitive interest rates. Of course, these days, the cost to borrow is up across the board due to recent interest rate hikes on the part of the Federal Reserve. But still, you may find that a personal loan charges a lot less interest than what your credit cards are charging. And so if you take out a personal loan and use your proceeds to pay your cards off, you might save yourself a lot of money overall.

Plus, when you carry a credit card balance, there’s the potential for the interest rate you’re being charged to climb over time. Personal loans don’t work that way. Rather, when you sign your loan documents, you’re given an interest rate that will be fixed throughout the life of your loan. So if you sign a $5,000 personal loan at 7% interest, that’s the rate you’ll be looking at until your loan is paid off (assuming you don’t refinance it).

How to qualify for a personal loan

Personal loans are unsecured, which means they aren’t backed by a specific asset. And that can make qualifying for one a little tricky.

When you take out an auto loan, for example, your lender has the right to repossess your vehicle if you don’t keep up with your payments. With a personal loan, there’s really no specific asset your lender can go after if you fall behind on your payments, so there’s more risk involved.

For this reason, you’ll generally need decent credit to qualify for a personal loan. And if you have poor credit, you should expect to get stuck with a higher interest rate on a personal loan, since your lender will assume it’s taking on more risk.

In fact, if your credit score really took a hit this year, then you may want to hold off on applying for a personal loan, because it may not end up being all that more cost-effective than simply repaying your credit cards. But if your credit score is in good shape, then a personal loan could be your ticket to shedding your leftover holiday debt as quickly and painlessly as possible.

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It’s a goal worth striving for. 

It’s fair to say that 2022 has been tough on a lot of people. Inflation has driven the cost of living upward in a very big way. And because so many people live paycheck to paycheck without any money in savings, higher prices have forced many consumers to rack up credit card debt just to cover basic expenses.

If you don’t have any money in your savings to speak of right now, then it’s a good idea to focus on building some cash reserves in 2023. In fact, your goal should really be to put together an emergency fund with enough money to cover three full months of essential bills. That way, if you lose your job or get hit with a large unplanned expense, you won’t have to resort to debt.

Now if you’re starting with no money in savings, you may not manage to complete your emergency fund in 2023. And that’s okay. The most important thing to do is save something and then keep working toward your ultimate goal.

In fact, you may even want to tell yourself that you’ll aim for $1,000 in savings in 2023 and take things from there. And if the idea of saving even that much seems daunting, here’s how to go about it.

1. Get on a budget

A budget won’t magically make your living costs less expensive. But what it will do is give you a clearer picture of what your expenses look like and where there may be room to cut corners. That could help you eke out a little money each month to put into the bank.

Plus, budgeting is something you can pretty much automate once you set yourself up. That’s because there are different apps you can use that link up to your credit cards and checking account so your spending is tracked and categorized automatically.

2. Pick one expense to cut

If you’re already living a very frugal lifestyle, then you may not have so many expenses to cut back on. But there may be something you can manage to spend a little bit less on.

Say you order lunch once a week to give yourself a break from having to prepare it and bring it to work. That’s certainly a reasonable expense. But if that lunch costs you $12 a day and you can make your own for $2, it means you’re technically spending $40 extra a month. If you save that $40 a month, you’ll practically be halfway to your $1,000 goal.

3. Get a side gig

If your earnings aren’t all that high and you’re not in line for a nice raise for 2023, then it pays to look at getting yourself a side hustle. Even if you only have a few hours to devote to a gig each week, that alone could get you to your $1,000 savings goal.

In fact, there are many side hustles that let you work at your own pace or set your own hours. If childcare is an issue for you, for example, you can also seek out a side hustle that can be done from home, like data entry or billing work.

Saving $1,000 in the course of a year might seem like a tall order at a time when everything has gotten so expensive. And to be clear, it may not be the easiest thing to do. But it’s important to try your best, because having that $1,000 in the bank the next time life doesn’t go your way could spell the difference between accumulating a credit card balance and staying debt-free.

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Is a rural home right for you? 

When you picture a rural area, do you imagine lots of farmland? Or do you simply think of a place where homes are really spread out? Either way, rural areas can be very remote. And that’s a mixed bag.

Now interestingly enough, the share of homes purchased in a rural area in 2022 reached an all-time high. A good 19% of homes purchased this year were in rural locations according to data from the National Association of Realtors.

But is moving to a rural area a good idea? Here’s why it is — and isn’t.

Pro No. 1: Lower prices

Rural areas can be less desirable than urban and suburban areas. Because of that, you may find that if you buy in a rural area, you won’t have to pay as much for a home. That could make it so you’re able to take on a mortgage loan whose payments fit comfortably into your budget. And given that mortgage rates are so high these days, getting to spend less on a home is a good thing.

Pro No. 2: More room to spread out

When you move somewhere that the average distance between homes is several acres or more, you get to benefit from loads of space and privacy. Moving to a rural area could mean more square footage inside your home, more land, and more peace and quiet than you’d get in an urban or suburban setting.

Con No. 1: Being far away from everything

When you move to a rural area, you often put yourself far away from jobs, retail shops, and in some cases, healthcare. Imagine you’re used to living in a neighborhood where your closest supermarket is a three-minute drive away. Swapping that for a situation where the closest grocery store is a 25-minute drive may not be desirable.

Con No. 2: Sub-par public services

Because rural areas don’t tend to be very populated, they don’t tend to take in as much money in property tax revenue as suburban or urban areas. But that lack of revenue can lead to inferior public services. You may find that in a rural area, the roads aren’t as well-maintained, the libraries aren’t as well-stocked, and the schools aren’t as highly rated.

Should you buy a home in a rural area?

Buying a home in a rural area could end up working out well for you. But before you even contemplate that sort of home purchase, ask yourself whether you’ve spent a meaningful amount of time in a rural area. If not, then it could pay to try to do a trial run before taking that leap.

Granted, rentals can be hard to come by in rural areas. But if you have a friend who lives in one, ask to bunk with them for a week or two so you can see what it’s like. You may find that you love the remoteness and quiet. Or, you may find that you’re spooked by being so far from people and amenities, and that you’d rather give up more land and more space to be closer to other homes and businesses.

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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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