Money Management

Here are Americans’ top goals for the new year. How do yours compare? 

If you’re planning to make a financial resolution to kick off 2023, you’re in good company. Recent research from The Ascent shows that two-thirds of Americans plan on making a financial resolution for the new year. In fact, Americans’ top 10 financial goals include:

Paying off debtSaving for a significant financial milestone, like buying a homeBuilding an emergency savings fundIncreasing incomeSaving for a large purchase, like a vacation or furnitureReducing spendingInvesting moreBuilding better financial habitsSaving for retirementIncreasing charitable contributions

A number of these are particularly important. Without an emergency fund, you might instantly end up in debt if an unexpected expense strikes. And if you’re carrying debt already, it’s important that you do your best to whittle it down so as to minimize the amount of interest you’re paying on it. So it’s a good thing that paying off debt is the most popular resolution Americans are making, with 53% giving it priority in 2023.

In fact, Dr. David Kass, Professor of Finance at University of Maryland’s Robert H. Smith School of Business, says, “Interest rates on credit card balances have soared to as high as 19% during 2022, far exceeding the 7% rate of inflation.” With interest rates that high, even a small amount of debt has the potential to skyrocket.

Kass says that to pay off debt successfully, it’s a good idea to set up a monthly budget. That could help you reduce your spending in different categories to free up cash for debt payoff purposes.

Americans face challenges on the road to meeting their goals

While most people are actively making financial resolutions for 2023, 81% of Americans think ongoing inflation will make it harder to meet their financial goals next year. And Kass thinks that’s something everyone should try their best to get ahead of.

“Since the rate of inflation is currently exceeding the rate of wage increases,” he says, “it may be necessary to reduce or eliminate some expenditures in the lowest priority categories in order to both balance the budget and be able to use surplus cash to either reduce debt or set aside into a savings account.”

Confidence levels are pretty low

Not only are Americans worried about inflation getting in the way of meeting their goals, but just 20% are confident they’ll be able to keep their upcoming financial New Year’s resolutions. Thankfully, Kass has some key advice.

“New Year’s resolutions, whether financial or otherwise, tend to wane as the year progresses,” he says. “One way to overcome this natural tendency would be to set up an incentive system that could, for example, result in a reward for each month that the resolutions are kept. Perhaps a specific dollar amount from each month’s surplus funds can be spent on something special or set aside into a dedicated savings account with the ultimate goal of purchasing a large ticket item such as a home, car, or to cover future educational expenses.”

It’s also a good idea to break up major goals into minor accomplishments. Let’s say you’re trying to dig your way out of $6,000 worth of credit card debt. That may seem daunting. So instead, tell yourself your initial goal is to eliminate your first $1,000 of debt. Once you’ve achieved that objective, move on to your next $1,000.

Fulfilling financial resolutions can be tough even during periods when living costs aren’t so high. But because of inflation, setting money aside for different goals might be even more difficult. But if you take a step-by-step approach to meeting your objectives, you might close out 2023 with a number of key financial wins under your belt.

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Talk about a big disappointment for parents. 

If you’ve been following the news, you may have seen that lawmakers are trying to push a $1.7 trillion spending bill through by the end of 2022. The bill includes a host of provisions, from funds earmarked for defense to emergency assistance dollars for Ukraine to changes to Medicaid and other healthcare programs. The spending package also includes provisions dubbed Secure 2.0 that are meant to help retirement savers.

But notably absent from that spending bill is a boost to the Child Tax Credit. And that could leave a lot of parents in a really tough spot come 2023.

An enhancement that did a world of good

Many families struggled with inflation this year and had to make hard choices because of higher living costs. For a lot of people, that meant racking up debt on credit cards and cutting back on expenses to stay afloat.

A boost to the Child Tax Credit would have no doubt helped bail a lot of families out this year. But lawmakers were unable to find a way to make a boost happen for 2022. And at this point, it’s looking iffy as to whether they’ll be successful in that regard for 2023.

That’s really unfortunate, because the enhanced Child Tax Credit actually did a lot of good things for parents in 2021. Last year, the credit’s maximum value rose from $2,000 per child to $3,000 for children aged 6 to 17 and $3,600 for children under age 6. The credit also changed to become fully refundable, which meant a recipient could claim it in full even if they had no tax liability.

Also, half of the boosted Child Tax Credit was paid to recipients in the form of monthly installments. Those hit bank accounts between July and December of 2021.

Meanwhile, research has shown that the boosted Child Tax Credit helped pull millions of children out of poverty. It also helped many families shore up their savings and struggle less with food insufficiency.

But in the absence of the enhanced credit, a lot of families have had a really tough year given the way living costs have soared. And since a boost to the Child Tax Credit isn’t being rolled into the aforementioned spending package, we can bet that an enhancement won’t take effect at any point in early 2023.

Is the boosted Child Tax Credit doomed?

Not necessarily. Lawmakers are still pushing to enhance the credit so it can provide relief to families who need it. But there are some barriers they’re facing.

For one thing, there’s disagreement as to whether the boosted Child Tax Credit should have a minimum earnings requirement. Some lawmakers want one, while others argue that implementing that provision will make it so that families who need the credit the most can’t claim it. There’s also the question of finding money to pay for the credit.

The good news is that lawmakers still have the boosted Child Tax Credit on their radar and are likely to keep fighting for it. But whether that means families will see added relief in 2023 is still a big question.

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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.
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One in 4 people in New Mexico received food benefits in 2021. 

On average, the Supplemental Nutrition Assistance Program (SNAP) helped feed 41.5 million people per month in 2021. The program is designed to help low-income families buy healthy food and, ultimately, reduce hunger in America. SNAP recipients can use the benefits to buy foodstuffs such as dairy, bread, cereals, meat, poultry, fruit, and vegetables.

SNAP is a federal program, but it gets implemented at a state level. This means there’s quite a bit of difference from state to state, particularly since individual states have some flexibility in how they operate. For example, states like Hawaii and Alaska pay more due to the higher food costs. Another big difference is participation rates. Only 5% of New Hampshire, Utah, and Wyoming residents used SNAP benefits in 2021. In contrast, 20% or more of people in the District of Columbia, Louisiana, and New Mexico participated in the program.

States with the highest SNAP participation

Last year, 15% or more of the population in these states received SNAP benefits:

New Mexico: 25% of populationDistrict of Columbia: 21% of populationLouisiana: 20% of populationOregon: 17% of populationWest Virginia: 17% of populationOklahoma: 16% of populationIllinois: 15% of populationAlabama: 15% of populationGeorgia: 15% of populationFlorida: 15% of populationNorth Carolina: 15% of population

Data source: USDA and Center on Budget and Policy Priorities (CBPP)

New Mexico tops the list, with 1 in 4 people receiving SNAP benefits in the state. Over 520,000 residents received food assistance in the 2021 fiscal year, according to data from the CBPP. According to 2019 data, 67% of SNAP participants in New Mexico are families with children. Over half the New Mexican SNAP recipients were working families.

Emergency allotments

Almost all of the states with high SNAP participation have continued to offer extra pandemic related food benefit payments. These emergency allotments allow states to pay recipients the maximum amount for each household, and gives an extra $95 to families that already receive the maximum.

Only two states and D.C. on the list above no longer pay emergency SNAP allotments. The District of Columbia stopped in November 2022, Georgia stopped in June 2022, and Florida stopped in June 2021. However, once the public health emergency ends in 2023, all states will have to end these extra payments. This will have a big impact on some SNAP recipients in 2023 as they could see a big drop in their payments.

Ways to make your SNAP benefits go further

SNAP benefits are designed to supplement a household’s income to bring it up to the minimum the USDA estimates is needed to eat healthily. The benefit amounts have risen dramatically in recent years due to changes in the way they get calculated and increases that reflect cost of living changes.

Even so, it isn’t easy to feed a household on SNAP. This is even more so the case because the skyrocketing costs of things like housing and utility bills has put pressure on many households’ checking account balances. You may feel like you’ve already cut your food budget down to the bone, but here are some to maximize your SNAP benefits.

Always shop with a list: Lists mean you can minimize your trips to the store, save time when you’re there, and avoid impulse purchases. It also helps you to make the most of cash back offers, coupons, and other offers. Figure out what you need and where the best discounts are before you set foot in a grocery store.Look for double-up programs: Almost all the states with high SNAP participation have Double Up Food Bucks programs. These mean SNAP recipients get two-for-one on fresh fruits and vegetables at participating stores and farmers markets.Use cash back apps: SNAP benefits are usually paid to an EBT card that can be used in a similar way to a debit card. Look for cash back apps that let you scan your receipts to get money back on your grocery spending.Use coupons when you can: Coupons and discounts can land you significant savings. Look for ways to save on products you buy regularly and try not to fall into the trap of buying something you didn’t need just because it’s on offer.Buy in bulk: If you’re on a tight budget it can be difficult to benefit from bulk savings. See if you can share the cost with a friend or family member. That way you both get the lower cost items without having to pay so much up front.

Bottom line

According to the USDA, over 1 in 10 American households experienced food insecurity in 2021. That figure is much higher in certain states, particularly New Mexico, where 1 in 4 people relied on food benefits last year.

If you’re struggling to put food on the table, SNAP benefits are a good place to start. You may also qualify for additional assistance programs, particularly if you have children. In an emergency, contact your local food pantry or soup kitchen.

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A legal loophole lets lenders avoid state rate caps and charge APRs as high as 200%. 

Financially, it’s been a tough year for many Americans. People have had to grapple with the double whammy of skyrocketing prices and unprecedented interest rate hikes. Not only have U.S. debt levels increased in recent months, some predatory lenders are also profiting from people’s financial struggles. As a result, USA Today is putting the spotlight on several banks that enable nationwide lending with super high rates.

Most — but not all — states cap the annual percentage rates (APRs) that lenders can charge. But certain fintech companies get around these rules by partnering with banks in states like Utah that do not cap rates on loans. USA Today said the following Utah banks are enabling the practice:

Capital Community Bank of ProvoFinWise Bank of MurrayFirst Electronic Bank of Salt Lake CityTransportation Alliance Bank, or TAB Bank, of Ogden

How lenders can charge APRs as high as 200% nationwide

In much of the country, state laws cap loan APRs. According to research from the National Consumer Law Center released earlier this year, the median rate cap for a $500 loan in 46 states is 39.5%.

The issue is that a handful of states, including Utah, do not cap APRs. By partnering with other financial companies around the country, those Utah-based banks are able to circumvent state regulations. Lauren Saunders, associate director of the National Consumer Law Center, told USA Today that they’re “exporting predatory lending all over the country.”

Dubbed “rent-a-bank” loans, consumer protection organizations argue companies are making loans that would otherwise be illegal. Borrowers might have to pay APRs of 100% or 200%, even in states with rate caps. The issue was highlighted in February when a group of consumer advocates wrote to the FDIC asking it to put a stop to these rent-a-bank schemes.

Some of the companies mentioned in the USA Today article defended themselves, arguing that they are better than payday lenders, some of whom charge even higher rates. Critics say these are predatory lenders who target people who need cash quickly, particularly those with low credit scores who might not qualify for a traditional loan.

How to avoid predatory lenders

The hallmarks of predatory loans are unfair, unclear, or abusive terms such as high rates, high fees, or excessively short repayment terms. If you’re having trouble qualifying for a loan or need money quickly, predatory lenders may try to take advantage of your situation. Unfortunately, these loans often come with so many strings attached that they quickly trap you in a cycle of debt.

Here are some ways to avoid unscrupulous lenders.

1. Shop around

If you’re considering a personal loan, shop around to find the best lender for your circumstances. Compare the APRs, loan terms, fees, and total cost of your loan. Read all the documents and ask lots of questions. It’s important you understand exactly what you’ll be paying each month, and how your loan works.

If you’re unsure of the details, ask a friend or financial advisor to check your documents. There are several organizations that offer free financial advice, so you might be able to get an expert to check your paperwork.

2. Look for warning signs

Watch out for these red flags when you’re comparing lenders:

Three-digit APRs: Be aware that many states cap APRs at less than 40% on small- to mid-sized consumer loans. Let’s say you take out a $500 loan with a six-month term and an APY of 200%. You may wind up paying an extra $300 in interest by the time you pay it off.Aggressive sales tactics: If you feel like the lender is being overly pushy or trying to rush you to sign before you’re ready, tread carefully. It may be they don’t want you to go away and compare prices or fully understand what you’re signing.Blank spaces in a document: When you read the paperwork, watch out for empty spaces. Predatory lenders might fill those spaces afterward with unfavorable terms you didn’t agree to.Excessive fees: Ask what fees you’ll have to pay, such as application fees, an origination fee, or a fee for paying your loan off early. Most lenders will charge some fees, such as late charges. But it isn’t a good sign if there are a lot of fees, particularly if they’re higher than other lenders.No credit check: You can get a personal loan with no credit score, but it won’t be easy and the interest rate will likely be much higher than other loans.

3. Look for alternatives

You may feel like going into debt is the only option, but there may be ways you can either cut your spending or bring in some extra cash. Look over your budget and see if there’s anywhere you can shave a few dollars off your spending.

Right now the job market is relatively strong, so there may be a way you can find some extra work or even take on a side hustle. Perhaps you have unwanted items you could sell to see you through a short-term crisis. Another option is to speak to local authorities and nonprofit organizations to find out if you qualify for assistance. You might even ask a family member for help.

If there’s any way you can avoid borrowing money at unfavorable terms, it will save you more pain further down the road. Might you be able to wait until you’ve had a chance to save up and pay in cash?

Bottom line

If you’re already struggling to make ends meet, taking on debt, particularly high interest debt, can make life even harder. If you can’t keep up with the payments, your credit score could take a hit which would make any further borrowing more complicated. Moreover, you may have to pay late fees and could face legal action.

Most importantly, don’t assume that your interest rate will be capped just because you live in a state with protections. The rent-a-bank loophole means predatory lenders can operate throughout the country. Read everything and know exactly what APR you’ll pay before you sign.

Our picks for the best personal loans

Our team of independent experts pored over the fine print to find the select personal loans that offer competitive rates and low fees. Get started by reviewing our picks for the best personal loans.

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.
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A high credit score can be worth thousands of dollars. Here’s how to get one. 

Your credit score is a key part of your overall financial health. Consumers with higher credit scores qualify for lower interest rates when borrowing money and can get credit cards with more features. Good credit also comes in handy anytime you need to go through a credit check, which can be required for everything from renting an apartment to setting up cellphone service.

Since there are many factors that go into credit scores, people sometimes wonder about the best way to improve their credit. Personal finance enthusiast Graham Stephan recently went over how to get a perfect credit score in a Twitter thread, and he shared several useful tips.

Understand the factors that go into your credit score

There are multiple types of credit scores out there, but your FICO® Score is generally considered the most important. That’s because it’s the most widely used type of credit score by lenders.

Five factors are used to calculate your FICO® Score. Here are those factors and how much of your score they make up:

Payment history (35%): Your record of on-time and late payments.Amounts owed (30%): The percentage of your total credit that you use.Length of credit history (15%): The age of your credit accounts, including your oldest account, newest account, and the average age of all your accounts.Credit mix (10%): Your mix of credit accounts, such as credit cards, auto loans, mortgages, etc. Having a more diverse credit mix with multiple types of accounts is better than having a single type of account.New credit (10%): Applications for new credit.

Stephan’s tips mostly focus on the first three factors. This makes sense, because they carry the most weight. Here’s what Stephan recommends.

Set up autopay to avoid missed payments

For a high credit score, the most important habit is paying on time. Even a single late payment can cause your score to drop by over 100 points, and it can stay on your credit file for up to seven years.

The good news is that late payments technically only count against you when they’re at least 30 days late. You can get charged a late fee before then, but it won’t hurt your credit until the 30-day mark.

Stephan suggests setting up autopay for your minimum credit card payment. You could also set it up for your card’s statement balance so it’s paid in full every month. Either way, autopay will ensure you don’t have any late payments.

Get the highest credit limit possible

The second biggest-part of your FICO® Score is your amounts owed. This is also called your credit utilization ratio, and the lower it is, the better. The rule of thumb is to keep your credit utilization below 30%. For example, if you have a $1,000 credit limit, keep your balance below $300.

To maintain a low credit utilization, Stephan recommends getting the highest possible limits on all your credit cards. You can do this by requesting a credit limit increase with each card issuer. But he only recommends this if you don’t have any spending problems. The point of a higher credit limit is to keep your credit utilization lower — not to spend more.

Don’t close your oldest credit card

Older credit accounts are good for your credit score, so it’s recommended to keep your oldest credit cards open. It’s not necessarily a huge issue if you close an older card at some point. Closed accounts still remain on your credit file for 10 years and keep contributing to your credit score. But it’s better to keep them open if possible.

Look for issues on your credit report

If there are any issues on your credit report, fixing them could be a quick way to boost your score. You can get your credit report from all three major credit bureaus at AnnualCreditReport.com. You’re legally entitled to a free annual credit report from each credit bureau, but they’re currently offering free weekly credit reports through 2023.

A free credit score and monitoring service is also a good way to stay up to date on your credit history. Several credit card companies offer these services to cardholders.

Fix negative items that are weighing down your credit

If you find negative items on your credit report, first check if they’re legitimate. To fix credit report errors and items that should have fallen off by now, file a dispute with the credit bureau that issued the report.

For legitimate issues, the best fix will depend on what the issue is. Here are some of the most common along with good fixes that Stephan suggests:

Limited credit history: See if someone you know with good credit will add you as an authorized user on their credit card. This allows you to piggyback on their credit history with that card.High credit utilization: Pay down your credit card balances. Another option is to open more credit cards so that you have more available credit. Keep in mind that this only works if you avoid using that credit to charge more.Late payments: Make a payment as soon as possible to get current on the account. Even if it has already gone on your credit report, a payment that’s 30 days late is better than one that’s 60 or 90 days late.Negotiate debts: If you have any accounts that have gone to collections, see if you can settle it and get it taken off your credit report as part of the settlement agreement.

Stephan’s tips are effective ways to raise your credit score. If you have some previous credit missteps, like missed payments, it could take time to rebuild from that. But all the advice above will help your credit, and with enough time, you’ll get to the excellent credit mark.

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When it comes to a travel credit card, there’s one key feature I look for above all others. 

Like many people, my family and I have started traveling again now that the COVID-19 pandemic has begun to wane. As a result, we decided to get a new travel rewards credit card.

As I began considering all of the different credit card options out there, there was one key feature that I looked for first. In fact, this feature was so important to me, I would not consider opening a travel credit card without it.

This feature is an absolute must for any travel credit card

When looking around for a travel credit card, the feature that I absolutely insist upon is airline lounge access.

Many airlines have lounges for customers who have their co-branded credit cards. And some travel cards have lounges of their own that cardmembers can go to relax in before they fly. Often, the cards that offer access to these lounges come with annual fees. But, for me, these fees are well worth paying and I’d rather have a card that costs money but offers lounge access when compared with one that doesn’t.

Lounge access is an important feature for me for a few reasons. One of the biggest is that most airline lounges provide food offerings, including soups and other options like a taco bar or meatball sandwiches as well as coffee, fruit and other drinks. Because I can access food in these lounges, I don’t have to buy meals for my family of four while we are at the airport. We can also get food that’s a little bit healthier than from fast food places at airports. And, in my experience, the food tastes better too — which is important when you have picky kids.

Lounge access also matters to me because I can usually get better wifi access without having to pay for it in airline lounges. This makes it possible for me to work while traveling. And the lounges offer a comfortable place to relax away from the hustle and bustle where you don’t have to fight for a seat, so I know we’ll be comfortable — and my kids can get a chance to nap if our flight is delayed.

If I didn’t have a credit card offering lounge access, I’d have to pay for it — which is expensive — or forgo it and lose out on perks that matter a lot to me. I don’t like either of these options, so I make absolutely certain that any travel card I sign up for offers airline lounges as one of its perks.

Focus on the features most important to you

For me, lounge access is important so that’s the first thing I look at when evaluating a travel card. But, everyone is different. For some people, other perks such as travel insurance or free checked bags on flights may be more important.

The good news is, with so many travel cards out there, just about everyone can find one that’s a good fit. So, just decide what features you want to prioritize when signing up for a credit card and then find one that’s right for you.

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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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